Exhibit 10.20
EXCHANGE AGREEMENT
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THIS EXCHANGE AGREEMENT ("Agreement") is made as of the 12th day of
February, 2002 by and among Amerigon Incorporated, a California corporation (the
"Company"), and the Investor set forth on the signature pages affixed hereto.
Recitals
A. The Company and the Investor 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. The Company and the Investor have previously entered into a Credit
Agreement dated as of September 20, 2001 (as amended to the date hereof, the
"Credit Agreement") which provides for a bridge loan facility under which the
Company has borrowed $2,500,000 in principal indebtedness and on which interest
has accrued but not been paid; and
C. The Investor wishes to exchange with the Company, and the Company
exchange with the Investor, upon the terms and conditions stated in this
Agreement, (i) the principal amount of indebtedness outstanding under the Credit
Agreement ($2,500,000) plus accrued interest thereunder (collectively, referred
to herein as the "Indebtedness") for (ii) the number of shares of Common Stock
of the Company, no par value ("Common Stock") equal to the quotient of (x)
$2,500,000 plus accrued but unpaid interest on the Credit Agreement as of the
Closing Date and (y) $1.50, and in addition, the Investor shall receive one
warrant to purchase shares of Common Stock in the form attached hereto as
Exhibit A for each dollar of Indebtedness (the "Warrants"); the Company and the
Investor acknowledge and agree that assuming the Closing (as defined below)
occurs on February 25, 2002, the number of Shares of Common Stock and Warrants
for which the Indebtedness will exchanged is 1,720,602 and 860,301,
respectively; and
D. Contemporaneous with the sale of the Common Stock and Warrants, the
parties hereto will execute and deliver a 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. Contemporaneous with the closing of this Agreement, the Company
will issue and sell (i) an aggregate of 4,333,368 shares of Common Stock and
(ii) Warrants to purchase an aggregate of 2,166,684 shares of Common Stock
pursuant to separate Purchase Agreements dated as of the date hereof with the
investors named therein.
In consideration of the mutual promises made herein and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. In addition to those terms defined above and elsewhere in
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this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings here set forth:
"Affiliate" means, with respect to any Person, any other Person which
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directly or indirectly Controls, is controlled by, or is under common control
with, such Person.
"Agreements" means this Agreement, the Warrants and the Registration
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Rights Agreement.
"Business Day" means a day, other than a Saturday or Sunday, on which
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banks in New York City and Los Angeles are open for the general transaction of
business.
"Company's Knowledge" means the actual knowledge of the "executive
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officers" (as that term is defined in Rule 405 promulgated under the 0000 Xxx)
of the Company, after due inquiry.
"Control" means the possession, direct or indirect, of the power to
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direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Intellectual Property" means all of the following: (i) patents,
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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; (v) trade secrets, confidential information
and know-how (including but not limited to ideas, formulae, compositions,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information); and (vi) proprietary
computer software (including but not limited to data, data bases and
documentation).
"Material Adverse Effect" means a material adverse effect on the
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assets, liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company and its subsidiaries taken as a whole.
"Nasdaq" means the NASDAQ Stock Market, Inc. SmallCap Market System.
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"Person" means an individual, corporation, partnership, limited
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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.
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"SEC Filings" has the meaning set forth in Section 4.6.
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"Securities" means the Shares, the Warrants and the Warrant Shares.
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"Shares" means the shares of Common Stock being received by the
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Investor hereunder in exchange for the Indebtedness.
"Subsidiary" has the meaning set forth in Section 4.1.
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"Warrant Shares" means the shares of Common Stock issuable upon
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exercise of or otherwise pursuant to the Warrants.
"1933 Act" means the Securities Act of 1933, as amended, and the rules
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and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and
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the rules and regulations promulgated thereunder.
2. Exchange of Indebtedness for Shares and Warrants. Subject to the terms
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and conditions of this Agreement, on the Closing Date, the Investor shall
exchange with the Company the Indebtedness for the Shares and the Warrants .
3. Closing. Upon confirmation that the conditions to closing specified
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herein have been satisfied, the Company shall deliver to such person as the
Investor shall direct, in trust, a certificate or certificates, registered in
such name or names as the Investor may designate, representing the Shares and
Warrants, with instructions that such certificates are to be held for release to
the Investor upon acknowledgement from the Investor that delivery of such Shares
and Warrants extinguishes the Indebtedness. On the date (the "Closing Date") the
Company receives such acknowledgement, the certificates evidencing the Shares
and Warrants shall be released to the Investor (the "Closing"). The exchange
shall take place at the offices of O'Melveny & Xxxxx LLP, 000 Xxxxxxxx, Xxxxx
000, Xxxxxx, Xxxxxxxxxx 00000, or at such other location and on such other date
as the Company and the Investor shall mutually agree. The Investor hereby agrees
that effective upon the Closing, the number of shares of Common Stock of the
Company purchasable by Investor under that certain Amended and Restated Bridge
Loan Warrant at $1.15 per share shall be reduced from 652,174 to 326,087 and the
Company shall deliver to Investor at Closing a revised Amended and Restated
Warrant reflecting such change and the existing Amended and Restated Bridge Loan
Warrant shall be surrendered to the Company at Closing and marked cancelled.
