Exhibit 10.38
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INVESTMENT AGREEMENT
Amended and Restated INVESTMENT AGREEMENT (this "AGREEMENT"), dated as of August
26, 2005 by and between Ophthalmic Imaging Systems, a California corporation
(the "Company"), and Dutchess Private Equities Fund, II, LP, a Delaware limited
partnership (the "Investor").
Whereas, the parties hereto are parties to an Investment Agreement dated as of
December 28, 2004 and now desire to amend and restate such agreement to make
certain modifications; Whereas, the parties desire that, upon the terms and
subject to the conditions contained herein, the Investor shall invest up to Nine
Million dollars ($9,000,000) to purchase the Company's Common Stock, no par
value per share (the "Common Stock"); Whereas, such investments will be made in
reliance upon the provisions of Section 4(2) under the Securities Act of 1933,
as amended (the "1933 Act"), Rule 506 of Regulation D, and the rules and
regulations promulgated thereunder, and/or upon such other exemption from the
registration requirements of the 1933 Act as may be available with respect to
any or all of the investments in Common Stock to be made hereunder; and Whereas,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto (as amended from time to time, the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act, and the rules and
regulations promulgated thereunder, and applicable state securities laws. NOW,
THEREFORE, in consideration of the foregoing recitals, which shall be considered
an integral part of this Agreement, the covenants and agreements set forth
hereafter, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Investor hereby
agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings specified or indicated below, and such meanings shall be equally
applicable to the singular and plural forms of such defined terms.
"1933 Act" shall have the meaning set forth in the preamble of this
Agreement.
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"1934 Act" shall mean the Securities Exchange Act of 1934, as it may be
amended.
"Affiliate" shall have the meaning specified in Section 5(h), below.
"Agreement" shall mean this Investment Agreement.
"Best Bid" shall mean the highest posted bid price of the Common Stock.
"Closing" shall have the meaning specified in Section 2(h).
"Closing Date" shall mean no more than nine (9) Trading Days following
the Put Notice Date.
"Common Stock" shall have the meaning set forth in the preamble of this
Agreement.
"Control" or "Controls" shall have the meaning specified in Section
5(h).
"Effective Date" shall mean the date the SEC declares effective under
the 1933 Act the Registration Statement covering the Securities.
"Environmental Laws" shall have the meaning specified in Section 4(m).
"Execution Date" shall mean the date indicated in the preamble to this
Agreement.
"Indemnities" shall have the meaning specified in Section 10.
"Indemnified Liabilities" shall have the meaning specified in Section
10.
"Ineffective Period" shall mean any period of time that the
Registration Statement or any Supplemental Registration Statement (as defined in
the Registration Rights Agreement) becomes ineffective or unavailable for use
for the sale or resale, as applicable, of any or all of the Registrable
Securities (as defined in the Registration Rights Agreement) for any reason (or
in the event the prospectus under either of the above is not current and
deliverable) during any time period required under the Registration Rights
Agreement.
"Investor" shall have the meaning indicated in the preamble of this
Agreement.
"Material Adverse Effect" shall have the meaning specified in Section
4(a).
"Maximum Common Stock Issuance" shall have the meaning specified in
Section 2(I).
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"Minimum Acceptable Price" shall mean the minimum per share price that
the Company will accept for the purchase of its Shares. With respect to every
Put Notice, the Company shall indicate the Minimal Acceptable Price for that
Put. The Minimal Acceptable Price shall be as a dollar per share amount.
"Open Period" shall mean the period beginning on and including the
Trading Day immediately following the Effective Date and ending on the earlier
to occur of (i) the date which is thirty (30) months from the Effective Date; or
(ii) termination of the Agreement in accordance with Section 8 below. The
Company shall have the right, but not the obligation, to extend the Open Period
for an additional six months.
"Pricing Period" shall mean the period beginning on the Put Notice Date
and ending on and including the date that is five (5) Trading Days after such
Put Notice Date.
"Principal Market" shall mean the American Stock Exchange, Inc., the
National Association of Securities Dealers, Inc. Over-the-Counter Bulletin
Board, the NASDAQ National Market System or the NASDAQ SmallCap Market,
whichever is the principal market on which the Common Stock is listed.
"Prospectus" shall mean the prospectus, preliminary prospectus and
supplemental prospectus used in connection with the Registration Statement.
"Purchase Amount" shall mean the total amount being paid by the
Investor on a particular Closing Date to purchase the Securities.
"Purchase Price" shall mean the greater of a) ninety-six percent (96%)
of the average of the two lowest closing Best Bid prices of the Common Stock
during the Pricing Period or b) the Minimal Acceptable Price.
"Put Amount" shall have the meaning set forth in Section 2(b) hereof.
"Put Notice" shall mean a written notice sent to the Investor by the
Company stating the Put Amount in U.S. dollars, the Company intends to sell to
the Investor pursuant to the terms of the Agreement, stating the current number
of Shares issued and outstanding on such date, and including the Minimal
Acceptable Price.
"Put Notice Date" shall mean the Trading Day immediately following the
day on which the Investor receives a Put Notice, however a Put Notice shall be
deemed delivered on (a) the Trading Day it is received by facsimile or otherwise
by the Investor if such notice is received prior to 12:00 pm Eastern Time, or
(b) the immediately succeeding Trading Day if it is received by facsimile or
otherwise
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after 12:00 pm Eastern Time on a Trading Day. No Put Notice may be deemed
delivered on a day that is not a Trading Day.
"Put Restriction" shall mean the days between the beginning of the
Pricing Period and Closing Date. During this time, the Company shall not be
entitled to deliver another Put Notice.
"Registration Period" shall have the meaning specified in Section 5(c),
below.
"Registration Rights Agreement" shall have the meaning set forth in the
recitals, above.
"Registration Statement" means the registration statement of the
Company filed under the 1933 Act covering the Common Stock issuable hereunder.
"Related Party" shall have the meaning specified in Section 5(h).
"Resolution" shall have the meaning specified in Section 7(e).
"SEC" shall mean the U.S. Securities & Exchange Commission.
"SEC Documents" shall have the meaning specified in Section 4(f).
"Securities" shall mean the shares of Common Stock issued pursuant to
the terms of the Agreement.
"Shares" shall mean the shares of the Company's Common Stock.
"Subsidiaries" shall have the meaning specified in Section 4(a).
"Trading Day" shall mean any day on which the Principal Market for the
Common Stock is open for trading, specifically from the hours of 9:30 am until
4:00 pm.
"Transaction Documents" shall mean this Agreement, the Registration
Rights Agreement, and each of the other agreements entered into by the parties
hereto in connection with this Agreement.
SECTION 2. PURCHASE AND SALE OF COMMON STOCK.
(A) PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and conditions set
forth herein, the Company shall issue and sell to the Investor, and the Investor
shall purchase from the Company, up to that number of Shares having an aggregate
Purchase Price of Nine Million dollars ($9,000,000).
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(B) DELIVERY OF PUT NOTICES.
