SECURITIES PURCHASE AGREEMENT
THIS
SECURITIES PURCHASE AGREEMENT (“Agreement”) is made as of the 25th day of
January, 2007 by and among Long-e International, Inc., a Utah corporation
(“Company”) and the investors set forth on the signature pages affixed hereto
(each an “Investor” and collectively the “Investors”).
Recitals
A.
The
Company and the Investors are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation D”), as promulgated by the U.S.
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
as amended; and
B.
Certain
of the Investors wish to purchase from the Company, and the Company wishes
to
sell and issue to such Investors, upon the terms and conditions stated in this
Agreement, (i) an aggregate of $5.812 Million of convertible promissory notes
in
the form attached hereto as Exhibit
A
(each a
“Note” and together the “Notes”
and,
together with certain Preferred Stock of the Company into which the Notes may
be
converted, the “Convertible
Security”)
which
Notes will be convertible into Fourteen Million Five Hundred Thirty Thousand
(14,530,000) shares of Common Stock or Preferred Stock of the Company in
accordance with the terms of the Notes, (ii) Series A warrants to purchase
an
aggregate of Seven Million Two Hundred Sixty Five Thousand (7,265,000) shares
of
Common Stock at an exercise price of $0.48 per share in the form attached hereto
as Exhibit
A-2,
(collectively, the “Series A Warrants”) and (iii) Series B warrants to purchase
an aggregate of Seven Million Two Hundred Sixty Five Thousand (7,265,000) shares
of Common Stock at an exercise price of $0.60 per share in the form attached
hereto as Exhibit
A-3,
(collectively, the “Series B Warrants” and together with the Series A Warrants,
the “Warrants”), in each case, for an aggregate purchase price of $5.812 Million
(the “Purchase Price”); and
C.
Contemporaneous
with the sale of the Notes and the Warrants, the parties hereto will execute
and
deliver an Amended and Restated Registration Rights Agreement, in the form
attached hereto as Exhibit
B
(the
“Registration Rights Agreement”), pursuant to which the Company will agree to
provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, and applicable
state securities laws; and
D.
The
Company has retained WestPark Capital, Inc. (“WestPark”) to act as its exclusive
placement agent in connection with the sale of the securities pursuant to this
Agreement (WestPark, together with any authorized co-placement or sub-agents
thereof, the “Placement Agent”)
In
consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties hereto agree as follows:
1. Definitions.
In
addition to those terms defined above and elsewhere in this Agreement, for
the
purposes of this Agreement, the following terms shall have the meanings set
forth below:
“Affiliate”
means,
with respect to any Person, any other Person which directly or indirectly
through one or more intermediaries Controls, is controlled by, or is under
common control with, such Person.
“Business
Day”
means
a
day, other than a Saturday or Sunday, on which banks in New York City are open
for the general transaction of business.
“Common
Stock”
means
the Company’s common stock, par value $0.001 per share, and any securities into
which the common stock may be reclassified.
“Common
Stock Equivalents”
means
any securities of the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Stock, including without limitation,
any
debt, preferred stock, rights, options, warrants or other instrument that is
at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
“Company’s
Knowledge”
means
the actual knowledge of the executive officers (as defined in Rule 405 under
the
0000 Xxx) of the Company, after due inquiry.
“Confidential
Information”
means
trade secrets, confidential information and know-how (including but not limited
to ideas, formulae, compositions, processes, procedures and techniques, research
and development information, computer program code, performance specifications,
support documentation, drawings, specifications, designs, business and marketing
plans, and customer and supplier lists and related information).
“Control”
(including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
“December
Purchase Agreement”
means
that Securities Purchase Agreement dated as of December 29, 2006 by and among
the Company (formerly Inncardio, Inc.), Long-E International Group Co., Ltd.
and
certain investors.
“Exempt
Issuance”
means
the issuance of (a) shares of Common Stock or options to employees, officers
or
directors of the Company pursuant to any stock or option plan or other
arrangement duly adopted by the Board of Directors of the Company established
for such purpose up to an aggregate of 10% of the outstanding shares of Common
Stock outstanding immediately following the closing of the transactions
contemplated by the Purchase Agreement (after giving effect to the conversion
into Common Stock of all convertible promissory notes issued further to the
Purchase Agreement, (b) securities upon the exercise of or conversion of any
Securities issued hereunder or issued to the Placement Agent and its designees
for the transactions contemplated hereunder or further to the December Purchase
Agreement, or convertible securities, options or warrants issued and outstanding
on the date of this Agreement, provided that such securities have not been
amended since the date of this Agreement to increase the number of such
securities, and (c) debt or equity issued pursuant to strategic transactions
with an operating company in a business synergistic with the business of the
Company at the time of such issuance and in which the Company receives benefits
in addition to the investment of funds or pursuant to arms’-length acquisitions
or arms’-length equipment leases, but shall not include a transaction in which
the Company is issuing securities primarily for the purpose of raising capital
or to an entity whose primary business is investing in securities.
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“Intellectual
Property”
means
all of the following: (i) patents, patent applications, patent disclosures
and
inventions (whether or not patentable and whether or not reduced to practice);
(ii) trademarks, service marks, trade dress, trade names, corporate names,
logos, slogans and Internet domain names, together with all goodwill associated
with each of the foregoing; (iii) copyrights and copyrightable works; (iv)
registrations, applications and renewals for any of the foregoing; and (v)
proprietary computer software (including but not limited to data, data bases
and
documentation).
“Material
Adverse Effect”
means
a
material adverse effect on (i) the assets, liabilities, results of operations,
condition (financial or otherwise), business, or prospects of the Company and
its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform
its obligations under the Transaction Documents.
“Person”
means
an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority or any
other
form of entity not specifically listed herein.
“Preferred
Stock”
means
shares of preferred stock of the Company with rights and preferences set forth
in the Certificate of Designations, Rights and Preferences attached as Exhibit
A
to the Note.
“Registration
Statement”
has
the
meaning set forth in the Registration Rights Agreement.
“SEC
Filings”
has
the
meaning set forth in Section 4.9
“Securities”
means,
collectively, the Notes, the Common Stock and/or Preferred Stock issuable upon
conversion of the Notes, the Warrants and the Warrant Shares.
“Subsidiary”
of
any
Person means another Person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if
there
are no such voting interests, 50% or more of the equity interests of which)
is
owned directly or indirectly by such first Person.
“Transaction
Documents”
means
this Agreement, the Notes, the Warrants, the warrants to be issued to the
Placement Agent, the Escrow Agreement and the Registration Rights
Agreement.
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“Warrant
Shares”
means
the shares of Common Stock issuable upon the exercise of the
Warrants.
“1933
Act”
means
the Securities Act of 1933, as amended, or any successor statute, and the rules
and regulations promulgated thereunder.
“1934
Act”
means
the Securities Exchange Act of 1934, as amended, or any successor statute,
and
the rules and regulations promulgated thereunder.
2. Purchase
and Sale of the Notes and Warrants.
Subject
to the terms and conditions of this Agreement, on the Closing Date (and by
Subsequent Closing), each of the Investors shall severally, and not jointly,
purchase, and the Company shall sell and issue to the Investors, the Notes
and
the Series A Warrants and the Series B Warrants in the respective amounts set
forth opposite the Investors’ names on the signature pages attached hereto in
exchange for the Purchase Price as specified in Section 3 below.
3. Closing.
3.1 Simultaneously
with the execution and delivery of this Agreement, the Company shall deliver
to
the Placement Agent, in trust, the Notes, the Series A Warrants and the Series
B
Warrants, registered in such name or names as the Investors may designate,
with
instructions that such securities are to be held for release to the Investors
only upon payment in full of the Purchase Price to the Company by all the
Investors.
3.2 a) Simultaneously
with the execution and delivery of this Agreement by an Investor, such Investor
shall: promptly cause a wire transfer of immediately available funds (U.S.
dollars) in an amount representing the “Purchase Price”, as set forth on such
Investor’s signature page, to be paid to an escrow account of Escrow Agent, set
forth on Schedule
I
affixed
hereto (the aggregate amounts being held in escrow are referred to herein as
the
“Escrow Amount”). Escrow Agent shall hold the Escrow Amount in escrow in
accordance with this Section 3.
(b) Escrow
Agent shall hold the Escrow Amount in escrow in accordance with and subject
to
the terms of that certain Escrow Agreement dated as of January 17, 2007, by
and
among the Company, the Placement Agent and the Escrow Agent.