4. Representations and Warranties of the Company. The Company hereby
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represents and warrants to the Investor that, except as set forth in the
schedules delivered herewith (collectively, the "Disclosure Schedules"):
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4. 1 Organization, Good Standing and Qualification. Each of the
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Company and its Subsidiaries is a corporation duly incorporated or a limited
liability company duly formed, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation and has all requisite
corporate or limited liability company 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 or a
foreign limited liability company 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 and could not reasonably be expected to have a Material Adverse Effect.
The Company's subsidiaries are reflected on Schedule 4.1 hereto (the
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"Subsidiaries").
4.2 Authorization. The Company has full power and authority and has
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taken all requisite action on the part of the Company, its officers, directors
and shareholders necessary for (i) the authorization, execution and delivery of
the Agreements, (ii) 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 Agreements
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.
4.3 Capitalization. Schedule 4.3 sets forth (a) the authorized capital
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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
Shares and the Warrants) exercisable for, or convertible into or exchangeable
for any shares of capital stock of the Company. All of the issued and
outstanding shares of the Company's capital stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of pre-emptive rights
and were issued in full compliance with applicable law. All of the issued and
outstanding equity interests of each Subsidiary have been duly authorized and
validly issued and are fully paid, nonassessable and free of pre-emptive rights,
were issued in full compliance with applicable law and, except as described on
Schedule 4.3, are owned by the Company, beneficially and of record, subject to
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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 on Schedule 4.3, there are no
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outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any of
its Subsidiaries is or may be obligated to issue any equity securities of any
kind and except as contemplated by this Agreement, neither the Company nor any
of its Subsidiaries is currently in negotiations for the issuance of any equity
securities of any kind. Except as described on Schedule 4.3 and except for the
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Registration Rights 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 on
Schedule 4.3, the Company has not granted any Person any currently outstanding
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or future arising right to require the Company to register any securities of
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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.
Schedule 4.3 sets forth a true and complete table setting forth the
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pro forma capitalization of the Company on a fully diluted basis giving effect
to (i) the issuance of the Shares and the Warrants, (ii) any adjustments in
other securities resulting from such issuance, and (iii) the exercise or
conversion of all outstanding securities. Except as described on Schedule 4.3,
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the issuance of the Securities hereunder will not trigger any outstanding
anti-dilution rights.
4.4 Valid Issuance. The Shares have been duly and validly authorized
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and, when issued and paid for pursuant to this Agreement, will be validly
issued, fully paid and nonassessable free and clear of all encumbrances and
restrictions, except for restrictions on transfer set forth in this Agreement or
imposed by applicable securities laws. The Warrants have been duly and validly
authorized. Upon the due exercise of the Warrants, the Warrant Shares issuable
upon such exercise 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 this Agreement or imposed by applicable securities laws.
The Company has reserved a sufficient number of shares of Common Stock for
issuance upon the exercise of the Warrants, free and clear of all encumbrances
and restrictions, except for restrictions on transfer set forth in this
Agreement or imposed by applicable securities laws.
4.5 Consents. Except as described on Schedule 4.20, the execution,
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delivery and performance by the Company of the Agreements and the offer,
issuance and sale of the Securities require no consent of, action by or in
respect of, or filing with, any Person, governmental body, agency, or official
other than filings that have been made pursuant to applicable state securities
laws and post-sale filings pursuant to applicable state and federal securities
laws which the Company undertakes to file within the applicable time periods.
The Company has taken all action necessary to exempt (i) the sale of the
Securities, (ii) the issuance of the Warrant Shares upon due exercise of the
Warrants, and (iii) the other transactions contemplated by this Agreement from
the provisions of any anti-takeover or business combination law or statute
binding on the Company or to which the Company or any of its assets and
properties may be subject.
4.6 Delivery of SEC Filings; Business. The Company has provided the
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Investor with copies of the Company's most recent Annual Report on Form 10-K for
the fiscal year ended December 31, 2000 (as amended prior to the date hereof,
the "10-K"), and all other reports filed by the Company pursuant to the 1934 Act
since the filing of the 10-K 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 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 as of the date
such SEC Filing was filed with the SEC.
4.7 [Intentionally deleted.]
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4.8 No Material Adverse Change. Since September 30, 2001, except as
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identified and described in the SEC Filings or as described on Schedule 4.8,
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there has not been:
(i) 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 10-K, except for changes in the ordinary
course of business which have not and could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate;
(ii) 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;
(iii) any material damage, destruction or loss, whether or not
covered by insurance to any assets or properties of the Company or its
Subsidiaries;
(iv) 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;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or a Subsidiary, except
in the ordinary course of business and which is not material to the assets,
properties, financial condition, operating results or business of the Company
and its Subsidiaries taken as a whole (as such business is presently conducted
and as it is proposed to be conducted);
(vi) any change or amendment to the Company's Articles of
Incorporation or by-laws, 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;
(vii) any material labor difficulties or labor union organizing
activities with respect to employees of the Company or any Subsidiary;
(viii) any transaction entered into by the Company or a
Subsidiary other than in the ordinary course of business;
(ix) 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;
(x) the loss or threatened loss of any customer which has had or
could reasonably be expected to have a Material Adverse Effect; or
(xi) any other event or condition of any character that has had
or could reasonably be expected to have a Material Adverse Effect.
