SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”)
is
dated as of September 10, 2008, between Premier Power Renewable Energy, Inc.,
a
Delaware corporation (the “Company”),
and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser”
and
collectively, the “Purchasers”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”),
and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and each Purchaser agree as
follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions.
In
addition to the terms defined elsewhere in this Agreement: (a) capitalized
terms
that are not otherwise defined herein have the meanings given to such terms
in
the Certificate of Designation (as defined herein), and (b) the following terms
have the meanings set forth in this Section 1.1:
“Accounts
Receivable”
shall
have the meaning ascribed to such term in Section 3.1(oo).
“Acquiring
Person”
shall
have the meaning ascribed to such term in Section 4.7.
“Action”
shall
have the meaning ascribed to such term in Section 3.1(j).
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 405 under the Securities Act.
“Board
of Directors” means
the
board of directors of the Company.
“Business
Day”
means
any day except Saturday, Sunday, any day which is a federal legal holiday in
the
United States or any day on which banking institutions in the State of New
York
are authorized or required by law or other governmental action to
close.
“Certificate
of Designation”
means
the Certificate of Designation to be filed prior to the Closing by the Company
with the Secretary of State of [Delaware], in the form of Exhibit
A
attached
hereto.
“Closing”
means
the closing of the purchase and sale of the Securities pursuant to Section
2.1.
“Closing
Date”
means
the Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to
(i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities have been satisfied or
waived.
“Closing
Statement”
means
the Closing Statement in the form Annex
A
attached
hereto.
“Commission”
means
the United States Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $0.0001 per share, and any other
class of securities into which such securities may hereafter be reclassified
or
changed into.
“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 exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive Common Stock.
“Company
Counsel”
means
Xxxxxxxxxx & Xxxxx LLP, with offices located at 00000 Xxxxxxxx Xxxx., Xxxxx
000, Xxx Xxxxxxx, XX 00000.
“Conversion
Price”
shall
have the meaning ascribed to such term in the Certificate of
Designation.
“Disclosure
Schedules”
shall
have the meaning ascribed to such term in Section 3.1.
“Discussion
Time”
shall
have the meaning ascribed to such term in Section 3.2(f).
“Effective
Date”
means
the date that the initial Registration Statement filed by the Company pursuant
to the Registration Rights Agreement is first declared effective by the
Commission.
“Escrow
Agent”
means
FWS.
“Escrow
Agreement”
means
the escrow agreement entered into prior to the date hereof, by and among the
Company and the Escrow Agent pursuant to which the Purchasers shall deposit
Subscription Amounts with the Escrow Agent to be applied to the transactions
contemplated hereunder.
“Evaluation
Date”
shall
have the meaning ascribed to such term in Section 3.1(r).
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“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Exempt
Issuance”
means
the issuance of (a) shares of Common Stock or options to employees, officers,
consultant or directors of the Company pursuant to any stock or option plan
duly
adopted for such purpose by a majority of the non-employee members of the Board
of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into shares of Common
Stock 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 or to decrease the exercise, exchange or
conversion price of such securities, (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the directors
of the Company, provided that any such issuance shall only be to a Person which
is, itself or through its subsidiaries, an operating company or the controlling
shareholder of an operating company in a business synergistic with the business
of the Company and from which the Company receives benefits in addition to
the
investment of funds, 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, and (d) the Private Warrant
sold to the Private Investor in connection with the Private Sale and the
underlying securities to be issued upon exercise of the Private
Warrant at
its
initial exercise price, but any price-based adjustment of the Private Warrant
subsequent to its issuance shall not be an Exempt Issuance.
“FWS”
means
Xxxxxxx Xxxxxxxxx & Xxxxx LLP with offices located at 000 Xxxxxxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
“GAAP”
means
the United States generally accepted accounting principles applied on a
consistent basis during the periods involved.
“Indebtedness”
shall
have the meaning ascribed to such term in Section 3.1(aa).
“Intellectual
Property Rights”
shall
have the meaning ascribed to such term in Section 3.1(o).
“Legend
Removal Date”
shall
have the meaning ascribed to such term in Section 4.1(c).
“Liens”
means
a
lien, charge, security interest, encumbrance, right of first refusal, preemptive
right or other restriction.
“Lock-Up
Agreement”
means
the Lock-Up Agreement, dated as of the date hereof, by and among the Company
and
the directors and officers of the Company, in the form of Exhibit
E
attached
hereto.
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“Material
Adverse Effect”
shall
have the meaning assigned to such term in Section 3.1(b).
“Material
Permits”
shall
have the meaning ascribed to such term in Section 3.1(m).
“Maximum
Rate”
shall
have the meaning ascribed to such term in Section 5.17.
“Merger”
means
the acquisition by Pubco of 100% of the issued and outstanding capital stock
of
Premier Power Renewable Energy, Inc. (“Premier”) and Premier’s subsidiaries,
Bright Future Technologies, Inc. and Premier Power Sp, by means of the Share
Exchange Agreement between Pubco and the shareholders of Premier dated as of
September 9, 2008.
“Person”
means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Preferred
Stock”
means
the up to 5,000,000 shares of the Company’s Series A Convertible Preferred Stock
issued hereunder having the rights, preferences and privileges set forth in
the
Certificate of Designation, in the form of Exhibit
A
hereto.
“Private
Investor”
shall
have the meaning ascribed to such term in Section 4.21.
“Private
Sale”
shall
have the meaning ascribed to such term in Section 4.21.
“Private
Sale Period”
shall
have the meaning ascribed to such term in Section 4.21.
“Private
Sale Closing Date”
shall
have the meaning ascribed to such term in Section 4.21.
“Private
Subscription Amount”
shall
have the meaning ascribed to such term in Section 4.21.
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an informal investigation or partial proceeding, such as a
deposition), whether commenced or threatened.
“Purchaser
Party”
shall
have the meaning ascribed to such term in Section 4.10.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, dated the date hereof, among the Company
and
the Purchasers, in the form of Exhibit
B
attached
hereto.
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“Registration
Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale of the Underlying Shares by each
Purchaser as provided for in the Registration Rights Agreement.
“Required
Approvals”
shall
have the meaning ascribed to such term in Section 3.1(e).
“Required
Minimum”
means,
as of any date, the maximum aggregate number of shares of Common Stock then
issued or potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon exercise in full of
all
Warrants or conversion in full of all shares of Preferred Stock, ignoring any
conversion or exercise limits set forth therein, and assuming that any
previously unconverted shares of Preferred Stock are held until the third
anniversary of the Closing Date.
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
“SEC
Reports”
shall
have the meaning ascribed to such term in Section 3.1(h).
“Securities”
means
the Preferred Stock, the Warrants, the Warrant Shares and the Underlying
Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Series
A Warrants”
means,
collectively, the Series A Common Stock purchase warrants delivered to the
Purchasers at the Closing in accordance with Section 2.2(a) hereof which
Warrants shall be exercisable immediately and have a term of exercise equal
to
four years and an exercise price equal to $2.50, subject to adjustment therein,
in the form of Exhibit
D-1
attached
hereto.
“Series
B Warrants”
means,
collectively, the Series B Common Stock purchase warrants delivered to the
Purchasers at the Closing in accordance with Section 2.2(a) hereof which
Warrants shall be exercisable immediately and have a term of exercise equal
to
four years and an exercise price equal to $3.00, subject to adjustment therein,
in the form of Exhibit
D-1
attached
hereto.
