SECURITIES PURCHASE AGREEMENT
THIS
SECURITIES PURCHASE AGREEMENT
(“Agreement”)
is
made as of the ___ day of June, 2008, by and among Emerald Dairy Inc., a Nevada
corporation, with an address at 00000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, XX
00000
(the “Company”),
and
the Investors set forth on the signature pages affixed hereto (each an
“Investor”
and
collectively the “Investors”).
Recitals:
A. The
Company and the Investors are executing and delivering this Agreement in
connection with an offering of securities of the Company (the “Offering”),
in
reliance upon the exemption from securities registration afforded by the
provisions of Section 4(2) of the Securities Act of 1933, as amended (the
“1933
Act”),
or
Regulation D promulgated thereunder (“Regulation
D”);
and
B. The
Investors wish to purchase from the Company, and the Company wishes to sell
and
issue to the Investors, in one or more Closings to occur on or prior to June
30,
2008 (provided the Minimum Loan Amount has been received by the Company on
or
before June 15, 2008), upon the terms and conditions stated in this
Agreement:
(i) Promissory
notes of up to an aggregate principal amount of $3,000,000, with an interest
rate of 8% per annum (“Notes”),
in
substantially the form attached hereto as Exhibit
A;
and
(ii) Warrants
to purchase that number of shares of the Company’s Common Stock equal to ten
(10%) percent of the principal dollar amount of the Notes purchased, at an
exercise price of $2.61 per share (“Warrants”),
in
substantially the form attached hereto as Exhibit
A;
and
C. Pursuant
to its terms: (a) not less than an aggregate of $1,000,000 of Notes (the
“Minimum
Loan Amount”)
and
100,000 Warrants (“Minimum
Warrants”);
and
(b) not more than an aggregate of $3,000,000 of Notes (the “Maximum
Loan Amount”)
and
300,000 Warrants (“Maximum Warrants”), may be sold in this
Offering.
In
consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties hereto agree as follows:
1. Definitions.
In
addition to those terms defined above and elsewhere in this Agreement, for
the
purposes of this Agreement, the following terms shall have the meanings set
forth below:
“Affiliate”
means,
with respect to any Person, any other Person which directly or indirectly
through one or more intermediaries Controls, is controlled by, or is under
common control with, such Person.
“Business
Day”
means
a
day, other than a Saturday or Sunday, on which banks in New York City are open
for the general transaction of business.
“Common
Stock”
means
the Company’s common stock, par value $0.001 per share, and any securities into
which the common stock may be reclassified.
“Company’s
Knowledge”
means
the actual knowledge of the executive officers (as defined in Rule 405 under
the
0000 Xxx) of the Company, after due inquiry.
“Confidential
Information”
means
trade secrets, confidential information and know-how (including but not limited
to ideas, formulae, compositions, processes, procedures and techniques, research
and development information, computer program code, performance specifications,
support documentation, drawings, specifications, designs, business and marketing
plans, and customer and supplier lists and related information).
“Control”
(including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
“Escrow
Agent”
means
Xxxxxxx Xxxx, LLP.
“Escrow
Agreement”
means
the Escrow Agreement the Company, the Investors and the Escrow Agent will enter
into at the Closing, in substantially the form attached hereto as Exhibit
C.
“Interest”
means
interest at a rate of 8% per annum.
“Intellectual
Property”
means
all of the following: (i) patents, patent applications, patent disclosures
and
inventions (whether or not patentable and whether or not reduced to practice);
(ii) trademarks, service marks, trade dress, trade names, corporate names,
logos, slogans and Internet domain names, together with all goodwill associated
with each of the foregoing; (iii) copyrights and copyrightable works; (iv)
registrations, applications and renewals for any of the foregoing; and (v)
proprietary computer software (including but not limited to data, data bases
and
documentation).
“Loan
Amount”
means
a
minimum of $1,000,000 and a maximum of $3,000,000.
“Material
Adverse Effect”
means
a
material adverse effect on (i) the assets, liabilities, results of operations,
condition (financial or otherwise), business, or prospects of the Company and
its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform
its obligations under the Transaction Documents.
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“Notes”
means
the promissory notes purchased in connection with the Offering.
“Person”
means
an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority or any
other
form of entity not specifically listed herein.
“SEC
Filings”
has
the
meaning set forth in Section 4.6.
“Securities”
means
the Notes, the Warrants and the Warrant Shares.
“Subsidiary”
of
any
Person means another Person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if
there
are no such voting interests, 50% or more of the equity interests of which)
is
owned directly or indirectly by such first Person.
“Transaction
Documents”
means
this Agreement, the Notes, the Warrants, the Escrow Agreement, and certain
other
papers, agreements, documents, instruments and certificates necessary to carry
out the purposes thereof.
“Warrants”
means
the warrants to purchase shares of Common Stock to be purchased in connection
with the Offering.
“Warrant
Shares”
means
the shares of Common Stock issuable upon the exercise of the
Warrants.
“1933
Act”
has
the
meaning set forth in the Recitals above.
“1934
Act”
means
the Securities Exchange Act of 1934, as amended, or any successor statute,
and
the rules and regulations promulgated thereunder.
2. Purchase
and Sale of Notes and Warrants.
2.1 Purchase
and Sale. Subject
to the terms and conditions of this Agreement, on each Closing Date, the
applicable Investors shall severally, and not jointly, purchase, and the Company
shall sell and issue to such Investors, the Notes and Warrants in the respective
amounts set forth opposite the Investors’ names on the signature pages attached
hereto in exchange for each Investor’s pro rata share of the Loan Amount as
further set forth in Section 3 below; provided,
however,
that
not less than $1,000,000 and not more than $3,000,000 of Notes, in the
aggregate, shall be purchased in this Offering.
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3. Closing.
Each
Investor shall deliver, or cause to be delivered, their pro rata share of the
Loan Amount to the Escrow Agent, in immediately available funds, to be held
and
disbursed by the Escrow Agent as provided in the Escrow Agreement. The Escrow
Agent shall promptly notify the Company of its receipt of the Loan Amount from
any Investor and shall deposit such amount in an interest bearing account,
as
further set forth in the Escrow Agreement. Upon receipt by the escrow Agent
of
the Loan Amount from an Investor, the Company shall deliver Notes and Warrants
to the Escrow Agent to be held and disbursed by the Escrow Agent as provided
in
the Escrow Agreement. The Loan Amount, Notes and Warrants are hereafter referred
to collectively as, the “Escrow
Property”).
The
Escrow Agent shall hold the Escrow Property in accordance with the terms and
conditions of the Escrow Agreement. On the date (each a “Closing
Date”)
the
Escrow Agent receives instructions from the Company directing the manner in
which the Escrow Agent shall distribute the Escrow Property, and provided each
of the conditions set forth in Section 6 hereof have been satisfied or waived
by
the appropriate party or parties, the Escrow Property shall be released to
the
Investor(s) and the Company, as applicable (each, a “Closing”).
The
Closing(s) shall take place at the offices of Xxxxxxx Xxxx LLP, 0000 Xxxxxxxx,
00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, or at such other location and on such other date
as
the Company and the Investors shall mutually agree.