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4.9 SEC Filings; S-3 Eligibility.
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(a) At the time of filing thereof, the SEC Filings complied as to
form in all material respects with the requirements of the 1934 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) During the preceding two years, each registration statement
and any amendment thereto filed by the Company pursuant to the 1933 Act and the
rules and regulations thereunder, as of the date such statement or amendment
became effective, complied as to form in all material respects with the 1933 Act
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; and each prospectus filed pursuant to Rule 424(b) under
the 1933 Act, as of its issue date and as of the closing of any sale of
securities pursuant thereto did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(c) The Company is eligible to use Form S-3 to register the
Registrable Securities (as such term is defined in the Registration Rights
Agreement) for sale by the Investor as contemplated by the Registration Rights
Agreement.
4.10 No Conflict, Breach, Violation or Default. The execution,
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delivery and performance of the Agreements by the Company and the issuance and
sale of the Securities will not conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under (i) the
Company's Articles of Incorporation or the Company's Bylaws, both as in effect
on the date hereof (copies of which have been provided to the Investor before
the date hereof), or (ii)(a) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company, any Subsidiary or any of their respective assets
or properties, or (b) any agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company or a Subsidiary is bound or to
which any of their respective assets or properties is subject, except, in the
case of clause (ii) only, as would not reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate.
4.11 Tax Matters. The Company and each Subsidiary has timely prepared
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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, except for those taxes being contested in
good faith and for which the Company or such Subsidiary has established adequate
reserves in accordance with generally accepted accounting principles. 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
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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
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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
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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
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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 No Labor Disputes. No material labor dispute with the employees
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of the Company or any Subsidiary exists or, to the Company's Knowledge, is
imminent.
4.15 Intellectual Property.
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(a) All Intellectual Property of the Company and its Subsidiaries
is currently in compliance with all legal requirements (including timely
filings, proofs and payments of fees) and is valid and enforceable. No
Intellectual Property of the Company or its Subsidiaries which is necessary for
the conduct of Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted has been or is now
involved in any cancellation, dispute or litigation, and, to the Company's
Knowledge, no such action is threatened. No patent of the Company or its
Subsidiaries has been or is now involved in any interference, reissue,
re-examination or opposition proceeding.
(b) All of the licenses and sublicenses and consent, royalty or
other agreements concerning Intellectual Property which are necessary for the
conduct of Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted to which the
Company or any Subsidiary is a party or by which any of their assets are bound
(other than generally commercially available, non-custom, off-the-shelf software
application programs having a retail acquisition price of less than $10,000 per
license)
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(collectively, "License Agreements") are valid and binding obligations of the
Company or its Subsidiaries that are parties thereto and, to the Company's
Knowledge, the other parties thereto, enforceable in accordance with their
terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally, and
there exists no event or condition which will result in a material violation or
breach of or constitute (with or without due notice or lapse of time or both) a
default by the Company or any of its Subsidiaries under any such License
Agreement.
(c) The Company and its Subsidiaries own or have the valid right
to use all of the Intellectual Property necessary for the conduct of the
Company's and each of its Subsidiaries' businesses substantially 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.
(d) The Company and its Subsidiaries own or have the valid right
to use the Intellectual Property that 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, free and clear of all liens, encumbrances,
adverse claims or obligations to license all such owned Intellectual Property,
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 other Intellectual Property used or held for use in
the respective businesses of the Company and its Subsidiaries. The Company and
its Subsidiaries have the right to use all of the owned and licensed
Intellectual Property 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 in all jurisdictions in which they conduct
their businesses.
(e) The Company and each of its Subsidiaries have taken
reasonable steps to maintain, police and protect the Intellectual Property which
it owns and 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, including the execution of appropriate confidentiality
agreements and intellectual property and work product assignments and releases.
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, and, to the
Company's Knowledge, the Intellectual Property rights 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 of the
Company and its Subsidiaries and the Company's and its Subsidiaries' use of any
Intellectual Property owned by a third party, and, to the Company's Knowledge,
there is no valid basis for the same.
(f) The consummation of the transactions contemplated hereby will
not result in the alteration, loss, impairment of or restriction on the
Company's or any of its
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Subsidiaries' ownership or right to use any of the Intellectual Property 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.
(g) All software owned by the Company or any of its Subsidiaries,
and, to the Company's Knowledge, all software licensed from third parties by the
Company or any of its Subsidiaries, (i) is free from any material defect, bug,
virus, or programming, design or documentation error; (ii) operates and runs in
a reasonable and efficient business manner; and (iii) conforms in all material
respects to the specifications and purposes thereof, except for such cases where
it could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.