“Short
Sales”
means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act and any other transaction designed to hedge the risk of ownership of the
Common Stock, however structured.
“Stated
Value”
means
$2.00 per share of Preferred Stock.
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“Subscription
Amount”
means,
as to each Purchaser, the aggregate amount to be paid for the Preferred Stock
purchased hereunder as specified below such Purchaser’s name on the signature
page of this Agreement and next to the heading “Subscription Amount,” in United
States dollars and in immediately available funds.
“Subsidiary”
means
any subsidiary of the Company as set forth on Schedule
3.1(a)
and
shall, where applicable, also include any direct or indirect subsidiary of
the
Company formed or acquired after the date hereof.
“To
the
knowledge of the Company”
means
the actual knowledge of the management of the Company.
“Trading
Day”
means
a
day on which the principal Trading Market is open for trading.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the American Stock Exchange, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
the
New York Stock Exchange or the OTC Bulletin Board.
“Transaction
Documents”
means
this Agreement, the Certificate of Designation, the Warrants, the [Escrow
Agreement], the Lock-Up Agreement, the Registration Rights Agreement, all
schedules and exhibits thereto and hereto and any other documents or agreements
executed in connection with the transactions contemplated
hereunder.
“Transfer
Agent”
means
Computershare Trust Company, N.A , the current transfer agent of the Company,
with a mailing address of 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000
and a facsimile number of (000) 000-0000, and any successor transfer agent
of
the Company.
“Underlying
Shares”
means
the shares of Common Stock issued and issuable upon conversion of the Preferred
Stock, upon exercise of the Warrants and issued and issuable in lieu of the
cash
payment of dividends on the Preferred Stock in accordance with the terms of
the
Certificate of Designation.
“Variable
Rate Transaction”
shall
have the meaning ascribed to such term in Section 4.12(b).
“VWAP”
means,
for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the Trading Market on which the Common Stock
is
then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day
from
9:30 a.m. (New York City time) to 4:02 p.m. (New York City time); (b) if
the OTC Bulletin Board is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on
the
OTC Bulletin Board; (c) if the Common
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Stock
is
not then listed or quoted for trading on the OTC Bulletin Board and if prices
for the Common Stock are then reported in the “Pink Sheets” published by Pink
Sheets, LLC (or a similar organization or agency succeeding to its functions
of
reporting prices), the most recent bid price per share of the Common Stock
so
reported; or (d) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good faith
by
the Purchasers of a majority in interest of the Securities then outstanding
and
reasonably acceptable to the Company, the fees and expenses of which shall
be
paid equally by the Purchasers and the Company.
“Vision”
means
Vision Opportunity Master Fund, Ltd.
“Warrants”
means,
collectively, the Series A Warrants and the Series B Warrants.
“Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE
II
PURCHASE
AND SALE
2.1 Closing.
On the
Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement
by
the parties hereto, the Company agrees to sell, and the Purchasers agree,
severally and not jointly, to purchase, up to an aggregate of $10,000,000 of
shares of Preferred Stock with an aggregate Stated Value equal to such
Purchaser’s Subscription Amount, and Warrants as determined by pursuant to
Section 2.2(a). The aggregate number of shares of Preferred Stock sold hereunder
shall be up to 5,000,000. Each Purchaser shall deliver to the Escrow Agent
via
wire transfer or a certified check of immediately available funds equal to
their
Subscription Amount and the Company shall deliver to each Purchaser their
respective shares of Preferred Stock and Warrants as determined pursuant to
Section 2.2(a) and the other items set forth in Section 2.2 issuable at the
Closing. Upon satisfaction of the conditions set forth in Sections 2.2 and
2.3,
the Closing shall occur at the offices of FWS or such other location as the
parties shall mutually agree and Vision and the Company shall deliver to the
Escrow Agent the Form of Escrow Release Notice (as defined in the Escrow
Agreement), duly executed.
2.2
Deliveries.
(a) On
the
Closing Date, the Company shall deliver or cause to be delivered to each
Purchaser the following:
(i)
this
Agreement duly executed by the Company;
(ii) a
legal
opinion of Company Counsel, in substantially the form of Exhibit
C
attached
hereto;
(iii) a
certificate evidencing a number of shares of Preferred Stock
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equal
to
such Purchaser’s Subscription Amount divided by the Stated Value, registered in
the name of such Purchaser;
(iv) the
Lock-Up Agreements;
(v) a
Series
A Warrant registered in the name of such Purchaser to purchase up to a number
of
shares of Common Stock equal to 50% of such Purchaser’s Subscription Amount
divided by the Conversion Price, which warrant shall have an exercise price
equal to $2.50,
subject
to adjustment therein;
(vi) a
Series
B Warrant registered in the name of such Purchaser to purchase up to a number
of
shares of Common Stock equal to 50% of such Purchaser’s Subscription Amount
divided by the Conversion Price, which Warrants shall have an exercise price
equal to $3.00,
subject
to adjustment therein;
(vii)
the
Escrow Agreement;
(viii) evidence
of the filing of the Certificate of Designation with the Secretary of State
of
Delaware;
(ix) evidence
that the Merger has been completed;
(x) evidence
that each person described in Section 4.14 has executed an agreement to not
engage in any Short Sales as described therein;
(xi) an
officer’s certificate from the Chief Executive Officer, dated as of the Closing
Date, certifying and setting forth (A) the names, signatures and positions
of
the Persons authorized to execute this Agreement and any other Transaction
Documents to which the Company is a party, (B) a copy of the resolutions of
the
Company authorizing the execution, delivery and performance of this Agreement,
and (C) certifying that the representations and warranties of the Company are
true and correct as of the Closing Date and that the Company has satisfied
all
of the conditions to the Closing; and
(xii) the
Registration Rights Agreement duly executed by the Company.
(b) On
the
Closing Date, each Purchaser shall deliver or cause to be delivered to the
Company (except as noted) the following:
(i)
this
Agreement duly executed by such Purchaser;
(ii) such
Purchaser’s Subscription Amount by wire transfer to the Escrow Agent;
and
(iii) the
Registration Rights Agreement duly executed by such Purchaser.
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2.3 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:
(i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Purchasers contained herein;
(ii) all
obligations, covenants and agreements of each Purchaser required to be performed
at or prior to the Closing Date shall have been performed; and
(iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this
Agreement.
(b) The
respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:
(i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein;
(ii) all
obligations, covenants and agreements of the Company required to be performed
at
or prior to the Closing Date (including, without limitation, completion of
the
Merger) shall have been performed;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the Company since
the
date hereof; and
(v) from
the
date hereof to the Closing Date, trading in the Common Stock shall not have
been
suspended by the Commission or the Company’s principal Trading Market (except
for any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the Closing), and, at any time
prior to the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum prices
shall
not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable
to
purchase the Securities at the Closing.
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ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1
Representations
and Warranties of the Company.
Except
as set forth in the Disclosure Schedules, which Disclosure Schedules shall
be
deemed a part hereof and shall qualify any representation or otherwise made
herein to the extent of the disclosure contained in the corresponding section
of
the Disclosure Schedules, the Company hereby makes the following representations
and warranties to each Purchaser:
(a) Subsidiaries.