The
Company shall have the right to conduct multiple Closings; provided, however,
that (i) on the first Closing Date, which shall take place on or before June
15,
2008, the Company shall receive at least the Minimum Loan Amount, (ii) any
Investor making an investment in the Notes and Warrants shall become a party
to
this Agreement and the additional Transaction Documents, as applicable, (iii)
any additional Closing(s) shall occur on or prior to June 30, 2008, and (iv)
the
Company shall not have the right to receive an aggregate investment in
connection with this Offering of more than the Maximum Loan Amount.
4. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Investors that, except as set
forth in the schedules delivered herewith (collectively, the “Disclosure
Schedules”):
4.1 Organization,
Good Standing and Qualification.
Each of
the Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry
on
its business as now conducted and to own its properties. Each of the Company
and
its Subsidiaries is duly qualified to do business as a foreign corporation
and
is in good standing in each jurisdiction in which the conduct of its business
or
its ownership or leasing of property makes such qualification or leasing
necessary unless the failure to so qualify has not had and could not reasonably
be expected to have a Material Adverse Effect. The Company’s Subsidiaries are
listed on Schedule
4.1
hereto.
4.2 Authorization.
The
Company has full power and authority and,
except as described in Schedule
4.2,
has
taken
all requisite action on the part of the Company, its officers, directors and
stockholders necessary for (i) the authorization, execution and delivery of
the
Transaction Documents, (ii) the authorization of the performance of all
obligations of the Company hereunder or thereunder, and (iii) the authorization,
issuance (or reservation for issuance) and delivery of the
Securities.
The
Transaction Documents constitute the legal, valid and binding obligations of
the
Company, enforceable against the Company in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and
similar laws of general applicability, relating to or affecting creditors’
rights generally.
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4.3 Capitalization.
Schedule
4.3
sets
forth (a) the authorized capital stock of the Company on the date hereof; (b)
the number of shares of capital stock issued and outstanding; (c) the number
of
shares of capital stock issuable pursuant to the Company’s stock plans; and (d)
the number of shares of capital stock issuable and reserved for issuance
pursuant to securities (other than the Securities) exercisable for, or
convertible into or exchangeable for any shares of capital stock of the Company.
All of the issued and outstanding shares of the Company’s capital stock have
been duly authorized and validly issued and are fully paid, nonassessable and
free of pre-emptive rights and were issued in full compliance with applicable
state and federal securities law and any rights of third parties. Except as
described on Schedule
4.3,
all of
the issued and outstanding shares of capital stock of each Subsidiary have
been
duly authorized and validly issued and are fully paid, nonassessable and free
of
pre-emptive rights, were issued in full compliance with applicable state and
federal securities law and any rights of third parties and are owned by the
Company, beneficially and of record, subject to no lien, encumbrance or other
adverse claim. Except as described on Schedule
4.3,
no
Person is entitled to pre-emptive or similar statutory or contractual rights
with respect to any securities of the Company. Except as described on
Schedule
4.3,
there
are no outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any
of
its Subsidiaries is or may be obligated to issue any equity securities of any
kind and except as contemplated by this Agreement, neither the Company nor
any
of its Subsidiaries is currently in negotiations for the issuance of any equity
securities of any kind. Except as described on Schedule
4.3,
there
are no voting agreements, buy-sell agreements, option or right of first purchase
agreements or other agreements of any kind among the Company and any of the
securityholders of the Company relating to the securities of the Company held
by
them. Except as described on Schedule
4.3,
no
Person has the right to require the Company to register any securities of the
Company under the 1933 Act, whether on a demand basis or in connection with
the
registration of securities of the Company for its own account or for the account
of any other Person.
Except
as
described on Schedule
4.3,
the
issuance and sale of the Securities hereunder will not obligate the Company
to
issue shares of Common Stock or other securities to any other Person (other
than
the Investors) and will not result in the adjustment of the exercise,
conversion, exchange or reset price of any outstanding security.
Except
as
described on Schedule
4.3,
the
Company does not have outstanding stockholder purchase rights or “poison pill”
or any similar arrangement in effect giving any Person the right to purchase
any
equity interest in the Company upon the occurrence of certain
events.
4.4 Valid
Issuance.
The
Notes have been duly and validly authorized and shall be free and clear of
all
encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction Documents.
The
Warrants have been duly and validly authorized. Upon the due exercise of the
Warrants, the Warrant Shares will be validly issued, fully paid and
non-assessable free and clear of all encumbrances and restrictions, except
for
restrictions on transfer set forth in the Transaction Documents or imposed
by
applicable securities laws and except for those created by the Investors. The
Company has reserved a sufficient number of shares of Common Stock for issuance
upon the exercise of the Warrants, free and clear of all encumbrances and
restrictions, except for restrictions on transfer set forth in the Transaction
Documents or imposed by applicable securities laws and except for those created
by the Investors.
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4.5 Consents.
Except
as described in Schedule
4.5,
the
execution, delivery and performance by the Company of the Transaction Documents,
and the offer, issuance and sale of the Securities, require no consent of,
action by or in respect of, or filing with, any Person, governmental body,
agency, or official other than filings that have been made pursuant to
applicable state securities laws and post-sale filings pursuant to applicable
state and federal securities laws or any other notices required thereby, all
of
which the Company undertakes to file within the applicable time periods. Subject
to the accuracy of the representations and warranties of each Investor set
forth
in Section 5 hereof, the Company has taken all action necessary to exempt (i)
the issuance and sale of the Notes and Warrants, (ii) the issuance of the
Warrant Shares upon due exercise of the Warrants, and (iii) the other
transactions contemplated by the Transaction Documents from the provisions
of
any stockholder rights plan or other “poison pill” arrangement, any
anti-takeover, business combination or control share law or statute binding
on
the Company or to which the Company or any of its assets and properties may
be
subject and any provision of the Company’s Certificate of Incorporation, as
amended, or Bylaws that is or could reasonably be expected to become applicable
to the Investors as a result of the transactions contemplated hereby, including
without limitation, the issuance of the Securities and the ownership,
disposition or voting of the Securities by the Investors or the exercise of
any
right granted to the Investors pursuant to this Agreement or the other
Transaction Documents.
4.6 Delivery
of SEC Filings; Business.
The
Company has made available to the Investors through the XXXXX system, true
and
complete copies of the Company’s Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2007 (the “10-KSB”),
and
all other reports filed by the Company pursuant to the 1934 Act since the filing
of the 10-KSB and prior to the date hereof (collectively, the “SEC
Filings”).
Except as indicated in the SEC Filings, the SEC Filings are the only filings
required of the Company pursuant to the 1934 Act for such period. The Company
and its Subsidiaries are engaged in all material respects only in the business
described in the SEC Filings and the SEC Filings contain a complete and accurate
description in all material respects of the business of the Company and its
Subsidiaries, taken as a whole.
4.7 Use
of
Proceeds.
The net
proceeds from this Offering will be used primarily for: (a) construction of
a
new production facility, (b) expenses related to the Offering, and (c) general
working capital purposes.
4.8 No
Material Adverse Change.