(h) The Company and its Subsidiaries have taken reasonable steps
to protect the Company's and its Subsidiaries' rights in their confidential
information and trade secrets. Each employee, consultant and contractor who has
had access to proprietary Intellectual Property which is necessary for the
conduct of Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted has executed an
agreement to maintain the confidentiality of such Intellectual Property and has
executed appropriate agreements that are substantially consistent with the
Company's standard forms thereof. Except under confidentiality obligations,
there has been no material disclosure of any of the Company's or its
Subsidiaries' confidential information or trade secrets to any third party.
4.16 Environmental Matters. Neither the Company nor any Subsidiary is
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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, and is subject to any claim relating to any Environmental
Laws, which violation, contamination, liability or claim has had or could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate; and there is no pending or, to the Company's Knowledge, threatened
investigation that might lead to such a claim.
4.17 Litigation. Except as described on Schedule 4.17, there are no
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pending actions, suits or proceedings against or affecting the Company, its
Subsidiaries or any of its or their properties; and to the Company's Knowledge,
no such actions, suits or proceedings are threatened or contemplated.
4.18 Financial Statements. The financial statements included in each
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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 (except as may be disclosed
therein or in the notes thereto, and, in the case of quarterly financial
statements, as
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permitted by Form 10-Q under the 1934 Act). Except as set forth in the financial
statements of the Company included in the SEC Filings filed prior to the date
hereof or as described on Schedule 4.18, neither the Company nor any of its
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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 maintain in
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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 Compliance with Nasdaq Continued Listing Requirements; Hardship
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Exemption. Except as set forth in Schedule 4.20, the Company is in compliance
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with applicable Nasdaq SmallCap Market continued listing requirements. Except as
set forth in Schedule 4.20, there are no proceedings pending or, to the
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Company's Knowledge, threatened against the Company relating to the continued
listing of the Company's Common Stock on the Nasdaq SmallCap Market and the
Company has not received any notice of, nor to the Company's Knowledge is there
any basis for, the delisting of the Common Stock from the Nasdaq SmallCap
Market. Pursuant to Marketplace Rule 4350(i)(2), Nasdaq has exempted the sale of
the Securities contemplated hereby from the provisions of Rule 4350 upon
compliance by the Company with the shareholder notification requirements of such
Rule (the "Exemption"). Reliance on Rule 4350(i)(2) was approved by the Audit
Committee of the Company's Board of Directors as required by such Rule. Copies
of all applications, correspondence and other materials relating to the granting
of the Exemption have been provided to the Investor. None of the documents
provided by the Company to Nasdaq in connection with the Exemption contained, as
of the date thereof, a misstatement of a material fact or the omission of a
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
4.21 Brokers and Finders. Except as described on Schedule 4.21, no
------------------- -------------
Person will have, as a result of the transactions contemplated by this
Agreement, 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.
4.22 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.
4.23 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
-11-
Company security or solicited any offers to buy any security, under
circumstances that would adversely affect reliance by the Company on Section
4(2) for the exemption from registration for the transactions contemplated
hereby or would require registration of the Securities under the 1933 Act.
4.24 Private Placement. The offer and sale of the Securities to the
-----------------
Investor as contemplated hereby is exempt from the registration requirements of
the 1933 Act.
4.25 Questionable Payments. Neither the Company nor any of its
---------------------
Subsidiaries nor, to the Company's Knowledge, any of their respective current or
former shareholders, 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.
4.26 Disclosures. The written materials delivered to the Investor in
-----------
connection with the transactions contemplated by the Agreements 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 Investor. The Investor hereby
----------------------------------------------
represents and warrants to the Company that:
5.1 Organization and Existence. The Investor is a validly existing
--------------------------
corporation, limited partnership or limited liability company and has 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 the
-------------
Investor of the Agreements have been duly authorized and the Agreements will
each constitute the valid and legally binding obligation of the Investor,
enforceable against the Investor 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.
5.3 Exchange Entirely for Own Account. The Securities to be received
---------------------------------
by the Investor hereunder will be acquired for the 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 the Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same in violation of the 1933 Act. The Investor is not a registered broker
dealer or an entity engaged in the business of being a broker dealer.
-12-
5.4 Investment Experience. The Investor acknowledges that it can bear
---------------------
the economic risk and complete loss of its investment in the Securities and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.
5.5 Disclosure of Information. The Investor has had an opportunity to
-------------------------
receive all additional 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. The
Investor acknowledges receipt of copies of the SEC Filings. Neither such
inquiries nor any other due diligence investigation conducted by the Investor
shall modify, amend or affect the Investor's right to rely on the Company's
representations and warranties contained in this Agreement.
5.6 Restricted Securities. The 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, until the earlier of (i)
-------
registration for resale pursuant to the Registration Rights Agreement or (ii)
the time when such Securities may be sold pursuant to Rule 144(k), certificates
evidencing such 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
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.