All of
the direct and indirect subsidiaries of the Company are set forth on
Schedule
3.1(a).
The
Company owns, directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all of the issued
and outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar rights
to
subscribe for or purchase securities.
(b) Organization
and Qualification.
The
Company and each of the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, with the requisite power
and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate or articles
of incorporation, bylaws or other organizational or charter documents. Each
of
the Company and the Subsidiaries is duly qualified to conduct business and
is in
good standing as a foreign corporation or other entity in each jurisdiction
in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in
good
standing, as the case may be, could not have or reasonably be expected to result
in: (i) a material adverse effect on the legality, validity or enforceability
of
any Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise)
of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material
Adverse Effect”)
and no
Proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification.
(c) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents by the Company
and
the consummation by it of the transactions contemplated hereby and thereby
have
been duly authorized by all necessary action on the part of the Company and
no
further action is required by the Company, the Board of Directors or the
Company’s stockholders in connection therewith other than in connection with
the
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Required
Approvals. Each Transaction Document to which it is a party has been (or upon
delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of
general application affecting enforcement of creditors’ rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.
(d) No
Conflicts.
The
execution, delivery and performance by the Company of the Transaction Documents
and the consummation by the Company of the other transactions to which it is
a
party and as contemplated hereby and thereby do not and will not: (i) conflict
with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the Company or
any
Subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company
or
Subsidiary debt or otherwise) or other understanding to which the Company or
any
Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal
and
state securities laws and regulations), or by which any property or asset of
the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be expected to
result in a Material Adverse Effect.
(e) Filings,
Consents and Approvals.
The
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court
or
other federal, state, local or other governmental authority or other Person
in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filings required pursuant to Section
4.6, (ii) the filing with the Commission of the Registration Statement, (iii)
the notice and/or application(s) to each applicable Trading Market for the
issuance and sale of the Securities and the listing of the Underlying Shares
for
trading thereon in the time and manner required thereby and (iv) the filing
of
Form D with the Commission and such filings as are required to be made under
applicable state securities laws (collectively, the “Required
Approvals”).
(f) Issuance
of the Securities.
The
Securities are duly authorized and, when issued and paid for in accordance
with
the applicable Transaction Documents, will be duly and validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the Company
other
than restrictions on transfer provided for in the Transaction
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Documents.
The Underlying Shares, when issued in accordance with the terms of the
Transaction Documents, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company other than restrictions
on
transfer provided for in the Transaction Documents. The Company has reserved
from its duly authorized capital stock a number of shares of Common Stock for
issuance of the Underlying Shares at least equal to the Required Minimum on
the
date hereof.
(g) Capitalization.
The
capitalization of the Company is as set forth on Schedule
3.1(g),
which
Schedule
3.1(g)
shall
also include the number of shares of Common Stock owned beneficially, and of
record, by Affiliates of the Company as of the date hereof. The Company has
not
issued any capital stock since its most
recently filed periodic report under the Exchange Act,
other
than pursuant to the exercise of employee stock options under the Company’s
stock option plans, the issuance of shares of Common Stock to employees pursuant
to the Company’s employee stock purchase plans and pursuant to the conversion
and/or exercise of Common Stock Equivalents outstanding as of the date of the
most recently filed periodic report under the Exchange Act, and the issuance
of
shares in connection with the Merger. No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate
in
the transactions contemplated by the Transaction Documents. Except as a result
of the purchase and sale of the Securities, there are no outstanding options,
warrants, scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into
or
exercisable or exchangeable for, or giving any Person any right to subscribe
for
or acquire any shares of Common Stock, or contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may become bound
to
issue additional shares of Common Stock or Common Stock Equivalents. The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. No further approval or authorization of any
stockholder, the Board of Directors or others is required for the issuance
and
sale of the Securities. There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among
any
of the Company’s stockholders.
(h) SEC
Reports; Financial Statements.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required
by
law or regulation to file such material) (the foregoing materials, including
the
exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the “SEC
Reports”)
on a
timely basis or has
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12 -
received
a valid extension of such time of filing and has filed any such SEC Reports
prior to the expiration of any such extension. As of their respective dates,
the
SEC Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act, as applicable, and none of the SEC Reports,
when filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which
they
were made, not misleading. The financial statements of the Company included
in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have
been
prepared in accordance with GAAP, except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present
in
all material respects the financial position of the Company and its consolidated
Subsidiaries as of and for the dates thereof and the results of operations
and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.
(i) Material
Changes.
Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in a subsequent SEC Report filed
prior
to the date hereof: (i) there has been no event, occurrence or development
that
has had or that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or disclosed in filings made with the Commission, (iii) the Company has
not
altered its method of accounting, (iv) the Company has not declared or made
any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares
of
its capital stock and (v) the Company has not issued any equity securities
to
any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any
request for confidential treatment of information. Except for the issuance
of
the Securities contemplated by this Agreement, the completion of the Merger,
or
as set forth on Schedule
3.1(i),
no
event, liability or development has occurred or exists with respect to the
Company or its Subsidiaries or their respective business, properties, operations
or financial condition, that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made or
deemed made that has not been publicly disclosed at least one (1) Trading Day
prior to the date that this representation is made.
(j) Litigation.
There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting
the
Company, any Subsidiary or any of their respective properties before or by
any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”)
which
(i) adversely
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13 -
affects
or challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any Subsidiary, nor any director or officer thereof,
is
or has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(k) Labor
Relations.
No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company which could reasonably
be
expected to result in a Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the Company nor
any of its Subsidiaries is a party to a collective bargaining agreement, and
the
Company and its Subsidiaries believe that their relationships with their
employees are good. No executive officer, to the knowledge of the Company,
is,
or is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement
or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each
such
executive officer does not subject the Company or any of its Subsidiaries to
any
liability with respect to any of the foregoing matters. The Company and its
Subsidiaries are in compliance with all U.S. federal, state, local and foreign
laws and regulations relating to employment and employment practices, terms
and
conditions of employment and wages and hours, except where the failure to be
in
compliance could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(l) Compliance.
Neither
the Company nor any Subsidiary: (i) is in default under or in violation of
(and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is
in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment, except in each case as could
not
have or reasonably be expected to result in a Material Adverse Effect.
(m) Regulatory
Permits.
The
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or
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14 -
foreign
regulatory authorities necessary to conduct their respective businesses, except
where the failure to possess such permits could not reasonably be expected
to
result in a Material Adverse Effect (“Material
Permits”),
and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(n) Title
to Assets.
The
Company and the Subsidiaries have good and marketable title in fee simple to
all
real property owned by them and good and marketable title in all personal
property owned by them that is material to the business of the Company and
the
Subsidiaries, in each case free and clear of all Liens, except for Liens that
do
not materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
the Subsidiaries and Liens for the payment of federal, state or other taxes,
the
payment of which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the Subsidiaries
are
held by them under valid, subsisting and enforceable leases with which the
Company and the Subsidiaries are in compliance.
(o) Patents
and Trademarks.
The
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
trade secrets, inventions, copyrights, licenses and other intellectual property
rights and similar rights as described in the SEC Reports as necessary or
material for use in connection with their respective businesses and which the
failure to so have could have a Material Adverse Effect (collectively, the
“Intellectual
Property Rights”).