Since
March 31, 2008, except as identified and described on Schedule
4.8,
there
has not been:
(a) any
change in the consolidated assets, liabilities, financial condition or operating
results of the Company from that reflected in the financial statements included
in the Company’s Quarterly Report of Form 10-Q for the fiscal quarter ended
March 31, 2008, except for changes in the ordinary course of business which
have
not had and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate;
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(b) any
declaration or payment of any dividend, or any authorization or payment of
any
distribution, on any of the capital stock of the Company, or any redemption
or
repurchase of any securities of the Company;
(c) any
material damage, destruction or loss, whether or not covered by insurance to
any
assets or properties of the Company or its Subsidiaries;
(d) any
waiver, not in the ordinary course of business, by the Company or any Subsidiary
of a material right or of a material debt owed to it;
(e) any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or a Subsidiary, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results or business of the Company and its Subsidiaries
taken as a whole (as such business is presently conducted and as it is proposed
to be conducted);
(f) any
change or amendment to the Company’s Certificate of Incorporation, as amended,
or Bylaws, or material change to any material contract or arrangement by which
the Company or any Subsidiary is bound or to which any of their respective
assets or properties is subject;
(g) any
material labor difficulties or labor union organizing activities with respect
to
employees of the Company or any Subsidiary;
(h) any
material transaction entered into by the Company or a Subsidiary other than
in
the ordinary course of business;
(i) the
loss
of the services of any key employee, or material change in the composition
or
duties of the senior management of the Company or any Subsidiary;
(j) the
loss
or threatened loss of any customer which has had or could reasonably be expected
to have a Material Adverse Effect; or
(k) any
other
event or condition of any character that has had or could reasonably be expected
to have a Material Adverse Effect.
4.9 SEC
Filings.
(a) At
the
time of filing thereof, the SEC Filings complied as to form in all material
respects with the requirements of the 1934 Act and did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
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(b) To
the
Company’s Knowledge, each registration statement and any amendment thereto filed
by the Company pursuant to the 1933 Act and/or 1934 Act, and the rules and
regulations thereunder, as of the date such statement or amendment became
effective, complied as to form in all material respects with the 1933 Act and/or
1934 Act, and did not contain any untrue statement of a material fact or omit
to
state any material fact required to be stated therein or necessary in order
to
make the statements made therein not misleading; and each prospectus filed
pursuant to Rule 424(b) under the 1933 Act, as of its issue date and as of
the
closing of any sale of securities pursuant thereto did not contain any untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary in order to make the statements made therein, in
the
light of the circumstances under which they were made, not
misleading.
4.10 No
Conflict, Breach, Violation or Default.
The
execution, delivery and performance of the Transaction Documents by the Company
and the issuance and sale of the Securities will not conflict with or result
in
a breach or violation of any of the terms and provisions of, or constitute
a
default under (i) the Company’s Certificate of Incorporation, as amended, or the
Company’s Bylaws, both as in effect on the date hereof (true and complete copies
of which have been made available to the Investors), or (ii)(a) any statute,
rule, regulation or order of any governmental agency or body or any court,
domestic or foreign, having jurisdiction over the Company, any Subsidiary or
any
of their respective assets or properties, or (b) any agreement or instrument
to
which the Company or any Subsidiary is a party or by which the Company or a
Subsidiary is bound or to which any of their respective assets or properties
is
subject.
4.11 Tax
Matters.
The
Company and each Subsidiary has timely prepared and filed all tax returns
required to have been filed by the Company or such Subsidiary with all
appropriate governmental agencies and timely paid all taxes shown thereon or
otherwise owed by it. The charges, accruals and reserves on the books of the
Company in respect of taxes for all fiscal periods are adequate in all material
respects, and there are no material unpaid assessments against the Company
or
any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of
any additional taxes, penalties or interest for any fiscal period or audits
by
any federal, state or local taxing authority except for any assessment which
is
not material to the Company and its Subsidiaries, taken as a whole. All taxes
and other assessments and levies that the Company or any Subsidiary is required
to withhold or to collect for payment have been duly withheld and collected
and
paid to the proper governmental entity or third party when due. There are no
tax
liens or claims pending or, to the Company’s Knowledge, threatened against the
Company or any Subsidiary or any of their respective assets or property. Except
as described on Schedule
4.11,
there
are no outstanding tax sharing agreements or other such arrangements between
the
Company and any Subsidiary or other corporation or entity.
4.12 Title
to Properties.
Except
as disclosed in Schedule
4.12,
the
Company and each Subsidiary has good and marketable title to all real properties
and all other properties and assets owned by it, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in Schedule
4.12,
the
Company and each Subsidiary holds any leased real or personal property under
valid and enforceable leases with no exceptions that would materially interfere
with the use made or currently planned to be made thereof by them.
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4.13 Certificates,
Authorities and Permits.
The
Company and each Subsidiary possess adequate certificates, authorities or
permits issued by appropriate governmental agencies or bodies necessary to
conduct the business now operated by it, and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation
or
modification of any such certificate, authority or permit that, if determined
adversely to the Company or such Subsidiary, could reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate.
4.14 Labor
Matters.
(a) Except
as set forth on Schedule
4.14,
the Company is not a party to or bound by any collective bargaining agreements
or other agreements with labor organizations. The Company has not violated
in
any material respect any laws, regulations, orders or contract terms, affecting
the collective bargaining rights of employees, labor organizations or any laws,
regulations or orders affecting employment discrimination, equal opportunity
employment, or employees’ health, safety, welfare, wages and hours.
(b) (i)
There are no labor disputes existing, or to the Company’s Knowledge, threatened,
involving strikes, slow-downs, work stoppages, job actions, disputes, lockouts
or any other disruptions of or by the Company’s employees, (ii) there are no
unfair labor practices or petitions for election pending or, to the Company’s
Knowledge, threatened before any governmental agency or labor commission
relating to the Company’s employees, (iii) no demand for recognition or
certification heretofore made by any labor organization or group of employees
is
pending with respect to the Company, and (iv) to the Company’s Knowledge, the
Company enjoys good labor and employee relations with its employees and labor
organizations.
(c) The
Company is, and at all times has been, in compliance in all material respects
with all applicable laws respecting employment (including laws relating to
classification of employees and independent contractors) and employment
practices, terms and conditions of employment, wages and hours, and immigration
and naturalization.
(d) Except
as disclosed in the SEC Filings or as described on Schedule
4.14,
the Company is not a party to, or bound by, any employment or other contract
or
agreement that contains any severance, termination pay or change of control
liability or obligation, including, without limitation, any “excess parachute
payment,” as defined in Section 2806(b) of the Internal Revenue
Code.
(e) Except
as specified in Schedule
4.14,
to the Company’s Knowledge, none of the Company’s employees is a Person who is
either a United States citizen or a permanent resident entitled to work in
the
United States. To the Company’s Knowledge, the Company has no liability for the
improper classification by the Company of such employees as independent
contractors or leased employees prior to the Closing.
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4.15 Intellectual
Property. Except
as
specified in Schedule
4.15:
(a) All
Intellectual Property of the Company and its Subsidiaries is currently in
compliance with all legal requirements (including timely filings, proofs and
payments of fees) and is valid and enforceable. No Intellectual Property of
the
Company or its Subsidiaries which is necessary for the conduct of Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted has been or is now involved in any
cancellation, dispute or litigation, and, to the Company’s Knowledge, no such
action is threatened. No patent of the Company or its Subsidiaries has been
or
is now involved in any interference, reissue, re-examination or opposition
proceeding.
