EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
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SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of November 17,
2000, between Electric Fuel Corporation, a corporation organized under the laws
of the State of Delaware (the "Company"), and the purchaser (the "Purchaser")
set forth on the execution page hereof (the "Execution Page").
WHEREAS:
A. The Company desires to sell, and the Purchaser desires to purchase,
upon the terms and conditions stated in this Agreement, (i) 1,000,000 shares of
the Company's Common Stock (the "Common Shares"), (ii) a warrant to purchase
666,667 shares of Common Stock in the form attached hereto as Exhibit A (the
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"Series A Warrants"); and (iii) a warrant to purchase 333,333 shares of Common
Stock in the form attached hereto as Exhibit B (the "Series B Warrants" and
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together with the Series A Warrants, the "Warrants"). The shares of Common Stock
issuable upon exercise of or otherwise pursuant to the Warrants are referred to
herein as the "Warrant Shares." The Common Shares, the Warrants and the Warrant
Shares are collectively referred to herein as the "Securities" and each of them
may individually be referred to herein as a "Security."
B. On November 9, 2000, the Company filed with the United States
Securities and Exchange Commission (the "SEC") a Registration Statement on Form
S-3 File No. 333- 49628 in the form attached hereto as Exhibit C (the
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"Registration Statement") to register under Section 5 of the Securities Act of
1933, as amended (the "Securities Act") the sale by the Company of the Company's
common stock, par value $.01 per share (the "Common Stock") and warrants to
purchase Common Stock. The Registration Statement was declared effective by the
SEC on November 15, 2000. On November 17, 2000 the Company filed a supplement to
the Registration Statement in the form attached hereto as Exhibit D (the
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"Supplement") to cover the issuance and sale of the Initial Securities (as
defined below) to the Purchaser pursuant to the terms of this Agreement and the
issuance of the Warrant Shares to the Purchaser upon exercise of the Warrants.
NOW, THEREFORE, the Company and the Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF INITIAL SECURITIES.
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(a) Purchase of Initial Securities. On the Closing Date (as defined below),
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subject to the satisfaction (or waiver) of the conditions set forth in Section 6
and Section 7 below, the Company shall issue and sell to the Purchaser, and the
Purchaser shall purchase from the Company, such number of Common Shares, Series
A Warrants and Series B Warrants (collectively the "Initial Securities") as is
set forth on the Purchaser's Execution Page attached hereto. The aggregate
purchase price (the "Purchase Price") to be paid by the Purchaser for the
Initial Securities shall be
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Eight Million Three Hundred Seventy-Five Thousand Dollars ($8,375,000).
(b) Form of Payment. On the Closing Date, the Purchaser shall pay the
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aggregate Purchase Price for the Initial Securities set forth on the Purchaser's
Execution Page on the Closing Date in United States dollars by wire transfer of
immediately available funds in accordance with the Company's written wiring
instructions attached as Schedule 1, against delivery of duly executed
certificates representing the Common Shares and duly executed Warrants being
purchased by the Purchaser and the Company shall deliver such certificates and
Warrants to the Purchaser against delivery of such aggregate Purchase Price.
(c) Closing Date. Subject to the satisfaction (or waiver) of the conditions
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thereto set forth in Section 6 and Section 7 below, the date and time of the
issuance and sale of the Initial Securities to the Purchaser pursuant to this
Agreement (the "Closing") shall be 12:00 noon, New York City time, on November
17, 2000, or such other time as may be mutually agreed upon by the Company and
the Purchaser (the "Closing Date"). The Closing shall occur at the offices of
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP, 22nd Floor, 0000 Xxxx Xxxxxx,
Xxxxxxxxxxxx, XX 00000.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES
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The Purchaser represents and warrants to the Company as follows:
(a) Information. The Purchaser represents that the specific information
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about the Purchaser set forth in the Supplement is true and correct.
(b) Governmental Review. The Purchaser understands that no United States
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federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
(c) Authorization; Enforcement. This Agreement has been duly and validly
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authorized, executed and delivered on behalf of the Purchaser and is a valid and
binding agreement of the Purchaser enforceable against the Purchaser in
accordance with its terms.
(d) Residency. The Purchaser is a resident of the jurisdiction set forth
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under the Purchaser's name on the Execution Page hereto executed by the
Purchaser.
(e) Accredited Investor. The Purchaser is an "accredited investor" as
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defined in Rule 501of Regulation D promulgated by the SEC under the Securities
Act.
(f) Purchase for Its Own Account, etc. The Purchaser is purchasing the
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Securities for its own account and has no intention to engage in any special
selling efforts with respect to the Securities.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to the Purchaser as follows:
(a) Organization and Qualification. The Company and each of its
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subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated (to the extent that
good standing is a recognized concept in such jurisdictions), and has the
requisite corporate power to own its properties and to carry on its business as
now being conducted. The Company and each of its subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary (to the extent that good standing is a recognized
concept in such jurisdictions) and where the failure so to qualify would be
reasonably likely to have a Material Adverse Effect. "Material Adverse Effect"
means any material adverse effect on (i) the validity of, and the ability of the
Company to issue, the Securities, (ii) the ability of the Company to perform its
obligations hereunder or under the Warrants or (iii) the business, operations,
properties or financial condition of the Company and its subsidiaries, taken as
a whole.
(b) Authorization; Enforcement. (i) The Company has the requisite corporate
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power and authority to enter into and perform its obligations under this
Agreement and the Warrants to issue and sell the Initial Securities in
accordance with the terms hereof and to issue the Warrant Shares upon exercise
of the Warrants in accordance with the terms of such Warrants; (ii) the
execution, delivery and performance of this Agreement and the Warrants by the
Company and the consummation by it of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Common Shares and
Warrants and the issuance and reservation for issuance of the Warrant Shares)
have been duly authorized by the Company's Board of Directors and no further
consent or authorization of the Company, its Board of Directors, any or
committee of the Board of Directors is required, and (iii) upon execution and
delivery of this Agreement in accordance with its terms, this Agreement will
constitute, and, upon execution and delivery by the Company of the Warrants, in
accordance with the terms of this Agreement, such instruments will constitute,
valid and binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of creditors' rights and remedies or by other equitable principles of general
application.