Neither the Company nor any Subsidiary has received a notice (written or
otherwise) that any of the Intellectual Property Rights used by the Company
or
any Subsidiary violates or infringes upon the rights of any Person. To the
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties, except where failure to do so could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(p) Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to the aggregate Subscription Amount. Neither the
Company nor any Subsidiary has any reason to believe that it will not be able
to
renew its existing insurance coverage as and when such coverage expires or
to
obtain similar coverage from similar insurers as may be necessary to continue
its business without a significant increase in cost.
(q) Transactions
with Affiliates and Employees.
Except
as set forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of
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15 -
the
Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than 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 knowledge of the
Company, any entity in which any officer, director, or any such employee has
a
substantial interest or is an officer, director, trustee or partner, in each
case in excess of $120,000 other than for: (i) payment of salary or consulting
fees for services rendered, (ii) reimbursement for expenses incurred on behalf
of the Company and (iii) other employee benefits, including stock option
agreements under any stock option plan of the Company.
(r) Xxxxxxxx-Xxxxx;
Internal Accounting Controls.
The
Company is in material compliance with all provisions of the Xxxxxxxx-Xxxxx
Act
of 2002 which are applicable to it as of the Closing Date. 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 Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company in the
reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission’s
rules and forms. The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and procedures as of the end
of the period covered by the Company’s most recently filed periodic report under
the Exchange Act (such date, the “Evaluation
Date”).
The
Company presented in its most recently filed periodic report under the Exchange
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 changes in the
Company’s internal control over financial reporting (as such term is defined in
the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
(s) Certain
Fees.
No
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or
on
behalf of other Persons for fees of a type contemplated in this Section that
may
be due in connection with the transactions contemplated by the Transaction
Documents.
-
16 -
(t) Private
Placement.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Section 3.2, no registration under the Securities Act is required
for
the offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does
not
contravene the rules and regulations of the Trading Market.
(u) Investment
Company.
The
Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act of 1940, as amended.
(v) Registration
Rights.
Other
than each of the Purchasers and the Person’s listed in Schedule
3.1(v),
no
Person has any right to cause the Company to effect the registration under
the
Securities Act of any securities of the Company.
(w)
Listing
and Maintenance Requirements.
The
Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, and the Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
that
the Commission is contemplating terminating such registration. The Company
has
not, in the 12 months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or quoted to
the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(x)
Application
of Takeover Protections.
The
Company and the Board of Directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s certificate of
incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result
of the Purchasers and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including without limitation
as a
result of the Company’s issuance of the Securities and the Purchasers’ ownership
of the Securities.
(y)
Disclosure.
Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither
it
nor any other Person acting on its behalf has provided any of the Purchasers
or
their agents or counsel with any information that it believes constitutes or
might constitute material, nonpublic information. The Company understands and
confirms that the Purchasers will rely on the foregoing representation in
effecting transactions in securities of the Company. All disclosure furnished
by
or on behalf of the Company to the Purchasers regarding the Company, its
business and the transactions contemplated
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17 -
hereby,
including the Disclosure Schedules to this Agreement, is true and correct and
does not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. The press
releases disseminated by the Company during the twelve months preceding the
date
of this Agreement taken as a whole do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in light of the circumstances
under which they were made and when made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.
(z)
No
Integrated Offering.
Assuming
the accuracy of the Purchasers’ representations and warranties set forth in
Section 3.2, 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 security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be integrated
with prior offerings by the Company for purposes of (i) the Securities Act
which
would require the registration of any such securities under the Securities
Act,
or (ii) any applicable shareholder approval provisions of any Trading Market
on
which any of the securities of the Company are listed or designated.
(aa)
Solvency.
Based
on the consolidated financial condition of the Company as of the Closing Date
after giving effect to the receipt by the Company of the proceeds from the
sale
of the Securities hereunder: (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature, (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof, and (iii)
the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account
all
anticipated uses of the cash, would be sufficient to pay all amounts on or
in
respect of its liabilities when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such debts
as
they mature (taking into account the timing and amounts of cash to be payable
on
or in respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization
or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the Closing Date. Schedule
3.1(aa)
sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary
has
commitments. For the purposes of this Agreement, “Indebtedness”
means
(x) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect
of
indebtedness of others, whether or not the same are or should be
-
18 -
reflected
in the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value
of
any lease payments
in excess of $50,000 due under leases required to be capitalized in accordance
with GAAP. Neither
the Company nor any Subsidiary is in default with respect to any
Indebtedness.
(bb)
Tax
Status.
Except
for matters that would not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect, the Company and each
Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon,
and the Company has no knowledge of a tax deficiency which has been asserted
or
threatened against the Company or any Subsidiary.
(cc)
No
General Solicitation.
Neither
the Company nor any person acting on behalf of the Company has offered or sold
any of the Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only to the
Purchasers and certain other “accredited investors” within the meaning of Rule
501 under the Securities Act.
(dd)
Foreign
Corrupt Practices.
Neither
the Company, nor to the knowledge of the Company, any agent or other person
acting on behalf of the Company, has: (i) directly or indirectly, used any
funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds, (iii)
failed to disclose fully any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) which is in violation
of law or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(ee)
Accountants.
The
Company’s accounting firm is set forth on Schedule
3.1(ee)
of the
Disclosure Schedules. To the knowledge and belief of the Company, such
accounting firm: (i) is a registered public accounting firm as required by
the
Exchange Act and (ii) shall express its opinion with respect to the financial
statements to be included in the Company’s Annual Report for the year ending
December 31, 2007.
(ff)
Seniority.
As of
the Closing Date, no Indebtedness or other claim against the Company is senior
to the Preferred Stock in right of payment, whether with respect to interest
or
upon liquidation or dissolution, or otherwise, other than indebtedness secured
by purchase money security interests (which is senior only as to underlying
assets covered thereby) and capital lease obligations (which is senior only
as
to the property covered thereby).
(gg)
No
Disagreements with Accountants and Lawyers.
There
are no disagreements of any kind, including but not limited to any disagreements
regarding fees owed for services rendered, presently existing, or reasonably
anticipated by the Company
-
19 -
to
arise,
between the Company and the accountants and lawyers formerly or presently
employed by the Company which could affect the Company’s ability to perform any
of its obligations under any of the Transaction Documents and the Company is
current with respect to any fees owed to its accountants and
lawyers.
(hh)
Acknowledgment
Regarding Purchasers’ Purchase of Securities.
The
Company acknowledges and agrees that each of the Purchasers is acting solely
in
the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary
of
the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated thereby and any advice given by
any
Purchaser or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated thereby is
merely incidental to the Purchasers’ purchase of the Securities. The Company
further represents to each Purchaser that the Company’s decision to enter into
this Agreement and the other Transaction Documents has been based solely on
the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.
(ii)
[Intentionally
omitted.]
(jj)
Regulation
M Compliance.
The Company has not, and to the knowledge of the Company no one acting on its
behalf has, (i) taken, directly or indirectly, any action designed to cause
or
to result in the stabilization or manipulation of the price of any security
of
the Company to facilitate the sale or resale of any of the Securities, (ii)
sold, bid for, purchased, or paid any compensation for soliciting purchases
of,
any of the securities of the Company, or (iii) paid or agreed to pay to any
Person any compensation for soliciting another to purchase any other securities
of the Company, other than, in the case of clauses (ii) and (iii), compensation
paid to the Company’s placement agent in connection with the placement of the
Securities.