(b) All
of
the licenses and sublicenses and consent, royalty or other agreements concerning
Intellectual Property which are necessary for the conduct of the Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted to which the Company or any Subsidiary is
a
party or by which any of their assets are bound (other than generally
commercially available, non-custom, off-the-shelf software application programs
having a retail acquisition price of less than $10,000 per license)
(collectively, “License
Agreements”)
are
valid and binding obligations of the Company or its Subsidiaries that are
parties thereto and, to the Company’s Knowledge, the other parties thereto,
enforceable in accordance with their terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting the
enforcement of creditors’ rights generally, and there exists no event or
condition which will result in a material violation or breach of or constitute
(with or without due notice or lapse of time or both) a default by the Company
or any of its Subsidiaries under any such License Agreement.
(c) The
Company and its Subsidiaries own or have the valid right to use all of the
Intellectual Property that is necessary for the conduct of the Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted and for the ownership, maintenance and
operation of the Company’s and its Subsidiaries’ properties and assets, free and
clear of all liens, encumbrances, adverse claims or obligations to license
all
such owned Intellectual Property and Confidential Information, other than
licenses entered into in the ordinary course of the Company’s and its
Subsidiaries’ businesses. The Company and its Subsidiaries have a valid and
enforceable right to use all third party Intellectual Property and Confidential
Information used or held for use in the respective businesses of the Company
and
its Subsidiaries.
(d) To
the
Company’s Knowledge, the conduct of the Company’s and its Subsidiaries’
businesses as currently conducted does not infringe or otherwise impair or
conflict with (collectively, “Infringe”)
any
Intellectual Property rights of any third party or any confidentiality
obligation owed to a third party, and, to the Company’s Knowledge, the
Intellectual Property and Confidential Information of the Company and its
Subsidiaries which are necessary for the conduct of Company’s and each of its
Subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted are not being Infringed by any third party. There
is no
litigation or order pending or outstanding or, to the Company’s Knowledge,
threatened or imminent, that seeks to limit or challenge or that concerns the
ownership, use, validity or enforceability of any Intellectual Property or
Confidential Information of the Company and its Subsidiaries and the Company’s
and its Subsidiaries’ use of any Intellectual Property or Confidential
Information owned by a third party, and, to the Company’s Knowledge, there is no
valid basis for the same.
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(e) The
consummation of the transactions contemplated hereby and by the other
Transaction Documents will not result in the alteration, loss, impairment of
or
restriction on the Company’s or any of its Subsidiaries’ ownership or right to
use any of the Intellectual Property or Confidential Information which is
necessary for the conduct of Company’s and each of its Subsidiaries’ respective
businesses as currently conducted or as currently proposed to be
conducted.
(f) The
Company and its Subsidiaries have taken reasonable steps to protect the
Company’s and its Subsidiaries’ rights in their Intellectual Property and
Confidential Information. Each employee, consultant and contractor who has
had
access to Confidential Information which is necessary for the conduct of
Company’s and each of its Subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted has executed an agreement
to
maintain the confidentiality of such Confidential Information and has executed
appropriate agreements that are substantially consistent with the Company’s
standard forms thereof, except where the failure to do so has not had and could
not reasonably be expected to have a Material Adverse Effect, individually
or in
the aggregate. Except under confidentiality obligations, there has been no
material disclosure of any of the Company’s or its Subsidiaries’ Confidential
Information to any third party.
4.16 Environmental
Matters.
Except
as specified in Schedule
4.16,
to the
Company’s Knowledge, neither the Company nor any Subsidiary (i) is in violation
of any statute, rule, regulation, decision or order of any governmental agency
or body or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, “Environmental
Laws”),
(ii)
owns or operates any real property contaminated with any substance that is
subject to any Environmental Laws, (iii) is liable for any off-site disposal
or
contamination pursuant to any Environmental Laws, or (iv) is subject to any
claim relating to any Environmental Laws, which violation, contamination,
liability or claim has had or could reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate; and there is no pending or,
to
the Company’s Knowledge, threatened investigation that might lead to such a
claim.
4.17 Litigation.
Except
as described on Schedule
4.17,
there
are no pending actions, suits or proceedings against or affecting the Company,
its Subsidiaries or any of its or their properties; and to the Company’s
Knowledge, no such actions, suits or proceedings are threatened or
contemplated.
4.18 Financial
Statements.
The
financial statements included in each SEC Filing present fairly, in all material
respects, the consolidated financial position of the Company as of the dates
shown and its consolidated results of operations and cash flows for the periods
shown, and such financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a consistent
basis (“GAAP”)
(except as may be disclosed therein or in the notes thereto, and, in the case
of
quarterly financial statements, as permitted by Form 10-QSB under the 1934
Act).
Except as set forth in the financial statements of the Company included in
the
SEC Filings filed prior to the date hereof or as described on Schedule
4.18,
neither
the Company nor any of its Subsidiaries has incurred any liabilities, contingent
or otherwise, except those incurred in the ordinary course of business,
consistent (as to amount and nature) with past practices since the date of
such
financial statements, none of which, individually or in the aggregate, have
had
or could reasonably be expected to have a Material Adverse Effect.
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4.19 Insurance
Coverage.
Except
as set forth on Schedule
4.19,
the
Company and each Subsidiary maintains in full force and effect insurance
coverage that is customary for comparably situated companies for the business
being conducted and properties owned or leased by the Company and each
Subsidiary, and the Company reasonably believes such insurance coverage to
be
adequate against all liabilities, claims and risks against which it is customary
for comparably situated companies to insure.
4.20 Brokers
and Finders.
No
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company, other than as described in Schedule
4.20.
4.21 No
Directed Selling Efforts or General Solicitation.
Neither
the Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation
D) in
connection with the offer or sale of any of the Securities.
4.22 No
Integrated Offering.
Neither
the Company nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any Company
security or solicited any offers to buy any security, under circumstances that
would adversely affect reliance by the Company on Section 4(2) for the exemption
from registration for the transactions contemplated hereby or would require
registration of the Securities under the 1933 Act.
4.23 Private
Placement.
The
offer and sale of the Securities to the Investors as contemplated hereby is
exempt from the registration requirements of the 1933 Act.
4.24 Questionable
Payments.
Neither
the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of
their respective current or former stockholders, directors, officers, employees,
agents or other Persons acting on behalf of the Company or any Subsidiary,
has
on behalf of the Company or any Subsidiary or in connection with their
respective businesses: (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity;
(b) made any direct or indirect unlawful payments to any governmental officials
or employees from corporate funds; (c) established or maintained any unlawful
or
unrecorded fund of corporate monies or other assets; (d) made any false or
fictitious entries on the books and records of the Company or any Subsidiary;
(e) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature; or (f) taken any actions that would
violate the U.S. Foreign Corrupt Practices Act of 1977, as amended.
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4.25 Transactions
with Affiliates.
Except
as disclosed in the SEC Filings or as disclosed on Schedule
4.25,
none of
the officers or directors of the Company and, to the Company’s Knowledge, none
of the employees of the Company is presently a party to any transaction with
the
Company or any Subsidiary (other than as holders of stock options and/or
warrants, and 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 Company’s Knowledge, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
4.26 Internal
Controls.