(c) Stockholder Authorization. Neither the execution, delivery or
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performance by the Company of this Agreement or the Warrants nor the
consummation by the Company of the transactions contemplated hereby or thereby
(including, without limitation, the issuance of the Initial Securities or the
issuance or reservation for issuance of the Warrant Shares) requires any consent
or authorization of the Company's stockholders, including but not limited to
consent under Rule 4460(i) promulgated by the National Association of Securities
Dealers, Inc. (the "NASD") or any similar rule.
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(d) Capitalization. The capitalization of the Company as of the date
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hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Warrants) exercisable or
exchangeable for, or convertible into, any shares of capital stock and the
number of shares reserved for issuance upon the exercise of the Warrants is set
forth on Schedule 3(d). All of such outstanding shares of capital stock have
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been, or upon issuance in accordance with the terms of any such warrants,
options or preferred stock, will be, validly issued, fully paid and non-
assessable. No shares of capital stock of the Company (including the Common
Shares and the Warrant Shares) are subject to preemptive rights or any other
similar rights of the stockholders of the Company or any liens or encumbrances.
Except for the Securities and as set forth on Schedule 3(d), as of the date of
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this Agreement, (i) 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
shares of capital stock of the Company or any of its subsidiaries, or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries, nor are any such issuances or arrangements contemplated, and (ii)
there are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of its or their securities
under the Securities Act. Schedule 3(d) sets forth all of the Company issued
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securities or instruments containing antidilution or similar provisions that
will be triggered by, and all of the resulting adjustments that will be made to
such securities and instruments as a result of, the issuance of the Securities
in accordance with the terms of this Agreement, or the Warrants. The Company has
furnished to the Purchaser true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof ("Certificate of
Incorporation"), the Company's By-laws as in effect on the date hereof (the "By-
laws"), and all other instruments and agreements governing securities
convertible into or exercisable or exchangeable for capital stock of the
Company.
(e) Issuance of Shares. The Common Shares are duly authorized and, upon
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issuance thereof by the Company and payment therefor by the Purchaser in
accordance with the terms of this Agreement, will be validly issued, fully paid
and non-assessable, and free from all taxes, liens, claims and encumbrances
(other than any that are the result of any action or inaction of the Purchaser
and that are not the result of any action or inaction on the part of the
Company) and will not be subject to preemptive rights, rights of first refusal
or other similar rights of stockholders of the Company and will not impose
personal liability on the holders thereof. The Warrant Shares are duly
authorized and reserved for issuance, and, upon exercise of the Warrants and
payment therefor in accordance with the terms thereof, will be validly issued,
fully paid and non-assessable, and free from all taxes, liens, claims and
encumbrances (other than any that are the result of any action or inaction on
the part of the Purchaser and that are not the result of any action or inaction
on the part of the Company) and will not be subject to preemptive rights, rights
of first refusal or other similar rights of stockholders of the Company and will
not impose personal liability upon the holder thereof.
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(f) No Conflicts. The execution, delivery and performance of this Agreement
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and the Warrants by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance, as applicable, of the Common Shares,
Warrants and Warrant Shares) will not (i) result in a violation of the
Certificate of Incorporation or By-laws or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment
(including, without limitation, the triggering of any anti-dilution provisions),
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including United States
federal and state securities laws and regulations and rules or regulations of
any self-regulatory organizations to which either the Company or its securities
are subject) 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, with respect to clause (ii), for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations that would
not, individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect). Neither the Company nor any of its subsidiaries is in violation
of its Certificate of Incorporation, By-laws or other organizational documents
and neither the Company nor any of its subsidiaries is in default (and the
Company is not aware of any event that has occurred which, with notice or lapse
of time or both, would put the Company or any of its subsidiaries in default)
under, nor to the knowledge of the Company has there occurred any event giving
others (with notice or lapse of time or both) 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, except
for actual or possible violations, defaults or rights that would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its subsidiaries are not being conducted, and shall not be
conducted so long as the Purchaser owns any of the Securities, in violation of
any law, ordinance or regulation of any governmental entity, except for possible
violations the sanctions for which either singly or in the aggregate would not
be reasonably likely to have a Material Adverse Effect. Except as specifically
contemplated by this Agreement, the Company is not required to obtain any
consent, approval, authorization or order of, or make any filing or registration
with, any court or governmental agency or any regulatory or self regulatory
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or the Warrants in each case in accordance with the terms
hereof or thereof. The Company is not in violation of the listing requirements
of the Nasdaq National Market ("Market/Exchange") and does not reasonably
anticipate that the Common Stock will be delisted by the Market/Exchange for the
foreseeable future except as a result of a possible decline in the market price
of the Common Stock.
(g) SEC Documents, Financial Statements. Since December 31, 1998, the
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Company has timely filed (within applicable extension periods) all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (all of the foregoing filed prior to the
date hereof, and the Registration Statement, as supplemented by the Supplement,
and all exhibits included therein and financial statements and schedules thereto
and documents incorporated by reference therein, being hereinafter referred to
herein as the "SEC Documents"). To the extent
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that any SEC Document is available under the SEC's XXXXX filing system, such SEC
Document shall be deemed to have been delivered to the Purchaser. The Company
has delivered to the Purchaser true and complete copies of the SEC Documents. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Exchange Act or the Securities Act, as the case may
be, 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 light of the circumstances under which they were
made, not misleading. None of the statements made in any such SEC Documents is,
or has been, required to be amended or updated under applicable law (except for
such statements as have been amended or updated in or by subsequent filings made
prior to the date hereof). 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 applicable with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"), consistently applied, during the periods
involved (except (i) as may otherwise be indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
immaterial year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents filed prior to the date
hereof, the Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to the date
of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
GAAP to be reflected in such financial statements, which liabilities and
obligations referred to in clauses (i) and (ii), individually or in the
aggregate, are not material to the financial condition or operating results of
the Company.
(h) Absence of Certain Changes. Since December 31, 1999, there has been no
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material adverse change and no material adverse development in the business,
properties, operations, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole, except as disclosed in the SEC
Documents filed prior to the date hereof.
(i) Absence of Litigation. Except as disclosed in the SEC Documents filed
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prior to the date hereof, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency, self-
regulatory organization or body, including, without limitation, the SEC or the
Market/Exchange, pending or, to the knowledge of the Company or any of its
subsidiaries, threatened against or affecting the Company, any of its
subsidiaries, or any of their respective directors or officers in their
capacities as such. There are no facts which, if known by a potential claimant
or governmental authority, could give rise to a claim or proceeding which, could
reasonably be expected to have a Material Adverse Effect.
