AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT
Exhibit 10.1
EXECUTION COPY
AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT
This AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (the "Agreement"),
dated as of November 19, 2010, is by and among Socket Mobile, Inc., a Delaware
corporation with offices located at 00000 Xxxxxx Xxxxx, Xxxxxx, XX 00000 (the
"Company"), and each of the investors listed on the Schedule
of Buyers attached hereto (individually, a "Buyer" and collectively,
the "Buyers").
RECITALS
A. The Company and each Buyer wish to amend and restate in its entirety that certain Securities Purchase Agreement dated as of October 27, 2010 (the "Prior Agreement") as follows, pursuant to Section 9(e) of the Prior Agreement.
B. The Company and each Buyer is executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 Act"),
and Rule 506 of Regulation D ("Regulation D") as promulgated
by the United States Securities and Exchange Commission (the "SEC")
under the 1933 Act.
C. The Company has authorized the issuance of senior secured convertible notes, in the aggregate amount of $1,000,000, in the form attached hereto as Exhibit A (the "Notes"), which Notes shall be convertible into shares of the Company's common stock, $0.001 par value per share (the "Common Stock") (as converted, collectively, the "Conversion Shares"), in accordance with the terms of the Notes.
D. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) a Note in the aggregate original principal amount set forth opposite such Buyer's name in column (3) on the Schedule of Buyers and (ii) a warrant to acquire up to that aggregate number of additional shares of Common Stock set forth opposite such Buyer's name in column (4) on the Schedule of Buyers, in the form attached hereto as Exhibit B (the "Warrants") (as exercised, collectively, the "Warrant Shares").
E. At the Closing, the parties hereto shall execute and deliver a Registration Rights Agreement, in the form attached hereto as Exhibit C (the "Registration Rights Agreement"), pursuant to which the Company has agreed to provide certain registration rights with respect to the Registrable Securities (as defined in the Registration Rights Agreement), under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.
F. The Notes, the Conversion Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the "Securities."
G. The Notes will be secured by a first priority perfected security interest in all of the assets of the Company and its Subsidiaries (as defined below), as evidenced by (i) a security agreement as each of the Buyers shall require in form and substance acceptable to each Buyer (the "Security Agreement"), (ii) a blocked account(s) agreement and a securities account control agreement, respectively, with respect to certain accounts described in the Security Agreement (the "Restricted Accounts"), in form and substance acceptable to each Buyer, duly executed by the Company and the depositary bank (each, an "Account Control Bank") in which such account is maintained (the "Account Control Agreements", and together with the Security Agreement and the other security documents and agreements entered into in connection with this Agreement and each of such other documents and agreements, as each may be amended or modified from time to time, collectively, the "Company Security Documents") and (iii) a guaranty, in form and substance reasonably acceptable to each holder of Notes, executed by each subsidiary of the Company at such time as the Company, directly or indirectly, forms or otherwise acquires each such subsidiary (or, if later, the date hereof) (as may be amended or modified from time to time, the "Guaranties", and together with the Company Security Documents, the "Security Documents") in favor of each Buyer pursuant to which each of them will guarantee the obligations of the Company under the Transaction Documents (as defined below).
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H. The Buyers desire to appoint Worldwide Stock Transfer LLC as collateral
agent with respect to the Collateral (as defined in the Security Agreement)
(in such capacity, the "Collateral Agent") pursuant to a Collateral
Agency Agreement, in form and substance acceptable to each Buyer (as amended
or modified from time to time, the "Collateral Agency Agreement").
I. At the Closing, the Company will issue to Xxxxxx Xxxxx Securities, Inc. a warrant to purchase 50,000 shares of Common Stock of the Company (the "Placement Agent Warrant") with terms that are substantially the same as the Warrants except that the such Placement Agent Warrant shall have net exercise provisions which allow for the net exercise of the Placement Agent Warrant at any time.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained
herein and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and each Buyer hereby agree as
follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
(a) Notes and Warrants. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the Company shall issue and
sell to each Buyer, and each Buyer severally, but not jointly, shall purchase
from the Company on the Closing Date (as defined below), a Note in the original
principal amount as is set forth opposite such Buyer's name in column (3) on
the Schedule of Buyers along with Warrants to acquire up to that aggregate number
of Warrant Shares as is set forth opposite such Buyer's name in column (4) on
the Schedule of Buyers.
(b) Closing. The closing (the "Closing") of the purchase of the Notes and the Warrants by the Buyers shall occur at the offices of Xxxxxxxxx Traurig, LLP, 00 X. Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000. The date and time of the Closing (the "Closing Date") shall be 10:00 a.m., New York time, on the first (1st) Business Day on which the conditions to the Closing set forth in Sections 6 and 7 below are satisfied or waived (or such later date as is mutually agreed to by the Company and each Buyer). As used herein "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to remain closed.
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(c) Purchase Price. The aggregate purchase price for the Notes and the Warrants to be purchased by each Buyer (the "Purchase Price") shall be the amount set forth opposite such Buyer's name in column (5) on the Schedule of Buyers.
(ii) Form of Payment. On the Closing Date, (i) each Buyer shall pay its respective
Purchase Price (less, in the case of any Buyer, the amounts withheld pursuant
to Section 4(g)) to the Company for the Notes and the Warrants to be issued
and sold to such Buyer at the Closing, by wire transfer of immediately available
funds in accordance with the Company's written wire instructions and (ii) the
Company shall deliver to each Buyer (A) a Note in the aggregate original principal
amount as is set forth opposite such Buyer's name in column (3) of the Schedule
of Buyers and (B) a Warrant pursuant to which such Buyer shall have the right
to acquire up to such aggregate number of Warrant Shares as is set forth opposite
such Buyer's name in column (4) of the Schedule of Buyers, in all cases, duly
executed on behalf of the Company and registered in the name of such Buyer or
its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer, severally and not jointly, represents and warrants to the Company
with respect to only itself that, as of the date hereof and as of the Closing
Date:
(a) Organization; Authority. Such Buyer is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents to which
it is a party and otherwise to carry out its obligations hereunder and thereunder.
(b) No Public Sale or Distribution. Such Buyer (i) is acquiring its
Note and Warrants, (ii) upon conversion of its Note will acquire the Conversion
Shares issuable upon conversion thereof, and (iii) upon exercise of its Warrants
will acquire the Warrant Shares issuable upon exercise thereof, in each case,
for its own account and not with a view towards, or for resale in connection
with, the public sale or distribution thereof in violation of applicable securities
laws, except pursuant to sales registered or exempted under the 1933 Act; provided,
however, by making the representations herein, such Buyer does not agree, or
make any representation or warranty, to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at
any time in accordance with or pursuant to a registration statement or an exemption
under the 1933 Act. Such Buyer is acquiring the Securities hereunder in the
ordinary course of its business. Such Buyer does not presently have any agreement
or understanding, directly or indirectly, with any Person to distribute any
of the Securities in violation of applicable securities laws.
(c) Accredited Investor Status. Such Buyer is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D.
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(d) Reliance on Exemptions. Such Buyer understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws
and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire
the Securities.
(e) Information. Such Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities which
have been requested by such Buyer. Such Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company. Such Buyer understands
that its investment in the Securities involves a high degree of risk. Such Buyer
has sought such accounting, legal and tax advice as it has considered necessary
to make an informed investment decision with respect to its acquisition of the
Securities.
(f) No Governmental Review. Such Buyer understands that no United States
federal or state agency or any other government or governmental agency has passed
on or made any recommendation or endorsement of the Securities or the fairness
or suitability of the investment in the Securities nor have such authorities
passed upon or endorsed the merits of the offering of the Securities.
(g) Transfer or Resale. Such Buyer understands that except as provided
in the Registration Rights Agreement and Section 4(h) hereof: (i) the Securities
have not been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless
(A) subsequently registered thereunder, (B) such Buyer shall have delivered
to the Company (if requested by the Company) an opinion of counsel to such Buyer,
in a form reasonably acceptable to the Company, to the effect that such Securities
to be sold, assigned or transferred may be sold, assigned or transferred pursuant
to an exemption from such registration, or (C) such Buyer provides the Company
with reasonable assurance that such Securities can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor
rule thereto) (collectively, "Rule 144"); (ii) any sale of
the Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144, and further, if Rule 144 is not applicable, any resale
of the Securities under circumstances in which the seller (or the Person (as
defined below) through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 0000 Xxx) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC promulgated
thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder.
(h) Validity; Enforcement. This Agreement, the Collateral Agency Agreement and the Registration Rights Agreement have been duly and validly authorized, executed and delivered on behalf of such Buyer and constitutes the legal, valid and binding obligations of such Buyer enforceable against such Buyer in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies.
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(i) No Conflicts. The execution, delivery and performance by such Buyer
of this Agreement, the Collateral Agency Agreement and the Registration Rights
Agreement and the consummation by such Buyer of the transactions contemplated
hereby and thereby will not (i) result in a violation of the organizational
documents of such Buyer or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which such Buyer is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws) applicable to such Buyer,
except in the case of clauses (ii) and (iii) above, for such conflicts, defaults,
rights or violations which would not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the ability of such Buyer to
perform its obligations hereunder.
(j) Manipulation of Prices. Neither such Buyer, nor to such Buyer's
knowledge, any of its affiliates or investment advisors, has taken or may take,
directly or indirectly, any action designed to cause or result in, or which
has constituted or which might reasonably be expected to constitute, the manipulation
of the price of the shares of Common Stock.
(k) Residency. Such Buyer is a resident of the jurisdiction specified
below its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that, as of the date
hereof and as of the Closing Date:
(a) Organization and Qualification. Each of the Company and each of its Subsidiaries are entities duly organized and validly existing and in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. Each of the Company and each of its Subsidiaries is duly qualified as a foreign entity to do business and is 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 (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any Subsidiary, individually or taken as a whole, (ii) the transactions contemplated hereby or in any of the other Transaction Documents or (iii) the authority or ability of the Company or any of its Subsidiaries to perform any of their respective obligations under any of the Transaction Documents (as defined below). As of the date hereof and the Closing Date, the Company has no Subsidiaries. "Subsidiaries" means any Person in which the Company, directly or indirectly, (I) owns any of the outstanding capital stock or holds any equity or similar interest of such Person or (II) controls or operates all or any part of the business, operations or administration of such Person, and each of the foregoing, is individually referred to herein as a "Subsidiary."
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(b) Authorization; Enforcement; Validity. The Company has the requisite
power and authority to enter into and perform its obligations under this Agreement
and the other Transaction Documents and to issue the Securities in accordance
with the terms hereof and thereof. Each Subsidiary has the requisite power and
authority to enter into and perform its obligations under the Transaction Documents
to which it is a party. The execution and delivery of this Agreement and the
other Transaction Documents by the Company and its Subsidiaries, and the consummation
by the Company and its Subsidiaries of the transactions contemplated hereby
and thereby (including, without limitation, the issuance of the Notes and the
reservation for issuance and issuance of the Conversion Shares issuable upon
conversion of the Notes and the issuance of the Warrants and the reservation
for issuance and issuance of the Warrant Shares issuable upon exercise of the
Warrants) have been duly authorized by the Company's board of directors and
each of its Subsidiaries' board of directors or other governing body, as applicable,
and (other than the filing with the SEC of one or more Registration Statements
in accordance with the requirements of the Registration Rights Agreement, a
Form D with the SEC and any other filings as may be required by any state securities
agencies) no further filing, consent or authorization is required by the Company,
its Subsidiaries, their respective boards of directors or their stockholders
or other governing body. This Agreement has been, and the other Transaction
Documents will be prior to the Closing, duly executed and delivered by the Company,
and each constitutes the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with its respective 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 applicable creditors'
rights and remedies and except as rights to indemnification and to contribution
may be limited by federal or state securities law and public policy, and the
remedy of specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. Prior to the Closing, the Transaction
Documents to which each Subsidiary is a party will be duly executed and delivered
by each such Subsidiary, and shall constitute the legal, valid and binding obligations
of each such Subsidiary, enforceable against each such Subsidiary in accordance
with their respective 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 applicable creditors' rights and remedies and except as rights
to indemnification and to contribution may be limited by federal or state securities
law. "Transaction Documents" means, collectively, this Agreement,
the Notes, the Warrants, the Collateral Agency Agreement, the Guaranties, the
Security Documents, the Registration Rights Agreement, the Irrevocable Transfer
Agent Instructions (as defined below) and each of the other agreements and instruments
entered into or delivered by any of the parties hereto in connection with the
transactions contemplated hereby and thereby, as may be amended from time to
time.