Upon the earlier of (i) registration for resale pursuant to the
Registration Rights Agreement and receipt by the Company of the Investor's
written confirmation and agreement that such Securities will not be disposed of
except in compliance with the prospectus delivery requirements of the 1933 Act
or (ii) Rule 144(k) becoming available the Company shall, upon an Investor's
written request, use commercially reasonable efforts to cause certificates
evidencing the Securities to be replaced with certificates which do not bear
such restrictive legends within three (3) Business Days and Warrant Shares
subsequently issued in respect 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. When the Company
is required to cause unlegended certificates to replace previously issued
legended certificates, if unlegended certificates are not delivered to an
Investor within seven (7) Business Days of submission by that
-13-
Investor of legended certificate(s) to the Company's transfer agent together
with a representation letter in customary form (five (5) Business Days if the
Investor notifies the Company in connection with such submission that it intends
to transfer or dispose of some or all of the securities represented by such
certificate), the Company shall be liable to the Investor for a penalty equal to
1% of the aggregate dollar amount of Indebtedness exchanged for the Securities
evidenced by such certificate(s) for each thirty (30) day period (or portion
thereof) beyond such seven (7) or five (5) Business Day period, as applicable,
that the unlegended certificates have not been so delivered.
5.8 Accredited Investor. The Investor is an accredited investor as
-------------------
defined in Rule 501(a) of Regulation D, as amended, under the 0000 Xxx.
5.9 No General Solicitation. The Investor did not learn of the
-----------------------
investment in the Securities as a result of any public advertising or general
solicitation.
5.10 Brokers and Finders. No Person will have, as a result of the
-------------------
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company, any Subsidiary or the Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Investor.
6. Conditions to the Closings.
--------------------------
6.1 Conditions to the Investor's Obligations. The obligation of the
----------------------------------------
Investor to exchange Indebtedness for Shares and Warrants at the Closing is
subject to the fulfillment to the Investor's satisfaction, on or prior to the
Closing Date, of the following conditions, any of which may be waived by the
Investor:
(a) The representations and warranties made by the Company in
Section 4 hereof qualified as to materiality shall be true and correct at all
times prior to 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 at all times prior to 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 in all
material respects all obligations and conditions herein required to be performed
or observed by it on or prior to the Closing Date.
(b) The Company shall have obtained in a timely fashion any and
all consents, permits, approvals, registrations and waivers necessary or
appropriate for consummation of the exchange of Indebtedness for Shares and
Warrants all of which shall be in full force and effect.
(c) The Company shall have executed and delivered the
Registration Rights Agreement.
-14-
(d) The Company shall have complied in all respects with the
requirements of the Exemption and any waiting periods relating thereto shall
have expired and the Shares and the Warrant Shares shall have been approved for
inclusion in Nasdaq upon official notice of issuance.
(e) [Intentionally deleted.]
(f) [Intentionally deleted.]
(g) The Company shall have entered into one or more agreements in
form and substance reasonably satisfactory to the Investor (the "Other
Investment Agreements") pursuant to which the Company agrees to sell shares of
Common Stock and warrants to purchase Common Stock to one or more institutional
investors on the same economic terms (including as to price) as contemplated
hereby (the "Other Investments"); provided, however, that an Other Investment
Agreement that contains substantially the same terms and conditions as set forth
herein (other than the other shares and warrants shall be sold for cash
consideration) shall be considered acceptable to the Investor.
(h) The Other Investments shall have been consummated in
accordance with the terms of the Other Investment Agreement and shall result in
gross proceeds to the Company of at least Six Million Five Hundred Thousand
Dollars ($6,500,000).
(i) 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 Agreements.
(j) 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 fulfilment of the
conditions specified in subsections (a), (b), (d), and (h) of this Section 6.1.
(k) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Secretary, dated as of the Closing Date, certifying
the resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Agreements and the
issuance of the Securities, certifying the current versions of the Certificate
of Incorporation and Bylaws of the Company and certifying as to the signatures
and authority of persons signing the Agreements and related documents on behalf
of the Company.
(l) The Investor shall have received an opinion from O'Melveny &
Xxxxx LLP, the Company's counsel, dated as of the Closing Date, in form and
substance reasonably acceptable to the Investor and addressing such legal
matters as the Investor may reasonably request.
-15-
(m) No stop order or suspension of trading shall have been
imposed by Nasdaq, the SEC or any other governmental regulatory body with
respect to public trading in the Common Stock.
6.2 Conditions to Obligations of the Company. The Company's obligation
----------------------------------------
to sell and issue the Securities 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 Investor in
Section 5 hereof, other than the representations and warranties contained in
Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the "Investment
Representations"), shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date with
the same force and effect as if they had been made on and as of said date. The
Investment Representations shall be true and correct in all respects when made,
and shall be true and correct in all respects on the Closing Date with the same
force and effect as if they had been made on and as of said date. The Investor
shall have performed in all material respects all obligations and conditions
herein required to be performed or observed by them on or prior to the Closing
Date.