(c) On
the
date the Company receives the Purchase Price of at least $3.4 million in the
aggregate from the Investors pursuant to the terms and conditions of this
Agreement (the “Closing Date”), the Notes, the Series A Warrants and the Series
B Warrants shall be released by the Placement Agent to the Investors (the
“Closing”). The Closing (and each Subsequent Closing) of the purchase and sale
of the Notes and Warrants shall take place at the offices of Xxxxxxxxxxx &
Xxxxxxxx Xxxxxxx Xxxxx Xxxxx LLP, 00000 Xxxxx Xxxxxx, Xxxx., Xxxxxxx Xxxxx,
Xxx
Xxxxxxx, Xxxxxxxxxx 00000, or at such other location and on such other date
as
the Company and the Investors shall mutually agree. Immediately following the
Closing, the capitalization of the Company shall be as set forth on Exhibit
C.
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3.3 At
any
time on or before February 28, 2007, the Company may sell up to an additional
$459,000
principal amount of Notes not sold as of the Closing to such persons and in
the
amounts as may be approved by the Company, subject to the limitations of the
following sentence. The parties acknowledge that such sales may be made pursuant
to the exercise of rights described in Section 7.8 of the December Purchase
Agreement; to the extent that such parties decline to exercise said rights,
any
such unpurchased Notes may not be reoffered by the Company to other parties.
All
such purchases of Notes shall be made on the terms and conditions set forth
in
this Agreement. Such purchases of Notes shall be made by each subsequent
purchaser by executing counterpart signature pages to this Agreement and the
other Transaction Documents, making such purchaser a party and bound by the
terms and conditions of this Agreement and such Transaction Documents. Any
Notes
and Warrants sold pursuant to this Section 1.4 shall be deemed to be “Notes” and
“Warrants” for all purposes under this Agreement and any purchasers thereof
shall be deemed to be “Investors” under this Agreement and each of the
Transaction Documents. Each sale of additional Notes pursuant to this Section
3.3 shall be deemed a “Subsequent Closing.” Exhibit C to this Agreement shall be
updated to reflect the Notes and Warrants purchased at each Subsequent Closing
and the parties purchasing such Notes and Warrants.
4. Representations
and Warranties of the Company.
For
purposes of this Section 4 only, the Company hereby represents and warrants
to
the Investors and the Placement Agent that, except as set forth in the schedules
delivered herewith (collectively, the “Disclosure Schedules”):
4.1 Organization,
Good Standing and Qualification.
Each of
the Company and its Subsidiaries is duly organized, validly existing and in
good
standing under the laws of the jurisdiction of its incorporation and has all
requisite power and authority to carry on its business as now conducted and
to
own its properties. Each of the Company and its Subsidiaries is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing
of
property makes such qualification or leasing necessary unless the failure to
so
qualify has not had and could not reasonably be expected to have a Material
Adverse Effect. The Company’s Subsidiaries are listed in the SEC
Filings.
4.2 Authorization.
The
Company has full power and authority and has taken all requisite action on
the
part of the Company, its officers, directors and stockholders necessary for
(i)
the authorization, execution and delivery of the Transaction Documents, (ii)
the
authorization of the performance of all obligations of the Company hereunder
or
thereunder, and (iii) the authorization, issuance (or reservation for issuance)
and delivery of the Securities. The Transaction Documents constitute the legal,
valid and binding obligations of the Company, enforceable against the Company
in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors’ rights generally.
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4.3 Capitalization.
The SEC
Filings sets forth (a) the authorized capital stock of the Company on the date
hereof; (b) the number of shares of capital stock issued and outstanding; (c)
the number of shares of capital stock issuable pursuant to the Company’s stock
plans; and (d) the number of shares of capital stock issuable and reserved
for
issuance pursuant to securities (other than the Securities) exercisable for,
or
convertible into or exchangeable for any shares of capital stock of the Company.
All of the issued and outstanding shares of the Company’s capital stock have
been duly authorized and validly issued and are fully paid, nonassessable and
free of pre-emptive rights and were issued in compliance with applicable state
and federal securities law and any rights of third parties. All of the issued
and outstanding shares of capital stock of each Subsidiary have been duly
authorized and validly issued and are fully paid, nonassessable and free of
pre-emptive rights, were issued in compliance with applicable state and federal
securities law and any rights of third parties and are owned by the Company,
beneficially and of record, subject to no lien, encumbrance or other adverse
claim. No Person is entitled to pre-emptive or similar statutory or contractual
rights with respect to any securities of the Company. Except as described in
the
SEC Filings, there are no outstanding warrants, options, convertible securities
or other rights, agreements or arrangements of any character under which the
Company or any of its Subsidiaries is or may be obligated to issue any equity
securities of any kind and except as contemplated by this Agreement, neither
the
Company nor any of its Subsidiaries is currently in negotiations for the
issuance of any equity securities of any kind. Except as described in the SEC
Filings and except for the Registration Rights Agreement and as set forth in
the
December Purchase Agreement, there are no voting agreements, buy-sell
agreements, option or right of first purchase agreements or other agreements
of
any kind among the Company and any of the securityholders of the Company
relating to the securities of the Company held by them. Except as described
in
the SEC Filings and except as provided in the Registration Rights Agreement,
no
Person has the right to require the Company to register any securities of the
Company under the 1933 Act, whether on a demand basis or in connection with
the
registration of securities of the Company for its own account or for the account
of any other Person.
The
issuance and sale of the Securities hereunder will not obligate the Company
to
issue shares of Common Stock or other securities to any other Person (other
than
the Investors) and will not result in the adjustment of the exercise,
conversion, exchange or reset price of any outstanding security.
The
Company does not have outstanding stockholder purchase rights or “poison pill”
or any similar arrangement in effect giving any Person the right to purchase
any
equity interest in the Company upon the occurrence of certain
events.
4.4 Valid
Issuance.
The
Notes have been duly and validly authorized when issued and paid for pursuant
to
this Agreement, shall be free and clear of all encumbrances and restrictions
(other than those created by the Investors), except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities
laws.
The Warrants have been duly and validly authorized. Upon the conversion of
the
Notes, the conversion of the Preferred Stock, if issued, and due exercise of
the
Warrants in accordance with the terms of the Warrants, shares of Common Stock
and/or Preferred Stock issued upon conversion of the Notes, the Warrant Shares,
respectively, will be validly issued, fully paid and non-assessable free and
clear of all encumbrances and restrictions, except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities
laws
and except for those created by the Investors. The Company has reserved a
sufficient number of shares of Common Stock for issuance upon the conversion
of
the Notes (or the Preferred Stock) and the exercise of the Warrants, free and
clear of all encumbrances and restrictions, except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities
laws
and except for those created by the Investors. But for the stockholder approval
referenced in Section 7.10 herein, the Series A Preferred Stock has been duly
and validly authorized.
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4.5 Consents.
The
execution, delivery and performance by the Company of the Transaction Documents
and the offer, issuance and sale of the Securities require no consent of, action
by or in respect of, or filing with, any Person, governmental body, agency,
or
official other (a) stockholder approval of the creation of “blank check”
preferred stock and (b) than filings that have been made pursuant to applicable
state securities laws and post-sale filings pursuant to applicable state and
federal securities laws which the Company undertakes to file within the
applicable time periods. Subject to the accuracy of the representations and
warranties of each Investor set forth in Section 6 hereof, the Company has
taken
all action necessary to exempt (i) the issuance and sale of the Securities,
(ii)
the issuance of the Warrant Shares upon due exercise of the Warrants, and (iii)
the other transactions contemplated by the Transaction Documents from the
provisions of any stockholder rights plan or other “poison pill” arrangement,
any anti-takeover, business combination or control share law or statute binding
on the Company or to which the Company or any of its assets and properties
may
be subject and any provision of the Company’s Articles of Incorporation or
Bylaws that is or could reasonably be expected to become applicable to the
Investors as a result of the transactions contemplated hereby, including without
limitation, the issuance of the Securities and the ownership, disposition or
voting of the Securities by the Investors or the exercise of any right granted
to the Investors pursuant to this Agreement or the other Transaction
Documents.
4.6 Delivery
of Memorandum and SEC Filings; Business.