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(j) Intellectual Property. Each of the Company and its subsidiaries owns or
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is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
domain names, licenses, permits, inventions, discoveries, processes, scientific,
technical, engineering and marketing data, object and source codes, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intangibles") necessary for the conduct of
its business as now being conducted. To the knowledge of the Company, neither
the Company nor any subsidiary of the Company infringes or is in conflict with
any right of any other person with respect to any Intangibles. Neither the
Company nor any of its subsidiaries has received written notice of any pending
conflict with or infringement upon such third party Intangibles. Neither the
Company nor any of its subsidiaries has entered into any consent agreement,
indemnification agreement, forbearance to xxx or settlement agreement with
respect to the validity of the Company's or its subsidiaries' ownership or right
to use its Intangibles and, to the best knowledge of the Company, there is no
reasonable basis for any such claim to be successful. The Intangibles owned by
the Company are valid and enforceable and no registration or patent relating
thereto has lapsed, expired or been abandoned or canceled or is the subject of
cancellation or other adversarial proceedings, and all applications therefor are
pending and in good standing. The U.S. patents obtained and owned by the Company
or its subsidiaries and which have expired for failure to pay the necessary
maintenance fees are not necessary for the conduct of the business of the
Company or its subsidiaries as it is now being conducted. To the knowledge of
the Company, the Intangibles licensed by the Company from others are valid and
enforceable and no registration relating thereto has lapsed, expired or been
abandoned or canceled or is the subject of cancellation or other adversarial
proceedings, and all applications therefor are pending and in good standing. The
Company and its subsidiaries have complied, in all material respects, with their
respective contractual obligations relating to the protection of the Intangibles
used pursuant to licenses. To the knowledge of the Company, the Intangibles
licensed by the Company from others do not infringe nor are they in conflict
with any right of any other person with respect to any Intangibles. Except as
set forth in Schedule 3(j), to the knowledge of the Company, no person is
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infringing on or violating the Intangibles owned or used by the Company or its
subsidiaries.
(k) Foreign Corrupt Practices. Neither the Company, nor any of its
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subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
(l) Disclosure. All information relating to or concerning the Company set
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forth in this Agreement or provided by or on behalf of the Company to the
Purchaser in connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not
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omitted to state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or exists with
respect to the Company or its subsidiaries or their respective businesses,
properties, operations or financial conditions, which has not been publicly
disclosed but, under applicable law, rule or regulation, would be required to be
disclosed by the Company in a registration statement filed on the date hereof by
the Company under the Securities Act with respect to the primary issuance of the
Company's securities.
(m) Acknowledgment Regarding Purchaser's Purchase of the Initial
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Securities. The Company acknowledges and agrees that the Purchaser is not acting
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as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement or the transactions contemplated hereby, the
relationship between the Company and the Purchaser is "arms-length" and any
statement made by the Purchaser or any of its representatives or agents in
connection with this Agreement and the transactions contemplated hereby (other
than representations, warranties and covenants of the Purchaser made herein) is
merely incidental to the Purchaser's purchase of Securities and has not been
relied upon by the Company, its officers or directors in any way.
(n) Listing. The Company has secured the listing of the Common Shares and
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Warrant Shares upon each national securities, exchange or automated quotation
system upon which shares of Common Stock are currently listed (subject to
official notice of issuance).
(o) Registration; Blue Sky. The Company has filed the Registration
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Statement and the Supplement with the SEC. The Registration Statement was
declared effective by the SEC on November 15, 2000. The Registration Statement
covers the sale of up to 3,250,000 shares of Common Stock and 1,750,000 warrants
to purchase Common Stock. The Registration Statement, as supplemented by the
Supplement, covers the issuance and sale of the Initial Securities to the
Purchaser pursuant to the terms of this Agreement and the issuance of the
Warrant Shares upon the exercise of the Warrants. Assuming the accuracy of the
Purchaser's representations, the Company is not required to take any action to
qualify the Securities for sale to the Purchaser pursuant to this Agreement
under the "blue sky" laws of any states of the United States. No stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceeding therefor has been initiated or threatened by the SEC. Any request
by the SEC for inclusion of additional information in the Registration Statement
or otherwise has been complied with or withdrawn by the SEC. Except for the
filing of the Supplement, the Company has not filed with the SEC any amendment
or supplement to the Registration Statement.
(p) Intentionally Omitted.
(q) No Integrated Offering. Neither the Company, nor any of its affiliates,
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nor any person acting on its or their behalf, has directly or indirectly made
any offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause this offering of Securities to be
integrated with any prior offering of securities of the Company for purposes of
any
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applicable stockholder approval provisions, including, without limitation, Rule
4460(i) of the NASD or any similar rule.
(r) No Brokers. Except as provided in the following sentence, the Company
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has taken no action which would give rise to any claim by any person for
brokerage commissions, finder's fees or similar payments by the Purchaser
relating to this Agreement or the transactions contemplated hereby. The Company
is responsible for all brokerage commissions, finder's fees or similar payments
relating to this Agreement and the transactions contemplated hereby which are
required to be paid to Josephthal & Co. Inc.
(s) Acknowledgment Regarding Securities. The Company's executive officers
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have studied and fully understand the nature of the Securities being sold
hereunder. The Company acknowledges that its obligation to issue Warrant Shares
upon exercise of the Warrants in accordance with the terms of the Warrants is
absolute and unconditional, regardless of the dilution that such issuance may
have on the ownership interests of other stockholders. Taking the foregoing into
account, the Company's Board of Directors has determined in its good faith
business judgment that the issuance of the Common Shares and Warrants hereunder
and the consummation of the other transactions contemplated hereby are in the
best interests of the Company and its stockholders.
(t) Title. The Company and its subsidiaries have good and marketable title
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in fee simple to all real property and good and merchantable title to all
personal property owned by them that 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 materially interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries. Any real property and facilities
held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not materially interfere with the use made and proposed to be
made of such property and buildings by the Company and its subsidiaries.
(u) Tax Status. Except as set forth in the SEC Documents, the Company and
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each of its subsidiaries has made or filed all foreign, U.S. federal, state and
local income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company has not executed a waiver with respect to
any statute of limitations relating to the assessment or collection of any
federal, state or local tax. The Company has received no notice that any of its
tax returns is presently being audited by any taxing authority.