(I) Subject to the terms and conditions of the Transaction Documents, and from
time to time during the Open Period, the Company may, in its sole discretion,
deliver a Put Notice to the Investor which states the Put Amount (designated in
U.S. Dollars) which the Company intends to sell to the Investor on a Closing
Date. The Put Notice shall be in the form attached hereto as Exhibit F and
incorporated herein by reference. The amount that the Company shall be entitled
to Put to the Investor (the "Put Amount") shall be equal to, at the Company's
election, the greater of: (A) Two Hundred percent (200%) of the average daily
volume (U.S. market only) of the Common Stock for the ten (10) Trading Days
prior to the applicable Put Notice Date, multiplied by the average of the three
(3) daily closing bid prices immediately preceding the Put Date, or (B) One
Hundred Thousand dollars ($100,000); provided that in no event will the Put
Amount be more than One Million Dollars ($1,000,000) with respect to any single
Put. During the Open Period, the Company shall not be entitled to submit a Put
Notice until after the previous Closing has been completed.
(II) If any closing bid price during the applicable Pricing Period with respect
to that Put Notice is less than Minimum Acceptable Price, the Company may elect,
by sending written notice to the Investor to cancel the Put Notice.
(C) RESERVED
(D) INVESTOR'S OBLIGATION TO PURCHASE SHARES. Subject to the conditions set
forth in this Agreement, following the Investor's receipt of a validly delivered
Put Notice, the Investor shall be required to purchase from the Company during
the related Pricing Period that number of Shares having an aggregate Purchase
Price equal to the lesser of (i) the Put Amount set forth in the Put Notice, or
(ii) if the Common Stock is trading above the Minimal Acceptable Price, twenty
percent (20%) of the aggregate trading volume of the Common Stock during the
applicable Pricing Period multiplied by either a) the average of the two (2)
lowest closing bid prices of the Company's Common Stock during the specified
Pricing Period or b) the Minimal Acceptable Price, but only if said Shares bear
no restrictive legend, are not subject to stop transfer instructions, pursuant
to Section 2(h), prior to the applicable Closing Date.
(E) Reserved
(F) CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE SHARES. Notwithstanding
anything to the contrary in this Agreement, the Company shall not be entitled to
deliver a Put Notice and the Investor shall not be obligated to purchase any
Shares at a Closing (as defined in Section 2(h)) unless each of the following
conditions are satisfied:
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(I) a Registration Statement shall have been declared effective and shall remain
effective and available for the resale of all the Registrable Securities (as
defined in the Registration Rights Agreement) at all times until the Closing
with respect to the subject Put Notice;
(II) at all times during the period beginning on the related Put Notice Date and
ending on and including the related Closing Date, the Common Stock shall have
been listed on the Principal Market and shall not have been suspended from
trading thereon for a period of five (5) consecutive Trading Days during the
Open Period and the Company shall not have been notified of any pending or
threatened proceeding or other action to suspend the trading of the Common
Stock;
(III) the Company has complied with its obligations and is otherwise not in
breach of a material provision of, or in material default under, this Agreement,
the Registration Rights Agreement or any other agreement executed in connection
herewith which has not been cured or corrected prior to delivery of the Put
Notice Date;
(IV) no injunction shall have been issued and remain in force, or action
commenced by a governmental authority which has not been stayed or abandoned,
prohibiting the purchase or the issuance of the Securities; and
(V) the issuance of the Securities will not violate any shareholder approval
requirements of the Principal Market. If any of the events described in clauses
(i) through (v) above occurs during a Pricing Period, then the Investor shall
have no obligation to purchase the Put Amount of Common Stock set forth in the
applicable Put Notice.
(G) RESERVED
(H) MECHANICS OF PURCHASE OF SHARES BY INVESTOR. Subject to the satisfaction of
the conditions set forth in Sections 2(f), 7 and 8, the closing of the purchase
by the Investor of Shares (a "Closing") shall occur on the date which is no
later than seven (7) Trading Days following the applicable Put Notice Date (each
a "Closing Date"). Prior to each Closing Date, (I) the Company shall deliver to
the Investor pursuant to this Agreement, certificates representing the Shares to
be issued to the Investor on such date and registered in the name of the
Investor; and (II) the Investor shall deliver to the Company the Purchase Price
to be paid for such Shares, determined as set forth in Sections 2(b) and 2(d).
In lieu of delivering physical certificates representing the Securities and
provided that the Company's transfer agent then is participating in The
Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST")
program, upon request of the Investor, the Company shall use its commercially
reasonable efforts to cause its transfer agent to electronically transmit the
Securities by
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crediting the account of the Investor's prime broker (which shall be specified
by the Investor a reasonably sufficient time in advance) with DTC through its
Deposit Withdrawal Agent Commission ("DWAC") system provided that the shares
have been sold and the Investor has complied with all applicable securities laws
in connection with such sale, including, without limitation, the prospectus
delivery requirements. The Company shall file a 424 (b) (3) that shall cover the
resale of the Securities. The Company understands that a delay in the issuance
of Securities beyond the Closing Date could result in economic loss to the
Investor. After the Effective Date, as compensation to the Investor for such
loss, the Company agrees to pay late payments to the Investor for late issuance
of Securities (delivery of Securities after the applicable Closing Date) in
accordance with the following schedule (where "No. of Days Late" is defined as
the number of trading days beyond the Closing Date. The Amounts are
cumulative.):
LATE PAYMENT FOR EACH
NO. OF DAYS LATE $10,000 OF COMMON STOCK
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
Over 10 $1,000 + $200 for each
Business Day late beyond
10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon written demand by the Investor. Nothing herein shall limit
the Investor's right to pursue actual damages for the Company's failure to issue
and deliver the Securities to the Investor, except to the extent that such late
payments shall constitute payment for and offset any such actual damages alleged
by the Investor. Notwithstanding the foregoing to the contrary, the Company
shall not be liable for any late payments under this Section 2(H) if such
failure is due to causes reasonably beyond the Company's control, including
fire, flood, strikes, labor troubles or other industrial disturbances, riots and
insurrections, war and acts of terrorism. Upon the occurrence of such a force
majeure event, the Company shall promptly notify the Investor with as much
detail as possible and shall promptly inform the Investor of any further
developments. Immediately after the cause is removed, the Company shall perform
its obligations with all due speed.
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(I) OVERALL LIMIT ON COMMON STOCK ISSUABLE. Notwithstanding anything contained
herein to the contrary, if during the Open Period the Company becomes listed on
an exchange that limits the number of shares of Common Stock that may be issued
without shareholder approval, then the number of Shares issuable by the Company
and purchasable by the Investor, including the shares of Common Stock issuable
to the Investors, shall not exceed that number of the shares of Common Stock
that may be issuable without shareholder approval, subject to appropriate
adjustment for stock splits, stock dividends, combinations or other similar
recapitalization affecting the Common Stock (the "Maximum Common Stock
Issuance"), unless the issuance of Shares, including any Common Stock to be
issued to the Investor pursuant to Section 10(b), in excess of the Maximum
Common Stock Issuance shall first be approved by the Company's shareholders in
accordance with applicable law and the By-laws and Articles of Incorporation of
the Company, if such issuance of shares of Common Stock could cause a delisting
on the Principal Market. The parties understand and agree that the Company's
failure to seek or obtain such shareholder approval shall in no way adversely
affect the validity and due authorization of the issuance and sale of Securities
or the Investor's obligation in accordance with the terms and conditions hereof
to purchase a number of Shares in the aggregate up to the Maximum Common Stock
Issuance limitation, and that such approval pertains only to the applicability
of the Maximum Common Stock Issuance limitation provided in this Section 2(i).