The
Company has made available to the Investors through the XXXXX system, true
and
complete copies of the Company’s most recent Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2005 (the “10-KSB”), and all other reports
filed by the Company pursuant to the 1934 Act since the filing of the 10-KSB
and
prior to the date hereof (collectively, the “SEC Filings”). The SEC Filings are
the only filings required of the Company pursuant to the 1934 Act for such
period. The Company and its Subsidiaries are engaged in all material respects
only in the business described in the SEC Filings and the SEC Filings contain
a
complete and accurate description in all material respects of the business
of
the Company and its Subsidiaries, taken as a whole.
4.7 Use
of
Proceeds.
The net
proceeds of the sale of the Notes and the Warrants hereunder shall be used
by
the Company for working capital and general corporate purposes.
4.8 No
Material Adverse Change.
Since
September 30, 2006, except as identified and described in the SEC Filings there
has not been:
(a) any
change in the consolidated assets, liabilities, financial condition or operating
results of the Company from that reflected in the financial statements included
in the SEC Filings, except for changes in the ordinary course of business which
have not had and could not reasonably be expected to have a Material Adverse
Effect, individually or in the aggregate;
(b) any
declaration or payment of any dividend, or any authorization or payment of
any
distribution, on any of the capital stock of the Company, or any redemption
or
repurchase of any securities of the Company;
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(c) any
material damage, destruction or loss, whether or not covered by insurance to
any
assets or properties of the Company or its Subsidiaries;
(d) any
waiver, not in the ordinary course of business, by the Company or any Subsidiary
of a material right or of a material debt owed to it;
(e) any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or a Subsidiary, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results, business or prospects of the Company and its
Subsidiaries taken as a whole (as such business is presently conducted and
as it
is proposed to be conducted);
(f) any
change or amendment to the Company’s Articles of Incorporation or Bylaws or
other organizational documents, or material change to any material contract
or
arrangement by which the Company or any Subsidiary is bound or to which any
of
their respective assets or properties is subject;
(g) any
material labor difficulties or labor union organizing activities with respect
to
employees of the Company or any Subsidiary;
(h) any
material transaction entered into by the Company or a Subsidiary other than
in
the ordinary course of business;
(i) the
loss
of the services of any key employee, or material change in the composition
or
duties of the senior management of the Company or any Subsidiary;
(j) the
loss
or threatened loss of any customer which has had or could reasonably be expected
to have a Material Adverse Effect; or
(k) any
other
event or condition of any character that has had or could reasonably be expected
to have a Material Adverse Effect.
4.9 SEC
Filings.
At the
time of filing thereof, the SEC Filings complied as to form in all material
respects with the requirements of the 1934 Act and did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
4.10 No
Conflict, Breach, Violation or Default.
The
execution, delivery and performance of the Transaction Documents by the Company
and the issuance and sale of the Securities will not (A) result in a violation
of any of the terms and provisions of (i) the Company’s Articles of
Incorporation or the Company’s Bylaws, both as in effect on the date hereof, or
(ii) any statute, rule, regulation or order of any governmental agency or body
or any court, domestic or foreign, having jurisdiction over the Company, any
Subsidiary or any of their respective assets or properties the violation of
which, either individually or in the aggregate, would not have a Material
Adverse Effect, or (B) conflict with or result in a breach or violation of
any
of the terms and provisions of, or constitute a default under, any agreement
or
instrument to which the Company or any Subsidiary is a party or by which the
Company or a Subsidiary is bound or to which any of their respective assets
or
properties is subject the violation of which, either individually or in the
aggregate, would not have a Material Adverse Effect.
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4.11 Tax
Matters.
The
Company and each Subsidiary has timely prepared and filed all tax returns
required to have been filed by the Company or such Subsidiary with all
appropriate governmental agencies and timely paid all taxes shown thereon or
otherwise owed by it. The charges, accruals and reserves on the books of the
Company in respect of taxes for all fiscal periods are adequate in all material
respects, and there are no material unpaid assessments against the Company
or
any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of
any additional taxes, penalties or interest for any fiscal period or audits
by
any federal, state or local taxing authority except for any assessment which
is
not material to the Company and its Subsidiaries, taken as a whole. All taxes
and other assessments and levies that the Company or any Subsidiary is required
to withhold or to collect for payment have been duly withheld and collected
and
paid to the proper governmental entity or third party when due. There are no
tax
liens or claims pending or, to the Company’s Knowledge, threatened against the
Company or any Subsidiary or any of their respective assets or property. Except
as described on Schedule
4.11,
there
are no outstanding tax sharing agreements or other such arrangements between
the
Company and any Subsidiary or other corporation or entity.
4.12 Title
to Properties.
Except
as disclosed in the SEC Filings, the Company and each Subsidiary has good and
marketable title to all real properties and all other properties and assets
owned by it, in each case free from liens, encumbrances and defects that would
materially affect the value thereof or materially interfere with the use made
or
currently planned to be made thereof by them; and except as disclosed in the
SEC
Filings, the Company and each Subsidiary holds any leased real or personal
property under valid and enforceable leases with no exceptions that would
materially interfere with the use made or currently planned to be made thereof
by them.
4.13 Certificates,
Authorities and Permits.
The
Company and each Subsidiary possess adequate certificates, authorities or
permits issued by appropriate governmental agencies or bodies necessary to
conduct the business now operated by it, and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation
or
modification of any such certificate, authority or permit that, if determined
adversely to the Company or such Subsidiary, could reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate.
4.14 Labor
Matters.
(a) Except
as
set forth in the SEC Filings, neither the Company nor any Subsidiary is a party
to or bound by any collective bargaining agreements or other agreements with
labor organizations. Neither the Company nor any Subsidiary has violated in
any
material respect any laws, regulations, orders or contract terms, affecting
the
collective bargaining rights of employees, labor organizations or any laws,
regulations or orders affecting employment discrimination, equal opportunity
employment, or employees’ health, safety, welfare, wages and hours.
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(b) (i)
There
are no labor disputes existing, or to the Company’s Knowledge, threatened,
involving strikes, slow-downs, work stoppages, job actions, disputes, lockouts
or any other disruptions of or by the employees of the Company or any
Subsidiary, (ii) there are no unfair labor practices or petitions for election
pending or, to the Company’s Knowledge, threatened before the National Labor
Relations Board or any other federal, state or local labor commission relating
to the employees of the Company or any Subsidiary, (iii) no demand for
recognition or certification heretofore made by any labor organization or group
of employees is pending with respect to the Company or any Subsidiary and (iv)
to the Company’s Knowledge, the Company and each of its Subsidiaries, enjoys
good labor and employee relations with its employees and labor
organizations.
(c) The
Company and each of its Subsidiaries is in compliance in all material respects
with all applicable laws respecting employment (including laws relating to
classification of employees and independent contractors) and employment
practices, terms and conditions of employment, wages and hours, and immigration
and naturalization. There are no claims pending or, to the Company’s Knowledge,
threatened against the Company or any Subsidiary before the Equal Employment
Opportunity Commission or any other administrative body or in any court
asserting any violation of Title VII of the Civil Rights Act of 1964, the Age
Discrimination Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other foreign,
federal, state or local law, statute or ordinance barring discrimination in
employment.
(d) Except
as
disclosed in the SEC Filings, neither the Company nor any Subsidiary is not
a
party to, or bound by, any employment or other contract or agreement that
contains any severance, termination pay or change of control liability or
obligation, including, without limitation, any “excess parachute payment,” as
defined in Section 280(g) of the Internal Revenue Code of 1986, as
amended.
4.15 Intellectual
Property.
(a) All
Intellectual Property of the Company and its Subsidiaries is currently in
compliance with all material legal requirements (including timely filings,
proofs and payments of fees) and is valid and enforceable. No Intellectual
Property of the Company or its Subsidiaries which is necessary for the conduct
of Company’s and each of its Subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted has been or is now involved
in any cancellation, dispute or litigation, and, to the Company’s Knowledge, no
such action is threatened. No patent of the Company or its Subsidiaries has
been
or is now involved in any interference, reissue, re-examination or opposition
proceeding.
(b) All
of
the licenses and sublicenses and consent, royalty or other agreements concerning
Intellectual Property which are necessary for the conduct of the Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted to which the Company or any Subsidiary is
a
party or by which any of their assets are bound (other than generally
commercially available, non custom, off the shelf software application programs
having a retail acquisition price of less than $500 per license) (collectively,
“License Agreements”) are valid and binding obligations of the Company or its
Subsidiaries that are parties thereto and, to the Company’s Knowledge, the other
parties thereto, enforceable in accordance with their terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors’ rights generally, and there exists no
event or condition which will result in a material violation or breach of or
constitute (with or without due notice or lapse of time or both) a default
by
the Company or any of its Subsidiaries under any such License
Agreement.