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(v) Key Employees. Each of the Company's directors, officers and any Key
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Employee (as defined below) is currently serving the Company in the capacity
disclosed in the SEC Documents. No Key Employee, to the best of the knowledge of
the Company and 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 Key Employee does not subject the Company or any of its subsidiaries to
any liability with respect to any of the foregoing matters. Except as provided
in Schedule 3(v), no Key Employee has, to the best of the knowledge of the
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Company and its subsidiaries, any intention to terminate or limit his employment
with, or services to, the Company or any of its subsidiaries, nor is any such
Key Employee subject to any constraints which would cause such employee to be
unable to devote his full time and attention to such employment or services.
"Key Employee" means the persons listed on Schedule 3(v) and any individual who
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assumes or performs any of the duties of a Key Employee. The employment
agreements for each of Xxxxxx X. Xxxxxxx and Xxxxxx Xxxxxx have been extended
until December 31, 2002, and the Company has delivered to the Purchaser, true
and correct copies of such employment agreements as so extended.
(w) Insurance. The Company has in force fire, casualty, product liability
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and other insurance policies, with extended coverage, sufficient in amount to
allow it to replace any of its material properties or assets which might be
damaged or destroyed or sufficient to cover liabilities to which the Company may
reasonably become subject and which would be reasonably likely to have a
Material Adverse Effect, and such types and amounts of other insurance with
respect to its business and properties, on both a per occurrence and an
aggregate basis, as are customarily carried by persons engaged in the same or
similar business as the Company. No default or event has occurred that could
give rise to a default under any such policy.
(x) Environmental Matters. The Company has received no notice of any
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environmental litigation or other environmental proceeding pending or threatened
by any governmental regulatory authority or others with respect to the current
or any former business of the Company or any partnership or joint venture
currently or at any time affiliated with the Company. No state of facts exists
as to environmental matters or Hazardous Substances (as defined below) that
involves the reasonable likelihood of a material capital expenditure by the
Company or that may otherwise have a Material Adverse Effect. The Company has
not treated, stored or disposed of, or otherwise deposited, in or on the
properties owned or leased by the Company or by any partnership or joint venture
currently or at any time affiliated with the Company any Hazardous Substances in
violation of any applicable environmental laws. The environmental compliance
programs of the Company comply in all respects with all environmental laws,
whether federal, state or local, currently in effect. As used herein, "Hazardous
Substances" means any substance, waste, contaminant, pollutant or material that
has been determined by any applicable governmental authority to be capable of
posing a risk of injury to health, safety, property or the environment.
-10-
(w) Inventory. All inventory of the Company and its subsidiaries is valued
---------
on the Company's consolidated books and records at the lower of cost, determined
by the "first in, first out" method of accounting, or the fair market value
thereof. Except, to the extent of the Company's reserves for obsolete or
unmerchantable inventory reflected in the Company's SEC Documents, all such
inventory, after consideration of reserves consisting of finished goods is of
merchantable quality and is saleable in the ordinary course of business
consistent with past practice.
4. COVENANTS.
---------
(a) Reasonable Best Efforts. The parties shall use their reasonable best
-----------------------
efforts timely to satisfy each of the conditions described in Section 6 and
Section 7 of this Agreement.
(b) Form 8-K. Within three (3) trading days after the Closing Date, the
--------
Company shall file a Form 8-K summarizing under Item 5 thereof this Agreement
and the transactions contemplated hereby, which Form 8-K shall attach this
Agreement and the Warrants, as exhibits to such Form 8-K.
(c) Reporting Status. So long as the Purchaser beneficially owns any
----------------
Securities, the Company shall timely file (within applicable extension periods)
all reports required to be filed with the SEC pursuant to the Exchange Act, and
the Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination. In addition, the Company shall take
all actions necessary to continue to meet the "registrant eligibility"
requirements set forth in the general instructions to Form S-3 or any successor
form thereto, to continue to be eligible to register the resale of its Common
Stock on a registration statement on Form S-3 under the Securities Act.
(d) Use of Proceeds. The Company shall use the proceeds from the sale of
---------------
the Common Shares and Warrants substantially as set forth in Schedule 4(d).
-------------
(e) Additional Equity Capital; Right of First Offer. During the period
-----------------------------------------------
beginning on the date hereof and ending 180 days following the Closing Date (the
"Lock-Up Period"), the Company will not, without the prior written consent of
the Purchaser so long as the Purchaser owns any Securities and, without
duplication, holders(s) of Warrants having a majority in-interest of the Warrant
Shares, contract with any party to obtain additional financing in which any
equity or equity-linked securities, having common stock registration rights
and/or public resale rights effective within one (1) year after the Closing
Date, are issued (including any debt financing with an equity component) (a
"Future Offering"). In addition, the Company will not conduct any Future
Offering during the period beginning on the date hereof and ending 180 days
following the expiration of the Lock-Up Period, unless it shall have first
delivered to Purchaser so long as the Purchaser owns any Securities, at least
ten (10) business days prior to the closing of such Future Offering, written
notice describing the proposed Future Offering, including the terms and
conditions thereof, and providing the Purchaser, an option during the ten (10)
business day period following delivery of such notice to purchase up to the
Applicable Portion (as defined below) of the securities being offered in the
Future Offering on the same terms as contemplated by such Future Offering.
During the Lock-up Period and during the 180 day period following the Mandatory
Exercise Date, as such term is defined in the Series B Warrant, the Company
will not issue any securities subject to the Registration Statement, except for
the Securities, unless it shall have first delivered to the Purchaser, so long
as the Purchaser owns any Securities, at least ten (10) business days prior to
the proposed issuance of such Securities, written notice describing the proposed
transaction, including the terms and conditions thereof, and providing the
Purchaser an option during the ten (10) business day period following the
delivery of such notice to purchase any or all of the securities being offered
on the same terms as contemplated by such offering. In addition, the Company
will not register for sale any of its equity securities in a secondary public
offering (other than pursuant to registration rights arising under obligations
existing on the Closing Date and disclosed on Schedule 3(d) hereto, except for
those arising under the employment agreements referred to in the last sentence
of Section 4(v) hereof; provided however that registrations pursuant to
registration rights arising under either or both of the employment agreements
referred to in the last sentence of Section 4(v) hereof will be permitted at any
time after the termination of such agreements) at any time during the Lock-Up
Period and during the 180 day period following the Mandatory Exercise Date, as
such term is defined in the Series B Warrant (the limitations referred to in
-11-
this and the three immediately preceding sentences are collectively referred to
as the "Capital Raising Limitations"). The Capital Raising Limitations shall not
apply to any transaction involving issuances of securities as consideration in a
merger, consolidation or acquisition of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of which is not to
raise equity capital), or as consideration for the acquisition of a business,
product or license by the Company. The Capital Raising Limitation also shall not
apply to (i) the issuance of securities pursuant to an underwritten public
offering, (ii) the issuance of securities upon exercise or conversion of the
Company's options, warrants or other convertible securities outstanding as of
the date hereof or (iii) the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option, bonus plan or
restricted stock plan for the benefit of the Company's employees, directors or
consultants. The "Applicable Portion" shall mean a fraction, the numerator of
which is the number of Initial Securities then held by the Purchaser and the
denominator of which is the total number of Initial Securities purchased by the
Purchaser hereunder.