(kk)
Manufacturing
and Marketing Rights.
Neither
the Company nor its Subsidiaries have granted rights to manufacture, produce,
assemble, license, market, or sell its products to any other Person and is
not
bound by any agreement that affects the Company’s or its Subsidiaries’ exclusive
right to develop, manufacture, assemble, distribute, market or sell its
respective products.
(ll)
Obligations
of Management.
Each
officer and key employee of the Company and its Subsidiaries is currently
devoting substantially all of his or her business time to the conduct of
business of the Company and its Subsidiaries. Neither the Company nor any of
its
Subsidiaries is aware that any officer or key employee of the Company or any
Subsidiary is planning to work less than full time at the Company or any
Subsidiary, as applicable, in the future. No officer or key employee is the
currently working or, to the Company’s knowledge, plans to work for a
competitive enterprise, whether or not such officer of key employee is or will
be compensated by such enterprise.
-
20 -
(mm)
Minute
Books.
The
minute books of the Company and its Subsidiaries made available to the
Purchasers contain a complete summary of all meetings of directors and
stockholders since the time of incorporation.
(nn)
Elections.
To the
Company’s knowledge, all elections and notices permitted by Section 83(b) of the
Internal Revenue Code and any analogous provisions of applicable state tax
laws
have been timely filed by all employees who have purchased shares of the Common
Stock under agreements that provide for the vesting of such shares of Common
Stock.
(oo)
Accounts
Receivable.
All
accounts receivable of the Company and its Subsidiaries that are reflected
on
the Company’s and its Subsidiaries’ balance sheets or interim balance sheets or
on the accounting records of the Company and its Subsidiaries as of the Closing
Date (collectively, the “Accounts
Receivable”)
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. Unless paid
prior to the Closing Date, the Accounts Receivable are or will be as of the
Closing Date current and collectible net of the respective reserves shown on
the
balance sheet or interim balance sheet or on the accounting records of the
Company and its Subsidiaries as of the Closing Date (which reserves are adequate
and calculated consistent with past practice and, in the case of the reserve
as
of the Closing Date, will not represent a greater percentage of the Accounts
Receivable as of the Closing Date than the reserve reflected in the interim
balance sheet represented of the Accounts Receivable reflected therein and
will
not represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). There is no contest, claim, or right of set-off,
other than returns in the ordinary course of business, under any agreement
and/or contract with any obligor of an Accounts Receivable relating to the
amount or validity of such Accounts Receivable. Schedule
3.1(oo)
contains
a complete and accurate list of all Accounts Receivable as of the date of the
interim balance sheet, which list sets forth the aging of such Accounts
Receivable.
(pp)
Inventory.
All
inventory of the Company and the Subsidiaries, whether or not reflected in
the
balance sheet or interim balance sheet, consists of a quality and quantity
usable and salable in the ordinary course of business, except for obsolete
items
and items of below standard quality, all of which have been written off or
written down to net realizable value in the balance sheet or interim balance
sheet or on the accounting records of the Company and the Subsidiaries as of
the
Closing Date, as the case may be. All inventories not written off have been
priced at the lower of cost or market on the last in, first out basis. The
quantities of each item of inventory (whether raw materials, work-in-process,
or
finished goods) are not excessive, but are reasonable in the present
circumstances of the Company and the Subsidiaries.
(qq)
Returns.
Neither
the Company nor any Subsidiary has it had any of its products returned by a
purchaser thereof, other than minor, nonrecurring warranty problems.
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21 -
(rr)
Employee
Benefits.
Except
as set forth on Schedule
3.1(rr),
neither
the Company nor any Subsidiary has (nor for the two years preceding the date
hereof has had) any plans which are subject to ERISA. “ERISA”
means
the Employee Retirement Income Security Act of 1974 or any successor law and
the
regulations and rules issued pursuant to that act or any successor
law.
3.2 Representations
and Warranties of the Purchasers.
Each
Purchaser, for itself and for no other Purchaser, hereby represents and warrants
as of the date hereof and as of the Closing Date to the Company as
follows:
(a) Organization;
Authority.
Such
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with full right,
corporate or partnership power and authority to enter into and to consummate
the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and delivery of
the
Transaction Documents and performance by such Purchaser of the transactions
contemplated by the Transaction Documents have been duly authorized by all
necessary corporate or similar action on the part of such Purchaser. Each
Transaction Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except: (i)
as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may
be
limited by applicable law.
(b) Own
Account.
Such
Purchaser understands that the Securities are “restricted securities” and have
not been registered under the Securities Act or any applicable state securities
law and is acquiring the Securities as principal for its own account and not
with a view to or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state securities
law, has no present intention of distributing any of such Securities in
violation of the Securities Act or any applicable state securities law and
has
no direct or indirect arrangement or understandings with any other persons
to
distribute or regarding the distribution of such Securities (this representation
and warranty not limiting such Purchaser’s right to sell the Securities pursuant
to the Registration Statement or otherwise in compliance with applicable federal
and state securities laws) in violation of the Securities Act or any applicable
state securities law. Such Purchaser is acquiring the Securities hereunder
in
the ordinary course of its business.
(c) Purchaser
Status.
At the
time such Purchaser was offered the Securities, it was, and as of the date
hereof it is, and on each date on which it converts any shares of Preferred
Stock or exercises any Warrants, it will be either: (i) an “accredited investor”
as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the
Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act. Such
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22 -
Purchaser
is not required to be registered as a broker-dealer under Section 15 of the
Exchange Act.
(d) Experience
of Such Purchaser.
Such
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters
so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment.
(e) General
Solicitation.
Such
Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
(f) Short
Sales and Confidentiality Prior To The Date Hereof.
Other
than consummating the transactions contemplated hereunder, such Purchaser has
not directly or indirectly, nor has any Person acting on behalf of or pursuant
to any understanding with such Purchaser, executed any purchases or sales,
including Short Sales, of the securities of the Company during the period
commencing from
the time
that such Purchaser first received a term sheet (written or oral) from the
Company or any other Person representing the Company setting forth the material
terms of the transactions contemplated hereunder until the date hereof
(“Discussion
Time”).
Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such
Purchaser’s assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions
of
such Purchaser’s assets, the representation set forth above shall only apply
with respect to the portion of assets managed by the portfolio manager that
made
the investment decision to purchase the Securities covered by this Agreement.
Other than to other Persons party to this Agreement, such Purchaser has
maintained the confidentiality of all disclosures made to it in connection
with
this transaction (including the existence and terms of this
transaction).
(g) Certain
Fees.
No
brokerage or finder’s fees or commissions are or will be payable by the
Purchaser to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents. The Company shall have no obligation
with respect to any fees or with respect to any claims made by or on behalf
of
other Persons for fees of a type contemplated in this Section that may be due
in
connection with the transactions contemplated by the Transaction
Documents.
(h) Access
to Information.