SECTION 3. INVESTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
The Investor represents and warrants to the Company, and covenants, that:
(A) SOPHISTICATED INVESTOR. The Investor has, by reason of its business and
financial experience, such knowledge, sophistication and experience in financial
and business matters and in making investment decisions of this type that it is
capable of (I) evaluating the merits and risks of an investment in the
Securities and making an informed investment decision; (II) protecting its own
interest; and (III) bearing the economic risk of such investment for an
indefinite period of time.
(B) AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable against the Investor in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(C) SECTION 9 OF THE 1934 ACT. During the term of this Agreement, the Investor
will comply with the provisions of Section 9 of the 1934 Act, and the
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rules promulgated thereunder, with respect to transactions involving the Common
Stock.
(D) ACCREDITED INVESTOR. Investor is an "Accredited Investor" as that term is
defined in Rule 501(a)(3) of Regulation D of the 1933 Act.
(E) NO CONFLICTS. The execution, delivery and performance of the Transaction
Documents by the Investor and the consummation by the Investor of the
transactions contemplated hereby and thereby will not result in a violation of
Partnership Agreement or other organizational documents of the Investor.
(F) OPPORTUNITY TO DISCUSS. The Investor has received all materials relating to
the Company's business, finance and operations which it has requested. The
Investor has had an opportunity to discuss the business, management and
financial affairs of the Company with the Company's management.
(G) INVESTMENT PURPOSES. The Investor is purchasing the Securities for its own
account for investment purposes and not with a view towards distribution and
agrees to resell or otherwise dispose of the Securities solely in accordance
with the registration provisions of the 1933 Act (or pursuant to an exemption
from such registration provisions).
(H) NO REGISTRATION AS A DEALER. The Investor is not and will not be required to
be registered as a "dealer" under the 1934 Act, either as a result of its
execution and performance of its obligations under this Agreement or otherwise.
(I) GOOD STANDING The Investor is a Limited Partnership, duly organized, validly
existing and in good standing in the State of Delaware. (J) TAX LIABILITIES. The
Investor understands that it is liable for its own tax liabilities. (K)
REGULATION M. The Investor will comply with Regulation M under the 1934 Act, if
applicable. (L) SHORTING. The Investor or any of it's subsidiaries and/or
affiliates, principals, advisors and partners will not short the Company's
Common Stock, either directly or indirectly, during the Open Period.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedules attached hereto, or as disclosed on the
Company's SEC Documents, the Company represents and warrants to the Investor
that:
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(A) ORGANIZATION AND QUALIFICATION. The Company is a corporation duly organized
and validly existing in good standing under the laws of the State of California,
and has the requisite corporate power and authorization to own its properties
and to carry on its business as now being conducted. Both the Company and the
companies it owns or controls, its "Subsidiaries," are duly qualified to do
business and are in good standing in every jurisdiction in which its ownership
of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results of operations or
financial condition of the Company and its Subsidiaries, if any, taken as a
whole, or on the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, or on the authority or
ability of the Company to perform its obligations under the Transaction
Documents (as defined in Section 1 and 4(b), below). (B) AUTHORIZATION;
ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.
(I) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Registration Rights Agreement, and each of the
other agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents"), and to issue the Securities in accordance with the terms hereof and
thereof.
(II) The execution and delivery of the Transaction Documents by the Company and
the consummation by it, of the transactions contemplated hereby and thereby,
including without limitation the reservation for issuance and the issuance of
the Securities pursuant to this Agreement, have been duly and validly authorized
by the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors, or its shareholders.
(III) The Transaction Documents have been duly and validly executed and
delivered by the Company.
(IV) The Transaction Documents constitute the valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
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(C) CAPITALIZATION. As of March 31, 2005, the authorized capital stock of the
Company consisted of 35,000,000 shares of Common Stock, no par value per share,
of which 15,063,585 shares were issued and outstanding and 4,344,878 shares were
reserved for issuance pursuant to options, warrants and other convertible
securities. All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. Except as disclosed in the
Company's publicly available filings or SEC Documents,
(I) no shares of the Company's capital stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company; (II) there are no outstanding debt securities; (III) there are no
outstanding shares of capital stock, options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries; (IV) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights Agreement),
(V) there are no outstanding securities of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (VI) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement; (VII) the Company
does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement; and (VIII) there is no dispute as
to the classification of any shares of the Company's capital stock. The Company
has furnished to the Investor, or the Investor has had access through XXXXX to,
true and correct copies of the Articles of Incorporation, as in effect on the
date hereof (the "Articles of Incorporation"), and the Company's By-laws, as in
effect on the date hereof (the "By-laws"), and the terms of all securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.
(D) ISSUANCE OF SHARES. The Company has reserved 6,000,000 Shares for issuance
pursuant to this Agreement has been duly authorized and reserved for issuance
(subject to adjustment pursuant to the Company's covenant set forth in Section
5(f) below) pursuant to this Agreement. Upon issuance in accordance with this
Agreement, the Securities will be validly issued, fully paid and non-assessable
and free from all taxes, liens and charges with respect to the issue
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thereof. In the event the Company cannot register a sufficient number of Shares
for issuance pursuant to this Agreement, the Company will use its best efforts
to authorize and reserve for issuance the number of Shares required for the
Company to perform its obligations hereunder as soon as reasonably practicable.
(E) NO CONFLICTS. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby will not (I) result in a violation of the
Articles of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or the
By-laws; or (II) to the Company's knowledge, conflict with, or constitute a
material default (or an event which with notice or lapse of time or both would
become a material default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, contract,
indenture mortgage, indebtedness or instrument to which the Company or any of
its Subsidiaries is a party, or to the Company's knowledge result in a violation
of any law, rule, regulation, order, judgment or decree (including United States
federal and state securities laws and regulations and the rules and regulations
of the Principal Market or principal securities exchange or trading market on
which the Common Stock is traded or listed) applicable to the Company or any of
its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Except as disclosed in Schedule 4(e), neither
the Company nor its Subsidiaries is in violation of any term of, or in default
under, the Articles of Incorporation, any Certificate of Designations,
Preferences and Rights of any outstanding series of preferred stock of the
Company or the By-laws or their organizational charter or by-laws, respectively,
or any contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its Subsidiaries, except for possible conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations that would
not individually or in the aggregate have a Material Adverse Effect. To the
knowledge of the Company, the business of the Company and its Subsidiaries is
not being conducted, and shall not be conducted, in violation of any law,
statute, ordinance, rule, order or regulation of any governmental authority or
agency, regulatory or self-regulatory agency, or court, except for possible
violations the sanctions for which either individually or in the aggregate would
not have a Material Adverse Effect. Except as specifically contemplated by this
Agreement and as required under the 1933 Act to the Company's knowledge, the
Company is not required to obtain any consent, authorization, permit or order
of, or make any filing or registration (except the filing of a registration
statement) with, any court, governmental authority or agency, regulatory or
self-regulatory agency or other third party in order for it to execute, deliver
or perform any of its obligations under, or contemplated by, the Transaction
Documents in accordance with the terms hereof or thereof. All consents,
authorizations, permits, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof and are in
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full force and effect as of the date hereof. Except as disclosed in Schedule
4(e), the Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company is not, and will not
be, in violation of the listing requirements of the Principal Market as in
effect on the date hereof and on each of the Closing Dates and is not aware of
any facts which would reasonably lead to delisting of the Common Stock by the
Principal Market in the foreseeable future.