(f) Expenses. The Company shall pay to Heights Capital Management, Inc.
--------
("Heights") at the Closing, reimbursement for the expenses reasonably incurred
by Heights and its affiliates and advisors in connection with the negotiation,
preparation, execution and delivery of this Agreement and the other agreements
to be executed in connection herewith, including, without limitation, Heights'
and its affiliates and advisors' reasonable due diligence and attorneys' fees
and expenses (the "Expenses"); provided, however, that Capital Ventures
International ("CVI") shall be permitted to deduct such Expenses (up to the
maximum amount set forth below) from the Purchase Price payable by CVI hereunder
and remit such Expenses to Heights. In addition, from time to time thereafter,
upon CVI's written request, the Company shall pay to Heights such additional
Expenses, if any, not covered by such payment, in each case to the extent
reasonably incurred by Heights or its affiliates or agents in connection with
the negotiation, preparation, execution and delivery of this Agreement and the
other agreement executed in connection herewith. Notwithstanding the foregoing,
the Company shall be obligated to reimburse Heights for no more than $50,000 of
Expenses (including additional Expenses) in the aggregate.
(g) Financial Information. The Company shall send the following reports to
---------------------
the Purchaser until the Purchaser transfers, assigns or sells all of its
Securities: (i) within ten (10) days after the filing with the SEC, a copy of
its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy
statements and any Current Reports on Form 8-K; and (ii) within one (1) day
after release, copies of all press releases issued by the Company or any of its
subsidiaries.
(h) Reservation of Shares. The Company shall at all times have authorized
---------------------
and reserved for the purpose of issuance a sufficient number of shares of Common
Stock to provide for the full exercise of the Warrants and the issuance of the
Warrant Shares in connection therewith and as otherwise required by the
Warrants.
(i) Listing. The Company shall maintain, so long as the Purchaser (or any
-------
of their affiliates) owns any Securities, the listing of all Common Shares and
such Warrant Shares as may from time to time be issued upon exercise of the
Warrants covered by this Agreement on each
-12-
national securities exchange or automated quotation system on which shares of
Common Stock are listed at the relevant time. The Company will use its best
efforts to continue the listing and trading of its Common Stock on the
Market/Exchange and will comply in all respects with the reporting, filing and
other obligations under the bylaws or rules of the NASD and such exchanges, as
applicable.
(j) Corporate Existence. So long as the Purchaser beneficially owns any
-------------------
Warrants, the Company shall maintain its corporate existence, and in the event
of a merger, consolidation or sale of all or substantially all of the Company's
assets, the Company shall ensure that the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
Warrants and the agreements and instruments entered into in connection herewith
regardless of whether or not the Company would have had a sufficient number of
shares of Common Stock authorized and available for issuance in order to effect
the exercise in full of all Warrants outstanding as of the date of such
transaction and (ii) is a publicly traded corporation whose common stock is
listed for trading on the Market/Exchange, New York Stock Exchange or American
Stock Exchange.
(k) No Integrated Offerings. The Company shall not make any offers or
-----------------------
sales of any security (other than the Securities) under circumstances that would
cause this offering of the Securities to be integrated with any other offering
of securities by the Company for purposes of any stockholder approval provision
applicable to the Company or its securities.
(l) Legal Compliance. The Company shall conduct its business and the
----------------
business of its subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except where
the failure to do so would not be reasonably likely to have a Material Adverse
Effect.
(m) Intentionally omitted.
(n) Trading Restrictions. The Purchaser shall not be permitted to sell,
--------------------
transfer or otherwise dispose of, during any 45 trading day period, more than
9.99% of the least number of shares of Common Stock issued and outstanding
during such 45 trading day period (other than dispositions to the Company).
(o) Information. Upon the request of the Purchaser, the Company will
-----------
furnish via electronic transmission or otherwise, to the Purchaser, so long as
it holds any Warrants:
(i) concurrently with the filing with the SEC of its annual reports
and quarterly reports on Form 10-K and Form 10-Q, respectively, a certificate of
the President, a Vice President or a senior financial officer of the Company
stating that, based upon such examination or investigation and review of this
Agreement as in the opinion of the signer is necessary to enable the signer to
express an informed opinion with respect thereto, neither the Company nor any of
its subsidiaries is or has during such period been in material default in the
performance or observance of any of the terms, covenants or conditions hereof,
or, if the Company or any of its subsidiaries shall be or shall have been in
default, specifying all such defaults, and the nature and period of existence
thereof, and
-13-
what action the Company or such subsidiary has taken, is taking or proposes to
take with respect thereto; and
(ii) the information the Company must deliver to any holder or to
any prospective transferee of Securities in order to permit the sale or other
transfer of such Securities pursuant to Rule 144A of the SEC or any similar rule
then in effect; provided that the Company shall only be required to deliver such
information, if at the time of such request, there is no current registration
statement covering the Warrant Shares.
The Company will keep at its principal executive office a true copy of
this Agreement (as at the time in effect), and cause the same to be available
for inspection at such office during normal business hours by any holder of
Securities or any prospective transferee of Securities designated by a holder
thereof.