(b) The Investor shall have executed and delivered the
Registration Rights Agreement.
(c) The Investor shall have delivered written documentation
confirming that the Indebtedness has been extinguished..
(d) The Shares and the Warrant Shares shall have been approved
for inclusion in Nasdaq upon official notice of issuance.
(e) 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 Agreements.
6.3 Termination of Obligations to Effect Closing; Effects.
-----------------------------------------------------
(a) The obligations of the Company, on the one hand, and the
Investor, on the other hand, to effect the Closing shall terminate as follows:
(i) Upon the mutual written consent of the Company and the
Investor;
(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;
-16-
(iii) By the Investor 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; or
(iv) By either the Company or the Investor if the Closing
has not occurred on or prior to March 31, 2002;
provided, however, that, except in the case of clause (i) above, the party
seeking to terminate its obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Agreements 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 the Company or the Investor of
their obligations to effect the Closing pursuant to this Section 6.3, written
notice thereof shall forthwith be given to the other parties hereto and the
obligation of all parties to effect the Closing shall be terminated, without
further action by any party. 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 Agreements 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 Agreements.
7. Covenants and Agreements of the Company.
---------------------------------------
7.1 Covenants and Agreements of the Company. Commencing on the date
---------------------------------------
hereof and continuing until such time as the Investor no longer owns in the
aggregate at least 25% of the Shares acquired hereunder (appropriately adjusted
for any stock split, reverse stock split, stock dividend or other
reclassification or combination of the Common Stock occurring after the date
hereof), the Investor shall have the right to participate in future capital
raising transactions on the terms and conditions set forth in this Section 7.1.
During such period, the Company shall give ten (10) Business Days advance
written notice to such Investor prior to any non-public offer or sale of any of
the Company's securities by providing to the Investor a term sheet containing
all material business terms of the proposed transaction. The Investor and its
respective assignees shall have the right (pro rata in accordance with such
Investor's participation in this offering) to purchase such Investor's Pro Rata
Share (as defined below) of such securities which are the subject of the
proposed transaction for the same consideration and on the same terms and
conditions as contemplated for such third-party sale. The Investor's rights
hereunder must be exercised in writing by the Investor within five (5) Business
Days following receipt of the notice from the Company. If, subsequent to the
Company giving notice to an Investor hereunder but prior to the Investor
exercising its right to participate (or the expiration of the five-Business Day
period without response from the Investor), the terms and conditions of the
proposed third-party sale are changed in any material respect from that
disclosed in the term sheet provided to such Investor, the Company shall be
required to provide a new notice to the Investor hereunder and the Investor
shall have the right, which must be exercised within five (5) Business Days of
such new notice, to exercise their rights to purchase the securities on such
-17-
changed terms and conditions as provided hereunder. In the event the Investor
does not exercise their rights hereunder, or affirmatively decline to engage in
the proposed transaction with the Company, then the Company may proceed with
such proposed transaction on the same terms and conditions as noticed to the
Investor. An Investor's "Pro Rata Share" for purposes of this Section 7.1 is the
ratio of (a) the sum of (i) the number of Shares the Investor holds plus (ii)
the number of Warrant Shares which the Investor has the right to acquire to (b)
a number of shares of Common Stock equal to the sum of (x) the total number of
shares of Common Stock then outstanding plus (y) the total number of shares of
Common Stock into which all then outstanding shares of preferred stock and other
convertible securities of the Company are then convertible plus (z) the total
number of shares of Common Stock underlying all then outstanding and presently
exercisable options, warrants and other rights to purchase shares of Common
Stock.
7.2 Limitation on Certain Actions. (a) For a period of one year from
-----------------------------
the Closing, the Company shall not offer or sell any Equity Securities (as
defined below) at a price per share lower than $1.50 or otherwise on terms more
favorable to the purchaser thereof than those contained in the Agreements
without the consent of the Investor, which consent shall not be unreasonably
withheld; provided, however, that the restrictions in this sentence shall not
apply to the issuance of an Equity Security to an officer, director, employee or
consultant to the Company or any Subsidiary pursuant to any incentive or stock
option plan of the Company approved by the Board of Directors or the
shareholders of the Company. The term "Equity Securities" means the Company's
capital stock, warrants, rights, and options giving the holder thereof the right
to acquire shares of capital stock, and any security directly or indirectly
convertible into or exercisable for or exchangeable into shares of the Company's
capital stock.
(b) Commencing on the date hereof and continuing until such time as
the Investor no longer owns in the aggregate at least 10% of the Shares acquired
hereunder (appropriately adjusted for any stock split, reverse stock split,
stock dividend or other reclassification or combination of the Common Stock
occurring after the date hereof), the Company shall not offer or sell or enter
into any agreement, arrangement or understanding to offer or sell any Equity
Security if the Equity Security (or any agreement, arrangement or understanding
entered into in connection therewith) provides for the future adjustment of (i)
the purchase price therefor, (ii) the number of Equity Securities to be issued,
or (iii) the conversion, exercise or exchange rate applicable thereto (other
than customary anti-dilution provisions no more favorable to the holder than
those contained in the Warrants) without the prior written consent of the
Investor, which consent shall not be unreasonably withheld or delayed.