(c) Issuance of Securities. The issuance of the Notes and the Warrants are duly authorized and upon issuance in accordance with the terms of the Transaction Documents shall be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof. As of the Closing, the Company shall have reserved from its duly authorized capital stock not less than the sum of (i) 152.0796% of the maximum number of Conversion Shares issuable upon conversion of the Notes (assuming for purposes hereof that the Notes are convertible at the initial Conversion Price (as defined in the Notes) and without taking into account any limitations on the conversion of the Notes set forth therein), and (ii) 100% of the maximum number of Warrant Shares issuable upon exercise of the Warrants (without taking into account any limitations on the exercise of the Warrants set forth therein). Upon conversion in accordance with the Notes or exercise in accordance with the Warrants (as the case may be), the Conversion Shares and the Warrant Shares, respectively, when issued, will be validly issued, fully paid and nonassessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Subject to the accuracy of the representations and warranties of the Buyers in this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the 1933 Act.
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(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and its Subsidiaries and the consummation by the Company
and its Subsidiaries of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Notes, the Warrants, the Conversion
Shares and Warrant Shares and the reservation for issuance of the Conversion
Shares and Warrant Shares) will not (i) result in a violation of the Certificate
of Incorporation (as defined below) or other organizational documents of the
Company or any of its Subsidiaries, any capital stock of the Company or any
of its Subsidiaries or Bylaws (as defined below) of the Company or any of its
Subsidiaries, (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree (including foreign, federal and state securities laws
and regulations and the rules and regulations of the Nasdaq Capital Market (the
"Principal Market") and including all applicable federal
laws, rules and regulations) 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, in the case of clause (ii) or (iii) above, to the
extent such violations that could not reasonably be expected to have a Material
Adverse Effect.
(e) Consents. Neither the Company nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with (other than the filing with the SEC of one or more Registration Statements in accordance with the requirements of the Registration Rights Agreement, a Form D with the SEC and any other filings as may be required by any state securities agencies), any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its respective obligations under or contemplated by the Transaction Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company or any Subsidiary is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the Closing Date, and neither the Company nor any of its Subsidiaries are aware of any facts or circumstances which might prevent the Company or any Subsidiary from obtaining or effecting any of the registration, application or filings contemplated by the Transaction Documents. The Company is not in violation of the requirements of the Principal Market and has no knowledge of any facts or circumstances which could reasonably lead to delisting or suspension of the Common Stock in the foreseeable future.
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(f) Acknowledgment Regarding Buyer's Purchase of Securities. The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of
an arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company or any of its Subsidiaries, (ii) an "affiliate"
(as defined in Rule 144) of the Company or any of its Subsidiaries or (iii)
to its knowledge, a "beneficial owner" of more than 10% of the shares
of Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (the "1934 Act")). The Company
further acknowledges that no Buyer is acting as a financial advisor or fiduciary
of the Company or any of its Subsidiaries (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given by a Buyer or any of its representatives or
agents in connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer's purchase of the Securities.
The Company further represents to each Buyer that the Company's and each Subsidiary's
decision to enter into the Transaction Documents to which it is a party has
been based solely on the independent evaluation by the Company, each Subsidiary
and their respective representatives.
(g) No General Solicitation; Placement Agent's Fees. Neither the Company,
nor any of its Subsidiaries or affiliates, nor any Person acting on its or their
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 Securities. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or brokers' commissions (other than for
Persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. Other than Xxxxxx Xxxxx Securities,
Inc. (the "Placement Agent"), neither the Company nor any of its Subsidiaries
has engaged any placement agent or other agent in connection with the sale of
the Securities.
(h) No Integrated Offering. None of the Company, its Subsidiaries or
any of their affiliates, nor any Person acting on their behalf has, directly
or indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require registration of
the issuance of any of the Securities under the 1933 Act, whether through integration
with prior offerings or otherwise, or cause this offering of the Securities
to require approval of stockholders of the Company under any applicable stockholder
approval provisions, including, without limitation, under the rules and regulations
of any exchange or automated quotation system on which any of the securities
of the Company are listed or designated. None of the Company, its Subsidiaries,
their affiliates nor any Person acting on their behalf will take any action
or steps that would require registration of the issuance of any of the Securities
under the 1933 Act or cause the offering of any of the Securities to be integrated
with other offerings.
(i) Dilutive Effect. The Company understands and acknowledges that the number of Conversion Shares and Warrant Shares will increase in certain circumstances. The Company further acknowledges that its obligation to issue the Conversion Shares upon conversion of the Notes and the Warrant Shares upon exercise of the Warrants in accordance with this Agreement, the Notes and the Warrants is, absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company.
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(j) Application of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including, without limitation, any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of Incorporation, Bylaws or other organizational documents or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to any Buyer as a result of the transactions contemplated by this Agreement, including, without limitation, the Company's issuance of the Securities and any Buyer's ownership of the Securities. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of shares of Common Stock or a change in control of the Company or any of its Subsidiaries.
(k) SEC Documents; Financial Statements. During the two (2) years prior
to the date hereof, the Company has timely 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,
notes and schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the "SEC Documents").
The Company has delivered to the Buyers or their respective representatives
true, correct and complete copies of each of the SEC Documents not available
on the XXXXX system. 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,
and none of the SEC Documents, at the time they were filed with the SEC, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
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 as in effect as of the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
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 which
will not be material, either individually or in the aggregate). No other information
provided by or on behalf of the Company to any of the Buyers which is not included
in the SEC Documents (including, without limitation, information referred to
in Section 2(e) of this Agreement) contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the statements
therein not misleading, in the light of the circumstance under which they are
or were made.
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(l) Absence of Certain Changes. Since the date of the Company's most
recent audited financial statements contained in a Form 10-K, there has been
no material adverse change and no material adverse development in the business,
assets, liabilities, properties, operations (including results thereof), condition
(financial or otherwise) or prospects of the Company or any of its Subsidiaries.
Since the date of the Company's most recent audited financial statements contained
in a Form 10-K, neither the Company nor any of its Subsidiaries has (i) declared
or paid any dividends, (ii) sold any assets, individually or in the aggregate,
outside of the ordinary course of business or (iii) made any material capital
expenditures, individually or in the aggregate. Neither the Company nor any
of its Subsidiaries has taken any steps to seek protection pursuant to any law
or statute relating to bankruptcy, insolvency, reorganization, receivership,
liquidation or winding up, nor does the Company or any Subsidiary have any knowledge
or reason to believe that any of their respective creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so. The Company and its Subsidiaries,
individually and on a consolidated basis, are not as of the date hereof, and
after giving effect to the transactions contemplated hereby to occur at the
Closing, will not be Insolvent (as defined below). For purposes of this Section
3(l), "Insolvent" means, (I) with respect to the Company and
its Subsidiaries, on a consolidated basis, (i) the present fair saleable value
of the Company's and its Subsidiaries' assets is less than the amount required
to pay the Company's and its Subsidiaries' total Indebtedness (as defined below),
(ii) the Company and its Subsidiaries are unable to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured or (iii) the Company and its Subsidiaries intend to incur
or believe that they will incur debts that would be beyond their ability to
pay as such debts mature; and (II) with respect to the Company and each Subsidiary,
individually, (i) the present fair saleable value of the Company's or such Subsidiary's
(as the case may be) assets is less than the amount required to pay its respective
total Indebtedness, (ii) the Company or such Subsidiary (as the case may be)
is unable to pay its respective debts and liabilities, subordinated, contingent
or otherwise, as such debts and liabilities become absolute and matured or (iii)
the Company or such Subsidiary (as the case may be) intends to incur or believes
that it will incur debts that would be beyond its respective ability to pay
as such debts mature. Neither the Company nor any of its Subsidiaries has engaged
in any business or in any transaction, and is not about to engage in any business
or in any transaction, for which the Company's or such Subsidiary's remaining
assets constitute unreasonably small capital.
(m) No Undisclosed Events, Liabilities, Developments or Circumstances.
No event, liability, development or circumstance has occurred or exists, or
is reasonably expected to exist or occur with respect to the Company, any of
its Subsidiaries or any of their respective businesses, properties, liabilities,
prospects, operations (including results thereof) or condition (financial or
otherwise), that (i) would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form S-1 filed with
the SEC relating to an issuance and sale by the Company of its Common Stock
and which has not been publicly announced, (ii) would reasonably be expected
to have a material adverse effect on any Buyer's investment hereunder or (iii)
would reasonably be expected to have a Material Adverse Effect.
(n) Conduct of Business; Regulatory Permits. Neither the Company nor any of its Subsidiaries is in violation of any term of or in default under its Certificate of Incorporation, any certificate of designation, preferences or rights of any other outstanding series of preferred stock of the Company or any of its Subsidiaries or Bylaws or their organizational charter, certificate of formation or certificate of incorporation or bylaws, respectively. Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except in all cases for possible violations which could not, individually or in the aggregate, have a Material Adverse Effect. Without limiting the generality of the foregoing, the Company is not in violation of any of the rules, regulations or requirements of the Principal Market and has no knowledge of any facts or circumstances that could reasonably lead to delisting or suspension of the Common Stock by the Principal Market in the foreseeable future. Since June 9, 2008, (i) the Common Stock has been listed or designated for quotation on the Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal Market and (iii) the Company has received no communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the Common Stock from the Principal Market. The Company and each of its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. Neither the Company nor any Subsidiary is engaged, principally or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. No proceeds from the sale of the Securities will be used by the Company or any Subsidiary to purchase or carry, or to reduce or refinance any Indebtedness incurred to purchase or carry, any Margin Stock or for any related purpose governed by Regulations T, U or X of the Board of Governors. For the purposes of this Agreement, "Margin Stock" shall have the meaning as defined in Regulation U of the Board of Governors.
10
(o) Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries
nor any director, officer, agent, employee or other Person acting on behalf
of the Company or any of its Subsidiaries has, in the course of its actions
for, or on behalf of, the Company or any of its Subsidiaries (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful payment
to any foreign or domestic government official or employee from corporate funds;
(iii) violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign
or domestic government official or employee.
(p) Xxxxxxxx-Xxxxx Act. The Company and each Subsidiary is in compliance
with all applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are
effective as of the date hereof, and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof.
(q) Transactions With Affiliates. None of the officers, directors or
employees of the Company or any of its Subsidiaries is presently a party to
any transaction with the Company or any of its Subsidiaries (other than for
ordinary course services as employees, officers or 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 such officer, director or employee or, to
the knowledge of the Company or any of its Subsidiaries, any corporation, partnership,
trust or other Person in which any such officer, director, or employee has a
substantial interest or is an employee, officer, director, trustee or partner.
Β
11
(r) Equity Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 10,000,000 shares of Common Stock, of which,
3,801,991 are issued and outstanding and 1,449,618 shares are reserved for issuance
pursuant to securities (other than the Notes, the Warrants and the Placement
Agent Warrant) exercisable or exchangeable for, or convertible into, shares
of Common Stock and (ii) 3,000,000 shares of preferred stock, of which none
are issued and outstanding. No shares of Common Stock are held in treasury.