Except
as set forth in the SEC Filings, the Company is
in material compliance with the provisions of the Xxxxxxxx-Xxxxx Act of 2002
currently applicable to the Company. The Company and
the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared
with
the existing assets at reasonable intervals and appropriate action is taken
with
respect to any differences. The Company has established disclosure controls
and
procedures (as defined in 1934 Act Rules 13a-14 and 15d-14) for the Company
and
designed such disclosure controls and procedures to ensure that material
information relating to the Company, including the Subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company’s most recently filed periodic report under the
1934 Act, as the case may be, is being prepared. The Company’s certifying
officers have evaluated the effectiveness of the Company's controls and
procedures as of the end of the period covered by the most recently filed
periodic report under the 1934 Act (such date, the “Evaluation
Date”).
The
Company presented in its most recently filed periodic report under the 1934
Act
the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls (as such term is defined in Item 308
of Regulation S-B) or, to the Company’s Knowledge, in other factors that could
significantly affect the Company’s internal controls. The Company maintains and
will continue to maintain a standard system of accounting established and
administered in accordance with GAAP and the applicable requirements of the
0000
Xxx.
4.27 Disclosures.
Neither
the Company nor any Person acting on its behalf has provided the Investors
or
their agents or counsel with any information that constitutes or might
constitute material, non-public information. The written materials delivered
to
the Investors in connection with the transactions contemplated by the
Transaction Documents do not contain any untrue statement of a material fact
or
omit to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made,
not
misleading.
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5. Representations
and Warranties of the Investors.
Each of
the Investors hereby severally, and not jointly, represents and warrants to
the
Company that:
5.1 Organization
and Existence.
Such
Investor is an individual or a validly existing corporation, limited
partnership, or limited liability company and has all requisite individual,
corporate, partnership or limited liability company power and authority to
invest in the Securities pursuant to this Agreement.
5.2 Authorization.
The
execution, delivery and performance by such Investor of the Transaction
Documents to which such Investor is a party have been duly authorized and will
each constitute the valid and legally binding obligation of such Investor,
enforceable against such Investor in accordance with their respective terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability, relating to or affecting
creditors’ rights generally.
5.3 Purchase
Entirely for Own Account.
The
Securities to be received by such Investor hereunder will be acquired for such
Investor’s own account, not as nominee or agent, and not with a view to the
resale or distribution of any part thereof in violation of the 1933 Act, and
such Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same in violation of the 1933 Act
without prejudice, however, to such Investor’s right at all times to sell or
otherwise dispose of all or any part of such Securities in compliance with
applicable federal and state securities laws.
Nothing
contained herein shall be deemed a representation or warranty by such Investor
to hold the Securities for any period of time. Such
Investor
is not a broker-dealer registered with the SEC under the 1934 Act or an entity
engaged in a business that would require it to be so registered.
5.4 Investment
Experience.
Such
Investor acknowledges that it can bear the economic risk and complete loss
of
its investment in the Securities and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment contemplated hereby.
5.5 Disclosure
of Information.
Such
Investor has had an opportunity to receive all information related to the
Company requested by it and to ask questions of and receive answers from the
Company regarding the Company, its business and the terms and conditions of
the
offering of the Securities. Such Investor acknowledges receipt of copies of
the
SEC Filings. Neither such inquiries nor any other due diligence investigation
conducted by such Investor shall modify, amend or affect such Investor’s right
to rely on the Company’s representations and warranties contained in this
Agreement.
5.6 Restricted
Securities.
Such
Investor understands that the Securities are characterized as “restricted
securities” under the U.S. federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and
that under such laws and applicable regulations such securities may be resold
without registration under the 1933 Act only in certain limited
circumstances.
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14 -
5.7 Legends.
It is
understood that, except as provided below, certificates evidencing the
Securities may bear the following or any similar legend:
(a) “The
securities represented hereby may not be transferred unless (i) such securities
have been registered for sale pursuant to the 1933 Act, as amended, or (ii)
the
Company has received an opinion of counsel reasonably satisfactory to it that
such transfer may lawfully be made without registration under the 1933 Act,
as
amended, or qualification under applicable state securities laws.”
(b) If
required by the authorities of any state in connection with the issuance of
sale
of the Securities, the legend required by such state authority.
5.8 Accredited
Investor.
Such
Investor is an “accredited investor” within the meaning of Rule 501(a) of
Regulation D promulgated under the 1933 Act for the reasons checked on
Schedule
1
hereto,
and would be considered either (a) a large institutional accredited investor,
or
(b) a "qualified institutional buyer" under Rule 144A under the 1933
Act.
5.9 No
General Solicitation.
Such
Investor did not learn of the investment in the Securities as a result of any
public advertising or general solicitation.
5.10 Brokers
and Finders.
No
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of such Investor, other than as described on Schedule
5.10.
5.11 Prohibited
Transactions.
During
the last thirty (30) days prior to the date hereof, neither such Investor nor
any Affiliate of such Investor which (x) had knowledge of the transactions
contemplated hereby, (y) has or shares discretion relating to such Investor’s
investments or trading or information concerning such Investor’s investments,
including in respect of the Securities, or (z) is subject to such Investor’s
review or input concerning such Affiliate’s investments or trading
(collectively, “Trading
Affiliates”)
has,
directly or indirectly, effected or agreed to effect any short sale, whether
or
not against the box, established any “put equivalent position” (as defined in
Rule 16a-1(h) under the 0000 Xxx) with respect to the Common Stock, granted
any
other right (including, without limitation, any put or call option) with respect
to the Common Stock or with respect to any security that includes, relates
to or
derived any significant part of its value from the Common Stock or otherwise
sought to hedge its position in the Securities (each, a “Prohibited
Transaction”).
Prior
to the latest to occur of (i) the termination of this Agreement, (ii) the
Company’s exercise of the Call Option (as defined in Section 18 of the
Warrants), or (iii) the conclusion of the Effectiveness Period (as defined
in
Section 2 of the Registration Rights Agreement), such Investor shall not, and
shall cause its Trading Affiliates not to, engage, directly or indirectly,
in a
Prohibited Transaction. Such Investor acknowledges that the representations,
warranties and covenants contained in this Section 5.11 are being made for
the
benefit of the Investors as well as the Company and that each of the other
Investors shall have an independent right to assert any claims against such
Investor arising out of any breach or violation of the provisions of this
Section 5.11.
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15 -
5.12 Reliance
on Exemptions.
Such
Investor understands that the Securities are being offered and sold to it in
reliance upon specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and such Investor’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
such Investor set forth herein in order to determine the availability of such
exemptions and the eligibility of such Investor to acquire the
Securities.
6.
Conditions
to Closing.
6.1 Conditions
to the Investors’ Obligations.
