SECURITIES PURCHASE AGREEMENT
Exhibit
10.2
This
SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into
as of December 17, 2007, by and between Rexahn Pharmaceuticals, Inc., a Delaware
corporation (the “Company”), and Kumho Investment Bank, a Korean
corporation (the “Purchaser”).
Recitals
The
Company and the Purchaser are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by
Section 4(2) under the Securities Act of 1933, as amended (the “1933
Act”), and the provisions of Regulation D (“Regulation D”)
and/or Regulation S (“Regulation S”), each as promulgated by the
U.S. Securities and Exchange Commission (the “SEC”) under the 1933
Act.
The
Purchaser wishes to purchase, and the Company wishes to sell and issue to the
Purchaser, upon the terms and subject to the conditions stated in this
Agreement, (i) 357,143 shares (the “Initial Shares”) of its common stock,
par value US$0.0001 per share (the “Common Stock”), and (ii)
a warrant, in substantially the form attached hereto as
Exhibit A (the “Warrant”), to acquire up to 71,429 shares of
Common Stock (the “Warrant Shares”) at an exercise price of US$1.80 per
share, for aggregate cash consideration of US$500,000.20 (the “Purchase
Price”).
Agreement
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt and sufficiency
of
which is hereby acknowledged, the Company and the Purchaser agree as
follows:
1. DEFINITIONS. In
addition to those terms defined above and elsewhere in this Agreement, for
the
purposes of this Agreement, the following terms shall have the meanings here
set
forth:
1.1 “1934
Act” means the Securities Exchange Act of 1934, as amended.
1.2 “Affiliate”
means, with respect to any Person, any other Person that directly or indirectly
through one or more intermediaries controls, is controlled by or is under common
control with, such Person, as such terms are used in and construed under
Rule 144 under the 1933 Act.
1.3 “Business
Day” means any day other than Saturday, Sunday or any other day on which
commercial banks in the City of New York are authorized or required by law
to
remain closed.
1.4 “Closing”
means the closing of the purchase and sale of the Securities pursuant to
Section 2.3.
1.5 “Closing
Date” means the date and time of the Closing.
1.6 “Effective
Date” means the date that the Registration Statement is first declared
effective by the SEC.
1.7 “Eligible
Market” means any of the New York Stock Exchange, the American Stock
Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ
Capital Market or the NASD Over-the-Counter Bulletin Board.
1.8 “Lien”
means any lien, charge, claim, security interest, encumbrance, right of first
refusal or other restriction.
1.9 “Material
Adverse Effect” means a material adverse effect on (i) the condition
(financial or otherwise), business, assets or results of operations of the
Company, (ii) the Company’s ability to perform any of its
obligations under the terms of the Transaction Documents in any material respect
or (iii) the rights and remedies of the Purchaser under the Transaction
Documents.
1.10 “Person”
means an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed
herein.
1.11 “Registration
Rights Agreement” means a Registration Rights Agreement substantially in the
form of Exhibit B hereto.
1.12 “Registration
Statement” means a registration statement meeting the requirements set forth
in the Registration Rights Agreement and covering the resale of the Initial
Shares and the Warrant Shares.
1.13 “Securities”
means the Common Stock, the Warrant and the Warrant Shares issued or issuable
pursuant to the Transaction Documents.
1.14 “Subsidiary”
means any Person in which the Company, directly or indirectly, owns capital
stock or holds an equity or similar interest.
1.15 “Trading
Day” means (a) any day on which the Common Stock is listed or quoted
and traded on its primary Trading Market, (b) if the Common Stock is not
then listed or quoted and traded on any Eligible Market, then a day on which
trading occurs on the NASDAQ Global Market (or any successor thereto), or
(c) if trading ceases to occur on the NASDAQ Global Market (or any
successor thereto), any Business Day.
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1.16 “Trading
Market” means the NASD Over-the-Counter Bulletin Board or any other Eligible
Market, or any other national securities exchange, market or trading or
quotation facility on which the Common Stock is then listed or
quoted.
1.17 “Transaction
Documents” means this Agreement, the Registration Rights Agreement, the
Warrant and any other agreement entered into, now or in the future, by the
Company in connection with this Agreement or any of the other Transaction
Documents.