All of such outstanding shares are duly authorized and have been, or upon issuance
will be, validly issued and are fully paid and nonassessable. 450,365 shares
of the Company's issued and outstanding Common Stock on the date hereof are
as of the date hereof owned by Persons who are "affiliates" (as defined
in Rule 405 of the 1933 Act and calculated based on the assumption that only
officers, directors and holders of at least 10% of the Company's issued and
outstanding Common Stock are "affiliates" without conceding that any
such Persons are "affiliates" for purposes of federal securities laws)
of the Company or any of its Subsidiaries. To the Company's knowledge, no Person
owns 10% or more of the Company's issued and outstanding shares of Common Stock
(calculated based on the assumption that all Convertible Securities (as defined
below), whether or not presently exercisable or convertible, have been fully
exercised or converted (as the case may be) taking account of any limitations
on exercise or conversion (including "blockers") contained therein
without conceding that such identified Person is a 10% stockholder for purposes
of federal securities laws). (i) None of the Company's or any Subsidiary's capital
stock is subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company or any Subsidiary; (ii)
except as disclosed in Schedule 3(r)(ii), there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any 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 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, or exercisable or exchangeable
for, any capital stock of the Company or any of its Subsidiaries; (iii) except
as disclosed in Schedule 3(r)(iii), there are no outstanding debt securities,
notes, credit agreements, credit facilities or other agreements, documents or
instruments evidencing Indebtedness of the Company or any of its Subsidiaries
or by which the Company or any of its Subsidiaries is or may become bound; (iv)
there are no financing statements securing obligations in any amounts filed
in connection with the Company or any of its Subsidiaries; (v) 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 pursuant to the Registration Rights Agreement); (vi) there are no
outstanding securities or instruments 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; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) neither the Company nor any Subsidiary has any stock
appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement; and (ix) neither the Company nor any of its Subsidiaries
have any liabilities or obligations required to be disclosed in the SEC Documents
which are not so disclosed in the SEC Documents, other than those incurred in
the ordinary course of the Company's or its Subsidiaries' respective businesses
and which, individually or in the aggregate, do not or could not have a Material
Adverse Effect. The Company has furnished to the Buyers true, correct and complete
copies of the Company's Certificate of Incorporation, as amended and as in effect
on the date hereof (the "Certificate of Incorporation"), and
the Company's bylaws, as amended and as in effect on the date hereof (the "Bylaws"),
and the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof in
respect thereto.
Β
12
(s) Indebtedness and Other Contracts. Neither the Company nor any of
its Subsidiaries, (i) except as disclosed on Schedule 3(s), has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement
or instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be expected
to result in a Material Adverse Effect, (iii) is in violation of any term of,
or in default under, any contract, agreement or instrument relating to any Indebtedness,
except where such violations and defaults would not result, individually or
in the aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company's officers, has or is expected to have a Material
Adverse Effect. For purposes of this Agreement: (x) "Indebtedness"
of any Person means, without duplication (A) all indebtedness for borrowed money,
(B) all obligations issued, undertaken or assumed as the deferred purchase price
of property or services (including, without limitation, "capital leases"
in accordance with generally accepted accounting principles) (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses, (E) all indebtedness
created or arising under any conditional sale or other title retention agreement,
or incurred as financing, in either case with respect to any property or assets
acquired with the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of default
are limited to repossession or sale of such property), (F) all monetary obligations
under any leasing or similar arrangement which, in connection with generally
accepted accounting principles, consistently applied for the periods covered
thereby, is classified as a capital lease, (G) all indebtedness referred to
in clauses (A) through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any mortgage, claim, lien, tax, right of first refusal, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including accounts
and contract rights) owned by any Person, even though the Person which owns
such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "Contingent Obligation" means, as to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto; and
(z) "Person" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated organization,
any other entity and a government or any department or agency thereof.
Β
13
(t) Absence of Litigation. There is no action, suit, proceeding, inquiry
or investigation before or by the Principal Market, any court, public board,
government agency, self-regulatory organization or body pending or, to the knowledge
of the Company, threatened against or affecting the Company or any of its Subsidiaries,
the Common Stock or any of the Company's or its Subsidiaries' officers or directors
which is outside of the ordinary course of business or individually or in the
aggregate material to the Company or any of its Subsidiaries which if determined
adversely would reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect. Without limitation of the foregoing, there has not
been, and to the knowledge of the Company, there is not pending or contemplated,
any investigation by the SEC involving the Company, any of its Subsidiaries
or any current or former director or officer of the Company or any of its Subsidiaries.
The SEC has not issued any stop order or other order suspending the effectiveness
of any registration statement filed by the Company under the 1933 Act or the
1934 Act.
(u) Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company 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 be unable 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.
(v) Employee Relations. Neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or employs any member of a
union. The Company believes that its and its Subsidiaries' relations with their
respective employees are good. No executive officer (as defined in Rule 501(f)
promulgated under the 0000 Xxx) or other key employee of the Company or any
of its Subsidiaries has notified the Company or any such Subsidiary that such
officer intends to leave the Company or any such Subsidiary or otherwise terminate
such officer's employment with the Company or any such Subsidiary. No executive
officer or other key employee of the Company or any of its Subsidiaries is,
or is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer or other
key employee (as the case may be) does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters.
The Company and its Subsidiaries are in compliance with all federal, state,
local and foreign laws and regulations respecting labor, employment and employment
practices and benefits, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
Β
14
(w) Title. The Company and its Subsidiaries own no real property and
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 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 and any of its
Subsidiaries. Any real property and facilities held under lease by the 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
or any of its Subsidiaries.
(x) 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,
original works, inventions, licenses, approvals, governmental authorizations,
trade secrets and other intellectual property rights and all applications and
registrations therefor ("Intellectual Property Rights") necessary
to conduct their respective businesses as now conducted and as presently proposed
to be conducted. None of the Company's or its Subsidiaries' Intellectual Property
Rights have expired, terminated or been abandoned, or are expected to expire,
terminate or be abandoned, within three years from the date of this Agreement.
The Company has no knowledge of any infringement by the Company or any of its
Subsidiaries of Intellectual Property Rights of others. Except as described
on Schedule 2(x), there is no claim, action or proceeding being made or brought,
or to the knowledge of the Company or any of its Subsidiaries, being threatened,
against the Company or any of its Subsidiaries regarding their Intellectual
Property Rights and the Company is not aware of any facts or circumstances which
might give rise to any of the foregoing infringements or claims, actions or
proceedings. The Company and each of its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their Intellectual Property Rights.
(y) Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with all Environmental Laws (as defined below), (ii) have received
all permits, licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance with
all terms and conditions of any such permit, license or approval where, in each
of the foregoing clauses (i), (ii) and (iii), the failure to so comply could
be reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term "Environmental Laws" means
all federal, state, local or foreign laws relating to pollution or protection
of human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including, without
limitation, laws relating to emissions, discharges, releases or threatened releases
of chemicals, pollutants, contaminants, or toxic or hazardous substances or
wastes (collectively, "Hazardous Materials") into the environment,
or otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials, as well as
all authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder.
15
(z) Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.
(aa) Tax Status. The Company and each of its Subsidiaries (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely 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 (iii) 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 and its Subsidiaries know of no basis for any such claim. The Company is not operated in such a manner as to qualify as a passive foreign investment company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.
(bb) Internal Accounting and Disclosure Controls. The Company and each
of its Subsidiaries maintains internal control over financial reporting (as
such term is defined in Rule 13a-15(f) under the 0000 Xxx) that is effective
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles, including 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 and to
maintain asset and liability accountability, (iii) access to assets or incurrence
of liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and liabilities
is compared with the existing assets and liabilities at reasonable intervals
and appropriate action is taken with respect to any difference. The Company
maintains disclosure controls and procedures (as such term is defined in Rule
13a-15(e) under the 0000 Xxx) that are effective in ensuring that information
required to be disclosed by the Company in the reports that it files or submits
under the 1934 Act is recorded, processed, summarized and reported, within the
time periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits under
the 1934 Act is accumulated and communicated to the Company's management, including
its principal executive officer or officers and its principal financial officer
or officers, as appropriate, to allow timely decisions regarding required disclosure.
Neither the Company nor any of its Subsidiaries has received any notice or correspondence
from any accountant or other Person relating to any potential material weakness
or significant deficiency in any part of the internal controls over financial
reporting of the Company or any of its Subsidiaries.
(cc) Off Balance Sheet Arrangements. There is no transaction, arrangement,
or other relationship between the Company or any of its Subsidiaries and an
unconsolidated or other off balance sheet entity that is required to be disclosed
by the Company in its 1934 Act filings and is not so disclosed or that otherwise
could be reasonably likely to have a Material Adverse Effect.
16
(dd) Investment Company Status. The Company is not, and upon consummation
of the sale of the Securities will not be, an "investment company,"
an affiliate of an "investment company," a company controlled by an
"investment company" or an "affiliated person" of, or "promoter"
or "principal underwriter" for, an "investment company"
as such terms are defined in the Investment Company Act of 1940, as amended.
(ee) Acknowledgement Regarding Buyers' Trading Activity. It is understood and acknowledged by the Company that (i) following the public disclosure of the transactions contemplated by the Transaction Documents, in accordance with the terms thereof, none of the Buyers have been asked by the Company or any of its Subsidiaries to agree, nor has any Buyer agreed with the Company or any of its Subsidiaries, to desist from effecting any transactions in or with respect to (including, without limitation, purchasing or selling, long and/or short) any securities of the Company, or "derivative" securities based on securities issued by the Company or to hold the Securities for any specified term; (ii) any Buyer, and counterparties in "derivative" transactions to which any such Buyer is a party, directly or indirectly, presently may have a "short" position in the Common Stock which was established prior to such Buyer's knowledge of the transactions contemplated by the Transaction Documents; and (iii) each Buyer shall not be deemed to have any affiliation with or control over any arm's length counterparty in any "derivative" transaction. The Company further understands and acknowledges that following the public disclosure of the transactions contemplated by the Transaction Documents pursuant to the Press Release (as defined below) one or more Buyers may engage in hedging and/or trading activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value and/or number of the Warrant Shares deliverable with respect to the Securities are being determined and (b) such hedging and/or trading activities, if any, can reduce the value of the existing stockholders' equity interest in the Company both at and after the time the hedging and/or trading activities are being conducted. The Company acknowledges that such aforementioned hedging and/or trading activities do not constitute a breach of this Agreement or any other Transaction Document or any of the documents executed in connection herewith or therewith.
(ff) Manipulation of Price. Neither the Company nor any of its Subsidiaries
has, and, to the knowledge of the Company, no Person acting on their behalf
has, directly or indirectly, (i) taken any action designed to cause or to result
in the stabilization or manipulation of the price of any security of the Company
or any of its Subsidiaries to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for soliciting purchases
of, any of the Securities (other than the Placement Agent), or (iii) paid or
agreed to pay to any Person any compensation for soliciting another to purchase
any other securities of the Company or any of its Subsidiaries.
(gg) U.S. Real Property Holding Corporation. Neither the Company nor
any of its Subsidiaries is, or has ever been, and so long as any of the Securities
are held by any of the Buyers, shall become, a U.S. real property holding corporation
within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended,
and the Company and each Subsidiary shall so certify upon any Buyer's request.
(hh) Registration Eligibility. The Company is eligible to register the
Registrable Securities for resale by the Buyers using Form S-3 promulgated under
the 1933 Act.
17
(ii) Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the issuance, sale and transfer of the Securities to be sold
to each Buyer hereunder will be, or will have been, fully paid or provided for
by the Company, and all laws imposing such taxes will be or will have been complied
with.
(jj) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the "BHCA") and to regulation by the Board of Governors of the Federal Reserve System (the "Federal Reserve"). Neither the Company nor any of its Subsidiaries or affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any equity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
(kk) Shell Company Status. The Company is not, and has never been, an
issuer identified in, or subject to, Rule 144(i).
(ll) Illegal or Unauthorized Payments; Political Contributions. Neither
the Company nor any of its Subsidiaries nor, to the best of the Company's knowledge
(after reasonable inquiry of its officers and directors), any of the officers,
directors, employees, agents or other representatives of the Company or any
of its Subsidiaries or any other business entity or enterprise with which the
Company or any Subsidiary is or has been affiliated or associated, has, directly
or indirectly, made or authorized any payment, contribution or gift of money,
property, or services, whether or not in contravention of applicable law, (a)
as a kickback or bribe to any Person or (b) to any political organization, or
the holder of or any aspirant to any elective or appointive public office except
for personal political contributions not involving the direct or indirect use
of funds of the Company or any of its Subsidiaries.