(F) SEC DOCUMENTS; FINANCIAL STATEMENTS. As of August 26, 2005, the Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the 1934
Act (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Investor or its representatives,
or they have had access through XXXXX to, true and complete copies of the SEC
Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents.
As of their respective dates, the financial statements of the Company included
in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, by a firm that is a
member of the Public Companies Accounting Oversight Board ("PCAOB") consistently
applied, during the periods involved (except (I) as may be otherwise indicated
in such financial statements or the notes thereto, or (II) in the case of
unaudited interim statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Neither the Company
nor any of its Subsidiaries or any of their officers, directors, employees or
agents have provided the Investor with any material, nonpublic information which
was not publicly disclosed prior to the date hereof and any material, nonpublic
information provided to the Investor by the Company or its Subsidiaries or any
of their officers, directors, employees or agents prior to any Closing Date
shall be publicly disclosed by the Company prior to such Closing Date.
(G) ABSENCE OF CERTAIN CHANGES. Except as set forth in the SEC Documents, the
Company does not intend to change the business operations of the Company in any
material way. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does
the Company or its Subsidiaries have any knowledge or
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reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
(H) ABSENCE OF LITIGATION. Except as set forth in the SEC Documents, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the executive officers of Company or any of its
Subsidiaries, threatened against or affecting the Company, the Common Stock or
any of the Company's Subsidiaries or any of the Company's or the Company's
Subsidiaries' officers or directors in their capacities as such, in which an
adverse decision could have a Material Adverse Effect.
(I) ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF SHARES. The Company
acknowledges and agrees that the Investor is acting solely in the capacity of
arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby and any advice given by the
Investor or any of its respective representatives or agents in connection with
the Transaction Documents and the transactions contemplated hereby and thereby
is merely incidental to the Investor's purchase of the Securities. The Company
further represents to the Investor that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
(J) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as
set forth in the SEC Documents, since March 31, 2005, no event, liability,
development or circumstance has occurred or exists, or to the Company's
knowledge is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, assets, prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration statement filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
(K) EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries is
involved in any union labor dispute nor, to the knowledge of the Company or any
of its Subsidiaries, is any such dispute threatened. Neither the Company nor any
of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that relations with their employees are
good. No executive officer (as defined in Rule 501(f) of the 0000 Xxx) has
notified the Company that such officer intends to leave the Company's employ or
otherwise terminate such officer's employment with the Company.
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(L) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. Except as set forth in the SEC Documents, none of the Company's
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual property rights
necessary to conduct its business as now or as proposed to be conducted have
expired or terminated, or are expected to expire or terminate within two (2)
years from the date of this Agreement. The Company and its Subsidiaries do not
have any knowledge of any infringement by the Company or its Subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service xxxx registrations, trade secret
or other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as set
forth in the SEC Documents, there is no claim, action or proceeding being made
or brought against, or to the Company's knowledge, being threatened against, the
Company or its Subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
xxxx registrations, trade secret or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its Subsidiaries have taken commercially
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties.
(M) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (I) are, to the
knowledge of management of the Company, in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"); (II)
have, to the knowledge of management of the Company, received all permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses; and (III) are in compliance, to the
knowledge of the Company, with all terms and conditions of any such permit,
license or approval where, in each of the three (3) foregoing cases, the failure
to so comply would have, individually or in the aggregate, a Material Adverse
Effect.
(N) TITLE. The Company and its Subsidiaries have good and marketable title to
all personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the SEC Documents or
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company or any
of its Subsidiaries. Any real property and facilities held under lease by the
15
Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(O) INSURANCE. Each of the Company's Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company reasonably believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
(P) REGULATORY PERMITS. The Company and its Subsidiaries have in full force and
effect all certificates, approvals, authorizations and permits from the
appropriate federal, state, local or foreign regulatory authorities and
comparable foreign regulatory agencies, necessary to own, lease or operate their
respective properties and assets and conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
approval, authorization or permit, except for such certificates, approvals,
authorizations or permits which if not obtained, or such revocations or
modifications which, would not have a Material Adverse Effect.
(Q) INTERNAL ACCOUNTING CONTROLS. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (I) transactions are executed in accordance with
management's general or specific authorizations; (II) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles by a firm with membership to the PCAOB
and to maintain asset accountability; (III) access to assets is permitted only
in accordance with management's general or specific authorization; and (IV) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(R) NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any of its
Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company's officers has or is expected in the future to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company's officers has or is
expected to have a Material Adverse Effect.
16
(S) TAX STATUS. The Company and each of its Subsidiaries has made or filed all
United States federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
(T) CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents filed at
least ten (10) days prior to the date hereof and except for arm's length
transactions pursuant to which the Company makes payments in the ordinary course
of business upon terms no less favorable than the Company could obtain from
third parties and other than the grant of stock options disclosed in the SEC
Documents, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
(U) DILUTIVE EFFECT. The Company understands and acknowledges that the number of
shares of Common Stock issuable upon purchases pursuant to this Agreement will
increase in certain circumstances including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines during the
period between the Effective Date and the end of the Open Period. The Company's
executive officers and directors have studied and fully understand the nature of
the transactions contemplated by this Agreement and recognize that they have a
potential dilutive effect. The Board of Directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that, subject to such
limitations as are expressly set forth in the Transaction Documents, its
obligation to issue shares of Common Stock upon purchases pursuant to this
Agreement is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Company. (V) ADDITIONAL FINANCING: During the Open Period, the Company shall
have the right to finance the Company with any third party, provided that the
financing is not an Equity Line or similar financing structure. (W) NO GENERAL
SOLICITATION. Neither the Company, nor any of its affiliates, nor any person
acting on its behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Common Stock offered hereby.
17
(X) NO BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS. No brokers,
finders or financial advisory fees or commissions will be payable by the Company
with respect to the transactions contemplated by this Agreement, other than
disclosed in this Agreement.
SECTION 5. COVENANTS OF THE COMPANY
(A) BEST EFFORTS. The Company shall use commercially reasonable efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Section 7
of this Agreement.
(B) BLUE SKY. The Company shall, at its sole cost and expense, on or before each
of the Closing Dates, take such action as the Company shall reasonably determine
is necessary to qualify the Securities for, or obtain exemption for the
Securities for, sale to the Investor at each of the Closings pursuant to this
Agreement under applicable securities or "Blue Sky" laws of such states of the
United States, as reasonably specified by Investor, and shall provide evidence
of any such action so taken to the Investor on or prior to the Closing Date.