1.18 List
of Additional Definitions. The following is a list of additional
terms used in this Agreement and a reference to the Section hereof in which
such
term is defined:
|
Term
|
Section
|
|
Action
|
3.8
|
|
Additional
Shares of Stock
|
5.7(b)
|
|
Adjusted
Initial Shares
|
5.7(b)
|
|
Adjusted
Purchase Price
|
5.7(b)
|
|
Aggregate
Consideration
|
5.7(b)
|
|
Agreement
|
Preamble
|
|
Common
Stock
|
Recitals
|
|
Company
|
Preamble
|
|
Diluted
Price
|
5.7(a)
|
|
Initial
Shares
|
Recitals
|
|
Make-Whole
Number
|
5.7(b)
|
|
Purchase
Price
|
Recitals
|
|
Purchaser
|
Preamble
|
|
Regulation
D
|
Recitals
|
|
Regulation
S
|
Recitals
|
|
SEC
|
Recitals
|
|
U.S.
Person
|
4.2
|
|
Warrant
|
Recitals
|
|
Warrant
Shares
|
Recitals
|
|
1933
Act
|
Preamble
|
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2. PURCHASE
AND SALE OF SECURITIES.
2.1 Purchase
of the Initial Shares and Warrant. Subject to the terms and
conditions of this Agreement and on the basis of the representations and
warranties made herein, the Company hereby agrees to sell and issue to the
Purchaser, and the Purchaser hereby agrees to purchase from the Company, the
Initial Shares and the Warrant for cash in an amount equal to the Purchase
Price.
2.2 Time
and Place of Closing. The Closing shall take place at the offices
of Xxxxxxxxxx & Xxxxx LLP, 0000 Xxx Xxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx,
XX 00000. The Closing shall take place on December 24,
2007.
2.3 Closing
Deliveries.
(a) At
the Closing, the Company shall deliver or cause to be delivered to the Purchaser
the following:
(i) a
stock certificate, free and clear of all restrictive legends (except as
expressly provided in Section 5.1(b)), evidencing the Initial
Shares, registered in the name of the Purchaser;
(ii) a
Warrant, issued in the name of the Purchaser, exercisable for up to a number
of
shares of Common Stock equal to the Warrant Shares;
(iii) a
copy of the Registration Rights Agreement executed on behalf of the Company;
and
(iv) any
other documents reasonably requested by the Purchaser or its counsel in
connection with the Closing, including, without limitation, certified copies
of
the Company’s certificate of incorporation, certificates of good standing and
customary officers’ and secretary’s certificates.
(c) At
the Closing, the Purchaser shall deliver or cause to be delivered to the Company
cash in an amount equal to the Purchase Price by wire transfer of immediately
available federal funds to the account of the Company.
2.4 Use
of Proceeds. The Company will use the net proceeds of the
issuance and sale of Initial Shares and the Warrant for its general working
capital and other corporate purposes.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY. The Company hereby represents and
warrants to the Purchaser as follows:
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3.1 Subsidiaries. The
Company has no direct or indirect Subsidiaries other than those listed in
Schedule 3.1. Except as disclosed in
Schedule 3.1, the Company owns, directly or indirectly, all of the
capital stock or comparable equity interests of each Subsidiary free and clear
of any Lien, and all the issued and outstanding shares of capital stock or
comparable equity interests of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights.
3.2 Organization
and Good Standing. Each of the Company and each Subsidiary is a
corporation validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with all
requisite power and authority to carry on its business as presently conducted
and own and use its properties and assets. Each of the Company and
each Subsidiary is authorized to conduct business as a foreign corporation
and
is in good standing in each jurisdiction where the conduct of its business
or
the ownership of its property requires such qualification, except where the
failure to be so qualified and in good standing would not, individually or
in
the aggregate, reasonably be expected to have or result in a Material Adverse
Effect.
3.3 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 hereunder and thereunder have been duly authorized
by
all necessary action on the part of the Company and no further action is
required by the Company in connection therewith. Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company enforceable against the Company
in
accordance with its terms.