10
(c) The
Company and its Subsidiaries own or have the valid right to use all of the
Intellectual Property that is necessary for the conduct of the Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted and for the ownership, maintenance and
operation of the Company’s and its Subsidiaries’ properties and assets, free and
clear of all liens, encumbrances, adverse claims or obligations to license
all
such owned Intellectual Property and Confidential Information, other than
licenses entered into in the ordinary course of the Company’s and its
Subsidiaries’ businesses. The Company and its Subsidiaries have a valid and
enforceable right to use all third party Intellectual Property and Confidential
Information used or held for use in the respective businesses of the Company
and
its Subsidiaries.
(d) To
the
Company’s Knowledge, the conduct of the Company’s and its Subsidiaries’
businesses as currently conducted does not infringe or otherwise impair or
conflict with (collectively, “Infringe”) any Intellectual Property rights of any
third party or any confidentiality obligation owed to a third party the
Intellectual Property and Confidential Information of the Company and its
Subsidiaries which are necessary for the conduct of Company’s and each of its
Subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted are not being Infringed by any third party. There
is no
litigation or order pending or outstanding or, to the Company’s Knowledge,
threatened or imminent, that seeks to limit or challenge or that concerns the
ownership, use, validity or enforceability of any Intellectual Property or
Confidential Information of the Company and its Subsidiaries and the Company’s
and its Subsidiaries’ use of any Intellectual Property or Confidential
Information owned by a third party, and, to the Company’s Knowledge, there is no
valid basis for the same.
(e) The
consummation of the transactions contemplated hereby and by the other
Transaction Documents will not result in the alteration, loss, impairment of
or
restriction on the Company’s or any of its Subsidiaries’ ownership or right to
use any of the Intellectual Property or Confidential Information which is
necessary for the conduct of Company’s and each of its Subsidiaries’ respective
businesses as currently conducted or as currently proposed to be
conducted.
(f) The
Company and its Subsidiaries have taken reasonable steps to protect the
Company’s and its Subsidiaries’ rights in their Intellectual Property and
Confidential Information.
11
4.16 Environmental
Matters.
Neither
the Company nor any Subsidiary is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic
or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment
or
human exposure to hazardous or toxic substances (collectively, “Environmental
Laws”), owns or operates any real property contaminated with any substance that
is subject to any Environmental Laws, is liable for any off-site disposal or
contamination pursuant to any Environmental Laws, or is subject to any claim
relating to any Environmental Laws, which violation, contamination, liability
or
claim has had or could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate; and there is no pending or, to the Company’s
Knowledge, threatened investigation that might lead to such a
claim.
4.17 Litigation.
Except
as described or in the SEC Filings there are no pending actions, suits or
proceedings against the Company, its Subsidiaries or any of its or their
properties; and to the Company’s Knowledge, no such actions, suits or
proceedings are threatened or contemplated.
4.18 Financial
Statements.
The
financial statements included in each SEC Filing present fairly, in all material
respects, the consolidated financial position of the Company as of the dates
shown and its consolidated results of operations and cash flows for the periods
shown, and such financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a consistent
basis (“GAAP”) (except as may be disclosed therein or in the notes thereto, and,
in the case of quarterly financial statements, as permitted by Form 10-QSB
under
the 1934 Act). Except as set forth in the financial statements of the Company
included in the SEC Filings filed prior to the date hereof, neither the Company
nor any of its Subsidiaries has incurred any liabilities, contingent or
otherwise, except those incurred in the ordinary course of business, consistent
(as to amount and nature) with past practices since the date of such financial
statements, none of which, individually or in the aggregate, have had or could
reasonably be expected to have a Material Adverse Effect.
4.19 Insurance
Coverage.
The
Company and each Subsidiary maintains in full force and effect insurance
coverage that is customary for comparably situated companies for the business
being conducted and properties owned or leased by the Company and each
Subsidiary, and the Company reasonably believes such insurance coverage to
be
adequate against all liabilities, claims and risks against which it is customary
for comparably situated companies to insure.
4.20 Brokers
and Finders.
Except
for the Placement Agent, no Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company.
4.21 No
Directed Selling Efforts or General Solicitation.
Neither
the Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation
D) in
connection with the offer or sale of any of the Securities.
4.22 No
Integrated Offering.
Neither
the Company nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any Company
security or solicited any offers to buy any security, under circumstances that
would adversely affect reliance by the Company on Section 4(2) for the exemption
from registration for the transactions contemplated hereby or would require
registration of the Securities under the 1933 Act.
12
4.23 Private
Placement.
Subject
to the accuracy of the representations and warranties of the Investors set
forth
in Section 5, the offer and sale of the Securities to the Investors as
contemplated hereby is exempt from the registration requirements of the 1933
Act.
4.24 Questionable
Payments.
Neither
the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of
their respective current or former stockholders, directors, officers, employees,
agents or other Persons acting on behalf of the Company or any Subsidiary,
has
on behalf of the Company or any Subsidiary or in connection with their
respective businesses: (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity;
(b) made any direct or indirect unlawful payments to any governmental officials
or employees from corporate funds; (c) established or maintained any unlawful
or
unrecorded fund of corporate monies or other assets; (d) made any false or
fictitious entries on the books and records of the Company or any Subsidiary;
or
(e) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature.
4.25 Transactions
with Affiliates.
Except
as disclosed in the SEC Filings, none of the officers or directors of the
Company and, to the Company’s Knowledge, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary (other
than as holders of stock options and/or warrants, and for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of
real
or personal property to or from, or otherwise requiring payments to or from
any
officer, director or such employee or, to the Company’s Knowledge, any entity in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner.
4.26 Internal
Controls.
The
Company is in material compliance with the provisions of the Xxxxxxxx-Xxxxx
Act
of 2002 currently applicable to the Company. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets
at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures
(as
defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed
such disclosure controls and procedures to ensure that material information
relating to the Company, including the Subsidiaries, is made known to the
certifying officers by others within those entities, particularly during the
period in which the Company’s most recently filed period report under the 1934
Act, as the case may be, is being prepared. The Company’s certifying officers
have evaluated the effectiveness of the Company’s controls and procedures as of
the end of the period covered by the most recently filed periodic report under
the 1934 Act (such date, the “Evaluation Date”). The Company presented in its
most recently filed periodic report under the 1934 Act the conclusions of the
certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no significant changes in the Company’s
internal controls (as such term is defined in Item 308 of Regulation S-K) or,
to
the Company’s Knowledge, in other factors that could significantly affect the
Company’s internal controls. The Company maintains and will continue to maintain
a standard system of accounting established and administered in accordance
with
GAAP and the applicable requirements of the 1934 Act.
13
4.27 Disclosures.
Neither
the Company nor any Person acting on its behalf has provided the Investors
or
their agents or counsel with any information that constitutes or might
constitute material, non-public information. The written materials delivered
to
the Investors in connection with the transactions contemplated by the
Transaction Documents do not contain any untrue statement of a material fact
or
omit to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made,
not
misleading.
5. Representations
and Warranties of the Investors.
Each of
the Investors hereby severally, and not jointly, represents and warrants to
the
Company that:
5.1 Organization
and Existence.
To the
extent indicated on the signature pages hereto, such Investor either (i) an
individual or a, (ii) corporation, (iii) limited partnership or (iv) limited
liability company validly existing under the laws of its state of incorporation
or formation, as applicable, and has, as applicable, all requisite corporate,
partnership or limited liability company power and authority to invest in the
Securities pursuant to this Agreement.
5.2 Authorization.
The
execution, delivery and performance by such Investor of the Transaction
Documents to which such Investor is a party have been duly authorized and will
each constitute the valid and legally binding obligation of such Investor,
enforceable against such Investor in accordance with their respective terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability, relating to or affecting
creditors’ rights generally.
5.3 Purchase
Entirely for Own Account.