(C) REPORTING STATUS. Until the earlier to occur of (I) the first date which is
after the date this Agreement is terminated pursuant to Section 8 and on which
the Holders (as that term is defined in the Registration Rights Agreement) may
sell all of the Securities without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto); and (II) the date on
which (A) the Holders shall have sold all the Securities; and (B) this Agreement
has been terminated pursuant to Section 8 (the "Registration Period"), the
Company shall file all reports required to be filed with the SEC pursuant to the
1934 Act, and the Company shall not terminate its status as a reporting company
under the 1934 Act.
(D) USE OF PROCEEDS. The Company will use the proceeds from the sale of the
Shares (excluding amounts paid by the Company for fees as set forth in the
Transaction Documents) for general corporate and working capital purposes and
acquisitions or assets, businesses or operations or for other purposes that the
Board of Directors deem to be in the best interest of the Company.
18
(E) FINANCIAL INFORMATION. The Company agrees to make available to the Investor
via XXXXX or other electronic means the following to the Investor during the
Registration Period: (I) within five (5) Trading Days after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-KSB, its Quarterly Reports
on Form 10-QSB, any Current Reports on Form 8-K and any Registration Statements
or amendments filed pursuant to the 1933 Act; (II) on the same day as the
release thereof, all press releases issued by the Company or any of its
Subsidiaries; (III) copies of any notices and other information made available
or given to the shareholders of the Company generally, contemporaneously with
the making available or giving thereof to the shareholders; and (IV) within two
(2) calendar days of filing or delivery thereof, copies of all documents filed
with, and all correspondence sent to, the Principal Market, any securities
exchange or market, or the National Association of Securities Dealers, Inc.,
unless such information is material nonpublic information.
(F) RESERVATION OF SHARES. Subject to the following sentence, the Company shall
take all action necessary to at all times have authorized, and reserved for the
purpose of issuance, a sufficient number of shares of Common Stock to provide
for the issuance of the Securities hereunder. In the event that the Company
determines that it does not have a sufficient number of authorized shares of
Common Stock to reserve and keep available for issuance as described in this
Section 5(f), the Company shall use its best efforts to increase the number of
authorized shares of Common Stock by seeking shareholder approval for the
authorization of such additional shares.
(G) LISTING. The Company shall promptly secure and maintain the listing of all
of the Registrable Securities (as defined in the Registration Rights Agreement)
upon the Principal Market and each other national securities exchange and
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, such listing
of all Registrable Securities from time to time issuable under the terms of the
Transaction Documents. Neither the Company nor any of its Subsidiaries shall
take any action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on the Principal Market (excluding suspensions of
not more than one (1) trading day resulting from business announcements by the
Company). The Company shall promptly provide to the Investor copies of any
notices it receives from the Principal Market regarding the continued
eligibility of the Common Stock for listing on such automated quotation system
or securities exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 5(g).
(H) TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall cause each of
its Subsidiaries not to, enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any
19
Subsidiary's officers, directors, persons who were officers or directors at any
time during the previous two (2) years, shareholders who beneficially own 5% or
more of the Common Stock, or affiliates or with any individual related by blood,
marriage or adoption to any such individual or with any entity in which any such
entity or individual owns a 5% or more beneficial interest (each a "Related
Party"), except for (I) customary employment arrangements and benefit programs
on reasonable terms, (II) any agreement, transaction, commitment or arrangement
on an arms-length basis on terms no less favorable than terms which would have
been obtainable from a person other than such Related Party, or (III) any
agreement, transaction, commitment or arrangement which is approved by a
majority of the disinterested directors of the Company. For purposes hereof, any
director who is also an officer of the Company or any Subsidiary of the Company
shall not be a disinterested director with respect to any such agreement,
transaction, commitment or arrangement. "Affiliate" for purposes hereof means,
with respect to any person or entity, another person or entity that, directly or
indirectly, (I) has a 5% or more equity interest in that person or entity, (II)
has 5% or more common ownership with that person or entity, (III) controls that
person or entity, or (IV) is under common control with that person or entity.
"Control" or "Controls" for purposes hereof means that a person or entity has
the power, direct or indirect, to conduct or govern the policies of another
person or entity.
(I) RESERVED.
(J) CORPORATE EXISTENCE. The Company shall use its best efforts to preserve and
continue the corporate existence of the Company.
(K) NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE
A PUT. The Company shall promptly notify Investor upon the occurrence of any of
the following events in respect of a Registration Statement or related
prospectus in respect of an offering of the Securities: (I) receipt of any
request for additional information by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the Registration Statement or related
prospectus; (II) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of any
Registration Statement or the initiation of any proceedings for that purpose;
(III) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Securities for sale
in any jurisdiction or the initiation or notice of any proceeding for such
purpose; (IV) the happening of any event that makes any statement made in such
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of a Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to
20
be stated therein or necessary to make the statements therein not misleading,
and that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (V) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate, and the Company shall promptly make available to
Investor any such supplement or amendment to the related prospectus. The Company
shall not deliver to Investor any Put Notice during the continuation of any of
the foregoing events.
(L) REIMBURSEMENT. If (I) Investor becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action, proceeding or investigation by any person (other than as a result
of a breach of the Investor's representations and warranties set forth in this
Agreement); or (II) Investor becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC against or involving the Company
or in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents (other than as a result of a breach of
the Investor's representations and warranties set forth in this Agreement), or
if Investor is impleaded in any such action, proceeding or investigation by any
person, then in any such case, the Company will reimburse Investor for its
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred. In
addition, other than with respect to any matter in which Investor is a named
party, the Company will pay to Investor the charges, as reasonably determined by
Investor, for the time of any officers or employees of Investor devoted to
appearing and preparing to appear as witnesses, assisting in preparation for
hearings, trials or pretrial matters, or otherwise with respect to inquiries,
hearing, trials, and other proceedings relating to the subject matter of this
Agreement. The reimbursement obligations of the Company under this section shall
be in addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to any affiliates of Investor that are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees, attorneys, accountants, auditors and controlling
persons (if any), as the case may be, of Investor and any such affiliate, and
shall be binding upon and inure to the benefit of any successors of the Company,
Investor and any such affiliate and any such person.
SECTION 6. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.
The obligation hereunder of the Company to issue and sell the Securities to the
Investor is further subject to the satisfaction, at or before each Closing Date,
of each of the following conditions set forth below. These conditions are for
the
21
Company's sole benefit and may be waived by the Company at any time in its sole
discretion.
(A) The Investor shall have executed each of this Agreement and the Registration
Rights Agreement and delivered the same to the Company.
(B) The Investor shall have delivered to the Company the Purchase Price for the
Securities being purchased by the Investor between the end of the Pricing Period
and the Closing Date via a Put Settlement Sheet (hereto attached as Exhibit G)
After receipt of confirmation of delivery of such Securities to the Investor,
the Investor, by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company will disburse the funds constituting
the Purchase Amount.