(mm) Money Laundering. The Company and its Subsidiaries are in compliance
with, and have not previously violated, the USA Patriot Act of 2001 and all
other applicable U.S. and non-U.S. anti-money laundering laws and regulations,
including, but not limited to, the laws, regulations and Executive Orders and
sanctions programs administered by the U.S. Office of Foreign Assets Control,
including, but not limited, to (i) Executive Order 13224 of September 23, 2001
entitled, "Blocking Property and Prohibiting Transactions With Persons
Who Commit, Threaten to Commit, or Support Terrorism" (66 Fed. Reg. 49079
(2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.
(nn) Management. Except as set forth in Schedule 3(nn) hereto, during
the past five year period, no current or former officer or director or, to the
knowledge of the Company, stockholder of the Company or any of its Subsidiaries
has been the subject of:
Β Β Β Β Β Β (i) a petition under bankruptcy laws or any
other insolvency or moratorium law or the appointment by a court of a receiver,
fiscal agent or similar officer for such Person, or any partnership in which
such person was a general partner at or within two years before the filing of
such petition or such appointment, or any corporation or business association
of which such person was an executive officer at or within two years before
the time of the filing of such petition or such appointment;
Β
18
Β Β Β Β Β Β (ii) a conviction in a criminal proceeding or
a named subject of a pending criminal proceeding (excluding traffic violations
that do not relate to driving while intoxicated or driving under the influence);
Β Β Β Β Β Β (iii) any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining any such person from, or otherwise limiting, the following
activities:
Β Β Β Β Β Β Β Β Β Β Β Β (1) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the United States Commodity Futures Trading Commission or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
Β Β Β Β Β Β Β Β Β Β Β Β (2) Engaging in
any type of business practice; or
Β Β Β Β Β Β Β Β Β Β Β Β (3) Engaging in
any activity in connection with the purchase or sale of any security or commodity
or in connection with any violation of securities laws or commodities laws;
Β Β Β Β Β Β (iv) any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any authority barring, suspending or otherwise
limiting for more than 60 days the right of any such person to engage in any
activity described in the preceding sub paragraph, or to be associated with
persons engaged in any such activity;
Β Β Β Β Β Β (v) a finding by a court of competent jurisdiction
in a civil action or by the SEC or other authority to have violated any securities
law, regulation or decree and the judgment in such civil action or finding by
the SEC or any other authority has not been subsequently reversed, suspended
or vacated; or
Β Β Β Β Β Β (vi) a finding by a court of competent jurisdiction
in a civil action or by the Commodity Futures Trading Commission to have violated
any federal commodities law, and the judgment in such civil action or finding
has not been subsequently reversed, suspended or vacated.
(oo) No Additional Agreements. The Company does not have any agreement
or understanding with any Buyer with respect to the transactions contemplated
by the Transaction Documents other than as specified in the Transaction Documents.
(pp) Public Utility Holding Act. None of the Company nor any of its
Subsidiaries is a "holding company," or an "affiliate" of
a "holding company," as such terms are defined in the Public Utility
Holding Act of 2005.
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(qq) Federal Power Act. None of the Company nor any of its Subsidiaries
is subject to regulation as a "public utility" under the Federal Power
Act, as amended.
(rr) Ranking of Notes. No Indebtedness of the Company, at the Closing,
will be senior to, or pari passu with, the Notes in right of payment, whether
with respect to payment or redemptions, interest, damages, upon liquidation
or dissolution or otherwise.
(ss) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Buyers or their agents or
counsel with any information that constitutes or could reasonably be expected
to constitute material, non-public information concerning the Company or any
of its Subsidiaries, other than the existence of the transactions contemplated
by this Agreement and the other Transaction Documents. The Company understands
and confirms that each of the Buyers will rely on the foregoing representations
in effecting transactions in securities of the Company. All disclosure provided
to the Buyers regarding the Company and its Subsidiaries, their businesses and
the transactions contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company or any of its Subsidiaries is true
and correct and does 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.
Each press release issued by the Company or any of its Subsidiaries during the
twelve (12) months preceding the date of this Agreement did not at the time
of release contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading. No event or circumstance has occurred or information exists
with respect to the Company or any of its Subsidiaries or its or their business,
properties, liabilities, prospects, operations (including results thereof) or
conditions (financial or otherwise), which, under applicable law, rule or regulation,
requires public disclosure at or before the date hereof or announcement by the
Company but which has not been so publicly disclosed. The Company acknowledges
and agrees that no Buyer makes or has made any representations or warranties
with respect to the transactions contemplated hereby other than those specifically
set forth in Section 2.
4. COVENANTS.
(a) Reasonable Best Efforts. Each Buyer shall use its reasonable best
efforts to timely satisfy each of the conditions to be satisfied by it as provided
in Section 6 of this Agreement. The Company shall use its reasonable best efforts
to timely satisfy each of the conditions to be satisfied by it as provided in
Section 7 of this Agreement.
(b) Form D and Blue Sky. The Company agrees to file a Form D with respect
to the Securities as required under Regulation D and to provide a copy thereof
to each Buyer promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to, qualify the Securities
for sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States (or
to obtain an exemption from such qualification), and shall provide evidence
of any such action so taken to the Buyers on or prior to the Closing Date. The
Company shall make all filings and reports relating to the offer and sale of
the Securities required under applicable securities or "Blue Sky"
laws of the states of the United States following the Closing Date.
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(c) Reporting Status. Until the date on which the Buyers shall have
sold all of the Registrable Securities (the "Reporting Period"),
the Company shall timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as
an issuer required to file reports under the 1934 Act even if the 1934 Act or
the rules and regulations thereunder would no longer require or otherwise permit
such termination. From the time Form S-3 is available to the Company for the
registration of the Registrable Securities, the Company shall take all actions
necessary to maintain its eligibility to register the Registrable Securities
for resale by the Buyers on Form S-3.
(d) Use of Proceeds. The Company will use the proceeds from the sale
of the Securities for working capital purposes, and not for (i) except as set
forth on Schedule 4(d), the repayment of any outstanding Indebtedness of the
Company or any of its Subsidiaries, (ii) the redemption or repurchase of any
securities of the Company or any of its Subsidiaries, or (iii) the settlement
of any outstanding litigation. Neither the Company nor any Subsidiary will use
the proceeds from the sale of the Securities, whether directly or indirectly,
and whether immediately, incidentally or ultimately, to purchase or carry Margin
Stock or to extend credit to others for the purpose of purchasing or carrying
Margin Stock or to refund Indebtedness originally incurred for such purpose.
(e) Financial Information. The Company agrees to send the following
to each Investor (as defined in the Registration Rights Agreement) during the
Reporting Period (i) unless the following are filed with the SEC through XXXXX
and are available to the public through the XXXXX system, within one (1) Business
Day after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K and Quarterly Reports on Form 10-Q, any interim reports or any consolidated
balance sheets, income statements, stockholders' equity statements and/or cash
flow statements for any period other than annual, any Current Reports on Form
8 K and any registration statements (other than on Form S 8) or amendments filed
pursuant to the 1933 Act, (ii) on the same day as the release thereof, facsimile
copies of all press releases issued by the Company or any of its Subsidiaries
and (iii) copies of any notices and other information made available or given
to the stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.
(f) Listing. The Company shall promptly secure the listing or designation
for quotation (as the case may be) of all of the Registrable Securities upon
each national securities exchange and automated quotation system, if any, upon
which the Common Stock is then listed or designated for quotation (as the case
may be) (subject to official notice of issuance) and shall maintain such listing
or designation for quotation (as the case may be) of all Registrable Securities
from time to time issuable under the terms of the Transaction Documents on such
national securities exchange or automated quotation system. The Company shall
maintain the Common Stock's listing or authorization for quotation (as the case
may be) on the Principal Market, The New York Stock Exchange, the NYSE Amex
LLC, the Nasdaq Global Market or the Nasdaq Global Select Market (each, an "Eligible
Market"). Neither the Company nor any of its Subsidiaries shall take
any action which could be reasonably expected to result in the delisting or
suspension of the Common Stock on an Eligible Market. The Company shall use
its reasonable best efforts to cause the Warrants to be listed on the Principal
Market within ninety (90) calendar days after the Closing Date. The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4(f).
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(g) Fees. The Company shall reimburse the lead investor for all reasonable
costs and expenses incurred by it or its affiliates in connection with the transactions
contemplated by the Transaction Documents (including, without limitation, all
reasonable legal fees and disbursements of Xxxxxxxxx Xxxxxxx, LLP in connection
therewith, documentation and implementation of the transactions contemplated
by the Transaction Documents and due diligence and regulatory filings in connection
therewith) (the "Expense Amount"), which amount shall be withheld
by a Buyer (at the request of Xxxxxxxxx Traurig, LLP) from its Purchase Price
at the Closing or paid by the Company upon termination of this Agreement on
demand by Xxxxxxxxx Xxxxxxx, LLP so long as such termination did not occur as
a result of a material breach by the lead investor of any of its obligations
hereunder (as the case may be). If the amount so withheld at the Closing by
a Buyer was less than the Expense Amount actually incurred by the lead investor
and/or Xxxxxxxxx Traurig, LLP, as applicable, in connection with the transactions
contemplated by the Transaction Documents, the Company shall promptly reimburse
Xxxxxxxxx Xxxxxxx, LLP on demand for such Expense Amount not so reimbursed by
the Company on the date hereof or through such withholding at the Closing. The
Company shall be responsible for the payment of any placement agent's fees,
financial advisory fees, transfer agent fees, DTC (as defined below) fees or
broker's commissions (other than for Persons engaged by any Buyer) relating
to or arising out of the transactions contemplated hereby (including, without
limitation, any fees payable to the Placement Agent, who is the Company's sole
placement agent in connection with the transactions contemplated by this Agreement).
The Company shall pay, and hold each Buyer harmless against, any liability,
loss or expense (including, without limitation, reasonable attorneys' fees and
out-of-pocket expenses) arising in connection with any claim relating to any
such payment. Except as otherwise set forth in the Transaction Documents, each
party to this Agreement shall bear its own expenses in connection with the sale
of the Securities to the Buyers.
(h) Pledge of Securities. Notwithstanding anything to the contrary contained
in Section 2(g), the Company acknowledges and agrees that the Securities may
be pledged by a Buyer in connection with a bona fide margin agreement or other
loan or financing arrangement that is secured by the Securities. The pledge
of Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Buyer effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document. The Company hereby agrees to execute and deliver such documentation
as a pledgee of the Securities may reasonably request in connection with a pledge
of the Securities to such pledgee by a Buyer.
(i) Disclosure of Transactions and Other Material Information. The Company shall, on or before 8:30 a.m., New York time, on the first (1st) Business Day after the date of this Agreement, issue a press release (the "Press Release") reasonably acceptable to the Buyers disclosing all the material terms of the transactions contemplated by the Transaction Documents. On or before 8:30 a.m., New York time, on the first (1st) Business Day after the date of this Agreement, the Company shall file a Current Report on Form 8 K describing all the material terms of the transactions contemplated by the Transaction Documents in the form required by the 1934 Act and attaching all the material Transaction Documents (including, without limitation, this Agreement (and all schedules to this Agreement), the form of Notes, the form of the Warrants, the form of Guaranties, the form of Security Documents and the form of the Registration Rights Agreement) (including all attachments, the "8-K Filing"). From and after the filing of the 8-K Filing, the Company shall have disclosed all material,
Β
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non-public information (if any) provided to any of the Buyers by the Company
or any of its Subsidiaries or any of their respective officers, directors, employees,
customers, suppliers, auditors or agents in connection with the transactions
contemplated by the Transaction Documents. The Company shall not, and the Company
shall cause each of its Subsidiaries and each of its and their respective officers,
directors, employees and agents not to, provide any Buyer with any material,
non-public information regarding the Company or any of its Subsidiaries from
and after the issuance of the Press Release without the express prior written
consent of such Buyer. In the event of a breach of any of the foregoing covenants,
including, without limitation, Section 4(o) of this Agreement, or any of the
covenants or agreements contained in any other Transaction Document, by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents (as determined in the reasonable good faith
judgment of such Buyer), in addition to any other remedy provided herein or
in the Transaction Documents, such Buyer shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such breach or such material, non-public information, as applicable, without
the prior approval by the Company, any of its Subsidiaries, or any of its or
their respective officers, directors, employees or agents. No Buyer shall have
any liability to the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents, for any such
disclosure. Subject to the foregoing, neither the Company, its Subsidiaries
nor any Buyer shall issue any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, the
Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
(i) in substantial conformity with the 8 K Filing and contemporaneously therewith
and (ii) as is required by applicable law and regulations (provided that in
the case of clause (i) each Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release).