The
Securities to be received by such Investor hereunder will be acquired for such
Investor’s own account, not as nominee or agent, and not with a view to the
resale or distribution of any part thereof in violation of the 1933 Act, and
such Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same in violation of the 1933 Act without
prejudice, subject, however, to such Investor’s right at all times to sell or
otherwise dispose of all or any part of such Securities in compliance with
applicable federal and state securities laws. Nothing contained herein shall
be
deemed a representation or warranty by such Investor to hold the Securities
for
any period of time. Such Investor is not a broker-dealer registered with the
SEC
under the 1934 Act or an entity engaged in a business that would require it
to
be so registered.
5.4 Investment
Experience.
Such
Investor acknowledges that it can bear the economic risk and complete loss
of
its investment in the Securities and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment contemplated hereby.
14
5.5 Disclosure
of Information.
Such
Investor has had an opportunity to receive all information related to the
Company requested by it and to ask questions of and receive answers from the
Company regarding the Company, its business and the terms and conditions of
the
offering of the Securities. Such Investor acknowledges receipt of copies of
the
SEC Filings. Neither such inquiries nor any other due diligence investigation
conducted by such Investor shall modify, limit or otherwise affect such
Investor’s right to rely on the Company’s representations and warranties
contained in this Agreement.
5.6 Restricted
Securities.
Such
Investor understands that the Securities are characterized as “restricted
securities” under the U.S. federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and
that under such laws and applicable regulations such securities may be resold
without registration under the 1933 Act only in certain limited
circumstances.
5.7 Legends.
It is
understood that, except as provided below, certificates evidencing the
Securities may bear the following or any similar legend:
(a) “The
securities represented hereby may not be transferred unless (i) such securities
have been registered for sale pursuant to the Securities Act of 1933, as
amended, (ii) such securities may be sold pursuant to Rule 144(k), or (iii)
the
Company has received an opinion of counsel reasonably satisfactory to it that
such transfer may lawfully be made without registration under the Securities
Act
of 1933 or qualification under applicable state securities laws.”
(b) If
required by the authorities of any state in connection with the issuance of
sale
of the Securities, the legend required by such state authority.
5.8 Accredited
Investor.
Such
Investor is an accredited investor as defined in Rule 501(a) of Regulation
D, as
amended, under the 1933 Act. The definition of “accredited investor” is annexed
hereto.
5.9 No
General Solicitation.
Such
Investor did not learn of the investment in the Securities as a result of any
general solicitation or general advertising.
5.10 Brokers
and Finders.
No
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of such Investor.
15
5.11 Prohibited
Transactions.
During
the last thirty (30) days prior to the date hereof, neither such Investor nor
any Affiliate of such Investor which (x) had knowledge of the transactions
contemplated hereby, (y) has or shares discretion relating to such Investor’s
investments or trading or information concerning such Investor’s investments,
including in respect of the Securities, or (z) is subject to such Investor’s
review or input concerning such Affiliate’s investments or trading
(collectively, “Trading Affiliates”) has, directly or indirectly, effected or
agreed to effect any short sale, whether or not against the box, established
any
“put equivalent position” (as defined in Rule 16a-1(h) under the 0000 Xxx) with
respect to the Common Shares, granted any other right (including, without
limitation, any put or call option) with respect to the Common Shares or with
respect to any security that includes, relates to or derived any significant
part of its value from the Common Shares or otherwise sought to hedge its
position in the Securities (each, a “Prohibited Transaction”). Prior to the
filing by the Company of a Current Report on Form 8-K announcing the
transactions contemplated hereby, such Investor shall not, and shall cause
its
Trading Affiliates not to, engage, directly or indirectly, in a Prohibited
Transaction. Such Investor acknowledges that the representations, warranties
and
covenants contained in this Section 6.11 are being made for the benefit of
the
Investors as well as the Company and that each of the other Investors shall
have
an independent right to assert any claims against such Investor arising out
of
any breach or violation of the provisions of this Section 6.11.
6. Conditions
to Closing.
6.1 Conditions
to the Investors’ Obligations. The obligation of each Investor to purchase the
Notes and the Warrants at Closing is subject to the fulfillment to such
Investor’s satisfaction, on or prior to the Closing Date, of the following
conditions, any of which may be waived by such Investor (as to itself
only):
(a) The
representations and warranties made by the Company in Section 4 hereof qualified
as to materiality shall be true and correct on the Closing Date, except to
the
extent any such representation or warranty expressly speaks as of an earlier
date, in which case such representation or warranty shall be true and correct
as
of such earlier date, and, the representations and warranties made by the
Company in Section 4 hereof not qualified as to materiality shall be true and
correct in all material respects on the Closing Date, except to the extent
any
such representation or warranty expressly speaks as of an earlier date, in
which
case such representation or warranty shall be true and correct in all material
respects as of such earlier date. The Company shall have performed all
obligations and covenants herein required to be performed by it on or prior
to
the Closing Date, including without limitation those contained in Section 3.1
hereof.
(b) The
Company shall have obtained any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation of the
purchase and sale of the Notes and the Warrants and the consummation of the
other transactions contemplated by the Transaction Documents to be consummated
on or prior to the Closing Date, all of which shall be in full force and
effect.
(c) The
Company shall have executed and delivered to the Placement Agent each of the
Transition Documents.
(d) No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order
of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in
the
other Transaction Documents.
16
(e) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Chief Executive Officer or its Chief Financial Officer, dated as of the
Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a), (b) and (d) of this Section 6.1.
(f) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Secretary, dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving, as applicable, the
transactions contemplated by this Agreement and the other Transaction Documents,
and the issuance of the Securities, certifying the current versions of its
Articles of Incorporation and Bylaws or other organizational documents and
certifying as to the signatures and authority of persons signing the Transaction
Documents and related documents on its behalf.
(g) No
stop
order or suspension of trading shall have been imposed by the SEC or any other
governmental or regulatory body with respect to public trading in the Common
Stock.
(h) The
Company and the Placement Agent shall have received executed signature pages
from Investors representing purchases of the Securities of at least $3.0 million
in the aggregate.
(i) The
Notes
and Warrants shall have been deposited with the Escrow Agent in accordance
with
the terms of Section 3.1 hereof.
6.2 Conditions
to Obligations of the Company.
The
Company’s obligation to sell and issue the Notes and the Warrants at the Closing
is subject to the fulfillment to the satisfaction of the Company on or prior
to
the Closing Date of the following conditions, any of which may be waived by
the
Company:
(a) The
representations and warranties made by the Investors in Section 6 hereof, other
than the representations and warranties contained in Sections 5.3, 5.4, 5.5,
5.6, 5.7, 5.8 and 5.9 (the “Investment Representations”), shall be true and
correct in all material respects when made, and shall be true and correct in
all
material respects on the Closing Date with the same force and effect as if
they
had been made on and as of said date. The Investment Representations shall
be
true and correct in all respects when made, and shall be true and correct in
all
respects on the Closing Date with the same force and effect as if they had
been
made on and as of said date. The Investors shall have performed in all material
respects all obligations and covenants herein required to be performed by them
on or prior to the Closing Date.
(b) The
Investors shall have executed and delivered the Registration Rights
Agreement.
17
6.3 Termination
of Obligations to Effect Closing; Effects.
(a) The
outstanding obligations of the Company, on the one hand, and the Investors,
on
the other hand, to effect any Closing shall terminate as follows:
(i) Upon
the
mutual written consent of the Company and the Investors;
(ii) By
the
Company if any of the conditions set forth in Section 6.2 shall have become
incapable of fulfillment, and shall not have been waived by the
Company;
(iii) By
an
Investor (with respect to itself only) if any of the conditions set forth in
Section 6.1 shall have become incapable of fulfillment, and shall not have
been
waived by the Investor;
(iv) By
either
the Company or any Investor (with respect to itself only) if the Closing has
not
occurred on or prior to February 28, 2007; or
provided,
however, that, except in the case of clause (i) above, the party seeking to
terminate its obligation to effect a Closing shall not then be in breach of
any
of its representations, warranties, covenants or agreements contained in this
Agreement or the other Transaction Documents if such breach has resulted in
the
circumstances giving rise to such party’s seeking to terminate its obligation to
effect the Closing.
(b) In
the
event of termination by any Investor of its obligations to effect a Closing
pursuant to this Section 6.3, written notice thereof shall forthwith be given
to
the other Investors and the other Investors shall have the right to terminate
their obligations to effect such Closing upon written notice to the Company
and
the other Investors. Nothing in this Section 6.3 shall be deemed to release
any
party from any liability for any breach by such party of the terms and
provisions of this Agreement or the other Transaction Documents or to impair
the
right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction
Documents.