The
obligation of each Investor to purchase the Notes and the Warrants at the
Closing is subject to the fulfillment to such Investor’s satisfaction, on or
prior to the Closing Date, of the following conditions, any of which may be
waived by such Investor (as to itself only):
(a) The
representations and warranties made by the Company in Section 4 hereof qualified
as to materiality shall be true and correct at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly
speaks as of a specific date, in which case such representation or warranty
shall be true and correct as of such date, and, the representations and
warranties made by the Company in Section 4 hereof not qualified as to
materiality shall be true and correct in all material respects at all times
prior to and on the Closing Date, except to the extent any such representation
or warranty expressly speaks as of a specific date, in which case such
representation or warranty shall be true and correct in all material respects
as
of such specific date.
(b) The
Company shall have performed in all material respects all obligations and
covenants herein required to be performed by it on or prior to the Closing
Date.
(c) The
Company shall have obtained any and all consents, permits, approvals,
registrations and waivers necessary
or appropriate for consummation of the purchase and sale of the Notes and the
Warrants and the consummation of the other transactions contemplated by the
Transaction Documents to be consummated on or prior to the Closing Date, all
of
which shall be in full force and effect.
(d) The
Company shall have executed and delivered the Warrants.
(e) The
Company and the Escrow Agent shall have executed and delivered the Escrow
Agreement.
(f) No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order
of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in
the
other Transaction Documents.
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(g) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Chief Executive Officer or its Chief Financial Officer, dated as of the
Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a), (b) and (c) of this Section 6.1.
(h) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Secretary, dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the other Transaction Documents and the issuance of the
Securities, certifying the current versions of the Certificate of Incorporation,
as amended, and Bylaws of the Company and certifying as to the signatures and
authority of persons signing the Transaction Documents and related documents
on
behalf of the Company.
(i) The
Investors shall have received an opinion from Xxxxxxx Xxxx LLP, the Company’s
counsel, dated as of the Closing Date, in form and substance reasonably
acceptable to the Investors and addressing such legal matters as the Investors
may reasonably request.
(j) No
stop
order or suspension of trading shall have been imposed by the SEC or any other
governmental or regulatory body with respect to public trading in the Common
Stock.
(k) The
Company shall have received not less than $1,000,000, or greater than
$3,000,000, in the aggregate.
6.2 Conditions
to Obligations of the Company.
The
Company’s obligation to sell and issue the Notes and the Warrants at the Closing
is subject to the fulfillment to the satisfaction of the Company on or prior
to
the Closing Date of the following conditions, any of which may be waived by
the
Company:
(a) The
representations and warranties made by the Investors in Section 5 hereof, other
than the representations and warranties contained in Sections 5.3, 5.4, 5.5,
5.6, 5.7, 5.8 and 5.9 (the “Investment
Representations”),
shall
be true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date. The Investment
Representations shall be true and correct in all respects when made, and shall
be true and correct in all respects on the Closing Date with the same force
and
effect as if they had been made on and as of said date. The Investors shall
have
performed in all material respects all obligations and covenants herein required
to be performed by them on or prior to the Closing Date.
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17 -
(b) The
Investors and the Escrow Agent shall have executed and delivered the Escrow
Agreement.
(c) No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order
of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in
the
other Transaction Documents.
(g) The
Company shall have received not less than $1,000,000, or greater than
$3,000,000, in the aggregate.
6.3 Termination
of Obligations to Effect Closing; Effects.
(a) The
outstanding obligations of the Company, on the one hand, and the Investors,
on
the other hand, to effect the Closing shall terminate as follows:
(i) Upon
the
mutual written consent of the Company and the Investors;
(ii) By
the
Company if any of the conditions set forth in Section 6.2 shall have become
incapable of fulfillment, and shall not have been waived by the
Company;
(iii) By
an
Investor (with respect to itself only) if any of the conditions set forth in
Section 6.1 shall have become incapable of fulfillment, and shall not have
been
waived by the Investor;
(iv) By
the
Company if the Closing of the sale of the Minimum Units has not occurred on
or
prior to June 15, 2008;
(v) Automatically,
with respect to any Notes and Warrants not previously sold, on June 30,
2008.
provided,
however,
that,
except in the case of clause (i) above, the party seeking to terminate its
obligation to effect the Closing shall not then be in breach of any of its
representations, warranties, covenants or agreements contained in this Agreement
or the other Transaction Documents if such breach has resulted in the
circumstances giving rise to such party’s seeking to terminate its obligation to
effect the Closing.
(b) In
the
event of termination by any Investor of its obligations to effect the Closing
pursuant to this Section 6.3, written notice thereof shall forthwith be given
to
the other Investors and the other Investors shall have the right to terminate
their obligations to effect such Closing upon written notice to the Company
and
the other Investors. Nothing in this Section 6.3 shall be deemed to release
any
party from any liability for any breach by such party of the terms and
provisions of this Agreement or the other Transaction Documents or to impair
the
right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction
Documents.
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18 -
7. Covenants
and Agreements of the Company.
7.1 Reservation
of Common Stock.
The
Company shall at all times reserve and keep available out of its authorized
but
unissued shares of Common Stock, solely for the purpose of providing for the
exercise of the Warrants, such number of shares of Common Stock as shall from
time to time equal the Warrant Shares issuable from time to time.
7.2 Reports.
The
Company will furnish to the Investors and/or their assignees such information
relating to the Company and its Subsidiaries as from time to time may reasonably
be requested by the Investors and/or their assignees; provided, however, that
the Company shall not disclose material nonpublic information to the Investors,
or to advisors to or representatives of the Investors, unless prior to
disclosure of such information the Company identifies such information as being
material nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and any Investor wishing to obtain such
information enters into an appropriate confidentiality agreement with the
Company with respect thereto.
7.3 No
Conflicting Agreements.
The
Company will not take any action, enter into any agreement or make any
commitment that would conflict or interfere in any material respect with the
Company’s obligations to the Investors under the Transaction
Documents.
7.4 Insurance.
The
Company shall not materially reduce the insurance coverages described in Section
4.19.
7.5 Compliance
with Laws.
The
Company will comply in all material respects with all applicable laws, rules,
regulations, orders and decrees of all governmental authorities.
7.6 Listing
of Underlying Shares and Related Matters.
If the
Company applies to have its Common Stock or other securities traded on any
stock
exchange or market, it shall include in such application the Warrant Shares
and
will take such other action as is necessary to cause such Common Stock to be
so
listed. Thereafter, the Company will use commercially reasonable efforts to
continue the listing and trading of its Common Stock on such exchange or market
and, in accordance, therewith, will use commercially reasonable efforts to
comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of such exchange or market, as
applicable.
7.7 Registration
Rights.
(a) Piggyback
Registration Rights.