(p) Inspection of Properties and Books. So long as the Purchaser shall
----------------------------------
hold any Securities, the Purchaser and its representatives and agents
(collectively, the "Inspectors") shall have the right, during reasonable local
business hours, at the Purchaser's expense, to visit and inspect any of the
properties of the Company and of its subsidiaries, to examine the books of
account and records of the Company and of its subsidiaries, to make or be
provided with copies and extracts therefrom, to discuss the affairs, finances
and accounts of the Company and of its subsidiaries with, and to be advised as
to the same by, its and their officers, employees and independent public
accountants (and by this provision the Company authorizes such accountants to
discuss such affairs, finances and accounts, whether or not a representative of
the Company is present) all at such reasonable times and intervals and to such
reasonable extent as the Purchaser may desire; provided, however, that each
Inspector shall hold in confidence and shall not make any disclosure (except to
the Purchaser) of any such information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the release of such information is ordered pursuant to a
subpoena or other order from a court or government body of competent
jurisdiction, or (b) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
4(p). The Purchaser agrees that it shall, upon learning that disclosure of such
information is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the information deemed
confidential. The Purchaser acknowledges that under certain circumstances the
Exchange Act may prohibit the trading of securities by persons having material
non-public information about the Company.
(q) Intentionally omitted.
-14-
(r) Stockholder Approval. If, on the Closing Date, the Company is
--------------------
prohibited by Rule 4460(i) of the NASD or any successor or similar rule, or the
rules of any other securities exchange on which the Common Stock is then listed
or traded, from issuing the shares of Common Stock issuable hereunder and upon
complete exercise of the Warrants (without giving effect to the limitations on
exercise contained in Section 7(f) of the Warrants), the Company shall call a
meeting of its stockholders to be held as promptly as practicable and in any
event no later than 90 days after the Closing Date for the purpose of voting
upon and approving this Agreement and the Warrants, the authorization and
issuance of the Common Shares and the Warrants, and the issuance of the Warrant
Shares upon exercise of or otherwise pursuant to the Warrants. The Company
shall, through its Board of Directors, recommend to its stockholders approval of
such matters. The Company shall use its best efforts to solicit from its
stockholders proxies in favor of such matters sufficient to comply with all
relevant legal requirements, including, without limitation, Rule 4460(i)
promulgated by the NASD, and shall vote such proxies in favor of such matters.
(s) Antidilution. So long as the Purchaser beneficially owns any
------------
Securities, the Company will send to the holders of Securities any notice which
the Company sends to holders of any debt or equity securities or instruments
(including options, warrants and other convertible securities) issued by the
Company which notice is occasioned by an event which triggers the application of
the anti-dilution provisions of such debt or equity securities or instruments
and results in an adjustment to any of the terms of such debt or equity
security. The Company will send the notice required by this Section 4(s) to the
holders of Securities at the same time as it sends such notice to the holders of
the affected debt or equity securities.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
(a) The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Purchaser or its nominee for the Warrant Shares in
such amounts as specified from time to time by the Purchaser to the Company upon
exercise of the Warrants.
(b) The Company warrants that no instruction other than the instructions
referred to in this Section 5 will be given by the Company to its transfer agent
and that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement.
(c) If the Purchaser provides the Company and the transfer agent with an
opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant an exemption from registration, or the Purchaser provides the Company
with reasonable assurances that such Securities may be sold under Section 4(1)
of the Securities Act, the Company shall permit the transfer and, in the case of
the Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates for such Warrant Shares in such names and in such denominations as
specified by the Purchaser.
-15-
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the Initial
Securities to the Purchaser hereunder is subject to the satisfaction, at or
before the Closing, of each of the following conditions thereto, 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.
(a) The Purchaser shall have executed the Purchaser's Execution Page to
this Agreement and delivered the same to the Company.
(b) The Purchaser shall have delivered the Purchase Price for the Initial
Securities in the amount set forth on the Purchaser's Execution Page in
accordance with Section 1(b)above.
(c) The representations and warranties of the Purchaser shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of such
date), and the Purchaser 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 the Purchaser at or
prior to the Closing Date.
(d) 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 or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) The Company shall have filed the Supplement. The Registration Statement
as supplemented by the Supplement, shall be effective and shall cover the
issuance and sale of the Initial Securities to the Purchaser pursuant to this
Agreement and the issuance and sale of Warrant Shares upon the exercise of the
Warrants. No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceeding therefor has been initiated
or threatened by the SEC.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
-----------------------------------------------------
The obligation of the Purchaser hereunder to purchase the Initial
Securities set forth on the Purchaser's Execution Page to be purchased by it at
the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that such conditions are for the
Purchaser's sole benefit and may be waived by the Purchaser at any time in the
Purchaser's sole discretion:
(a) The Company shall have executed this Agreement and the Warrants and
delivered executed original copies of the same to the Purchaser.
-16-
(b) The Company shall have filed the Supplement. The Registration Statement
as supplemented by the Supplement, shall be effective and shall cover the
issuance and sale of the Initial Securities to the Purchaser pursuant to this
Agreement and the issuance and sale of Warrant Shares upon the exercise of the
Warrants. No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceeding therefor has been initiated
or threatened by the SEC. Any request by the SEC for inclusion of additional
information in the Registration Statement or otherwise shall have been complied
with and the Company shall not have filed with the SEC any subsequent amendment
or supplement to the Registration Statement without the consent of the
Purchaser.
(c) The Company shall have delivered or caused to be delivered to the
Purchaser duly executed certificates representing the Common Shares (in such
denominations as the Purchaser shall request) and duly executed warrant
agreements in the forms of Exhibit A or Exhibit B, as applicable representing
the Warrants (each in such denominations as the Purchaser shall request) being
so purchased by the Purchaser in accordance with Section 1(b) above.
(d) The Common Stock shall be authorized for quotation and listed on the
Market/Exchange and trading in the Common Stock (or the Market/Exchange
generally) shall not have been suspended by the SEC or the Market/Exchange.
(e) The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of such
date) and the Company 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 the Company at or prior
to the Closing Date. The Purchaser shall have received a certificate, executed
by the Chief Executive Officer of the Company after reasonable investigation,
dated as of the Closing Date to the foregoing effect.
(f) No statute, rule, regulation, executive order, decree, ruling,
injunction, action or proceeding shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction or
any self-regulatory organization having authority over the matters contemplated
hereby which questions the validity of, challenges or prohibits the consummation
of, any of the transactions contemplated by this Agreement.
(g) The Purchaser shall have received an opinion of the Company's counsel,
dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Purchaser and in substantially the form of Exhibit E
---------
attached hereto.