3.4 No
Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the
transactions contemplated hereby and thereby do not and will not
(a) 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, (b) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become
a
default) under, or give to others any rights of termination, amendment,
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 (c) 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 (assuming the accuracy of the Purchaser’s representations and warranties
and compliance by the Purchaser with its respective covenants as set forth
in
this Agreement), including federal and state securities laws and regulations
and
the rules and regulations of any self-regulatory organization to which the
Company or its securities are subject, 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 (b) and (c), such as would not, individually or in the aggregate,
reasonably be expected to have or result in a Material Adverse
Effect.
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3.5 Issuance
of the Securities. The Securities have been duly
authorized. The Initial Shares and Warrant, when issued and paid for
in accordance with the terms of this Agreement, and the Warrant Shares issuable
upon exercise of the Warrant when so issued and paid for in accordance with
the
terms of the Warrant, will be validly issued, fully paid and nonassessable,
and
free and clear of all Liens and charges and shall not be subject to preemptive
or similar rights. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock to be issued to
the
Purchaser upon exercise of the Securities. Assuming the continued
validity of the Purchaser’s representations and warranties contained in
Section 4, the offer, issuance and sale of the Securities to the
Purchaser pursuant to this Agreement and upon exercise of the Warrant are exempt
from registration requirements of the 0000 Xxx.
3.6 Capitalization. The
aggregate number of shares and type of all authorized, issued and outstanding
capital stock, options and other securities of the Company (whether or not
presently convertible into or exercisable or exchangeable for shares of capital
stock of the Company) as of the date hereof is set forth in
Schedule 3.6. All outstanding shares of capital stock are
duly authorized, validly issued, fully paid and nonassessable and have been
issued in compliance with all applicable securities laws. Except as
set forth in Schedule 3.6 and except for customary adjustments as a
result of stock dividends, stock splits, combinations of shares,
reorganizations, recapitalizations, reclassifications or other similar events,
as of the date hereof there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders). 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 such securities.
3.7 Answer
to all Inquires. The Company has answered all inquiries that the
Purchaser has made of it concerning the Company, its business and financial
condition, or any other matter relating to the operation of the Company and
the
offering and sale of the Initial Shares and Warrant. No written statement or
inducement that is contrary to the information conveyed to the Purchaser that
if
untrue would have a material effect on the Company’s business taken as a whole
has been made by or on behalf of the Company to the Purchaser.
3.8 Absence
of Litigation. Except as set forth in Schedule 3.8,
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, any of the Company’s officers or
directors in their capacities as such and 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 (a) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the Securities
or (b) could, if there were an unfavorable decision, individually or in the
aggregate, have or result in a Material Adverse Effect. To the
knowledge of the Company, no judgment, injunction, writ, award, decree or order
has been issued by any court or other governmental authority against the
Company.
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3.9 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.
3.10 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 relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, reasonably be expected to have or result
in a
Material Adverse Effect.
3.11 Transactions
with Affiliates and Employees. Except as set forth in Schedule
3.11, none of the officers or directors of the Company and, to the knowledge
of 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.
3.12 Title
to Assets. The Company and its Subsidiaries have valid title to
or leasehold rights for all real property that is material to the business
of
the Company and the Subsidiaries 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
disclosed in Schedule 3.12 or as do not, individually or in the
aggregate, materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries. Any real property
and facilities held under lease by the Company and its Subsidiaries are held
by
them under valid, subsisting and enforceable leases of which the Company and
the
Subsidiaries are in compliance; except as would not, individually or in the
aggregate, reasonably be expected to have or result in a Material Adverse
Effect.
3.13 Registration
Rights. Except as described in Schedule 3.13, as of
the date hereof the Company has not granted or agreed to grant to any Person
any
rights (including “piggy-back” registration rights) to have any securities of
the Company registered with the SEC or any other governmental authority that
have not been satisfied or waived.
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3.14 Form SB-2
Eligibility. The Company is eligible to register the resale of
its Common Stock for resale by the Purchasers under Form SB-2 promulgated
under the 0000 Xxx.
3.15 Disclosure. All
disclosures provided to the Purchaser regarding the Company, its business and
the transactions contemplated hereby, including the Schedules to this Agreement,
furnished by or on behalf of the Company are true and correct in all material
respects and do not contain any untrue statement of a material fact to the
extent of the Company’s knowledge. Except for the transactions
contemplated by this Agreement, no event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or
its
or their business, properties, prospects, operations or financial conditions,
which, under applicable law, rule or regulation, requires public disclosure
or
announcement by the Company but which has not been so publicly announced or
disclosed.
4. REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER. The Purchaser hereby represents
and warrants to the Company as follows as of the date hereof and the Closing
Date:
4.1 Organization;
Authority. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the Republic of
Korea. The Purchaser has the requisite corporate power and authority
to enter into and to consummate the transactions contemplated by the Transaction
Documents to which it is a party and otherwise to carry out its obligations
hereunder and thereunder. The execution, delivery and performance by
the Purchaser of the Transaction Documents to which it is a party have been
duly
authorized by all necessary action on the part of the Purchaser. Each
Transaction Document to which the Purchaser is a party has been (or upon
delivery will have been) duly executed by the Purchaser and, when delivered
by
the Purchaser in accordance with terms hereof, will constitute the valid and
legally binding obligations of the Purchaser, enforceable against it in
accordance with its terms.
4.2 The
Purchaser’s Status. At the time the Purchaser was offered the
Securities, it was, and at the date hereof it is, an “accredited investor” as
defined in Rule 501(a) under the 0000 Xxx. The Purchaser is not
a broker-dealer, or required to be registered as a broker-dealer, under
Section 15 of the 0000 Xxx. The Purchaser is not a U.S. person
within the meaning of Rule 902(k) of Regulation S under the 1933 Act
(“U.S. Person”), which term includes: (i) a natural person resident
in the United States; (ii) a partnership or corporation organized or
incorporated under the laws of the United States; (iii) an estate of which
any executor or administrator is a U.S. Person; (iv) a trust of which any
trustee is a U.S. Person (other than a trust of which any professional fiduciary
duty acting as trustee is a U.S. Person, if a trustee who is not a U.S. Person
has sole or shared investment discretion with respect to the trust assets,
and
no beneficiary of the trust (and no settler if the trust is revocable) is a
U.S.
Person); (v) an agency or branch of a foreign entity located in the United
States; (vi) a non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the benefit or account
of a U.S. Person; (vii) a discretionary account or similar account (other
than an estate or trust) held by a dealer or other fiduciary organized,
incorporated or (if an individual) resident in the United States; and
(viii) a partnership or corporation (A) organized or incorporated
under the laws of any foreign jurisdiction and (B) formed by a U.S. Person
principally for the purpose of investing in securities not registered under
the
1933 Act, unless it is organized or incorporated, and owned, by accredited
investors (as defined in Rule 501(a) under the 0000 Xxx) who are not
natural persons, estates or trusts. If the Purchaser is a trust, no
beneficiary of the trust is a U.S. Person.
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4.3 Experience
of the Purchaser; Substantial Risk of Loss. The 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, and the Purchaser
has had available such information with respect to the Company as the Purchaser
deems necessary or appropriate to make such evaluation and an informed
investment decision with respect thereto. The 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. The
Purchaser has discussed with its professional legal, tax and financial advisors,
to the extent it deemed appropriate, the suitability of the investment in the
Securities for its particular tax and financial situation.
4.4 Manner
and Place of Solicitation. The 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. The Purchaser has not
been
offered the Securities in the United States and at the time of execution of
this
Agreement is physically outside the United States.
4.5 No
Public Sale or Distribution; Investment Intent. The Purchaser is
acquiring the Securities in the ordinary course of business for its own account
for investment purposes only and not on behalf or for the benefit of any U.S.
Person or with a view towards, or for resale in connection with, the public
sale
or distribution thereof, and the Purchaser does not have a present intention
nor
a present arrangement to effect any distribution of the Securities to or through
any person or entity. Except as expressly contemplated by the
Transaction Documents, the sale and resale of the Securities has not been
pre-arranged with any U.S. Person or buyer in the United States, and the
Purchaser has no present plans to enter into any contract, undertaking,
agreement or arrangement for the distribution, resale, subdivision or
fractionalization of the Securities. In order to induce the Company to issue
and
sell the Securities subscribed for hereby, the Purchaser agrees that the Company
will have no obligation to recognize the ownership, beneficial or otherwise,
of
the Securities by anyone but the Purchaser. Notwithstanding the
foregoing, by making the representations herein, the Purchaser does not agree
to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to an effective registration statement or an exemption under the 0000
Xxx.