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19 -
(i) Each
holder of Warrants or Warrant Shares is hereby granted the right to “piggyback”
the Warrant Shares issuable and/or issued upon exercise of the Warrants (such
shares being referred to herein as “Registrable
Securities”)
on
each registration statement filed by the Company so long as the registration
form to be used is suitable for the registration of the Registrable Securities
(a “Piggyback
Registration”)
(it
being understood that the Form S-8 and Form S-4 may not be used for such
purposes), all at the Company’s cost and expense (except commissions or
discounts and fees of any of the holders’ own professionals, if any; it being
understood that the Company shall not be obligated to pay the fees of more
than
one counsel for the holders of the Registrable Securities); provided,
however,
that
this paragraph (i) shall not apply to any Registrable Securities if such
Registrable Securities may then be sold within a six (6) month period under
Rule
144 (assuming the holder’s compliance with the provisions of the Rule) and the
Company delivers an opinion to that effect to the transfer agent; and provided,
further, that
if
the offering with respect to which a registration statement is filed is an
underwritten primary or secondary offering of the Company’s securities and the
managing underwriter advises the Company in writing that in its opinion the
number of securities requested to be included in such registration exceeds
the
number that can be sold in such offering without adversely affecting such
underwriter’s ability to effect an orderly distribution of such securities or
otherwise adversely effecting such offering (including, without limitation,
causing a diminution in the offering price of the Company’s securities) the
Company will include in such registration statement: (A) first, the securities
being sold for the account of the Company; (B) second, the number of securities
with respect to which the Company has granted rights to participate in such
registration (including the Registrable Securities) that, in the opinion of
such
underwriter, can be sold pro rata among the respective holders of such
securities on the basis of the amount of such securities then owned by each
such
holder. The Company shall give each holder of Registrable Securities at least
fifteen (15) days written notice of the intended filing date of any registration
statement, other than a registration statement filed on Form S-4 or Form S-8
and
each holder of Registrable Securities shall have seven (7) days after receipt
of
such notice to notify the Company of its intent to include the Registrable
Securities in the registration statement.
(ii) If,
at
any time after giving written notice of its intention to register any securities
and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may,
at
its election, give written notice of such determination to all holders of the
Registrable Securities and (A) in the case of a determination not to register,
shall be relieved of its obligation to register any Registrable Securities
in
connection with such abandoned registration and (B) in the case of a
determination to delay such registration of its securities, shall be permitted
to delay the registration of such Registrable Securities for the same period
as
the delay in registering such other Company securities.
(b) Expenses.
The
Company shall bear all fees and expenses attendant to registering the
Registrable Securities (except any underwriters’ discounts and commissions and
fees of any of the holders’ own professionals, if any; it being understood that
the Company shall not be obligated to pay the fees of more than one counsel
for
the holders of the Registrable Securities). The Company agrees to use its best
efforts to cause the filing required herein to become effective promptly and
to
qualify to register the Registrable Securities in such States as are reasonably
requested by the holder(s); provided,
however,
that in
no event shall the Company be required to register the Registrable Securities
in
a State in which such registration would cause (i) the Company to be obligated
to register or license to do business in such State, or (ii) the principal
stockholders of the Company to be obligated to escrow any of their shares of
capital stock of the Company.
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(c) Indemnification.
The
Company shall indemnify and hold harmless each holder of the Registrable
Securities to be sold pursuant to any Registration Statement hereunder and
each
of such holder’s officers, directors, employees, agents, partners, legal counsel
and accountants, and each person, if any, who controls each of the foregoing
within the meaning of Section 15 of the Securities Act or Section 20(a) of
the
1934 Act, as amended, against all loss, claim, damage, expense or liability
(including all reasonable attorneys’ fees and other expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever incurred
by the indemnified party in any action or proceeding between the indemnitor
and
indemnified party or between the indemnified party and any third party or
otherwise) to which any of them may become subject under the Securities Act,
the
Exchange Act or any other statute or at common law or otherwise under laws
of
foreign countries, arising from such registration statement or based upon any
untrue statement or alleged untrue statement of a material fact contained in
(i)
any preliminary prospectus, registration statement or prospectus (as from time
to time each may be amended and supplemented); (ii) in any post-effective
amendment or amendments or any new registration statement and prospectus in
which is included the Registrable Securities; or (iii) any application or other
document or written communication (collectively called “application”)
executed by the Company or based upon written information furnished by the
Company in any jurisdiction in order to qualify the Registrable Securities
under
the securities laws thereof or filed with the commission, any state securities
commission or agency, Nasdaq or any securities exchange; or the omission or
alleged omission therefrom of 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; unless such statement or omission is
made
in reliance upon, and in strict conformity with, written information furnished
to the Company with respect to the holders expressly for use in a preliminary
prospectus, registration statement or prospectus, or any amendment or supplement
thereof, or in any application, as the case may be. The Company agrees promptly
to notify the holders of the Registrable Securities of the commencement of
any
litigation proceedings against the Company or any of its officers, directors
or
controlling persons in connection with the issue and sale or resale of the
Registrable Securities or in connection with any such registration statement
or
prospectus.
8. Survival
and Indemnification.
8.1 Survival.
The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing of the transactions contemplated by this
Agreement.
8.2 Indemnification.
The
Company agrees to indemnify and hold harmless each Investor and its Affiliates
and their respective directors, officers, employees and agents from and against
any and all losses, claims, damages, liabilities and expenses (including without
limitation reasonable attorney fees and disbursements and other expenses
incurred in connection with investigating, preparing or defending any action,
claim or proceeding, pending or threatened and the costs of enforcement thereof)
(collectively, “Losses”)
to
which such Person may become subject as a result of any breach of
representation, warranty, covenant or agreement made by or to be performed
on
the part of the Company under the Transaction Documents, and will reimburse
any
such Person for all such amounts as they are incurred by such
Person.
-
21 -
8.3 Conduct
of Indemnification Proceedings.
Promptly
after receipt by any Person (the “Indemnified
Person”)
of
notice of any demand, claim or circumstances which would or might give rise
to a
claim or the commencement of any action, proceeding or investigation in respect
of which indemnity may be sought pursuant to Section 8.2, such Indemnified
Person shall promptly notify the Company in writing and the Company shall assume
the defense thereof, including the employment of counsel reasonably satisfactory
to such Indemnified Person, and shall assume the payment of all fees and
expenses; provided,
however, that
the
failure of any Indemnified Person so to notify the Company shall not relieve
the
Company of its obligations hereunder except to the extent that the Company
is
materially prejudiced by such failure to notify. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the
fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless: (i) the Company and the Indemnified Person shall have mutually agreed
to
the retention of such counsel; or (ii) in the reasonable judgment of counsel
to
such Indemnified Person representation of both parties by the same counsel
would
be inappropriate due to actual or potential differing interests between them.
The Company shall not be liable for any settlement of any proceeding effected
without its written consent, which consent shall not be unreasonably withheld,
but if settled with such consent, or if there be a final judgment for the
plaintiff, the Company shall indemnify and hold harmless such Indemnified Person
from and against any loss or liability (to the extent stated above) by reason
of
such settlement or judgment. Without the prior written consent of the
Indemnified Person, which consent shall not be unreasonably withheld, the
Company shall not effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability arising out of such proceeding.
9. Miscellaneous.
9.1 Successors
and Assigns.
This
Agreement may not be assigned by a party hereto without the prior written
consent of the Company or the Investors, as applicable, provided, however,
that
an Investor may assign its rights and delegate its duties hereunder in whole
or
in part to an Affiliate or to a third party acquiring some or all of its
Securities in a private transaction without the prior written consent of the
Company or the other Investors, after notice duly given by such Investor to
the
Company provided, that no such assignment or obligation shall affect the
obligations of such Investor hereunder. The provisions of this Agreement shall
inure to the benefit of and be binding upon the respective permitted successors
and assigns of the parties. Nothing in this Agreement, express or implied,
is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
-
22 -
9.2 Counterparts;
Faxes.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. This Agreement may also be executed via facsimile, which shall
be
deemed an original.