Without the prior written consent of the applicable Buyer, the Company shall
not (and shall cause each of its Subsidiaries and affiliates to not) disclose
the name of such Buyer in any filing, announcement, release or otherwise. Notwithstanding
anything contained in this Agreement to the contrary and without implication
that the contrary would otherwise be true, the Company expressly acknowledges
and agrees that no Buyer has had, and no Buyer shall have (unless expressly
agreed to by a particular Buyer after the date hereof in a written definitive
and binding agreement executed by the Company and such particular Buyer (it
being understood and agreed that no Buyer may bind any other Buyer with respect
thereto)), any duty of confidentiality with respect to, or a duty not to trade
on the basis of, any material, non-public information regarding the Company
or any of it Subsidiaries.
(j) Additional Registration Statements. Until the Applicable Date (as
defined below) and at any time thereafter while any Registration Statement is
not effective or the prospectus contained therein is not available for use,
the Company shall not file a registration statement under the 1933 Act relating
to securities that are not the Registrable Securities. "Applicable Date"
means the first date on which the resale by the Buyers of all Registrable Securities
is covered by one or more effective Registration Statements (as defined in the
Registration Rights Agreement) (and each prospectus contained therein is available
for use on such date).
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(k) Additional Issuance of Securities. So long as any Buyer beneficially
owns any Securities, the Company will not, without the prior written consent
of Buyers holding a majority in aggregate principal amount of the Notes then
outstanding, issue any Notes (other than to the Buyers as contemplated hereby)
and the Company shall not issue any other securities that would cause a breach
or default under the Notes or the Warrants. The Company agrees that for the
period commencing on the date hereof and ending on the date immediately following
the one hundred twenty (120) Trading Day (as defined in the Warrants) anniversary
of the Applicable Date (provided that such period shall be extended by the number
of Trading Days during such period and any extension thereof contemplated by
this proviso on which any Registration Statement is not effective or any prospectus
contained therein is not available for use) (the "Restricted Period"),
neither the Company nor any of its Subsidiaries shall directly or indirectly
issue, offer, sell, grant any option or right to purchase, or otherwise dispose
of (or announce any issuance, offer, sale, grant of any option or right to purchase
or other disposition of) any equity security or any equity-linked or related
security (including, without limitation, any "equity security" (as
that term is defined under Rule 405 promulgated under the 1933 Act), any Convertible
Securities (as defined below), any debt, any preferred stock or any purchase
rights) (any such issuance, offer, sale, grant, disposition or announcement
(whether occurring during the Restricted Period or at any time thereafter) is
referred to as a "Subsequent Placement"). Notwithstanding
the foregoing, this Section 4(k) shall not apply in respect of the issuance
of (A) shares of Common Stock or standard options to purchase Common Stock to
directors, officers or employees of the Company in their capacity as such pursuant
to an Approved Stock Plan (as defined below), provided that (1) all such issuances
(taking into account the shares of Common Stock issuable upon exercise of such
options) after the date hereof pursuant to this clause (A) do not, in the aggregate,
exceed more than 5% of the Common Stock issued and outstanding immediately prior
to the date hereof and (2) the exercise price of any such options is not lowered,
none of such options are amended to increase the number of shares issuable thereunder
and none of the terms or conditions of any such options are otherwise materially
changed in any manner that adversely affects any of the Buyers; (B) shares of
Common Stock issued upon the conversion or exercise of Convertible Securities
(other than standard options to purchase Common Stock issued pursuant to an
Approved Stock Plan that are covered by clause (A) above) issued prior to the
date hereof, provided that the conversion price of any such Convertible Securities
(other than standard options to purchase Common Stock issued pursuant to an
Approved Stock Plan that are covered by clause (A) above) is not lowered, none
of such Convertible Securities (other than standard options to purchase Common
Stock issued pursuant to an Approved Stock Plan that are covered by clause (A)
above) are amended to increase the number of shares issuable thereunder and
none of the terms or conditions of any such Convertible Securities (other than
standard options to purchase Common Stock issued pursuant to an Approved Stock
Plan that are covered by clause (A) above) are otherwise materially changed
in any manner that adversely affects any of the Buyers; (C) the Conversion Shares,
(D) the Warrant Shares, (E) from and after thirty (30) calendar days after the
First Adjustment Date (as defined in the Notes), the shares of Common Stock
issued in the AboCom Exchange; and (F) the shares of Common Stock issued upon
exercise of the Placement Agent Warrant (each of the foregoing in clauses (A)
through (F), collectively the "Excluded Securities").
"Approved Stock Plan" means any employee benefit
plan which has been approved by the board of directors of the Company prior
to or subsequent to the date hereof pursuant to which shares of Common Stock
and standard options to purchase Common Stock may be issued to any employee,
officer or director for services provided to the Company in their capacity as
such. "Convertible Securities" means any capital stock
or other security of the Company or any of its Subsidiaries that is at any time
and under any circumstances directly or indirectly convertible into, exercisable
or exchangeable for, or which otherwise entitles the holder thereof to acquire,
any capital stock or other security of the Company (including, without limitation,
Common Stock) or any of its Subsidiaries.
24
(l) Reservation of Shares. So long as any Notes or Warrants remain outstanding,
the Company shall take all action necessary to at all times have authorized,
and reserved for the purpose of issuance, no less than (i) 152.0796% of the
maximum number of shares of Common Stock issuable upon conversion of all the
Notes (assuming for purposes hereof, that the Notes are convertible at the Conversion
Price (as defined in the Notes) and without regard to any limitations on the
conversion of the Notes set forth therein), and (ii) 100% of the maximum number
of shares of Common Stock issuable upon exercise of all the Warrants (without
regard to any limitations on the exercise of the Warrants set forth therein).
(m) Conduct of Business. The business of the Company and its Subsidiaries shall not be conducted in violation of any law, ordinance or regulation of any governmental entity, except where such violations would not reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect.
(n) Other Notes; Variable Securities. (i) So long as any Notes remain
outstanding, the Company will not issue any Notes (other than to the Buyers
as contemplated hereby) and the Company shall not issue any other securities
that would cause a breach or default under the Notes. Until all of the Registrable
Securities have been sold by the Buyers, the Company and each Subsidiary shall
be prohibited from effecting or entering into an agreement to effect any Subsequent
Placement involving a Variable Rate Transaction. "Variable Rate
Transaction" means a transaction in which the Company or any Subsidiary
(i) issues or sells any Convertible Securities either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the trading
prices of or quotations for the shares of Common Stock at any time after the
initial issuance of such Convertible Securities, or (B) with a conversion, exercise
or exchange price that is subject to being reset at some future date after the
initial issuance of such Convertible Securities or upon the occurrence of specified
or contingent events directly or indirectly related to the business of the Company
or the market for the Common Stock, other than pursuant to a customary "weighted
average" anti-dilution provision or (ii) enters into any agreement (including,
without limitation, an equity line of credit or an "at-the-market"
offering) whereby the Company or any Subsidiary may sell securities at a future
determined price (other than standard and customary "preemptive" or
"participation" rights). Each Buyer shall be entitled to obtain injunctive
relief against the Company and its Subsidiaries to preclude any such issuance,
which remedy shall be in addition to any right to collect damages.
(o) Participation Right. From the date hereof through the two (2) year
anniversary of the Closing Date, neither the Company nor any of its Subsidiaries
shall, directly or indirectly, effect any Subsequent Placement unless the Company
shall have first complied with this Section 4(o). The Company acknowledges and
agrees that the right set forth in this Section 4(o) is a right granted by the
Company, separately, to each Buyer.
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Β Β Β Β Β Β (i) At least five (5) Trading Days prior to any proposed or intended Subsequent Placement, the Company shall deliver to each Buyer a written notice of its proposal or intention to effect a Subsequent Placement (each such notice, a "Pre-Notice"), which Pre-Notice shall not contain any information (including, without limitation, material, non-public information) other than: (i) a statement that the Company proposes or intends to effect a Subsequent Placement, (ii) a statement that the statement in clause (i) above does not constitute material, non-public information and (iii) a statement informing such Buyer that it is entitled to receive an Offer Notice (as defined below) with respect to such Subsequent Placement upon its written request. Upon the written request of a Buyer within three (3) Trading Days after the Company's delivery to such Buyer of such Pre-Notice, and only upon a written request by such Buyer, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver to such Buyer an irrevocable written notice (the "Offer Notice") of any proposed or intended issuance or sale or exchange (the "Offer") of the securities being offered (the "Offered Securities") in a Subsequent Placement, which Offer Notice shall (w) identify and describe the Offered Securities, (x) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (y) identify the Persons (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with such Buyer in accordance with the terms of the Offer such Buyer's pro rata portion of 66% of the Offered Securities, provided that the number of Offered Securities which such Buyer shall have the right to subscribe for under this Section 4(o) shall be (a) based on such Buyer's pro rata portion of the aggregate original principal amount of the Notes purchased hereunder by all Buyers (the "Basic Amount"), and (b) with respect to each Buyer that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other Buyers as such Buyer shall indicate it will purchase or acquire should the other Buyers subscribe for less than their Basic Amounts (the "Undersubscription Amount").
Β Β Β Β Β Β (ii) To accept an Offer, in whole or in part, such Buyer must deliver a written notice to the Company prior to the end of the third (3rd) Business Day after such Buyer's receipt of the Offer Notice (the "Offer Period"), setting forth the portion of such Buyer's Basic Amount that such Buyer elects to purchase and, if such Buyer shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Buyer elects to purchase (in either case, the "Notice of Acceptance"). If the Basic Amounts subscribed for by all Buyers are less than the total of all of the Basic Amounts, then such Buyer who has set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, if the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the "Available Undersubscription Amount"), such Buyer who has subscribed for any Undersubscription Amount shall be entitled to purchase only that portion of the Available Undersubscription Amount as the Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers that have subscribed for Undersubscription Amounts, subject to rounding by the Company to the extent it deems reasonably necessary. Notwithstanding the foregoing, if the Company desires to modify or amend the terms and conditions of the Offer prior to the expiration of the Offer Period, the Company may deliver to each Buyer a new Offer Notice and the Offer Period shall expire on the third (3rd) Business Day after such Buyer's receipt of such new Offer Notice.
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Β Β Β Β Β Β (iii) The Company shall have five (5) Business Days from the expiration of the Offer Period above (i) to offer, issue, sell or exchange all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by a Buyer (the "Refused Securities") pursuant to a definitive agreement(s) (the "Subsequent Placement Agreement"), but only to the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring Person or Persons or less favorable to the Company than those set forth in the Offer Notice and (ii) to publicly announce (a) the execution of such Subsequent Placement Agreement, and (b) either (x) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (y) the termination of such Subsequent Placement Agreement, which shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement and any documents contemplated therein filed as exhibits thereto.
Β Β Β Β Β Β (iv) In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in Section 4(o)(iii) above), then such Buyer may, at its sole option and in its sole discretion, reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that such Buyer elected to purchase pursuant to Section 4(o)(ii) above multiplied by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to Buyers pursuant to this Section 4(o) prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that any Buyer so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have again been offered to the Buyers in accordance with Section 4(o)(i) above.
Β Β Β Β Β Β (v) Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, such Buyer shall acquire from the Company, and the Company shall issue to such Buyer, the number or amount of Offered Securities specified in its Notice of Acceptance. The purchase by such Buyer of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and such Buyer of a separate purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to such Buyer and its counsel.