4.6 Information
Regarding the Company. The Purchaser has been furnished with or
has had access to all publicly available documents and records of the Company
so
as to allow the Purchaser to understand and evaluate such records and documents
fully. In addition, the Purchaser has received from the Company such
other information concerning its operations, financial condition and other
matters as the Purchaser has requested and considered all factors the Purchaser
deems material in deciding on the advisability of investing in the
Securities. In evaluating the suitability of an investment in the
Company, the Purchaser has not been furnished and has not relied upon any
representations or other information (whether oral or written) other than as
set
forth herein or in the publicly available documents and records of the
Company. The Purchaser has not relied on any projections in making an
investment decision with respect to the Securities.
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4.7 No
Distribution. The Purchaser has not distributed the records and
documents the Company provided to the Purchaser under or in connection with
this
Agreement to any other Person.
4.8 Information
Regarding the Purchaser. All information which the Purchaser has
provided to the Company concerning itself, its financial position, and the
knowledge of financial and business matters of the person making the investment
decision on behalf of the Purchaser, including all information
contained herein, is true and complete as of the date of this Agreement and
will
be true and complete as of the Closing Date. If in any respect the
representations and warranties of the Purchaser contained herein and all other
information that the Purchaser has provided to the Company shall not be true
and
accurate at any time prior to the Closing Date, the Purchaser agrees to give
prompt written notice of such fact to the Company, specifying which
representations, warranties or information are not true and accurate and the
reasons therefor. The Purchaser understands that the offering and
sale of the Securities is intended to be exempt from registration under the
1933
Act, by virtue of Regulation D and/or Regulation S of the 1933 Act, and
from applicable U.S. or foreign federal or state securities laws based, in
part,
upon the representations, warranties and agreements contained in this Agreement
and that the Company may rely on such representations, warranties and agreements
in connection therewith.
4.9 Regulation
S Compliance. The address set forth in Section 7.2 of this
Agreement is the Purchaser’s true and correct residence or principal place of
business and the Purchaser has no present intention of becoming a resident
of
any state or other jurisdiction of the United States or moving its principal
place of business within the United States. The Purchaser acknowledges and
agrees that until the expiration of the one-year distribution compliance period
within the meaning of Rule 902(f) of Regulation S under the 1933 Act,
the Purchaser will only resell the Securities in compliance with the provisions
of Regulation S, pursuant to registration under the 1933 Act or pursuant to
an exemption from registration. The Purchaser agrees not to engage in
hedging transactions with regard to the Securities unless in compliance with
the
1933 Act.
5. COVENANTS
AND AGREEMENTS.
5.1 Transfer
Restrictions.
(a) The
Purchaser covenants that the Securities will only be disposed of pursuant to
an
effective registration statement under the 1933 Act or pursuant to an available
exemption from the registration requirements of the 1933 Act, and in compliance
with any applicable state securities laws. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144(k) under the 1933 Act,
the Company may require the transferor 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 under
the 1933 Act. Notwithstanding the foregoing, the Company hereby
consents to and agrees to register on the books of the Company without any
such
legal opinion, any transfer of Securities by the Purchaser to an Affiliate
of
the Purchaser, provided that the transferee certifies to the Company
that it is an “accredited investor” as defined in Rule 501(a) promulgated
under the 1933 Act.
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(b) The
Purchaser agrees to the imprinting, except as otherwise permitted by
Section 5.1(c), of a legend in substantially the following form on
any certificate evidencing Securities:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE [AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF] HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS
AMENDED (THE “SECURITIES ACT”) OR ANY OTHER U.S. OR FOREIGN SECURITIES LAWS,
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, HYPOTHECATED OTHERWISE TRANSFERRED
UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE U.S. AND FOREIGN
SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
COMPLIANCE WITH APPLICABLE U.S. AND FOREIGN SECURITIES LAWS. THE
COMPANY MAY REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
TO THE EFFECT THAT ANY PROPOSED OFFER, SALE, HYPOTHECATION OR OTHER TRANSFER
IS
IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS. HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED BY
THIS CERTIFICATE [AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF] MAY NOT
BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
(c) Certificates
evidencing Securities shall not be required to contain the legend set forth
in
Section 5.1(b) or any other legend if such Securities are
eligible for sale under Rule 144(k) under the 1933 Act or if such legend is
not required under applicable requirements of the 1933 Act (including judicial
interpretations and pronouncements issued by the Staff of the
SEC). Following such time as a legend is no longer required for
certain Securities, the Company will, no later than ten Trading Days following
the delivery by the Purchaser to the Company of a legended certificate
representing such Securities, deliver or cause to be delivered to the Purchaser
a certificate representing such Securities that is free from all restrictive
and
other legends.