(C) No statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
SECTION 7. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.
The obligation of the Investor hereunder to purchase Shares is subject to the
satisfaction, on or before each Closing Date, of each of the following
conditions set forth below.
(A) The Company shall have executed each of the Transaction Documents and
delivered the same to the Investor.
(B) The Common Stock shall be authorized for quotation on the Principal Market
and trading in the Common Stock shall not have been suspended by the Principal
Market or the SEC, at any time beginning on the date hereof and through and
including the respective Closing Date (excluding suspensions of not more than
one (1) Trading Day resulting from business announcements by the Company,
provided that such suspensions occur prior to the Company's delivery of the Put
Notice related to such Closing).
(C) The representations and warranties of the Company shall be true and correct
as of the date when made and as of the applicable Closing Date as though made at
that time (except for (I) representations and warranties that speak as of a
specific date and (II) with respect to the representations made in Sections
4(g), (h) and (j) and the third sentence of Section 4(k) hereof, events which
occur on or after the date of this Agreement and are disclosed in SEC filings
made by the Company at least ten (10) Trading Days prior to the applicable Put
Notice Date) and the Company shall have performed, satisfied and complied with
the covenants, agreements and conditions required by the Transaction Documents
22
to be performed, satisfied or complied with by the Company on or before such
Closing Date. The Investor may request an update as of such Closing Date
regarding the representation contained in Section 4(c) above.
(D) The Company shall have executed and delivered to the Investor the
certificates representing, or have executed electronic book-entry transfer of,
the Securities (in such denominations as such Investor shall request) being
purchased by the Investor at such Closing.
(E) The Board of Directors of the Company shall have adopted resolutions
consistent with Section 4(b)(ii) above (the "Resolutions") and such Resolutions
shall not have been amended or rescinded prior to such Closing Date. (F)
reserved (G) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
(H) The Registration Statement shall be effective on each Closing Date and no
stop order suspending the effectiveness of the Registration statement shall be
in effect or to the Company's knowledge shall be pending or threatened.
Furthermore, on each Closing Date (I) neither the Company nor Investor shall
have received notice that the SEC has issued or intends to issue a stop order
with respect to such Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of such Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
SEC's concerns have been addressed and Investor is reasonably satisfied that the
SEC no longer is considering or intends to take such action), and (II) no other
suspension of the use or withdrawal of the effectiveness of such Registration
Statement or related prospectus shall exist.
(I) At the time of each Closing, the Registration Statement (including
information or documents incorporated by reference therein) and any amendments
or supplements thereto shall not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or which would require public
disclosure or an update supplement to the prospectus.
(J) If applicable, the shareholders of the Company shall have approved the
issuance of any Shares in excess of the Maximum Common Stock Issuance in
accordance with Section 2(i) or the Company shall have obtained appropriate
approval pursuant to the requirements of Calfiornia law and the Company's
Articles of Incorporation and By-laws.
23
(K) The conditions to such Closing set forth in Section 2(f) shall have been
satisfied on or before such Closing Date.
(L) The Company shall have certified to the Investor the number of Shares of
Common Stock outstanding when a Put Notice is given to the Investor.
SECTION 8. TERMINATION. This Agreement shall terminate upon any of the following
events:
(I) when the Investor has purchased an aggregate of Nine Million dollars
($9,000,000) in the Common Stock of the Company pursuant to this Agreement;
(II) on the date which is thirty (30) months after the Effective Date, unless
the Company exercises its option to extend this Agreement for an additional six
(6) months;
(III) upon written notice from the Company, stating its intentions to cancel
this Agreement. The Company shall not terminate this Agreement during a Pricing
Period. Any remuneration of Shares due to the Investor at the time of
Termination, shall be immediately issued and delivered within one (1) day of
Termination. Any delay in such issuances will carry penalties outlined in
Section 2 (H).
SECTION 9. SUSPENSION
This Agreement shall be suspended upon any of the following events, and shall
remain suspended until such event is rectified:
(I) the trading of the Common Stock is suspended by the SEC, the
Principal Market or the NASD for a period of two (2) consecutive Trading Days
during the Open Period;
(II) The Common Stock ceases to be registered under the 1934 Act or
listed or traded on the Principal Market. Upon the occurrence of one (1) of the
above-described events, the Company shall send written notice of such event to
the Investor.
SECTION 10. INDEMNIFICATION.
In consideration of the parties mutual obligations set forth In the Transaction
Documents, each of the parties (in such capacity, an "Indemnitor") shall defend,
protect, indemnify and hold harmless the other and all of the other party's
shareholders, officers, directors, employees, counsel, and direct or indirect
investors and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and
24
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and reasonable expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (I) any
misrepresentation or breach of any representation or warranty made by the
Indemnitor or any other certificate, instrument or document contemplated hereby
or thereby; (II) any breach of any covenant, agreement or obligation of the
Indemnitor contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby; or (III) any cause of
action, suit or claim brought or made against such Indemnitee by a third party
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, except insofar as any such
misrepresentation, breach or any untrue statement, alleged untrue statement,
omission or alleged omission is made in reliance upon and in conformity with
information furnished to Indemnitor which is specifically intended for use in
the preparation of any such Registration Statement, preliminary prospectus,
prospectus or amendments to the prospectus. To the extent that the foregoing
undertaking by the Indemnitor may be unenforceable for any reason, the
Indemnitor shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. The indemnity provisions contained herein shall be in addition to any cause
of action or similar rights Indemnitor may have, and any liabilities the
Indemnitor or the Indemnitees may be subject to.
SECTION 11. GOVERNING LAW; MISCELLANEOUS.
(A) GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts without regard to
the principles of conflict of laws. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
Boston, County of Suffolk, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of
25
this Agreement in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction.
(B) LEGAL FEES; AND MISCELLANEOUS FEES. Except as otherwise set forth in the
Transaction Documents, each party shall pay the fees and expenses of its
advisers, counsel, the accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. Any attorneys' fees and
expenses incurred by either the Company or by the Investor in connection with
the preparation, negotiation, execution and delivery of any amendments to this
Agreement or relating to the enforcement of the rights of any party, after the
occurrence of any breach of the terms of this Agreement by another party or any
default by another party in respect of the transactions contemplated hereunder,
shall be paid on demand by the party which breached the Agreement and/or
defaulted, as the case may be. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of any Securities.
(C) COUNTERPARTS. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
(D) HEADINGS; SINGULAR/PLURAL. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Whenever required by the context of this
Agreement, the singular shall include the plural and masculine shall include the
feminine.
(E) SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(F) ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all other prior oral
or written agreements between the Investor, the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein (including the other
Transaction Documents) contain the entire understanding of the parties with
respect to the matters covered herein and therein and, except as specifically
set forth herein or therein, neither the Company nor the Investor makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Investor, and no provision hereof may be
26
waived other than by an instrument in writing signed by the party against whom
enforcement is sought.
(G) NOTICES. Any notices or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered (I) upon receipt, when delivered personally; (II) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (III) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
Ophthalmic Imaging Systems
000 Xxxxxxx Xxx, Xxxxx X
Xxxxxxxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Investor:
Dutchess Private Equities fund, LP, II
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Each party shall provide five (5) days' prior written notice to the other party
of any change in address or facsimile number.