Such
Purchaser acknowledges that it has been afforded (i) the opportunity to ask
such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in
the
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23 -
Securities;
(ii) access to information about the Company and the Subsidiaries and their
respective financial condition, results of operations, business, properties,
and
management sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses
or
can acquire without unreasonable effort or expense that is necessary to make
an
informed investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser's right to rely on the truth, accuracy and completeness of the
Company's representations and warranties contained in the Transaction
Documents.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to the Company
or
to an Affiliate of a Purchaser or in connection with a pledge as contemplated
in
Section 4.1(b), the Company may require the transferor thereof to provide to
the
Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act. As a condition of transfer, any such transferee shall agree in writing
to
be bound by the terms of this Agreement and the Registration Rights Agreement
and shall have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.
(b) The
Purchasers agree to the imprinting, so long as is required by this Section
4.1,
of a legend on any of the Securities in the following form:
[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
[CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY
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24 -
ACCEPTABLE
TO THE COMPANY. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE]
[CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject
to
approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith. Further,
no
notice shall be required of such pledge. At the appropriate Purchaser’s expense,
the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including, if the Securities are subject
to registration pursuant to the Registration Rights Agreement, the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) under
the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.
(c) Certificates
evidencing the Underlying Shares shall not contain any legend (including the
legend set forth in Section 4.1(b) hereof): (i) while a registration statement
(including the Registration Statement) covering the resale of such security
is
effective under the Securities Act, (ii) following any sale of such Underlying
Shares pursuant to Rule 144 or (iii) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission).
The
Company shall cause its counsel to issue a legal opinion to the Transfer Agent
promptly after the Effective Date if required by the Transfer Agent to effect
the removal of the legend hereunder. If all or any shares of Preferred Stock
are
converted or any portion of a Warrant is exercised at a time when there is
an
effective registration statement to cover the resale of the Underlying Shares,
or if such legend is not otherwise required under applicable requirements of
the
Securities Act (including judicial interpretations and pronouncements issued
by
the staff of the Commission) then such Underlying Shares shall be issued free
of
all legends. The Company agrees that following the Effective Date or at such
time as such legend is no longer required under this Section 4.1(c), it will,
no
later than three Trading Days following the delivery by a Purchaser to the
Company or the Transfer Agent of a certificate representing Underlying Shares,
as applicable, issued with a restrictive legend (such third Trading Day, the
“Legend
Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate representing
such shares that is free from all restrictive and other legends. The Company
may
not make any notation on its records or give instructions to the Transfer Agent
that enlarge the restrictions on transfer set forth in this Section 4.
Certificates for Underlying Shares subject to legend removal hereunder shall
be
transmitted by the Transfer Agent to
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25 -
the
Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System as directed by such Purchaser.
(d) [Intentionally
omitted.]
(e) Each
Purchaser, severally and not jointly with the other Purchasers, agrees that
such
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are sold
pursuant to a Registration Statement, they will be sold in compliance with
the
plan of distribution set forth therein, and acknowledges that the removal of
the
restrictive legend from certificates representing Securities as set forth in
this Section 4.1 is predicated upon the Company’s reliance upon this
understanding.
4.2
Acknowledgment
of Dilution.
The
Company acknowledges that the issuance of the Securities may result in dilution
of the outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions. The Company further acknowledges that its
obligations under the Transaction Documents, including, without limitation,
its
obligation to issue the Underlying Shares pursuant to the Transaction Documents,
are unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim the Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.
4.3
Furnishing
of Information.
If the
Common Stock is not registered under Section 12(b) or 12(g) of the Exchange
Act
on the date hereof, the Company agrees to cause the Common Stock to be
registered under Section 12(g) of the Exchange Act as soon as practicable after
the Effective Date. Until the earliest of the time that no Purchaser owns
Securities, the Company covenants to maintain the registration of the Common
Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. As long as any Purchaser owns Securities, if
the
Company is not required to file reports pursuant to the Exchange Act, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) such information as is required for the Purchasers to sell
the
Securities under Rule 144. The Company further covenants that it will take
such
further action as any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the requirements of the exemption
provided by Rule 144.
4.4
Integration.
The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities to the
Purchasers in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.
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26 -
4.5
Conversion
and Exercise Procedures.
Each of
the form of Notice of Exercise included in the Warrants and the form of Notice
of Conversion included in the Certificate of Designation set forth the totality
of the procedures required of the Purchasers in order to exercise the Warrants
or convert the Preferred Stock. No additional legal opinion, other information
or instructions shall be required of the Purchasers to exercise their Warrants
or convert their Preferred Stock. The Company shall honor exercises of the
Warrants and conversions of the Preferred Stock and shall deliver Underlying
Shares in accordance with the terms, conditions and time periods set forth
in
the Transaction Documents.
4.6
Securities
Laws Disclosure;
Publicity.
The
Company shall, no later than 5:30 p.m. (New York City time) on the second
Trading Day immediately following the Closing Date, issue a Current Report
on
Form 8-K, disclosing the material terms of the Merger and the transactions
contemplated hereby and thereby and including the Transaction Documents as
exhibits thereto. The Company and each Purchaser shall consult with each other
in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue
any
such press release nor otherwise make any such public statement without the
prior consent of the Company, with respect to any press release of any
Purchaser, or without the prior consent of each Purchaser, with respect to
any
press release of the Company, which consent shall not unreasonably be withheld
or delayed, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except:
(a) as required by federal securities law in connection with (i) any
registration statement contemplated by the Registration Rights Agreement and
(ii) the filing of final Transaction Documents (including signature pages
thereto) with the Commission and (b) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under this clause
(b).
4.7 Shareholder
Rights Plan.
No
claim will be made or enforced by the Company or, with the consent of the
Company, any other Person, that any Purchaser is an “Acquiring Person” under any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or similar anti-takeover plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement,
by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers.
4.8
Non-Public
Information.
Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company covenants and agrees
that
neither it, nor any other Person acting on its behalf, will provide any
Purchaser or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto
such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing covenant in effecting transactions
in securities of the Company.
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27 -
4.9 Use
of
Proceeds.
Except
as set forth on Schedule
4.9
attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and shall not use such proceeds for:
(a)
the satisfaction of any portion of the Company’s debt (other than payment of
trade payables in the ordinary course of the Company’s business and prior
practices), (b) the redemption of any Common Stock or Common Stock Equivalents
or (c) the settlement of any outstanding litigation. In addition, the Company
shall not pay any transaction fees out of the gross proceeds other than a fee
of
3% of the gross proceeds to GT Securities, Inc., audit fees of approximately
$175,000, consulting fees of $210,000 to Genesis Capital Advisors, LLC and
Company Counsel fees of approximately $150,000, plus reimbursement of Vision’s
expenses as set forth in Section 5.2.
4.10 Indemnification
of Purchasers.
Subject
to the provisions of this Section 4.10, the Company will indemnify and hold
each
Purchaser and its directors, officers, shareholders, members, partners,
employees and agents (and any other Persons with a functionally equivalent
role
of a Person holding such titles notwithstanding a lack of such title or any
other title), each Person who controls such Purchaser (within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, shareholders, agents, members, partners or employees (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title) of such
controlling person (each, a “Purchaser
Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result
of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against a Purchaser in any
capacity, or any of them or their respective Affiliates, by any stockholder
of
the Company who is not an Affiliate of such Purchaser, with respect to any
of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser’s representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).