Β Β Β Β Β Β (vi) Any Offered Securities not acquired by a Buyer or other Persons in accordance with this Section 4(o) may not be issued, sold or exchanged until they are again offered to such Buyer under the procedures specified in this Agreement.
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Β Β Β Β Β Β (vii) The Company and each Buyer agree that if any Buyer elects to participate in the Offer, neither the Subsequent Placement Agreement with respect to such Offer nor any other transaction documents related thereto (collectively, the "Subsequent Placement Documents") shall include any term or provision whereby such Buyer shall be required to agree to any restrictions on trading as to any securities of the Company or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, any agreement previously entered into with the Company or any instrument received from the Company.
Β Β Β Β Β Β (viii) Notwithstanding anything to the contrary in this Section 4(o) and unless otherwise agreed to by such Buyer, the Company shall either confirm in writing to such Buyer that the transaction with respect to the Subsequent Placement has been abandoned or shall publicly disclose its intention to issue the Offered Securities, in either case, in such a manner such that such Buyer will not be in possession of any material, non-public information, by the fifth (5th) Business Day following delivery of the Offer Notice. If by such fifth (5th) Business Day, no public disclosure regarding a transaction with respect to the Offered Securities has been made, and no notice regarding the abandonment of such transaction has been received by such Buyer, such transaction shall have been abandoned and such Buyer shall not be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries. Should the Company decide to pursue such transaction with respect to the Offered Securities, the Company shall provide such Buyer with another Offer Notice and such Buyer will again have the right of participation set forth in this Section 4(o). The Company shall not be permitted to deliver more than one such Offer Notice to such Buyer in any sixty (60) day period, except as expressly contemplated by the last sentence of Section 4(o)(ii).
Β Β Β Β Β Β (ix) The restrictions contained in this Section
4(o) shall not apply in connection with the issuance of any Excluded Securities.
The Company shall not circumvent the provisions of this Section 4(o) by providing
terms or conditions to one Buyer that are not provided to all.
(p) Dilutive Issuances. For so long as any Notes or Warrants remain
outstanding, the Company shall not, in any manner, enter into or affect any
Dilutive Issuance (as defined in the Notes) if the effect of such Dilutive Issuance
is to cause the Company to be required to issue upon conversion of any Notes
or exercise of any Warrant any shares of Common Stock in excess of that number
of shares of Common Stock which the Company may issue upon conversion of the
Notes and exercise of the Warrants without breaching the Company's obligations
under the rules or regulations of the Principal Market. As of any date, other
than AboCom Exchange (as defined in the Warrants) and Redemption Issuances (to
the extent the Company is in compliance with the applicable provisions governing
Redemption Issuances (as defined in the Warrants) as set forth in the Warrants),
unless either (i) the Company has obtained the written approval of its stockholders
providing for the Company's issuance of all of the Securities as described in
the Transaction Documents in accordance with applicable law and the rules and
regulations of the Principal Market prior to such date and the Equity Conditions
(as defined in the Notes) are satisfied as of such date or (ii) no Notes or
Warrants remain outstanding, the Company shall not, in any manner, enter into
or affect any Dilutive Issuance if the effect of such Dilutive Issuance would,
but for the application of the Conversion Floor Price (as defined in the Notes)
or the Exercise Floor Price (as defined in the Warrant), as applicable, cause
either (i) the Conversion Price (as defined in the Notes) to be reduced below
the Conversion Floor Price or (ii) the Exercise Price (as defined in the Warrant)
to be reduced below the Exercise Floor Price.
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(q) Passive Foreign Investment Company. The Company shall conduct its
business in such a manner as will ensure that the Company will not be deemed
to constitute a passive foreign investment company within the meaning of Section
1297 of the U.S. Internal Revenue Code of 1986, as amended.
(r) Restriction on Redemption and Cash Dividends. So long as any Notes
are outstanding, the Company shall not, directly or indirectly, redeem, or declare
or pay any cash dividend or distribution on, any securities of the Company without
the prior express written consent of the Buyers.
(s) Corporate Existence. So long as any Buyer beneficially owns any
Notes or Warrants, the Company shall not be party to any Fundamental Transaction
(as defined in the Notes) unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Notes and the
Warrants.
(t) Closing Documents. On or prior to fourteen (14) calendar days after
the Closing Date, the Company agrees to deliver, or cause to be delivered, to
each Buyer and Xxxxxxxxx Xxxxxxx, LLP executed copies of the Transaction Documents,
Securities and other document required to be delivered to any party pursuant
to Section 7 hereof.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.
(a) Register. The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to each holder of Securities), a register for the Notes and the Warrants
in which the Company shall record the name and address of the Person in whose
name the Notes and the Warrants have been issued (including the name and address
of each transferee), the principal amount of the Notes held by such Person,
the number of Conversion Shares issuable upon conversion of the Notes and the
number of Warrant Shares issuable upon exercise of the Warrants held by such
Person. The Company shall keep the register open and available during business
hours for inspection of any Buyer or its legal representatives, provided that
the Company has been provided with reasonable prior notice.
(b) Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent and any subsequent transfer agent in a form acceptable to each of the Buyers (the "Irrevocable Transfer Agent Instructions") to issue certificates or credit shares to the applicable balance accounts at The Depository Trust Company ("DTC"), registered in the name of each Buyer or its respective nominee(s), for the Conversion Shares and the Warrant Shares in such amounts as specified from time to time by each Buyer to the Company upon conversion of the Notes or the exercise of the Warrants (as the case may be). The Company represents and warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5(b), and stop transfer instructions to give effect to
29
Section 2(g) hereof, will be given by the Company to its transfer agent with respect to the Securities, and that the Securities shall otherwise be freely transferable on the books and records of the Company, as applicable, to the extent provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale, assignment or transfer of the Securities in accordance with Section 2(g), the Company shall permit the transfer and shall promptly instruct its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment or transfer involves Conversion Shares or Warrant Shares sold, assigned or transferred pursuant to an effective registration statement or in compliance with Rule 144, the transfer agent shall issue such shares to such Buyer, assignee or transferee (as the case may be) without any restrictive legend in accordance with Section 5(d) below. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to a Buyer. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5(b) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5(b), that a Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. The Company shall cause its counsel to issue the legal opinion referred to in the Irrevocable Transfer Agent Instructions to the Company's transfer agent on each Effective Date (as defined in the Registration Rights Agreement). Any fees (with respect to the transfer agent, counsel to the Company or otherwise) associated with the issuance of such opinion or the removal of any legends on any of the Securities shall be borne by the Company.
(c) Legends. Each Buyer understands that the Securities have been issued
(or will be issued in the case of the Conversion Shares and the Warrant Shares)
pursuant to an exemption from registration or qualification under the 1933 Act
and applicable state securities laws, and except as set forth below, the Securities
shall bear any legend as required by the "blue sky" laws of any state
and a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]
HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO
THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO
THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
THE SECURITIES.
Β
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(d) Removal of Legends. Certificates evidencing Securities shall not
be required to contain the legend set forth in Section 5(c) above or any other
legend (i) while a registration statement (including a Registration Statement)
covering the resale of such Securities is effective under the 1933 Act, (ii)
following any sale of such Securities pursuant to Rule 144 (assuming the transferor
is not an affiliate of the Company), (iii) if such Securities are eligible to
be sold, assigned or transferred under Rule 144 (provided that a Buyer provides
the Company with reasonable assurances that such Securities are eligible for
sale, assignment or transfer under Rule 144 which shall not include an opinion
of counsel), (iv) in connection with a sale, assignment or other transfer (other
than under Rule 144), provided that such Buyer provides the Company with an
opinion of counsel to such Buyer, in a generally acceptable form, to the effect
that such sale, assignment or transfer of the Securities may be made without
registration under the applicable requirements of the 1933 Act or (v) if such
legend is not required under applicable requirements of the 1933 Act (including,
without limitation, controlling judicial interpretations and pronouncements
issued by the SEC). If a legend is not required pursuant to the foregoing, the
Company shall no later than two (2) Trading Days following the delivery by a
Buyer to the Company or the transfer agent (with notice to the Company) of a
legended certificate representing such Securities (endorsed or with stock powers
attached, signatures guaranteed, and otherwise in form necessary to affect the
reissuance and/or transfer, if applicable), together with any other deliveries
from such Buyer as may be required above in this Section 5(d), as directed by
such Buyer, either: (A) provided that the Company's transfer agent is participating
in the DTC Fast Automated Securities Transfer Program and such Securities are
Conversion Shares or Warrant Shares, credit the aggregate number of shares of
Common Stock to which such Buyer shall be entitled to such Buyer's or its designee's
balance account with DTC through its Deposit/Withdrawal at Custodian system
or (B) if the Company's transfer agent is not participating in the DTC Fast
Automated Securities Transfer Program, issue and deliver (via reputable overnight
courier) to such Buyer, a certificate representing such Securities that is free
from all restrictive and other legends, registered in the name of such Buyer
or its designee (the date by which such credit is so required to be made to
the balance account of such Buyer's or such Buyer's nominee with DTC or such
certificate is required to be delivered to such Buyer pursuant to the foregoing
is referred to herein as the "Required Delivery Date").
(e) Failure to Timely Deliver; Buy-In. If the Company fails to (i) issue and deliver (or cause to be delivered) to a Buyer by the Required Delivery Date a certificate representing the Securities so delivered to the Company by such Buyer that is free from all restrictive and other legends or (ii) credit the balance account of such Buyer's or such Buyer's nominee with DTC for such number of Conversion Shares or Warrant Shares so delivered to the Company, then, in addition to all other remedies available to such Buyer, the Company shall pay in cash to such Buyer on each day after the Required Delivery Date that the issuance or credit of such shares is not timely effected an amount equal to 2% of the original principal amount of such Buyer's Note. In addition to the foregoing, if the Company fails to so properly deliver such unlegended certificates or so properly credit the balance account of such Buyer's or such Buyer's nominee with DTC by the Required Delivery Date, and if on or after the Required Delivery Date such Buyer purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Buyer of shares of Common Stock that such Buyer anticipated receiving from the Company without any restrictive legend, then, in addition to all other remedies available to such Buyer, the Company shall, within three (3) Trading Days after such Buyer's request and in such Buyer's sole discretion, either (i) pay cash to such Buyer in an amount equal to such Buyer's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the "Buy-In Price"), at which point the Company's obligation to deliver such certificate or credit such Buyer's balance account shall terminate and such shares shall be cancelled, or (ii) promptly honor its obligation to deliver to such Buyer a certificate or certificates or credit such Buyer's DTC account representing such number of shares of Common Stock that would have been issued if the Company timely complied with its obligations hereunder and pay cash to such Buyer in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Conversion Shares or Warrant Shares (as the case may be) that the Company was required to deliver to such Buyer by the Required Delivery Date times (B) the Closing Sale Price (as defined in the Warrants) of the Common Stock on the Trading Day immediately preceding the Required Delivery Date.
31
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
(a) The obligation of the Company hereunder to issue and sell the Notes and
the related Warrants to each Buyer at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion by providing each Buyer with
prior written notice thereof:
Β Β Β Β Β Β (i) Such Buyer shall have executed each of the
other Transaction Documents to which it is a party and delivered the same to
the Company.
Β Β Β Β Β Β (ii) Such Buyer and each other Buyer shall have
delivered to the Company the Purchase Price (less, in the case of any Buyer,
the amounts withheld pursuant to Section 4(g)) for the Note and the related
Warrants being purchased by such Buyer at the Closing by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company.
Β Β Β Β Β Β (iii) The representations and warranties of such
Buyer shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though originally made at that time (except
for representations and warranties that speak as of a specific date, which shall
be true and correct as of such specific date), and such Buyer shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by such Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
(a) The obligation of each Buyer hereunder to purchase its Note and its related Warrants at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer's sole benefit and may be waived by such Buyer at any time in
its sole discretion by providing the Company with prior written notice thereof:
Β Β Β Β Β Β (i) The Company and each Subsidiary (as the case may be) shall have duly executed and delivered to such Buyer each of the Transaction Documents to which it is a party and the Company shall have duly executed and delivered to such Buyer a Note (in such original principal amount as is set forth across from such Buyer's name in column (3) of the Schedule of Buyers) and the related Warrants (for such aggregate number of shares of Common Stock as is set forth across from such Buyer's name in column (4) of the Schedule of Buyers) being purchased by such Buyer at the Closing pursuant to this Agreement.