7. Covenants
and Agreements of the Company.
7.1 Reservation
of Common Stock.
The
Company shall at all times reserve and keep available out of its authorized
but
unissued shares of Common Stock, solely for the purpose of providing for the
conversion of the Notes and/or Preferred Stock, if any, and the exercise of
the
Warrants such number of shares of Common Stock as shall from time to time equal
the Warrant Shares issuable from time to time and shares of Common Stock
underlying the Notes and/or Preferred Stock, if any.
7.2 Reports.
The
Company will furnish to the Investors and/or their assignees such information
relating to the Company and its Subsidiaries as from time to time may reasonably
be requested by the Investors and/or their assignees; provided, however, that
the Company shall not disclose material, non-public information to the
Investors, or to advisors to or representatives of the Investors, unless prior
to disclosure of such information the Company identifies such information as
being material, non-public information and provides the Investors, such advisors
and representatives with the opportunity to accept or refuse to accept such
material, non-public information for review and any Investor wishing to obtain
such information enters into an appropriate confidentiality agreement with
the
Company with respect thereto.
18
7.3 No
Conflicting Agreements.
The
Company will not take any action, enter into any agreement or make any
commitment that would conflict or interfere in any material respect with the
Company’s obligations to the Investors under the Transaction
Documents.
7.4 Insurance.
The
Company shall not materially reduce the insurance coverages described in Section
4.19.
7.5 Compliance
with Laws.
The
Company will comply in all material respects with all applicable laws, rules,
regulations, orders and decrees of all governmental authorities.
7.6 Termination
of Covenants.
The
provisions of Sections 7.2 through 7.5 shall terminate and be of no further
force and effect on the date on which the Company’s obligations under the
Registration Rights Agreement to register or maintain the effectiveness of
any
registration covering the Registrable Securities (as such term is defined in
the
Registration Rights Agreement) shall terminate.
7.7 Removal
of Legends.
Upon
the earlier of (i) registration for resale pursuant to the Registration Rights
Agreement or (ii) Rule 144(k) becoming available the Company shall (A) deliver
to the Company’s transfer agent for the Common Stock (the “Transfer Agent”)
irrevocable instructions that the Transfer Agent shall reissue a certificate
representing shares of Common Stock without legends upon receipt by such
Transfer Agent of the legended certificates for such shares, together with
either (1) a customary representation by the Investor that Rule 144(k) applies
to the shares of Common Stock represented thereby or (2) a statement by the
Investor that such Investor has sold the shares of Common Stock represented
thereby in accordance with the Plan of Distribution contained in the
Registration Statement, and (B) cause its counsel to deliver to the Transfer
Agent one or more blanket opinions to the effect that the removal of such
legends in such circumstances may be effected under the 1933 Act. From and
after
the earlier of such dates, upon an Investor’s written request, the Company shall
promptly cause certificates evidencing the Investor’s Securities to be replaced
with certificates which do not bear such restrictive legends, and Warrant Shares
or shares of Common Stock issuable upon conversion of the Notes and/or Preferred
Stock, if any subsequently issued upon due exercise of the Warrants shall not
bear such restrictive legends provided the provisions of either clause (i)
or
clause (ii) above, as applicable, are satisfied with respect to such Warrant
Shares or conversion shares, as applicable. When the Company is required to
cause unlegended certificates that replace previously issued legended
certificates to be prepared by the Transfer Agent and delivered to the holders
thereof, if unlegended certificates are not delivered to an Investor within
five
(5) Business Days of submission by that Investor of legended certificate(s)
to
the Transfer Agent as provided above (or to the Company, in the case of the
Warrants or the Notes and/or Preferred Stock, if any), the Company shall be
liable to the Investor for liquidated damages in an amount equal to 1.5% of
the
aggregate purchase price of the Securities evidenced by such certificate(s)
for
each thirty (30) day period (or portion thereof) beyond such five (5) Business
Day that the unlegended certificates have not been so delivered.
19
7.8 Participation
Right.
Excluding the issuance of the Securities referenced in Section 3.3 herein or
as
otherwise set forth in this Section 7.8, the Investors shall have a pro rata
right to participate in any subsequent placements of debt or equity until one
(1) year after the effective date of the initial registration statement filed
further to the Registration Rights Agreement on terms no less favorable than
those obtained by the Company from an unaffiliated third party. Each Investor
must notify the Company within 20 days following their receipt of notice from
the Company of such proposed financing of its intention to participate in the
financing, the closing of which shall occur within 30 days following the
Company’s receipt of such participation notice. This participation right shall
not apply to an Exempt Issuance. In the event that there is such a subsequent
placement of debt or equity to any of the Investors, the Placement Agent will
be
entitled to receive cash compensation with respect to the amount invested by
such Investors based on the cash commission rate paid to the Placement Agent
for
the Securities sold hereunder.
7.9 Subsequent
Equity Sales.
From
the date hereof until such time as the Investors hold shares of Preferred Stock,
Notes and/or Warrants convertible or exercisable, as the case may be, into
an
aggregate of less than 3.0 million (3,000,000) shares of the Company’s Common
Stock, the Company shall be prohibited from effecting or entering into an
agreement to effect a “Variable
Rate Transaction”
or
an
“MFN
Transaction”
(each
as defined below). The term “Variable
Rate Transaction”
shall
mean a transaction in which the Company issues or sells (i) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock 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 debt or equity 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 debt or equity security
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.
The
term “MFN
Transaction”
shall
mean a transaction in which the Company issues or sells any securities in a
capital raising transaction or series of related transactions which grants
to an
investor the right to receive additional shares based upon future transactions
of the Company on terms more favorable than those granted to such investor
in
such offering. Any Investor shall be entitled to obtain injunctive relief
against the Company to preclude any such issuance, which remedy shall be in
additional to any right to collect damages. Notwithstanding the foregoing this
Section 7.9 shall not apply in respect of an Exempt Issuance, except that no
Variable Rate Transaction or MFN Transaction shall be an Exempt
Issuance.
7.10 Stockholder
Resolutions.
At or
before the next annual meeting of the stockholders of the Company, the Board
of
Directors shall propose and submit to the holders of the Common Stock for
approval of the following:
(a) adoption
of that form of Certificate of Designations of Preferences, Rights and
Limitations of Series A Convertible Preferred Stock attached hereto as
Exhibit
D
and
filing of the same with the Secretary of State of Utah (or such other
jurisdiction upon any reincorporation of the Company further to such stockholder
solicitation); and
20
(b) an
amendment to the Company’s Articles of Incorporation that provides substantially
as follows:
The
Company shall not effect any conversion of the Series A Convertible Preferred
Stock or any exercise of any Series A or Series B Warrants to purchase shares
of
Common Stock, and no Holder shall have the right to convert any portion of
the
Series A Preferred Stock or exercise any such warrant to the extent that after
such conversion or exercise, as the case may be, the Holder would beneficially
own in excess of 9.9% of the then issued and outstanding shares of common stock.
This provision may be waived or amended only with the consent of the subject
Holder and the consent of holders of a majority of the shares of outstanding
Common Stock who are not Affiliates. Solely for purposes of the foregoing,
the
term “Affiliate” shall mean any person: (a) that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with the Company or (b) who beneficially owns (i) as an original
purchaser any shares of Common Stock issued further to the December Purchase
Agreement, (ii) any shares of the Company’s Series A Convertible Preferred Stock
or (iii) any Series A or Series B Warrant(s) to purchase shares of the Company’s
Common Stock issued further to the December Purchase Agreement or this
Agreement.
8. Survival
and Indemnification.
8.1 Survival.
The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing of the transactions contemplated by this
Agreement for a period of 18 months following the Closing.
8.2 Indemnification.
The
Company agree to indemnify and hold harmless each Investor and the Placement
Agent and their respective Affiliates and their respective directors, officers,
employees and agents from and against any and all losses, claims, damages,
liabilities and expenses (including without limitation reasonable attorneys’
fees and disbursements and other expenses incurred in connection with
investigating, preparing or defending any action, claim or proceeding, pending
or threatened and the costs of enforcement thereof) (collectively, “Losses”) to
which such Person may become subject as a result of any breach of
representation, warranty, covenant or agreement made by or to be performed
on
the part of the Company under the Transaction Documents, and will reimburse
any
such Person for all such amounts as they are incurred by such
Person.