7.3 Reservation of Common Stock. The Company shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of providing for the exercise of the Warrants,
such number of shares of Common Stock as shall from time to time equal the
number of shares sufficient to permit the exercise of the Warrants issued
pursuant to this Agreement in accordance with their respective terms.
7.4 Reports. The Company will furnish to such Investor and/or its
-------
assignees such information relating to the Company and its Subsidiaries as from
time to time may reasonably be requested by such Investor and/or its assignees;
provided, however, that such Investor and/or assignees shall hold in confidence
any confidential or proprietary information
-18-
received from the Company and identified as such at the time of disclosure such
information and shall use any such confidential or proprietary information
solely for the purpose of monitoring and evaluating their investment in the
Company and; provided, further, that the Company shall not be required to
provide any information to the Investor which, if disclosed to such Investor
and/or its assignees pursuant to the terms of this Section 7.4, would, in the
good faith judgment of the Company, cause the Company or any Subsidiary to
violate the terms of a confidentiality undertaking binding on the Company or
such Subsidiary. The Investor and/or assignee acknowledges that it is aware, and
that it will advise its representatives who are given access to such
information, that the United States securities laws may prohibit a person who
has material, non-public information concerning matters that may be disclosed to
it pursuant to this Section 7.4 from purchasing or selling securities of the
Company or a company which may be, or may be affiliated with, a party to a
business arrangement or proposed business arrangement with the Company or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities. The Company shall not disclose material nonpublic information to the
Investor, or to advisors to or representatives of the Investor, unless prior to
disclosure of such information the Company identifies such information as being
material nonpublic information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review.
7.5 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 obligations to the Investor under the
Agreements.
7.6 Insurance. The Company shall not materially reduce the insurance
---------
coverages described in Section 4.19.
7.7 Compliance with Laws. The Company will comply in all material
--------------------
respects with all applicable laws, rules, regulations, orders and decrees of all
governmental authorities.
7.8 Nasdaq Listing and Related Matters; Compliance with Nasdaq
----------------------------------------------------------
Exemption Requirements. (a) Promptly following the execution and delivery of
----------------------
this Agreement, the Company shall take all action necessary to cause the Shares
and the Warrant Shares to be listed on Nasdaq no later than the Closing Date and
to comply with the terms and conditions of the Exemption, including, but not
limited to, (i) issuing a press release in a form reasonably satisfactory to
Nasdaq, and (ii) mailing to all shareholders a notification (the "Notification")
to the effect that the Audit Committee of the Board of Directors of the Company
has expressly approved the determination not to seek shareholder approval in
connection with the offer and sale of the Securities in reliance on the
exception provided in Nasdaq Marketplace Rule 4350(i)(2), Nasdaq has approved
the Exemption, and describing the basis for the Exemption. The Notification
shall not at any time prior to the Closing Date 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 light of the circumstances under which they were
made, not misleading.
-19-
(b) Further, if the Company applies to have its Common Stock or other
securities traded on any other principal stock exchange or market, it shall
include in such application the Shares and the Warrant Shares and will take such
other action as is necessary to cause such Common Stock to be so listed. The
Company will use commercially reasonable efforts to continue the listing and
trading of its Common Stock on Nasdaq and, in accordance, therewith, will use
commercially reasonable efforts to comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of such
exchange, as applicable.
7.9 Termination of Covenants. The provisions of Sections 7.4 through
------------------------
7.7 shall terminate and be of no further force and effect upon the earliest of
(i) the mutual consent of the Company and the Investor, (ii) the date on which
the Company's obligations to maintain an effective registration statement under
the Registration Rights Agreement terminate, or (iii) the occurrence of a
"Change of Control" of the Company. As used herein, "Change of Control" means
the consolidation or merger of the Company with or into any other entity or
entities which results in the holders of Common Stock of the Company immediately
prior to such transaction owning less than 50% of the voting power of the
successor entity and pursuant to which such holders receive either (i) cash,
(ii) freely tradable securities, or (iii) a combination of cash and freely
tradable securities, the sale, conveyance or other disposition by the Company of
all or substantially all of its assets, or the consummation of a tender or
exchange offer pursuant to which a Person (including any group) becomes the
beneficial owner of 80% or more of the outstanding voting power of the Company.
8. Survival and Indemnification.
----------------------------
8.1 Survival. All representations, warranties, covenants and
--------
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants and agreements as of the date hereof and shall survive the
execution and delivery of this Agreement for a period of eighteen (18) months
from the Closing Date; provided, however, that the provisions contained in
Section 7 hereof shall survive in accordance therewith.