(H) NO ASSIGNMENT. This Agreement may not be assigned.
(I) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of
the parties hereto and is not for the benefit of, nor may any provision hereof
be enforced by, any other person. (J) SURVIVAL. The representations and
warranties of the Company and the Investor contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4 and 5, and the indemnification
provisions set forth in Section 10, shall survive each of the Closings and the
termination of this Agreement.
(K) PUBLICITY. The Company and Investor shall consult with each other in issuing
any press releases or otherwise making public statements with respect to the
transactions contemplated hereby and no party shall issue any such press
27
release or otherwise make any such public statement without the prior consent of
the other parties, which consent shall not be unreasonably withheld or delayed,
except that no prior consent shall be required if such disclosure is required by
law, in which such case the disclosing party shall provide the other parties
with prior notice of such public statement. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of Investor without the prior
consent of such Investor, except to the extent required by law. Investor
acknowledges that this Agreement and all or part of the Transaction Documents
may be deemed to be "material contracts" as that term is defined by Item
601(b)(10) of Regulation S-B, and that the Company may therefore be required to
file such documents as exhibits to reports or registration statements filed
under the 1933 Act or the 1934 Act. Investor further agrees that the status of
such documents and materials as material contracts shall be determined solely by
the Company, in consultation with its counsel.
(L) FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(M) PLACEMENT AGENT. The Company agrees to pay Dragonfly Capital Partners, LLC
("Dragonfly"), a registered broker dealer a cash fee equal to a percentage of
the total gross proceeds raised from each Put based on the following fee
schedule:
Gross proceeds raised up to $1 million 2% (two percent)
Gross proceeds raised over $1 million up to $2 million 1% (one percent)
Gross proceeds raised over $2 million 1/2% (one half of one
percent)
The fee shall be paid directly from the Company. The Investor shall have no
obligation with respect to any fees or with respect to any claims made by or on
behalf of other persons or entities for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by the
Transaction Documents. The Company shall indemnify and hold harmless the
Investor, their employees, officers, directors, agents, and partners, and their
respective affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses incurred
in respect of any such claimed or existing fees, as such fees and expenses are
incurred.
(N) NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
28
(O) REMEDIES. The Investor and each holder of the Shares shall have all rights
and remedies set forth in this Agreement and the Registration Rights Agreement
and all rights and remedies which such holders have been granted at any time
under any other agreement or contract and all of the rights which such holders
have under any law. Any person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any default or breach
of any provision of this Agreement, including the recovery of reasonable
attorneys fees and costs, and to exercise all other rights granted by law.
(P) PAYMENT SET ASIDE. To the extent that the Company makes a payment or
payments to the Investor hereunder or under the Registration Rights Agreement or
the Investor enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
(Q) PRICING OF COMMON STOCK. For purposes of this Agreement, the bid price of
the Common Stock in this Agreement shall be as reported on Bloomberg.
[balance of page left intentionally blank]
29
SIGNATURE PAGE OF INVESTMENT AGREEMENT
Your signature on this Signature Page evidences your agreement to be bound by
the terms and conditions of the Investment Agreement as of the date first
written above. The undersigned signatory hereby certifies that he has read and
understands the Investment Agreement, and the representations made by the
undersigned in this Investment Agreement are true and accurate, and agrees to be
bound by its terms.
DUTCHESS PRIVATE EQUITIES FUND, II, L.P.
BY ITS GENERAL PARTNER,
DUTCHESS CAPITAL MANAGEMENT, LLC
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------
Xxxxxxx X. Xxxxxxxx, Managing Member
OPHTHALMIC IMAGING SYSTEMS
By: /s/ Xxxxx Xxxxxxx
------------------------------------
Xxxxx Xxxxxxx, Chief Financial Officer
30
LIST OF EXHIBITS
----------------
EXHIBIT A Registration Rights Agreement
EXHIBIT B Opinion of Company's Counsel
EXHIBIT C [reserved]
EXHIBIT D Broker Representation Letter
EXHIBIT E Board Resolution
EXHIBIT F Put Notice
EXHIBIT G Put Settlement Sheet
31
EXHIBIT A
32
EXHIBIT B
33
EXHIBIT C
34
EXHIBIT D
[BROKER'S LETTERHEAD]
Date
Via Facsimile
Attention:
----------
Re: OPHTHALMIC IMAGING SYSTEMS
Dear __________________:
It is our understanding that the Form______ Registration Statement bearing SEC
File Number ( ___-______) filed by Ophthalmic Imaging Systems, on Form _____ on
__________, 200X was declared effective on _________, 200X. This letter shall
confirm that ______________ shares of the common stock of Ophthalmic Imaging
Systems, are being sold on behalf of __________________ and that we shall comply
with the prospectus delivery requirements set forth in that Registration
Statement by filing the same with the purchaser.
If you have any questions please do not hesitate to call.
Sincerely,
cc: .
35
EXHIBIT E
36
EXHIBIT F
Date:
RE: Put Notice Number __
Dear Xx. Xxxxxxxx,
This is to inform you that as of today, Ophthalmic Imaging Systems, a California
corporation (the "Company"), hereby elects to exercise its right pursuant to the
Investment Agreement to require Dutchess Private Equities Fund, II, LP. to
purchase shares of its common stock. The Company hereby certifies that:
The amount of this put is $__________.
The Pricing Period runs from ________ until _______.
The Minimal Acceptable Price for this Put shall be: _________
The current number of shares issued and outstanding as of the Company are:
------------------
Regards,
------------------
Xxxxx Xxxxxxx
Chief Financial Officer
Ophthalmic Imaging Systems
37
EXHIBIT G
PUT SETTLEMENT SHEET
Date:
Xxxxxxx,
Pursuant to the Put given by Ophthalmic Imaging Systems to Dutchess Private
Equities Fund, II, L.P. on _________________ 200x, we are now submitting the
amount of common shares for you to issue to Dutchess.
This letter shall confirm that ________ shares of Ophthalmic Imaging Systems
have been sold by Dutchess Private Equities Fund, II, LP and that Dutchess
Private Equities Fund, II, LP has complied with the prospectus delivery
requirements set forth in the Registration Statement by delivering such
prospectus to the purchaser(s) of the shares. Accordingly, please have a
certificate bearing no restrictive legend totaling __________ shares issued to
Dutchess Private Equities Fund, II, LP immediately and send via DWAC to the
following account:
XXXXXX
If not DWAC eligible, please send FedEx Priority Overnight to:
XXXXXX
Once these shares are received by us, we will have the funds wired to the
Company.