(h) There shall have been no material adverse changes and no material
adverse developments in the business, properties, operations, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, since the date hereof, and no
-17-
information, of which the Purchaser is not currently aware, shall come to the
attention of the Purchaser that is materially adverse to the Company.
(i) The Purchaser shall have received: (A) a copy of resolutions, duly
adopted by the Board of Directors of the Company, which shall be in full force
and effect at the time of the Closing, authorizing the execution, delivery and
performance by the Company of this Agreement, the Warrants and the consummation
by the Company of the transactions contemplated hereby and thereby, (B) the
Company's certificate of incorporation, as amended to date, and (C) the
Company's by-laws, as amended to date, each of the foregoing certified as such
by the Secretary or Assistant Secretary of the Company.
(j) The aggregate Purchase Price for the Initial Securities being purchased
hereunder by the Purchaser at the Closing shall be Eight Million Three Hundred
Seventy Five Thousand Dollars ($8,375,000).
(k) The Company shall have filed its quarterly report on Form 10-Q for the
nine months ended September 30, 2000 on or prior to the Closing Date.
8. INDEMNIFICATION AND CONTRIBUTION
--------------------------------
(a) Indemnification
---------------
(i) To the extent permitted by law, the Company will indemnify, hold
harmless and defend (A) the Purchaser and (B) the directors, officers, partners,
members, employees and agents of the Purchaser and each person who controls any
Investor within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, if any, (each, an "Indemnified Person"), against any joint or
several losses, claims, damages, liabilities or expenses (collectively,
together with actions, proceedings or inquiries by any regulatory or self-
regulatory organization, whether commenced or threatened, in respect thereof,
"Claims") to which any of them may become subject insofar as such Claims arise
out of or are based upon: (I) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or the Supplement (as
amended or supplemented, if the Company files any amendment or supplement with
the SEC) or the omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the circumstances
under which the statements therein were made, not misleading, or (II) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Securities (the matters in the foregoing clauses (I) and (II) being,
collectively, "Violations"). Subject to the restrictions set forth in Section
8(a)(iii) with respect to the number of legal counsel, the Company shall
reimburse the Purchaser and each other Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating,
defending or settling any such Claim. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section
8(a)(i): (Y) shall not apply to a Claim arising
-18-
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified Person
expressly for use in the Supplement or any amendment or supplement thereto; and
(Z) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Securities by the
Purchaser.
(ii) In connection with the Supplement, the Purchaser agrees severally
and not jointly to indemnify, hold harmless and defend, to the same extent and
in the same manner set forth in Section 8(a)(i), the Company, each of its
directors, each of its officers, its employees, agents and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, (each an "Indemnified Party"), against any
Claim to which any of them may become subject, under the Securities Act, the
Exchange Act or otherwise, insofar as such Claim arises out of or is based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with the representations and
warranties of the Purchaser in this Agreement or written information furnished
to the Company by the Purchaser expressly for use in connection with the
Supplement and subject to Section 8(a)(iii), the Purchaser will reimburse any
legal or other expenses (promptly as such expenses are incurred and are due and
payable) reasonably incurred by them in connection with investigating, defending
or settling any such Claim; provided, however, that the indemnity agreement
-----------------
contained in this Section 8(a)(ii) shall not apply to amounts paid in settlement
of any Claim if such settlement is effected without the prior written consent of
the Purchaser, which consent shall not be unreasonably withheld; provided,
--------
further, however, that the Purchaser shall be liable under this Agreement
------- -------
(including this Section 8(a)(ii) and Section 8(b)), for only that amount as does
not exceed the Purchase Price paid by the Purchaser for the Initial Securities.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall survive
the transfer of the Initial Securities by the Purchaser.
(iii) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 8(a) of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if indemnification is to be sought against any indemnifying party
under this Section 8(a), deliver to the indemnifying party a written notice of
the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
--------
however, that such indemnifying party shall not be entitled to assume such
-------
defense and an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential conflicts of interest between such Indemnified Person or
Indemnified Party and any other indemnified or indemnifying party
-19-
represented by such counsel in such proceeding or the actual or potential
defendants in, or targets of, any such action include both the Indemnified
Person or the Indemnified Party and the indemnifying party and any such
Indemnified Person or Indemnified Party reasonably determines that there may be
legal defenses available to such Indemnified Person or Indemnified Party which
are in conflict with those available to such indemnifying party. The
indemnifying party shall pay for only one separate legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and such legal
counsel shall be selected by Purchaser acquiring a majority of the Initial
Securities, if the Purchaser are entitled to indemnification hereunder, or by
the Company, if the Company is entitled to indemnification hereunder, as
applicable. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 8(a), except to the extent that the
indemnifying party is actually prejudiced in its ability to defend such action.
The indemnification required by this Section 8(a) shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
(b) Contribution. To the extent any indemnification by an indemnifying
------------
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 8(a) to the fullest extent permitted by law as is
appropriate to reflect the relative fault of the indemnifying party, on the one
hand, and the Indemnified Person or Indemnified Party, as the case may be, on
the other hand, with respect to the Violation giving rise to the applicable
Claim; provided, however, that (i) no contribution shall be made under
-------- -------
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 8(a), (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Securities
who was not guilty of such fraudulent misrepresentation, and (iii) contribution
(together with any indemnification or other obligations under this Agreement) by
any seller of Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Securities.
-20-
9. GOVERNING LAW; MISCELLANEOUS.
----------------------------
(a) Governing Law; Jurisdiction. This Agreement shall be governed by and
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construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. Each of the parties
hereto irrevocably consents to the jurisdiction of the United States federal
courts and the state courts located in the State of Delaware in any suit or
proceeding based on or arising under this Agreement and irrevocably agree that
all claims in respect of such suit or proceeding may be determined in such
courts. Each of the parties hereto irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. Each of the
parties hereto further agrees that service of process upon the other parties
hereto mailed by first class mail shall be deemed in every respect effective
service of process upon such parties in any such suit or proceeding. Nothing
herein shall affect the right of any of the parties hereto to serve process in
any other manner permitted by law. Each of the parties hereto agrees that a
final non-appealable judgment in any such suit or proceeding to which it is a
party shall be conclusive and may be enforced in other jurisdictions by suit on
such judgment or in any other lawful manner.
(b) Counterparts. This Agreement may be executed in two or more
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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. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof, provided that the failure to so deliver any manually executed
Execution Page shall not affect the validity or enforceability of this
Agreement.