32
Β Β Β Β Β Β (ii) Such Buyer shall have received the opinion
of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., the Company's counsel, dated
as of the Closing Date, in the form acceptable to such Buyer.
Β Β Β Β Β Β (iii) The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form acceptable to such Buyer, which instructions shall have been delivered to and acknowledged in writing by the Company's transfer agent.
Β Β Β Β Β Β (iv) The Company shall have delivered to such
Buyer a certificate evidencing the formation and good standing of the Company
and each of its Subsidiaries in each such entity's jurisdiction of formation
issued by the Secretary of State (or comparable office) of such jurisdiction
of formation as of a date within ten (10) days of the Closing Date.
Β Β Β Β Β Β (v) The Company shall have delivered to such
Buyer a certificate evidencing the Company's and each Subsidiary's qualification
as a foreign corporation and good standing issued by the Secretary of State
(or comparable office) of each jurisdiction in which the Company and each Subsidiary
conducts business and is required to so qualify, as of a date within ten (10)
days of the Closing Date.
Β Β Β Β Β Β (vi) The Company shall have delivered to such
Buyer a certified copy of the Certificate of Incorporation as certified by the
Delaware Secretary of State within ten (10) days of the Closing Date.
Β Β Β Β Β Β (vii) Each Subsidiary shall have delivered to
such Buyer a certified copy of its certificate of incorporation as certified
by the Secretary of State (or comparable office) of such Subsidiary's jurisdiction
of incorporation within ten (10) days of the Closing Date.
Β Β Β Β Β Β (viii) The Company and each Subsidiary shall have delivered to such Buyer a certificate, in the form acceptable to such Buyer, executed by the Secretary of the Company and each Subsidiary and dated as of the Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted by the Company's and each Subsidiary's board of directors in a form reasonably acceptable to such Buyer, (ii) the Certificate of Incorporation of the Company and the organizational documents of each Subsidiary and (iii) the Bylaws of the Company and the bylaws of each Subsidiary, each as in effect at the Closing.
33
Β Β Β Β Β Β (ix) Each and every representation and warranty
of the Company shall be true and correct as of the date when made and as of
the Closing Date as though originally made at that time (except for representations
and warranties that speak as of a specific date, which shall be true and correct
as of such specific date) and the Company shall have performed, satisfied and
complied in all respects with the covenants, agreements and conditions required
to be performed, satisfied or complied with by the Company at or prior to the
Closing Date. Such Buyer shall have received a certificate, duly executed by
the Chief Executive Officer or the Chief Financial Officer of the Company, dated
as of the Closing Date, to the foregoing effect and as to such other matters
as may be reasonably requested by such Buyer in the form acceptable to such
Buyer.
Β Β Β Β Β Β (x) The Company shall have delivered to such
Buyer a letter from the Company's transfer agent certifying the number of shares
of Common Stock outstanding on the Closing Date immediately prior to the Closing.
Β Β Β Β Β Β (xi) The Common Stock (I) shall be designated for quotation or listed (as applicable) on the Principal Market and (II) shall not have been suspended, as of the Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension by the SEC or the Principal Market have been threatened, as of the Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by falling below the minimum maintenance requirements of the Principal Market.Β Β Β Β Β Β
Β
(xii) The Company shall have obtained all governmental, regulatory or third
party consents and approvals, if any, necessary for the sale of the Securities,
including without limitation, those required by the Principal Market.
Β Β Β Β Β Β (xiii) No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction
that prohibits the consummation of any of the transactions contemplated by the
Transaction Documents.
Β Β Β Β Β Β (xiv) Since the date of execution of this Agreement,
no event or series of events shall have occurred that reasonably would have
or result in a Material Adverse Effect.
Β Β Β Β Β Β (xv) The Company shall have obtained approval
of the Principal Market to list or designate for quotation (as the case may
be) the Conversion Shares and the Warrant Shares.
Β Β Β Β Β Β (xvi) In accordance with the terms of the Security
Documents, the Company shall have delivered to the Collateral Agent (i) certificates
representing the Subsidiaries' shares of capital stock to the extent such subsidiary
is a corporation or otherwise has certificated capital stock, along with duly
executed blank stock powers and (ii) appropriate financing statements on Form
UCC-1 to be duly filed in such office or offices as may be necessary or, in
the opinion of the Collateral Agent, desirable to perfect the security interests
purported to be created by each Security Document.
Β Β Β Β Β Β (xvii) Within two (2) Business Days prior to
the Closing, the Company shall have delivered or caused to be delivered to each
Buyer and the Collateral Agent (i) true copies of UCC search results, listing
all effective financing statements which name as debtor the Company or any of
its Subsidiaries filed in the prior five years to perfect an interest in any
assets thereof, together with copies of such financing statements, none of which,
except as otherwise agreed in writing by the Buyers, shall cover any of the
Collateral (as defined in the Security Documents) and the results of searches
for any tax lien and judgment lien filed against such Person or its property,
which results, except as otherwise agreed to in writing by the Buyers shall
not show any such Liens (as defined in the Security Documents); and (ii) a perfection
certificate, duly completed and executed by the Company and each of its Subsidiaries,
in form and substance satisfactory to the Buyers.
34
Β Β Β Β Β Β (xviii) Contemporaneously with the Closing, the
Collateral Agent shall have received (i) a duly executed copy of the payoff
letter with respect to the Indebtedness owed to Silicon Valley Bank set forth
on Schedule 3(r)(iii) ("Existing Secured Indebtedness"), (ii)
any and all related release, cancellation and/or termination documents, duly
executed by the Company and the holder of the Existing Secured Indebtedness,
together with the UCC-3 termination statements for all UCC-1 financing statements,
filed by holder of the Existing Secured Indebtedness, covering any portion of
the Collateral (as defined in the Security Agreement) and existing as of the
Closing Date, and (iii) acknowledgement filings of such UCC-3 termination statements,
in form and substance reasonably satisfactory to the Required Holders; or, in
the case of clauses (ii) - (iii) hereof arrangements satisfactory to the Required
Holders shall have been made providing for the delivery of such items to the
Collateral Agent promptly following payment in full of the Existing Secured
Indebtedness.
Β Β Β Β Β Β (xix) Each Account Control Bank and the Collateral
Agent shall have duly executed and delivered to such Buyer an Account Control
Agreement with respect to each Restricted Account held at such Account Control
Bank.
Β Β Β Β Β Β (xx) The Company and its Subsidiaries shall have
delivered to such Buyer such other documents relating to the transactions contemplated
by this Agreement as such Buyer or its counsel may reasonably request.
8. TERMINATION.
In the event that the Closing shall not have occurred with respect to a Buyer within five (5) days of the date hereof, then such Buyer shall have the right to terminate its obligations under this Agreement with respect to itself at any time on or after the close of business on such date without liability of such Buyer to any other party; provided, however, (i) the right to terminate this Agreement under this Section 8 shall not be available to such Buyer if the failure of the transactions contemplated by this Agreement to have been consummated by such date is the result of such Buyer's breach of this Agreement and (ii) the abandonment of the sale and purchase of the Notes and the Warrants shall be applicable only to such Buyer providing such written notice, provided further that no such termination shall affect any obligation of the Company under this Agreement to reimburse such Buyer for the expenses described in Section 4(g) above. Nothing contained in this Section 8 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.
35
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. The parties hereby agree that pursuant to 735 Illinois Compiled Statutes 105/5-5 they have chosen that all questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Chicago, Illinois, 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. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) 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. In the event that any signature is delivered by
facsimile transmission or by an e-mail which contains a portable document format
(.pdf) file of an executed signature page, such signature page shall create
a valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such signature page
were an original thereof.
(c) Headings; Gender. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement. Unless the context clearly indicates otherwise, each pronoun herein
shall be deemed to include the masculine, feminine, neuter, singular and plural
forms thereof. The terms "including," "includes," "include"
and words of like import shall be construed broadly as if followed by the words
"without limitation." The terms "herein," "hereunder,"
"hereof" and words of like import refer to this entire Agreement instead
of just the provision in which they are found.
(d) Severability. If any provision of this Agreement is prohibited by
law or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable
shall be deemed amended to apply to the broadest extent that it would be valid
and enforceable, and the invalidity or unenforceability of such provision shall
not affect the validity of the remaining provisions of this Agreement so long
as this Agreement as so modified continues to express, without material change,
the original intentions of the parties as to the subject matter hereof and the
prohibited nature, invalidity or unenforceability of the provision(s) in question
does not substantially impair the respective expectations or reciprocal obligations
of the parties or the practical realization of the benefits that would otherwise
be conferred upon the parties. The parties will endeavor in good faith negotiations
to replace the prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to that of the
prohibited, invalid or unenforceable provision(s). Notwithstanding anything
to the contrary contained in this Agreement or any other Transaction Document
(and without implication that the following is required or applicable), it is
the intention of the parties that in no event shall amounts and value paid by
the Company and/or its Subsidiaries (as the case may be), or payable to or received
by any of the Buyers, under the Transaction Documents (including without limitation,
any amounts that would be characterized as "interest" under applicable
law) exceed amounts permitted under any applicable law. Accordingly, if any
obligation to pay, payment made to any Buyer, or collection by any Buyer pursuant
the Transaction Documents is finally judicially determined to be contrary to
any such applicable law, such obligation to pay, payment or collection shall
be deemed to have been made by mutual mistake of such Buyer, the Company and
its Subsidiaries and such amount shall be deemed to have been adjusted with
retroactive effect to the maximum amount or rate of interest, as the case may
be, as would not be so prohibited by the applicable law. Such adjustment shall
be effected, to the extent necessary, by reducing or refunding, at the option
of such Buyer, the amount of interest or any other amounts which would constitute
unlawful amounts required to be paid or actually paid to such Buyer under the
Transaction Documents. For greater certainty, to the extent that any interest,
charges, fees, expenses or other amounts required to be paid to or received
by such Buyer under any of the Transaction Documents or related thereto are
held to be within the meaning of "interest" or another applicable
term to otherwise be violative of applicable law, such amounts shall be pro-rated
over the period of time to which they relate.
36
(e) Entire Agreement; Amendments. This Agreement, the other Transaction
Documents and the schedules and exhibits attached hereto and thereto and the
instruments referenced herein and therein supersede all other prior oral or
written agreements between the Buyers, the Company, its Subsidiaries, their
affiliates and Persons acting on their behalf solely with respect to the matters
contained herein and therein, and this Agreement, the other Transaction Documents,
the schedules and exhibits attached hereto and thereto and the instruments referenced
herein and therein contain the entire understanding of the parties solely with
respect to the matters covered herein and therein; provided, however, nothing
contained in this Agreement or any other Transaction Document shall (or shall
be deemed to) (i) have any effect on any agreements any Buyer has entered into
with the Company or any of its Subsidiaries prior to the date hereof with respect
to any prior investment made by such Buyer in the Company or (ii) waive, alter,
modify or amend in any respect any obligations of the Company or any of its
Subsidiaries, or any rights of or benefits to any Buyer or any other Person,
in any agreement entered into prior to the date hereof between or among the
Company and/or any of its Subsidiaries and any Buyer and all such agreements
shall continue in full force and effect. Except as specifically set forth herein
or therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. For clarification purposes,
the Recitals are part of this Agreement. No provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and
the Required Holders (as defined below), and any amendment to any provision
of this Agreement made in conformity with the provisions of this Section 9(e)
shall be binding on all Buyers and holders of Securities, as applicable, provided
that no such amendment shall be effective to the extent that it (1) applies
to less than all of the holders of the Securities then outstanding or (2) imposes
any obligation or liability on any Buyer without such Buyer's prior written
consent (which may be granted or withheld in such Buyer's sole discretion).