9.3 Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
9.4 Notices.
Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by telex or telecopier, then such notice
shall be deemed given upon receipt of confirmation of complete transmittal,
(iii) if given by mail, then such notice shall be deemed given upon the earlier
of (A) receipt of such notice by the recipient or (B) three days after such
notice is deposited in first class mail, postage prepaid, and (iv) if given
by
an internationally recognized overnight air courier, then such notice shall
be
deemed given one Business Day after delivery to such carrier. All notices shall
be addressed to the party to be notified at the address as follows, or at such
other address as such party may designate by ten days’ advance written notice to
the other party:
If
to the
Company:
00000
Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
|
Attn:
|
Xxx
Xxxxxx, Chief Financial Officer
|
|
Fax:
|
(000)
000-0000
|
With
a
copy to:
Xxxxxxx
Xxxx LLP
0000
Xxxxxxxx, 00xx Xxxxx
Xxx
Xxxx,
XX 00000
|
Attn:
|
Xxxxxxx
X. Xxxxx, Esq.
|
|
Fax:
|
(000)
000-0000
|
If
to the
Investors:
to
the
addresses set forth on the signature pages hereto.
9.5 Expenses.
The
parties hereto shall pay their own costs and expenses in connection herewith.
In
the event that legal proceedings are commenced by any party to this Agreement
against another party to this Agreement in connection with this Agreement or
the
other Transaction Documents, the party or parties which do not prevail in such
proceedings shall severally, but not jointly, pay their pro rata share of the
reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses
incurred by the prevailing party in such proceedings.
-
23 -
9.6 Amendments
and Waivers.
Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Investors. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any Securities purchased under
this Agreement at the time outstanding, each future holder of all such
Securities, and the Company. Notwithstanding the foregoing, no consideration
shall be offered or paid by the Company to any Investor to amend or consent
to a
waiver or modification of any provision of any of this Agreement unless the
same
consideration also is offered to all of the holders of the Notes and/or
Warrants.
9.7 Publicity.
No
public release or announcement concerning the transactions contemplated hereby
shall be issued by the Company or the Investors without the prior consent of
the
Company (in the case of a release or announcement by the Investors) or the
Investors (in the case of a release or announcement by the Company) (which
consents shall not be unreasonably withheld), except as such release or
announcement may be required by law or the applicable rules or regulations
of
any securities exchange or securities market, in which case the Company or
the
Investors, as the case may be, shall allow the Investors or the Company, as
applicable, to the extent reasonably practicable in the circumstances,
reasonable time to comment on such release or announcement in advance of such
issuance.
9.8 Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law
which
renders any provision hereof prohibited or unenforceable in any
respect.
9.9 Entire
Agreement.
This
Agreement, including the Exhibits and the Disclosure Schedules, and the other
Transaction Documents constitute the entire agreement among the parties hereof
with respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter hereof and thereof.
9.10 Further
Assurances.
The
parties shall execute and deliver all such further instruments and documents
and
take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.
-
24 -
9.11 Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in New York County
and the United States District Court for the Southern District of New York
for
the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Agreement and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served
on
each party hereto anywhere in the world by the same methods as are specified
for
the giving of notices under this Agreement. Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that
any
such suit, action or proceeding brought in any such court has been brought
in an
inconvenient forum. EACH
OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.
9.12 Independent
Nature of Investors’ Obligations and Rights.
The obligations of each Investor under any Transaction Document are several
and
not joint with the obligations of any other Investor, and no Investor shall
be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by
such
Investor independently of any other Investor. Nothing contained herein or in
any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents.
Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
-
25 -
9.13 Acceptance
of Investment.
Except as otherwise set forth herein, at any time prior to the Closing Date,
the
Company, in its sole discretion, may (i) accept or reject any Investor’s
purchase of Notes and Warrants in whole or in part, or (ii) allot to any
Investor a lesser number of Notes and Warrants than the number of Notes and
Warrants set forth on the Investor’s signature page attached
hereto.
[signature
page follows]
-
26 -
IN
WITNESS WHEREOF,
the
parties have executed this Agreement or caused their duly authorized officers
to
execute this Agreement as of the date first above written.
| EMERALD DAIRY INC. | ||
| |
|
|
| By: | ||
|
Name: Xxxx Xxxx Shan |
||
| Title: Chief Executive Officer | ||
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27 -
COUNTERPART
SIGNATURE PAGE
By
signing below, the undersigned agrees to the terms of the Securities Purchase
Agreement and to purchase the Note and Warrants set forth below.
|
INVESTOR:
|
|
|
Principal
amount of Note being
purchased:
|
|
| Warrant Shares: | By: | |
| Name: | ||
|
Title:
|
| Address: | |||
| Loan Amount: | Facsimile: | ||
|
with
a copy to:
|
|
||
|
Please
complete the following:
|
||||
|
1.
|
The
exact name that your Note and Warrants are
to
be registered in (this is the name that will
appear
on your Note and Warrant certificates).
You
may use a nominee name if appropriate:
|
|||
|
2.
|
The
relationship between the Investors and the
Registered
Holder listed in response to item 1
above:
|
|||
|
3.
|
The
mailing address and facsimile number of the
|
|||
| Registered Holder listed in response to item 1 | ||||
|
above
(if different from above):
|
Facsimile:
|
|||
|
4.
|
(For
United States Investors:)
The Social
Security
Number or Tax Identification Number
of
the Registered Holder listed in the response to
item
1 above:
|
|||
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28 -
Exhibit
A
(Form
of Note)
-
29 -
Exhibit
B
(Form
of Warrant)
-
30 -
Exhibit
C
(Form
of Escrow Agreement)
-
31 -
Schedule
1
Accredited
Investor Status
|
Investor
Name (please print):
|
Please
initial below the items which apply to your status as an Accredited
Investor.
| An individual having a net worth with spouse (excluding automobiles, principal residence and furnishings) at the time of purchase, | ||
|
|
individually
or jointly, in excess of $1,000,000.
|
|
| An individual whose individual net income was in excess of $200,000 in each of the two most recent years, or whose joint net | ||
|
|
income
with his or her spouse was in excess of $300,000 in each of those
years,
and who reasonably expects his individual or joint income with such
investor’s spouse to reach such level in the current
year.
|
|
| A corporation or partnership, not formed for the specific purpose of acquiring the purchased securities, having total assets in excess | ||
|
|
of
$5,000,000.
|
|
| A small business investment company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small | ||
|
|
Business
Investment Act of 1958.
|
|
| A self-directed benefit plan within the meaning of ERISA, with investment decisions made solely by persons who are accredited | ||
|
|
investors
as defined in Rule 501(2) of Regulations D.
|
|
| A trust with total assets in excess of $5,000,000 not formed for the specific purpose of acquiring the purchased securities, whose | ||
|
|
purchase
is directed by a sophisticated person (i.e., a person who has such
knowledge and experience in financial and business matters that he,
she or
it is capable of evaluating the merits and risks of an investment
in the
purchased securities).
|
|
|
|
An
entity in which all of the equity owners are accredited
investors.
|
|
|
|
Other
(describe):
|
||
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32 -