If any action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right
to
assume the defense thereof with counsel of its own choosing reasonably
acceptable to the Purchaser Party. Any Purchaser Party shall have the right
to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense
of
such Purchaser Party except to the extent that (i) the employment thereof has
been specifically authorized by the Company in writing, (ii) the Company has
failed after a reasonable period of time to assume such defense and to employ
counsel or (iii) in such action there is, in the reasonable opinion of such
separate counsel, a material conflict on any material issue between the position
of the Company and the position of such Purchaser Party, in which case the
Company shall be responsible for the reasonable fees and expenses of no more
than one such separate counsel. The Company will not be liable to any Purchaser
Party under this Agreement (y) for any settlement by a Purchaser Party effected
without the Company’s prior written consent, which shall not be unreasonably
withheld or
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28 -
delayed;
or (z) to the extent, but only to the extent that a loss, claim, damage or
liability is attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such Purchaser
Party in this Agreement or in the other Transaction Documents or from such
Purchaser Party’s fraud, gross negligence, willful misconduct or
malfeasance.
4.11 Reservation
and Listing of Securities.
(a) The
Company shall maintain a reserve from its duly authorized shares of Common
Stock
for issuance pursuant to the Transaction Documents in such amount as may then
be
required to fulfill its obligations in full under the Transaction Documents.
(b) If,
on
any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than 130% of (i) the Required Minimum on
such date, minus (ii) the number of shares of Common Stock previously issued
pursuant to the Transaction Documents, then the Board of Directors shall use
commercially reasonable efforts to amend the Company’s certificate or articles
of incorporation to increase the number of authorized but unissued shares of
Common Stock to at least the Required Minimum at such time (minus the number
of
shares of Common Stock previously issued pursuant to the Transaction Documents),
as soon as possible and in any event not later than the 75th
day
after such date; provided that the Company will not be required at any time
to
authorize a number of shares of Common Stock greater than the maximum remaining
number of shares of Common Stock that could possibly be issued after such time
pursuant to the Transaction Documents.
(c) The
Company shall, if applicable: (i) in the time and manner required by the
principal Trading Market, prepare and file with such Trading Market an
additional shares listing application covering a number of shares of Common
Stock at least equal to the Required Minimum on the date of such application,
(ii) take all steps necessary to cause such shares of Common Stock to be
approved for listing on such Trading Market as soon as possible thereafter,
(iii) provide to the Purchasers evidence of such listing and (iv) maintain
the
listing of such Common Stock on any date at least equal to the Required Minimum
on such date on such Trading Market or another Trading Market.
4.12 Subsequent
Equity Sales.
(a) [Intentionally
omitted.]
(b) From
the
date hereof until such time as the earlier of (i) no Purchaser holds any of
the
Securities or (ii) three (3) years from the date hereof, the Company shall
be
prohibited from effecting or entering into an agreement to effect any Subsequent
Financing involving a Variable Rate Transaction. “Variable
Rate Transaction”
means
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 price, exercise price or exchange rate or other price that is based
upon and/or varies with the trading prices of or
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29 -
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 or (ii) enters into any agreement, including, but
not limited to, an equity line of credit, whereby the Company may sell
securities at a future determined price.
(c) Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of an Exempt
Issuance, except that no Variable Rate Transaction shall be an Exempt
Issuance.
4.13 Equal
Treatment of Purchasers.
No
consideration (including any modification of any Transaction Document) shall
be
offered or paid to any Person to amend or consent to a waiver or modification
of
any provision of any of the Transaction Documents unless the same consideration
is also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted
to
each Purchaser by the Company and negotiated separately by each Purchaser,
and
is intended for the Company to treat the Purchasers as a class and shall not
in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or
otherwise.
4.14 Short
Sales and Confidentiality After The Date Hereof.
Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
neither it, nor any Affiliate acting on its behalf or pursuant to any
understanding with it, will execute any Short Sales during the period commencing
on August 11, 2008 and ending the earlier of (i) one year after the date on
which the last registration statement the Company is required to file so that
all of the Underlying Shares are registered becomes effective, or (ii) 18 months
after the Closing Date. The Company shall obtain similar agreements from all
of
its officers and directors, Genesis Capital Advisors, LLC and Private
Investor.
Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 4.6, such Purchaser will
maintain the confidentiality of the existence and terms of this transaction
and
the information included in the Transaction Documents and the Disclosure
Schedules.
4.15 Form
D; Blue Sky Filings.
The
Company agrees to timely file a Form D with respect to the Securities as
required under Regulation D and to provide a copy thereof, promptly upon request
of any Purchaser. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to
qualify the Securities for, sale to the Purchasers at the Closing under
applicable securities or “Blue Sky” laws of the states of the United States, and
shall provide evidence of such actions promptly upon request of any
Purchaser.
4.16 Capital
Changes.
Until
the one year anniversary of the Effective Date, the Company shall not undertake
a reverse or forward stock split or reclassification of the Common Stock without
the prior written consent of the Purchasers holding a majority in
interest
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30 -
of
the
shares of Preferred Stock, unless such change is required for a stock exchange
listing including but not limited to a listing on the American Stock Exchange,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market and the New York Stock Exchange.
4.17 Investor
Relations Firm.
Until
and unless the Common Stock is listed on any tier of the Nasdaq Stock Market,
the Company shall retain and use the services of an investor relations firm
(“IR
Firm”)
which
IR Firm shall be reasonably acceptable to Vision. The Company shall retain
at
least $300,000 of the proceeds from this offering in the Escrow Account solely
for the purpose of paying the IR Firm and for expenses of investor relations
initiatives recommended by such IR Firm. In addition, if any of the Warrants
are
exercised, not less than 7% of the proceeds to the Company from any such
exercises, shall be allocated to investor relations initiatives, provided,
however, that if the Common Stock becomes listed on any tier of the Nasdaq
Stock
Market (the “Nasdaq Listing”), then the Company will no longer be required to
allocate any proceeds from the Warrant exercises subsequent to the Nasdaq
Listing. The Company shall use commercially reasonable efforts to undertake
any
such measures as IR Firm shall recommend that are, in good faith, acceptable
to
the Board of Directors.
4.18 Director
& Officer and Key Man Insurance.
No
later than the one year anniversary of the date hereof (or such later date
as
Vision agrees to in writing), the Company and each Subsidiary agree to be
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as are prudent and customary in the businesses
in
which the Company and the Subsidiaries are engaged, including, but not limited
to, (i) directors and officers insurance coverage at least equal to $1,000,000,
and (ii) key man life insurance on each of Xxxx Xxxxx and Xxxxxx de Anquin
with
coverage of at least $500,000 each.
4.19 Employee
Stock Option Plan.
Following the Closing, the Company shall establish an employee stock option
plan
(which may include provisions for the grant of options to directors and
consultants), which such plan shall provide that at no time may options be
granted which would, in the aggregate, exceed 10% of the number of shares of
Common Stock issued and outstanding.
4.20 Employment
Agreements.
No
later than the Closing Date, the Company shall enter into written employment
agreements with each of Xxxx Xxxxx and Xxxxxx de Anquin, on terms and conditions
which are reasonably satisfactory to Vision
4.21 Private
Sale of Management Equity. During
the thirty (30) calendar day period after the Closing Date, the officers and
directors of Premier shall be permitted to sell up to $3,000,000 (the
“Private
Subscription Amount”)
of
their equity holdings in Premier to an accredited investor (“Private
Investor”)
at a
post-Merger equivalent price of no less than $1.81 per share pursuant to an
agreement in form and substance reasonably satisfactory to Vision (the
“Private
Sale”).