(c) Headings. The headings of this Agreement are for convenience of
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reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
------------
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement and the Warrants contain
----------------------------
the entire understanding of the Purchaser, the Company, their affiliates and
persons acting on their behalf with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor the Purchaser makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived other than by an instrument in writing signed by the waiving party and no
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Purchaser.
-21-
(f) Notices. Any notices required or permitted to be given under the terms
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of this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally, by responsible overnight carrier or by
confirmed facsimile, and shall be effective five (5) days after being placed in
the mail, if mailed, or upon receipt or refusal of receipt, if delivered
personally, or by responsible overnight carrier or confirmed facsimile, in each
case addressed to a party. The addresses for such communications shall be:
If to the Company:
ELECTRIC FUEL CORPORATION
000 Xxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxxxx 00000
Tel. No.:(000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
Chairman of the Board and
Chief Financial Officer
with a copy simultaneously transmitted by like means to:
Xxxxxx Beach LLP
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Tel. No.: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxx Xxxxxxx, Esq.
and to:
Xxxxxx Har-Oz, Adv
Vice President and General Counsel
Electric Fuel Limited
Western Industrial Park
X.X. Xxx 000
Xxxx Xxxxxxx 00000, Xxxxxx
Tel. No.: 000-0-000-0000
Fax No.: 000-0-000-0000
If to the Purchaser, to such address set forth under the Purchaser's name
on the Execution Page hereto executed by the Purchaser.
Each party shall provide notice to the other parties of any change in
address.
-22-
(g) Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the parties and their successors and assigns. Except as
provided herein or therein, neither the Company nor the Purchaser shall assign
this Agreement or any rights or obligations hereunder. The Purchaser may assign
its rights hereunder to any of its "affiliates," as that term is defined under
the Exchange Act, without the consent of the Company or to any other person or
entity with the consent of the Company, which consent shall not be unreasonably
withheld. This provision shall not limit a Purchaser's right to transfer the
Securities pursuant to the terms of the Warrants and this Agreement, or to
assign the Purchaser's rights hereunder or thereunder to any such transferee of
at least ten percent of either Warrant. In addition, and notwithstanding
anything to the contrary contained in this Agreement or the Warrants, the
Securities may be pledged and all rights of the Purchaser under this Agreement
or any other agreement or document related to the transactions contemplated
hereby may be assigned, without further consent of the Company, to a bona fide
pledgee in connection with the Purchaser's margin or brokerage account.
(h) 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; provided that Section 4(f) may be enforced by Heights.
(i) Survival. The representations and warranties of the Company and the
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agreements and covenants set forth in Sections 3, 4, 5, 8 and 9 hereof shall
survive the Closing notwithstanding any due diligence investigation conducted by
or on behalf of the Purchaser. Moreover, none of the representations and
warranties made by the Company herein shall act as a waiver of any rights or
remedies the Purchaser may have under applicable U.S. federal or state
securities laws. The Company shall indemnify and hold harmless each Purchaser
and each of the Purchaser's officers, directors, employees, partners, members,
agents and affiliates for all losses or damages arising as a result of or
related to any breach or alleged breach by the Company of any of its
representations or covenants set forth herein, including advancement of expenses
as they are incurred; provided that without limiting the Company's
indemnification obligations for actual breaches by the Company of any of its
representations or covenants set forth herein, the Company's indemnification
obligations for any alleged breach of the Company's representations or covenants
shall arise only in connection with allegations made by third parties unrelated
to the Purchaser and its affiliates .
(j) Publicity. The Company and the Purchaser shall have the right to
---------
approve before issuance any press releases, SEC or NASD filings, or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Purchaser, to make any press release or SEC or NASD filings with
respect to such transactions as is required by applicable law and regulations
(although the Purchaser shall be consulted by the Company in connection with any
such press release and filing prior to its release and shall be provided with a
copy thereof).
-23-
(k) Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Termination. In the event that the Closing shall not have occurred on
-----------
or before November 17, 2000, unless the parties agree otherwise, this Agreement
shall terminate at the close of business on such date. Notwithstanding any
termination of this Agreement, any party not in breach of this Agreement shall
preserve all rights and remedies it may have against another party hereto for a
breach of this Agreement prior to or relating to the termination hereof.
(m) Joint Participation in Drafting. Each party to this Agreement has
--------------------------------
participated in the negotiation and drafting of this Agreement and the Warrants.
As such, the language used herein and therein shall be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rule of
strict construction will be applied against any party to this Agreement.
(n) Equitable Relief. The Company acknowledges that a breach by it of its
----------------
obligations hereunder will cause irreparable harm to the Purchaser by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly,
the Company acknowledges that the remedy at law for a breach of its obligations
hereunder (including, but not limited to, its obligations pursuant to Section 5
hereof) will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement (including, but not
limited to, its obligations pursuant to Section 5 hereof), that the Purchaser
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer of the
Securities, without the necessity of showing economic loss and without any bond
or other security being required.
(o) Additional Acknowledgement. The Purchaser acknowledges that it has
--------------------------
independently evaluated the merits of the transactions contemplated by this
Agreement and the Warrants, that it has independently determined to enter into
the transactions contemplated hereby and thereby, and that it is not acting in
concert with any other person in making its purchase of securities hereunder.
The Purchaser and, to its knowledge, the Company agree that the Purchaser has
not taken any actions that would deem the Purchaser to be a member of a "group"
for purposes of Section 13(d) of the Exchange Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused
this Agreement to be duly executed as of the date first above written.
ELECTRIC FUEL CORPORATION
/s/ Xxxxxx Xxxxxx
By:------------------------
Name: Xxxxxx Xxxxxx
Title: President and CEO
PURCHASER:
CAPITAL VENTURES INTERNATIONAL
By: Heights Capital Management, Inc.
its authorized agent
/s/ Xxxxxx Xxxxxxxx
By:------------------------
Name: Xxxxxx Xxxxxxxx
Title: Investment Manager
RESIDENCE: Cayman Islands
ADDRESS: c/o Heights Capital Management Inc.
000 Xxxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn.: Xx. Xxxxxx Xxxxxxxx
with copies of all notices to:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn.: Xxxxx X. Xxxxxxx, Esq.
AGGREGATE SUBSCRIPTION AMOUNT
Percentage of Each Initial Security 100 %
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Purchase Price $ 8,375,000