8.2 Indemnification. The Company agrees to indemnify and hold
---------------
harmless, on an after-tax and after insurance recovery basis, the Investor and
its Affiliates and their respective directors, officers, employees and agents
from and against any and all losses, claims, damages, liabilities and expenses
(including without limitation reasonable attorney fees and disbursements and
other expenses incurred in connection with investigating, preparing or defending
any action, claim or proceeding, pending or threatened and the costs of
enforcement hereof) (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
Agreements, 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
-20-
the defense thereof, including the employment of counsel reasonably satisfactory
to such Indemnified Person, and shall assume the payment of all fees and
expenses; provided, however, that the failure of any Indemnified Person so to
-------- -------
notify the Company shall not relieve the Company of its obligations hereunder
except to the extent that the Company is materially prejudiced by such failure
to notify. In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless: (i) the Company and the
Indemnified Person shall have mutually agreed to the retention of such counsel;
or (ii) in the reasonable judgment of counsel to such Indemnified Person
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. The Company shall not be
liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent, or if there be a final judgment for the plaintiff, the Company
shall indemnify and hold harmless such Indemnified Person from and against any
loss or liability (to the extent stated above) by reason of such settlement or
judgment. Without the prior written consent of the Indemnified Person, which
consent shall not be unreasonably withheld, the Company shall not effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Person from all liability arising out
of such proceeding.
9. Miscellaneous.
-------------
9.1 Successors and Assigns. This Agreement may not be assigned by
----------------------
a party hereto without the prior written consent of the Company or the Investor,
as applicable, provided, however, (i) 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 portion or all of its Securities in a private transaction
without the prior written consent of the Company, after notice duly given by the
Investor to the Company, provided, that no such assignment or obligation shall
affect the obligations of the Investor hereunder, and (ii) the Company may
assign its rights and delegate its duties hereunder to any surviving or
successor corporation in connection with a merger or consolidation of the
Company with another corporation, or a sale, transfer or other disposition of
all or substantially all of the Company's assets to another corporation, without
the prior written consent of the Investor, after notice duly given by the
Company to the Investor. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective permitted successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
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.
-21-
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 day after delivery to
such carrier. All notices shall be addressed to the party to be notified at the
address as follows, or at such other address as such party may designate by ten
days' advance written notice to the other party:
If to the Company:
Amerigon Incorporated
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Fax: 000.000.0000
With a copy to:
O'Melveny & Xxxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxx
Fax: 000.000.0000
If to the Investor, to the addresses set forth on the signature
pages hereto.
9.5 Expenses. The parties hereto shall pay their own costs and
--------
expenses in connection herewith, except that the Company shall pay the
reasonable fees and expenses of counsel to the Investors at the Closing. The
Company shall reimburse the Investor upon demand for all reasonable
out-of-pocket expenses incurred by the Investor, including without limitation
reimbursement of attorneys' fees and disbursements, in connection with any
amendment, modification or waiver of this Agreement or the other Agreements. In
the event that legal proceedings are commenced by any party to this Agreement
against another party to this Agreement in connection with this Agreement or the
other Agreements, the party or parties which do not prevail in such proceedings
shall severally, but not jointly, pay their pro rata share of the reasonable
attorneys' fees and other reasonable out-of-pocket costs and expenses incurred
by the prevailing party in such proceedings.
-22-
9.6 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investor.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities received under this Agreement at the
time outstanding, each future holder of all such securities, and the Company.
9.7 Publicity. No public release or announcement concerning the
---------
transactions contemplated hereby shall be issued by the Company or the Investor
without the prior consent of the Company (in the case of a release or
announcement by the Investor) or Big Beaver Investments LLC ("Big Beaver") (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 Investor, as the
case may be, shall allow Big Beaver or the Company, as applicable, to the extent
reasonably practicable in the circumstances, reasonable time to comment on such
release or announcement in advance of such issuance.
9.8 Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
9.9 Entire Agreement. This Agreement, including the Exhibits and
----------------
the Disclosure Schedules, and the other Agreements 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; provided, however, this Agreement does not supersede or modify that
certain Investors Rights Agreement dated as of June 8, 1999, by and among the
Company, the Investor and Westar Capital II LLC, a Delaware limited liability
company ("Westar"), as amended.
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.
9.11 Governing Law; Consent to Jurisdiction. This Agreement shall
--------------------------------------
be governed by, and construed in accordance with, the internal laws of the State
of New York without regard to the choice of law principles thereof. Each of the
parties hereto irrevocably submits to the exclusive jurisdiction of the courts
of the State of New York located in New York County and the United States
District Court for the Southern District of New York for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this
Agreement
-23-
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.
[signature page follows]
-24-
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.
The Company: AMERIGON INCORPORATED
By:
------------------
Name:
Title:
The Investor: BIG BEAVER INVESTMENTS LLC
By:
-------------------------
Name:
Title:
Address for Notice:
000 X. Xxx Xxxxxx Xxxx, Xxxxx 000
Xxxx, Xxxxxxxx 00000
Attn: President
Facsimile: 248.362.3033
with a copy to:
XxXxxxxxx, Will & Xxxxx
00000 Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxx, Esq.
Facsimile: 949.851.9348