Any
provision in such purchase agreement providing for additional shares to be
issued or transferred to the Private Investor upon the occurrence or
non-occurrence of any subsequent event or contingency, shall be presumptively
unreasonable. During the Private Sale Period, the Company shall also be allowed
to sell to Private Investor, for a cash purchase price of at least such
warrant’s fair market value, a common stock purchase warrant
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registered
in the name of Private Investor to purchase up to a number of shares of Common
Stock equal to 100% of the total number of shares of Common Stock sold to
Private Investor by the Company’s officers and/or directors in the Private Sale,
which warrant shall have an exercise price of no less than $2.50 per share,
subject to adjustment therein (the “Private
Warrant”).
As a
condition of such sale, Private Investor shall be required to execute a lockup
agreement similar to the Lock-Up Agreement with a lockup period that begins
on
the closing date of the Private Sale (“Private
Sale Closing Date”)
and
ends the earlier of (i) one year after the Effective Date or (ii) eighteen
(18)
months after the Private Sale Closing Date.
4.22 Appointment
of Chief Financial Officer.
The
Company shall appoint a Chief Financial Officer qualified to hold such position
in a publicly traded company, within one hundred and twenty (120) calendar
days
of the Closing Date. Such Chief Financial Officer shall be reasonably acceptable
to Vision, not to be unreasonably withheld or delayed..
4.23 Independent
Board of Directors.
The
Company shall use best efforts to add members to its Board of Directors such
that within one hundred and twenty (120) calendar days from the Closing Date
a
majority of the Board shall be “independent directors” within the meaning of the
rules of the Nasdaq Stock Market.
ARTICLE
V
MISCELLANEOUS
5.1Termination.
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the Closing has not been consummated on or before September 30,
2008; provided,
however,
that
such termination will not affect the right of any party to xxx for any breach
by
the other party (or parties).
5.2Fees
and Expenses.
At the
Closing, the Company has agreed to reimburse Vision up to $100,000 for its
actual legal fees and expenses and due diligence fees and expenses. Except
as
expressly set forth in the Transaction Documents to the contrary, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to
the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all transfer agent fees, stamp taxes and other taxes
and
duties levied in connection with the delivery of any Securities to the
Purchasers.
5.3Entire
Agreement.
The
Transaction Documents, together with the exhibits and schedules thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
5.4 Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of: (a) the date of transmission, if such notice or
communication is delivered via
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facsimile
at the facsimile number set forth on the signature pages attached hereto prior
to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day
after the date of transmission, if such notice or communication is delivered
via
facsimile at the facsimile number set forth on the signature pages attached
hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York
City
time) on any Trading Day, (c) the second Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service or
(d)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set forth on the
signature pages attached hereto.
5.5 Amendments;
Waivers.
No
provision of this Agreement may be waived, modified, supplemented or amended
except in a written instrument signed, in the case of an amendment, by the
Company and the Purchasers holding at least a majority of the Preferred Stock
then outstanding or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof,
nor
shall any delay or omission of any party to exercise any right hereunder in
any
manner impair the exercise of any such right.
5.6 Headings.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
5.7 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser (other than by merger). Any Purchaser may assign
any
or all of its rights under this Agreement to any Person to whom such Purchaser
assigns or transfers any Securities, provided that such transferee agrees in
writing to be bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the
“Purchasers.”
5.8 No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Section 4.10.
5.9 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents shall be governed by and construed and enforced
in
accordance with the internal laws of the State of New York, without regard
to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively
in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with
respect
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to
the
enforcement of any of the Transaction Documents), and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any claim that
it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law. If either party shall commence an action or proceeding
to enforce any provisions of the Transaction Documents, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or
proceeding.
5.10 Survival.
The
representations and warranties contained herein shall survive the Closing and
the delivery of the Securities for the applicable statute of limitations.
5.11 Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.
5.12 Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be
hereafter declared invalid, illegal, void or unenforceable.
5.13 Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) any of the other Transaction Documents, whenever any
Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within
the periods therein provided, then such Purchaser may rescind or withdraw,
in
its sole discretion from time to time upon written notice to the Company, any
relevant notice, demand or election in whole or in part without prejudice to
its
future actions and rights; provided,
however,
that in
the case of a rescission of a conversion of the Preferred Stock or exercise
of a
Warrant, the Purchaser
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shall
be
required to return any shares of Common Stock subject to any such rescinded
conversion or exercise notice.
5.14 Replacement
of Securities.
If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof (in the case of mutilation),
or
in lieu of and substitution therefor, a new certificate or instrument, but
only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction. The applicant for a new certificate or instrument under
such circumstances shall also pay any reasonable third-party costs (including
customary indemnity) associated with the issuance of such replacement
Securities.
5.15 Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each of the Purchasers and the Company
will
be entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the Transaction
Documents and hereby agrees to waive and not to assert in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
5.16 Payment
Set Aside.
To the
extent that the Company makes a payment or payments to any Purchaser pursuant
to
any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement
or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation,
any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
5.17[Intentionally
omitted.]
5.18 Independent
Nature of Purchasers’ Obligations and Rights.
The
obligations of each Purchaser under any Transaction Document are several and
not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers 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 Purchaser 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 Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation
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35 -
of
the
Transaction Documents. For reasons of administrative convenience only,
Purchasers and their respective counsel have chosen to communicate with the
Company through FWS. FWS does not represent all of the Purchasers but only
Vision. The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because
it
was required or requested to do so by the Purchasers.
5.19 Liquidated
Damages.
The
Company’s obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of the Company
and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due
and
payable shall have been canceled.
5.20 Saturdays,
Sundays, Holidays, etc. If
the
last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall not be a Business Day, then such action
may be taken or such right may be exercised on the next succeeding Business
Day.
5.21 Construction.
The
parties agree that each of them and/or their respective counsel has reviewed
and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.
5.22WAIVER
OF JURY TRIAL.
IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY
AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE
GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(Signature
Pages Follow)
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36 -
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as
of
the date first indicated above.
|
Address
for Notice:
|
|
|
By:
__________________________________________
Name:
Xxxx Xxxxx
Title:
Chief Executive Officer
With
a copy to (which shall not constitute notice):
|
0000
Xxxxxxxx Xxxxx, Xxxxx 000
Xx
Xxxxxx Xxxxx, XX 00000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
|
|
Xxxxxxxxxx
& Xxxxx LLP
Attn:
Xxxxx X. Xxxxx, Esq.
00000
Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx
Xxxxxxx, XX 00000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
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[PURCHASER
SIGNATURE PAGES TO PPRE SECURITIES PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of
Purchaser: ____________________________________________________
Signature
of Authorized Signatory of Purchaser:
__________________________
Name
of
Authorized Signatory: ____________________________________
Title
of
Authorized Signatory: _____________________________________
Email
Address of Authorized Signatory:
___________________________________________
Fax
Number of Authorized Signatory:
_________________________________________
Address
for Notice of Purchaser:
Address
for Delivery of Securities for Purchaser (if not same as address for
notice):
Subscription
Amount: _____________________________________
Shares:
______________________________________
Series
A
Warrant Shares: ___________________________________
Series
B
Warrant Shares: ___________________________________
EIN
Number: __________________________________________
[SIGNATURE
PAGES CONTINUE]
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