8.3 Conduct
of Indemnification Proceedings.
Promptly after receipt by any Person (the “Indemnified Person”) of notice of any
demand, claim or circumstances which would or might give rise to a claim or
the
commencement of any action, proceeding or investigation in respect of which
indemnity may be sought pursuant to Section 8.2, such Indemnified Person shall
promptly notify the Company in writing, and the Company shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Person, and shall assume the payment of all fees and expenses;
provided, however, that the failure of any Indemnified Person so to notify
the
Company shall not relieve the Company of its obligations hereunder except to
the
extent that the Company is materially prejudiced by such failure to notify.
In
any such proceeding, any Indemnified Person shall have the right to retain
its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person unless: (i) the Company and the Indemnified Person
shall have mutually agreed to the retention of such counsel; or (ii) in the
reasonable judgment of counsel to such Indemnified Person representation of
both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The Company shall not be liable for any
settlement of any proceeding effected without its written consent, which consent
shall not be unreasonably withheld, but if settled with such consent, or if
there be a final judgment for the plaintiff, the Company shall indemnify and
hold harmless such Indemnified Person from and against any loss or liability
(to
the extent stated above) by reason of such settlement or judgment. Without
the
prior written consent of the Indemnified Person, which consent shall not be
unreasonably withheld, the Company shall not effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person
is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Party, unless such settlement includes an unconditional release
of such Indemnified Person from all liability arising out of such
proceeding.
21
9. Miscellaneous.
9.1 Successors
and Assigns.
This
Agreement may not be assigned by a party hereto without the prior written
consent of the Company or the Investors, as applicable; provided, however,
that
an Investor may assign its rights and delegate its duties hereunder in whole
or
in part to an Affiliate or to a third party acquiring some or all of its
Securities in a private transaction without the prior written consent of the
Company or the other Investors, after notice duly given by such Investor to
the
Company; provided further, that no such assignment or obligation shall affect
the obligations of such Investor hereunder. The provisions of this Agreement
shall inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto
and
the Placement Agent or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
9.2 Counterparts;
Faxes.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. This Agreement may also be executed via facsimile, which shall
be
deemed an original.
9.3 Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
9.4 Notices.
Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by telex or telecopier, then such notice
shall be deemed given upon receipt of confirmation of complete transmittal,
(iii) if given by mail, then such notice shall be deemed given upon the earlier
of (A) receipt of such notice by the recipient or (B) three days after such
notice is deposited in first class mail, postage prepaid, and (iv) if given
by
an internationally recognized overnight air courier, then such notice shall
be
deemed given one Business Day after delivery to such carrier. All notices shall
be addressed to the party to be notified at the address as follows, or at such
other address as such party may designate by ten days’ advance written notice to
the other party:
22
If
to the
Company:
Long-E
International Group Co., Ltd.
X-0X,
Xxxxx Xxxxxxxxx Xxxxx, Xxxxxx Xxxx,
Xx-Xxxx
Industry Xxxx,
Xxxxxxxx,
000000, Xxxxxxxxx, Xxxxx
Telephone:
(00) 000 0000 0000
Facsimile:
(00) 000 0000 0000
Attention:
Chairman of the Board
With
a
copy to (which shall not constitute notice):
Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxx Xxxxx Xxxxx LLP
00000
Xxxxx Xxxxxx Xxxxxxxxx, Xxxxxxx Xxxxx
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxx Xxxxxxx, Esq.
If
to the
Investors:
to
the
addresses set forth on the signature pages hereto, with copies, as it relates
to
notices sent to Vision Opportunity Master Fund, Ltd. to (which shall not
constitute notice):
Xxxxxx
Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
Park
Avenue Tower
00
Xxxx
00xx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxxxxxx, Esq.
9.5 Expenses.
The
parties hereto shall pay their own costs and expenses in connection herewith,
except that the Company shall pay the reasonable fees and expenses of Xxxxxx
Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP, counsel to Vision Opportunity
Master Fund, Ltd. All of such fees and expenses shall be deducted from the
Escrow Amount pursuant to signed written instructions of the Company and the
Placement Agent.
9.6 Amendments
and Waivers.
Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors holding eighty five percent (85%) of the principal amount of
Notes
issued further to this Agreement and then outstanding. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder
of
any Securities purchased under this Agreement at the time outstanding, each
future holder of all such Securities, and the Company.
23
9.7 Publicity.
Except
as set forth below, no public release or announcement concerning the
transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or
announcement by the Investors) or the Investors (in the case of a release or
announcement by the Company) (which consents shall not be unreasonably
withheld), except as such release or announcement may be required by law or
the
applicable rules or regulations of any securities exchange or securities market,
in which case the Company or the Investors, as the case may be, shall allow
the
Investors or the Company, as applicable, to the extent reasonably practicable
in
the circumstances, reasonable time to comment on such release or announcement
in
advance of such issuance. By 8:30 a.m. (New York City time) on the trading
day
immediately following the Closing Date, the Company shall issue a press release
disclosing the consummation of the transactions contemplated by this Agreement
on such Closing Date. No later than the next trading day following the Closing
Date, the Company will file a Current Report on Form 8-K attaching the press
release described in the foregoing sentence as well as copies of the Transaction
Documents and any material, non-public information that was disclosed on or
prior to the Closing Date to any of the Investors. In addition, the Company
will
make such other filings and notices in the manner and time required by the
SEC.
Notwithstanding the foregoing, the Company shall not publicly disclose the
name
of any Investor, or include the name of any Investor in any filing with the
SEC
(other than the Registration Statement and any exhibits to filings made in
respect of this transaction in accordance with periodic filing requirements
under the 0000 Xxx) or any regulatory agency, without the prior written consent
of such Investor, except to the extent such disclosure is required by law or
trading market regulations, in which case the Company shall provide the
Investors with prior notice of such disclosure.
9.8 Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law
which
renders any provision hereof prohibited or unenforceable in any
respect.
9.9 Entire
Agreement.
This
Agreement, including the Exhibits and the Disclosure Schedules, and the other
Transaction Documents constitute the entire agreement among the parties hereof
with respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter hereof and thereof.
9.10 Further
Assurances.
The
parties shall execute and deliver all such further instruments and documents
and
take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.
24
9.11 Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof to the extent that the general application of the laws of another
jurisdiction would be required thereby. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York
located in New York County and the United States District Court for the Southern
District of New York for the purpose of any suit, action, proceeding or judgment
relating to or arising out of this Agreement and the transactions contemplated
hereby. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the
same
methods as are specified for the giving of notices under this Agreement. Each
of
the parties hereto irrevocably consents to the jurisdiction of any such court
in
any such suit, action or proceeding and to the laying of venue in such court.
Each party hereto irrevocably waives any objection to the laying of venue of
any
such suit, action or proceeding brought in such courts and irrevocably waives
any claim that any such suit, action or proceeding brought in any such court
has
been brought in an inconvenient forum. EACH
OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.
9.12 Independent
Nature of Investors’ Obligations and Rights.
The
obligations of each Investor under any Transaction Document are several and
not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by
such
Investor independently of any other Investor. Nothing contained herein or in
any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents.
Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
25
IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
authorized officers to execute this Agreement as of the date first above
written.
| LONG-E INTERNATIONAL, INC. | ||
| |
|
|
| By: | /s/ Bu Shengfu | |
|
Name: Bu Shengfu |
||
| Title: Chairman and CEO | ||
26
|
The
Investors:
|
XXXXXX
PARTNERS LP
|
||
|
By:
|
/s/ Xxxxxx Xxxxxx Xxxxxx | ||
|
Name:
|
Xxxxxx
Xxxxxx Xxxxxx
|
||
|
Title:
|
Managing
Partner
|
||
|
Purchase
Price:
|
$3.4
Million
|
||
|
Principal
Amount of Notes:
|
$3.4
Million
|
||
|
Number
of Series A Warrants:
|
4,250,000
|
||
|
Number
of Series B Warrants:
|
4,250,000
|
||
|
Address
for Notice:
|
c/o
Barron Capital Advisors LLC
000
Xxxxx Xxxxxx, 0xx Xxxxx
Xxx
Xxxx, XX 00000
Telephone
(000) 000-0000
Facsimile
(000) 000-0000
|
||
[Signature
page to Securities Purchase
Agreement]
|
The
Investors:
|
VISION
OPPORTUNITY MASTER FUND, LTD
|
||
|
By:
|
/s/ Xxxx Xxxxxxxx | ||
|
Name:
|
Xxxx
Xxxxxxxx
|
||
|
Title:
|
Managing
Partner
|
||
|
Purchase
Price:
|
$1.0
Million
|
||
|
Principal
Amount of Notes:
|
$1.0
Million
|
||
|
Number
of Series A Warrants:
|
1,250,000
|
||
|
Number
of Series B Warrants:
|
1,250,000
|
||
|
Address
for Notice:
|
c/o
Vision Capital Advisors LLC
00
X. 00xx
Xxxxxx, 0xx Xxxxx
Xxx
Xxxx, XX 00000
Telephone
(000) 000-0000
Facsimile
(000) 000-0000
|
||
|
The
Investors:
|
JCAR
FUNDS LTD.
|
||
|
By:
|
/s/
Xxx Xxxxxx
|
||
|
Name:
|
Xxx
Xxxxxx
|
||
|
Title:
|
|||
|
Purchase
Price:
|
$400,000
|
||
|
Principal
Amount of Notes:
|
$400,000
|
||
|
Number
of Series A Warrants:
|
500,000
|
||
|
Number
of Series B Warrants:
|
500,000
|
||
|
Address
for Notice:
|
000-0000
Xxxxxxx Xxxxxx
Xxxxxxxx,
XX X0X 0X0
XXXXXX
Attention:
Xxx Xxxxxx
Facsimile
(000) 000-0000
|
||
[Signature
page to Securities Purchase
Agreement]
|
The
Investors:
|
XXX
XXXXXX
|
||
|
By:
|
/s/ Xxx Xxxxxx | ||
|
Name:
|
Xxx
Xxxxxx
|
||
|
Title:
|
|||
|
Purchase
Price:
|
$100,000
|
||
|
Principal
Amount of Notes:
|
$100,000
|
||
|
Number
of Series A Warrants:
|
125,000
|
||
|
Number
of Series B Warrants:
|
125,000
|
||
|
Address
for Notice:
|
000
Xxxxxx Xxxxx
Xxxxxxxx,
XX 00000
Attention:
Xxx Xxxxxx
Facsimile
(000) 000-0000
|
||
[Signature
page to Securities Purchase
Agreement]
|
The
Investors:
|
XXXXX
XXXXX
|
||
|
By:
|
/s/ Xxxxx Xxxxx | ||
|
Name:
|
Xxxxx
Xxxxx
|
||
|
Title:
|
|||
|
Purchase
Price:
|
$100,000
|
||
|
Principal
Amount of Notes:
|
$100,000
|
||
|
Number
of Series A Warrants:
|
125,000
|
||
|
Number
of Series B Warrants:
|
125,000
|
||
|
Address
for Notice:
|
000
Xxxxxx Xxxxx
Xxxxxxxx,
XX 00000
Attention:
Xxx Xxxxxx
Facsimile
(000) 000-0000
|
||
[Signature
page to Securities Purchase
Agreement]
|
The
Investors:
|
XXXXXXX
XXXXXX
|
||
|
By:
|
/s/ Xxxxxxx Xxxxxx | ||
|
Name:
|
Xxxxxxx
Xxxxxx
|
||
|
Title:
|
|||
|
Purchase
Price:
|
$100,000
|
||
|
Principal
Amount of Notes:
|
$100,000
|
||
|
Number
of Series A Warrants:
|
125,000
|
||
|
Number
of Series B Warrants:
|
125,000
|
||
|
Address
for Notice:
|
000
Xxxxxx Xxxxx
Xxxxxxxx,
XX 00000
Attention:
Xxx Xxxxxx
Facsimile
(000)
000-0000
|
||
|
The
Investors:
|
NUTMEG
/ MERCURY FUND, LLP
|
||
|
By:
|
/s/
Xxxxxxx Xxxxxxxx
|
||
|
Name:
|
Xxxxxxx
Xxxxxxxx
|
||
|
Title:
|
|||
|
Purchase
Price:
|
$153,000
|
||
|
Principal
Amount of Notes:
|
$153,000
|
||
|
Number
of Series A Warrants:
|
191,250
|
||
|
Number
of Series B Warrants:
|
191,250
|
||
|
Address
for Notice:
|
0000
Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx,
XX 00000
Attention:
Xxxxxxx Xxxxxxxx
Facsimile
(000) 000-0000
|
||
|
The
Investors:
|
XXXXXX
AND XXXXX XXXX JTWROS
|
||
|
By:
|
/s/
Xxxxxx Xxxx
|
||
|
Name:
|
Xxxxxx
Xxxx
|
||
|
Title:
|
|||
|
Purchase
Price:
|
$100,000
|
||
|
Principal
Amount of Notes:
|
$100,000
|
||
|
Number
of Series A Warrants:
|
125,000
|
||
|
Number
of Series B Warrants:
|
125,000
|
||
|
Address
for Notice:
|
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, XX 00000
Attention:
Xxxxxx Xxxx
Facsimile
(000) 000-0000
|
||
[Signature
page to Securities Purchase
Agreement]
Definition
of “Accredited Investor”
|
Category
A ___
|
The
undersigned is an individual (not a partnership, corporation, etc.)
whose
individual net worth, or joint net worth with his or her spouse,
presently
exceeds $1,000,000.
|
|
Category
B ___
|
The
undersigned is an individual (not a partnership, corporation, etc.)
who
had an income in excess of $200,000 in each of the two most recent
years,
or joint income with his or her spouse in excess of $300,000 in each
of
those years (in each case including foreign income, tax exempt income
and
full amount of capital gains and losses but excluding any income
of other
family members and any unrealized capital appreciation) and has a
reasonable expectation of reaching the same income level in the current
year.
|
|
Category
C ___
|
The
undersigned is a director or executive officer of the Company which
is
issuing and selling the securities.
|
|
Category
D ___
|
The
undersigned is a bank; a savings and loan association; insurance
company;
registered investment company; registered business development company;
licensed small business investment company (“SBIC”); or employee benefit
plan within the meaning of Title 1 of ERISA and (a) the investment
decision is made by a plan fiduciary which is either a bank, savings
and
loan association, insurance company or registered investment advisor,
or
(b) the plan has total assets in excess of $5,000,000 or (c) is a
self
directed plan with investment decisions made solely by persons that
are
accredited investors.
|
|
Category
E ___
|
The
undersigned is a private business development company as defined
in
section 202(a)(22) of the Investment Advisors Act of 1940.
|
|
Category
F ___
|
The
undersigned is either a corporation, partnership, Massachusetts business
trust, or non-profit organization within the meaning of Section 501(c)(3)
of the Internal Revenue Code, in each case not formed for the specific
purpose of acquiring the Securities and with total assets in excess
of
$5,000,000.
|
|
Category
G ___
|
The
undersigned is a trust with total assets in excess of $5,000,000,
not
formed for the specific purpose of acquiring the Securities, where
the
purchase is directed by a “sophisticated investor” as defined in
Regulation 506(b)(2)(ii) under the Act.
|
|
Category
H ___
|
The
undersigned is an entity (other than a trust) in which all of the
equity
owners are “accredited investors” within one or more of the above
categories. If relying upon this Category alone, each equity owner
must
complete a separate copy of this Agreement.
|
SCHEDULE
I
Wire
Instructions:
|
Bank:
|
Xxxxx
Fargo Bank
0000
Xxxxxx xx xxx Xxxxx
Xxx
Xxxxxxx, XX 00000
|
|
|
ABA
No.:
|
000000000
|
|
|
Account
Name:
|
Subscription
Escrow Account #3
|
|
|
Account
No.:
|
5763556601
|
|
|
Reference:
|
Law
Offices of Xxxxx X. Xxxxx, A Professional
Corporation
|
EXHIBIT
A-1
Form
of
Convertible Note
[See
attached]
EXHIBIT
A-2
Form
of
Series A Warrant
[See
attached.]
EXHIBIT
A-3
Form
of
Series B Warrant
[See
attached.]
EXHIBIT
B
Form
of
Amended and Restated Registration Rights Agreement
[See
attached.]
EXHIBIT
C
Post-Closing
Capitalization
[See
attached.]
EXHIBIT
D
Form
of
Certificate of Designations of Preferences,
Rights
and Limitations of Series A Convertible Preferred Stock
[See
attached.]