Regards,
Xxxxxxx X. Xxxxxxxx
38
DATE. . . . . . . . . . . . . . PRICE
Date of Day 1 . . . . . . . . . Closing Bid of Day 1
Date of Day 2 . . . . . . . . . Closing Bid of Day 2
Date of Day 3 . . . . . . . . . Closing Bid of Day 3
Date of Day 4 . . . . . . . . . Closing Bid of Day 4
Date of Day 5 . . . . . . . . . Closing Bid of Day 5
LOWEST 2 (TWO) CLOSING BIDS IN PRICING PERIOD
------------
PUT AMOUNT
------------
AMOUNT WIRED TO COMPANY
------------
PURCHASE PRICE (96% (NINETY-SIX PERCENT))
------------
AMOUNT OF SHARES DUE
------------
The undersigned has completed this Put as of this ___th day of _________, 20xx.
Ophthalmic Imaging Systems
-----------------------
Xxxxx Xxxxxxx, CFO
39
DISCLOSURE SCHEDULE
Pursuant to the Amended and Restated Investment Agreement (the
"Agreement"), dated as of August 26, 2005, by and between Ophthalmic Imaging
Systems, a California corporation (the "Company"), and Dutchess Private Equities
Fund II, LP, a Delaware limited partnership (the "Purchaser"), the Company
hereby provides to the Purchaser this Disclosure Schedule. All capitalized terms
herein shall have the meanings ascribed to them in the Agreement.
The disclosures in any section or subsection of this Disclosure
Schedule are qualified and supplemented in all material respects by disclosures
made by the Company in its filings with the Securities and Exchange Commission.
Any item included on this Disclosure Schedule with respect to any subsection of
Section 4 of the Agreement shall be deemed to relate to each other subsection of
Section 4 of the Agreement to the extent such relationship is reasonably
apparent.
Nothing in this Disclosure Schedule is intended to expand or diminish
(other than as an exception to a representation or warranty of the Company
contained in the Agreement) or to create any covenant on the part of the Company
or the Purchaser. Inclusion of any item in this Disclosure Schedule (i) except
to the extent expressly stated in this Disclosure Schedule, does not represent a
determination by the Company or the Purchaser that such item is "material," nor
shall it be deemed to establish a standard of materiality; (ii) does not
represent a determination by the Company that such item did not arise in the
ordinary course of business and (iii) shall not constitute, or be deemed to be,
an admission to any party concerning any item set forth herein. To the extent
that this Disclosure Schedule provides descriptions or summaries of documents or
instruments, such descriptions or summaries are not necessarily complete but are
meant to identify certain documents and instruments which may be reviewed by the
Purchaser for their complete terms and contents.
The information included herein is disclosed confidentially, and the
recipients agree by their receipt thereof that it shall be held subject to the
obligations of confidentiality contained in the Agreement. Such information
shall not be used for any purposes except in furtherance of the specific
transactions contemplated by the Agreement.
40
SCHEDULE 4(a) SUBSIDIARIES
None.
41
SCHEDULE 4(c) CAPITALIZATION
(See Attached)
42
SCHEDULE 4(e) CONFLICTS
None.
43
SCHEDULE 4(g) MATERIAL CHANGES
None.
44
SCHEDULE 4(h) LITIGATION
LEGAL PROCEEDINGS
On March 9, 2004, the Company filed a civil action in the United States District
Court for the Eastern District of California against several of its former
employees, led by former vice-president Xxxx Xxxxxxxx, who have been doing
business for the last two years as Imaging Service Group (ISG) and Zeta
Development Laboratories in El Dorado Hills, California, and several affiliated
persons and companies, including Xxxx Xxxxxxx, Eyepictures, Inc., Xxxxxx Xxxxxxx
Xx., and two of his ophthalmic equipment businesses, Zeta Development Labs, Inc.
(doing business as Justice Diagnostic Imaging) and Justice Ophthalmics, Inc. The
complaint alleges claims for misappropriation of trade secrets, violations of
the federal computer fraud and abuse act, copyright infringement, breach of
contract, interference with contract, and false advertising. The complaint seeks
monetary damages and injunctive relief against the defendants.
On August 20, 2004, the United States District Court for the Eastern District of
California granted in part the Company's application for a preliminary
injunction against certain of the defendants. In December 2004, the Court
dismissed Xxxxxx Xxxxxxx, Xx. as an individual and Justice Ophthalmics, Inc.
from the case. Trial in the matter currently is scheduled for April 2006.
45
SCHEDULE 4(l) INTELLECTUAL PROPERTY
On June 15, 1993, we were issued United States Letters Patent No.
5,220,360 for "Apparatus and Method for Topographical Analysis of the Retina."
This patent relates to the Glaucoma-Scope(R) apparatus, and methods used by the
apparatus for topographically mapping the retina and comparing the mapping to
previous mappings.
Further, although we believe that our products do not and will not
infringe on patents or violate proprietary rights of others, it is possible that
our existing rights may not be valid or that infringement of existing or future
patents, trademarks or proprietary rights may occur or be claimed to occur by
third parties.
In the event that any of our products, infringe patents, trademarks or
proprietary rights of others, we may be required to modify the design of such
products, change the names under which the products or services are provided or
obtain licenses. There can be no assurance that we will be able to do so in a
timely manner, upon acceptable terms and conditions, or at all. The failure to
do any of the foregoing could have a material adverse effect on our business.
There can be no assurance that our patents or trademarks, if granted, would be
upheld if challenged or that competitors might not develop similar or superior
processes or products outside the protection of any patents issued to us. In
addition, there can be no assurance that we will have the financial or other
resources necessary to enforce or defend a patent or trademark infringement or
proprietary rights violation action. Moreover, if our products infringe patents,
trademarks or proprietary rights of others, we could, under certain
circumstances, become liable for damages, which also could have a material
adverse effect on our business.
We also rely on trade secrets, know-how, continuing technological
innovation and other unpatented proprietary technology to maintain our
competitive position. Certain of the proprietary software, optical interfaces
and synchronization modules of our digital imaging systems are largely
proprietary and constitute trade secrets, but the basic computer hardware,
software, digital cameras and video components are purchased from third parties.
No patent applications have been filed with respect thereto. We anticipate
aggressively defending our unpatented proprietary technology, although there is
no assurance that others will not independently develop substantially equivalent
proprietary information or techniques, or otherwise gain access to our trade
secrets or disclose such technology, or that we can meaningfully protect our
rights to our unpatented trade secrets and other proprietary technology.
We seek to protect our unpatented proprietary technology, in part,
through proprietary confidentiality and nondisclosure agreements with employees,
consultants and other parties. Our confidentiality agreements with our employees
and consultants generally contain industry standard provisions requiring such
individuals to assign to us without additional consideration any inventions
conceived or reduced to practice by them while employed or retained by us,
subject to customary exceptions. There can be no assurance that proprietary
information agreements with employees, consultants and others will not be
breached, that we would have adequate remedies for any breach or that our trade
secrets will not otherwise become known to or independently developed by
competitors.
46
SCHEDULE 4(n) LIENS
o Wells Fargo line of credit for $150,000; secured by $150,000 restricted
cash (Xxxxx Fargo CD)
o United Mizrachi Bank Ltd. and Bank Leumi Le Israel B.M. have a lien on
all of OIS assets
o Laurus Master Funds LTD $1,200,000 Convertible Note.
o Laurus Master Funds LTD $1,000,000 Convertible Note
47
SCHEDULE 4(t) CERTAIN TRANSACTIONS
None
48