No waiver shall be effective unless it is in writing and signed by an authorized
representative of the waiving party, provided that the Required Holders may
waive any provision of this Agreement, and any waiver of any provision of this
Agreement made in conformity with the provisions of this Section 9(e) shall
be binding on all Buyers and holders of Securities, as applicable, provided
that no such waiver shall be effective to the extent that it (1) applies to
less than all of the holders of the Securities then outstanding (unless a party
gives a waiver as to itself only) or (2) imposes any obligation or liability
on any Buyer without such Buyer's prior written consent (which may be granted
or withheld in such Buyer's sole discretion). No consideration shall be offered
or paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration
also is offered to all of the parties to the Transaction Documents, all holders
of the Notes or all holders of the Warrants (as the case may be). The Company
has not, directly or indirectly, made any agreements with any Buyers relating
to the terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents. Without limiting
the foregoing, the Company confirms that, except as set forth in this Agreement,
no Buyer has made any commitment or promise or has any other obligation to provide
any financing to the Company, any Subsidiary or otherwise. As a material inducement
for each Buyer to enter into this Agreement, the Company expressly acknowledges
and agrees that (i) no due diligence or other investigation conducted by a Buyer,
any of its advisors or any of its representatives shall affect such Buyer's
right to rely on, or shall modify or qualify in any manner or be an exception
to any of, the Company's representations and warranties contained in this Agreement
or any other Transaction Document and (ii) unless a provision of this Agreement
or any other Transaction Document is expressly preceded by the phrase "except
as disclosed in the SEC Documents," nothing contained in any of the SEC
Documents shall affect such Buyer's right to rely on, or shall modify or qualify
in any manner or be an exception to any of, the Company's representations and
warranties contained in this Agreement or any other Transaction Document. "Required
Holders" means (i) prior to the Closing Date, each Buyer entitled
to purchase at least $250,000 in principal amount of the Notes at the Closing
and (ii) on or after the Closing Date, holders of a majority of the Registrable
Securities (excluding any Registrable Securities held by the Company or any
of its Subsidiaries) issued or issuable hereunder or pursuant to the Notes and/or
the Warrants.
37
(f) Notices. Any notices, consents, waivers 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) Business Day after deposit with an overnight
courier service with next day delivery specified, in each case, properly addressed
to the party to receive the same. The addresses and facsimile numbers for such
communications shall be:
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β If to the Company:
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Socket
Mobile, Inc.
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β 00000
Xxxxxx Xxxxx
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Xxxxxx,
XX 00000
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Telephone:
(000) 000-0000
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Facsimile:
(000) 000-0000
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Attention:
Chief Executive Officer
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β With
a copy (for informational purposes only) to:
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Xxxxxx
Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β 000
Xxxx Xxxx Xxxx
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Xxxx
Xxxx, XX 00000
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Telephone:
(000) 000-0000
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Facsimile:
(000) 000-0000
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Attention:
Xxxxxxx X. Xxxxxxx
38
Β
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β If to the Transfer Agent: Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β American
Stock Transfer & Trust Company
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β 00
Xxxxxx Xxxx, Xxxxx Xxxxx
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Xxx
Xxxx, XX 00000
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Telephone:
(000) 000-0000
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Facsimile:
(000) 000-0000
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Attention:
Xxxxx Xxxxx
If to a Buyer, to its address and facsimile number set forth on the Schedule
of Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers,
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β with
a copy (for informational purposes only) to:
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Xxxxxxxxx
Traurig, LLP
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β MetLife
Building
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β 000
Xxxx Xxxxxx
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Xxx
Xxxx, XX 00000
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Telephone:
(000) 000-0000
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Facsimile:
(000) 000-0000
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Attention:
Xxxxxxx X. Xxxxxxxxx, Esq.
or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change, provided that Xxxxxxxxx Traurig, LLP shall only be provided copies of notices sent to the lead investor. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.
39
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of any of the Securities. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the Required Holders, including, without limitation, by way of a
Fundamental Transaction (as defined in the Warrants) (unless the Company is
in compliance with the applicable provisions governing Fundamental Transactions
set forth in the Warrants) or a Fundamental Transaction (as defined in the Notes)
(unless the Company is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Notes). A Buyer may assign some or
all of its rights hereunder in connection with any transfer of any of its Securities
without the consent of the Company, in which event such assignee shall be deemed
to be a Buyer hereunder with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, other than the Indemnitees referred to in Section 9(k).
Β
(i) Survival. The representations, warranties, agreements and covenants
shall survive the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) Further Assurances. Each party shall use its reasonable best efforts
to 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 any 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.
(k) Indemnification. In consideration of each Buyer's execution and delivery of the Transaction Documents and acquiring the Securities thereunder and in addition to all of the Company's other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless each Buyer and each holder of any Securities and all of their stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons' agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and 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 (a) any misrepresentation or breach of any representation or warranty made by the Company or any Subsidiary in any of the Transaction Documents,(b) any breach of any covenant, agreement or obligation of the Company or any Subsidiary contained in any of the Transaction Documents or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company or any Subsidiary) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of any of the Transaction Documents, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, (iii) any disclosure properly made by such Buyer pursuant to Section 4(i), or (iv) the status of such Buyer or holder of the Securities as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. Except as otherwise set forth herein, the mechanics and procedures with respect to the rights and obligations under this Section 9(k) shall be the same as those set forth in Section 6 of the Registration Rights Agreement.
40
(l) 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. No specific representation or warranty shall limit the generality or applicability of a more general representation or warranty. Each and every reference to share prices, shares of Common Stock and any other numbers in this Agreement that relate to the Common Stock shall be automatically adjusted for stock splits, stock combinations and other similar transactions that occur with respect to the Common Stock after the date of this Agreement. Notwithstanding anything contained in this Agreement to the contrary, or any references to "Buyers" herein, Buyer and the Company acknowledge and agree that Buyer is the only Buyer party to the transactions contemplated by this Agreement.
(m) Remedies. Each Buyer and each holder of any Securities shall have
all rights and remedies set forth in the Transaction Documents 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 breach of any provision of this
Agreement and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it or any Subsidiary fails to perform,
observe, or discharge any or all of its or such Subsidiary's (as the case may
be) obligations under the Transaction Documents, any remedy at law may prove
to be inadequate relief to the Buyers. The Company therefore agrees that the
Buyers shall be entitled to seek specific performance and/or temporary, preliminary
and permanent injunctive or other equitable relief from any court of competent
jurisdiction in any such case without the necessity of proving actual damages
and without posting a bond or other security.
(n) Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Buyer exercises a right, election, demand or option under a Transaction Document and the Company or any Subsidiary does not timely perform its related obligations within the periods therein provided, then such Buyer may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company or such Subsidiary (as the case may be), any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.
41
(o) Payment Set Aside; Currency. To the extent that the Company makes a payment or payments to any Buyer hereunder or pursuant to any of the other Transaction Documents or any of the Buyers enforce or exercise their 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, foreign, 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. Until the Warrants and all warrants issued pursuant to the terms thereof are no longer outstanding, the Company shall not effect any stock combination, reverse stock split or other similar transaction (or make any public announcement or disclosure with respect to any of the foregoing) without the prior written consent of the Required Holders. Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement and the other Transaction Documents are in United States Dollars ("U.S. Dollars"), and all amounts owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. "Exchange Rate" means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation.
(q) Judgment Currency.
Β Β Β Β Β Β (i) If for the purpose of obtaining or enforcing
judgment against the Company in any court in any jurisdiction it becomes necessary
to convert into any other currency (such other currency being hereinafter in
this Section 9(q) referred to as the "Judgment Currency") an amount
due in US Dollars under this Agreement, the conversion shall be made at the
Exchange Rate prevailing on the Trading Day immediately preceding:
Β Β Β Β Β Β Β Β Β Β Β Β (1) the date actual
payment of the amount due, in the case of any proceeding in the courts of New
York or in the courts of any other jurisdiction that will give effect to such
conversion being made on such date: or
Β Β Β Β Β Β Β Β Β Β Β Β (2) the date on
which the foreign court determines, in the case of any proceeding in the courts
of any other jurisdiction (the date as of which such conversion is made pursuant
to this Section 9(q)(i)(2) being hereinafter referred to as the "Judgment
Conversion Date").
Β Β Β Β Β Β (ii) If in the case of any proceeding in the court of any jurisdiction referred to in Section 9(q)(i)(2) above, there is a change in the Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the applicable party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the Exchange Rate prevailing on the date of payment, will produce the amount of US Dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Conversion Date.
42
Β Β Β Β Β Β (iii) Any amount due from the Company under this
provision shall be due as a separate debt and shall not be affected by judgment
being obtained for any other amounts due under or in respect of this Agreement.
(r) Independent Nature of Buyers' Obligations and Rights. The obligations of each Buyer under the Transaction Documents are several and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers as, and the Company acknowledges that the Buyers do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Buyers are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by the Transaction Documents or any matters, and the Company acknowledges that the Buyers are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by the Transaction Documents. The decision of each Buyer to purchase Securities pursuant to the Transaction Documents has been made by such Buyer independently of any other Buyer. Each Buyer acknowledges that no other Buyer has acted as agent for such Buyer in connection with such Buyer making its investment hereunder and that no other Buyer will be acting as agent of such
Β
Buyer in connection with monitoring such Buyer's investment in the Securities
or enforcing its rights under the Transaction Documents. The Company and each
Buyer confirms that each Buyer has independently participated with the Company
and its Subsidiaries in the negotiation of the transaction contemplated hereby
with the advice of its own counsel and advisors. Each Buyer shall be entitled
to independently protect and enforce its rights, including, without limitation,
the rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Buyer to be joined as an additional
party in any proceeding for such purpose. The use of a single agreement to effectuate
the purchase and sale of the Securities contemplated hereby was solely in the
control of the Company, not the action or decision of any Buyer, and was done
solely for the convenience of the Company and its Subsidiaries and not because
it was required or requested to do so by any Buyer. It is expressly understood
and agreed that each provision contained in this Agreement and in each other
Transaction Document is between the Company, each Subsidiary and a Buyer, solely,
and not between the Company, its Subsidiaries and the Buyers collectively and
not between and among the Buyers.
[signature pages follow]
Β
Β
Β
Β
Β
Β
43
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Agreement to be duly executed as of the date first written
above.
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β
Β | Β | SOCKET MOBILE, INC. | |
Β | Β | ||
Β | By: | /s/ Xxxxx X. Xxxxxx | |
Β |
|
Name: Xxxxx
X. Xxxxxx Title: Chief Financial Officer |
Β
Β
Β
Β
Β
Β
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.
Β | Β | XXXXXX BAY MASTER FUND LTD. | |
Β | Β By: Xxxxxx Bay Capital Management LP, Investment Manager | ||
Β | By: | /s/ Xxxx Xxxx | |
Β |
|
Name: Xxxx
Xxxx Title: Authorized Signatory |
Β
Β
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β BUYERS:
Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β
Β
Β
SCHEDULE OF BUYERS
(1)
|
Β Β
|
(2)
|
Β Β
|
(3)
|
Β Β
|
(4)
|
Β Β
|
(5)
|
Β Β
|
(6)
|
Β | Β | Β | Β | Β | Β | Β | Β | Β | Β | Β |
Buyer
|
|
Address and Facsimile Number
|
|
Original Principal Amount of Notes
|
|
Aggregate
Number of Warrant Shares |
|
Purchase Price
|
|
Legal Representative's Address and Facsimile Number
|
Β | Β | Β | Β | Β | Β | Β | Β | Β | Β | Β |
Xxxxxx Bay Master Fund Ltd. | Β | 000 Xxxxxxxx, 00xx Xxxxx Xxx Xxxx, Xxx Xxxx 00000 Attention: Xxxx Xxxx Facsimile: (000) 000-0000 Telephone: (000) 000-0000 Residence: United States E-mail: xxxxxxxxxxx@xxxxxxxxxxxxxxxx.xxx |
Β |
$1,000,000
|
500,000
|
$1,000,000
|
Β | N/A | ||
Β | Β | Β | Β | Β | Β | Β | Β | Β | Β | Β |
Β