(d) The
Purchaser agrees that stop transfer instructions have been or will be placed
with respect to the Securities so as to restrict the resale, pledge,
hypothecation or other transfer thereof and that the Company’s stock transfer
agent will not be required to accept for registration of transfer any
Securities, except upon presentation of evidence satisfactory to the Company
and
the transfer agent that the restrictions set forth in this Agreement have been
complied with. The Purchaser also agrees that stop transfer
instructions described in the preceding sentence will be placed with respect
to
any new certificate representing the Securities upon presentment by the
Purchaser of a certificate for transfer.
11
5.2 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 be
required to fulfill its obligations in full under the Transaction
Documents.
(b) The
Company shall (i) in the time and manner required by each Trading Market,
prepare and file with such Trading Market an additional shares listing
application covering all of the shares of Common Stock issued or issuable under
the Transaction Documents, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing on each 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 each such
Trading Market.
5.3 Reports
and Filing. Upon execution of this Agreement, the Company shall
fully cooperate with the Purchaser in preparing, drafting and filing the reports
the Purchaser must file with the relevant government authorities, agencies,
offices and other institutions in connection with the acquisition of foreign
securities by the Purchaser. The Purchaser shall fully cooperate with the
Company in preparing, drafting and filing any reports and documents pursuant
to
the relevant securities laws and regulations.
5.4 General
Indemnity. The Company agrees to indemnify and hold harmless the
Purchaser and its directors, officers, affiliates, agents, successors and
assigns from an against any and all losses, liabilities, deficiencies, costs,
damages and expenses (including, without limitation, reasonable attorneys’ fees,
charges and disbursements) incurred by the Purchaser as a result of any
inaccuracy in or breach of the representations, warranties or covenants made
by
the Company herein. The Purchaser agrees to indemnify and hold
harmless the Company and its directors, officers, affiliates, agents, successors
and assigns from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable
attorneys’ fees, charges and disbursements) incurred by the Company as a result
of any inaccuracy in or breach of the representations, warranties or covenants
made by such the Purchaser herein.
5.5 Compliance
with Laws. So long as the Purchaser beneficially owns any
Securities, the Company will use reasonable efforts to comply with all
applicable laws, rules, regulations, orders and decrees of all governmental
authorities, except to the extent non-compliance (in one instance or in the
aggregate) would not have a Material Adverse Effect.
5.6 Disbursement
of Funds. At the Closing, the Purchaser shall transfer cash in an
amount equal to the Purchase Price to a separate account of the Company in
the
manner specified in Section 2.3(b).
12
5.7 Antidilution.
(a) If,
at any time prior to the second anniversary of the Closing Date, the Company
issues Additional Shares of Stock at an effective net price to the Company
(the
“Diluted Price”) that is less than the Adjusted Purchase Price, then
within ten Business Days of such issuance, the Company shall issue to the
Purchaser an additional number of shares of Common Stock equal to the Make-Whole
Number. No shares shall be issued pursuant to this
Section 5.7 upon the issuance by the Company of warrants or options
to purchase Common Stock or preferred stock, and any adjustment in connection
with such options or warrants shall be made at the time such options or warrants
are exercised and the Company issues Common Stock or preferred stock, as
applicable, to the holder thereof (provided that such exercise occurs
prior to the second anniversary of the Closing Date). Notwithstanding
the foregoing or any other provision hereof to the contrary, the Company shall
not be obligated to issue any Common Stock pursuant to this Section 5.7
unless the Purchaser purchases all of the Initial Shares as provided
herein.
(b) For
purposes of this Section 5.7, the following defined terms shall have
the following meanings:
“Additional
Shares of Stock” shall mean all shares of Common Stock and/or preferred
stock issued by the Company, other than: (1) shares of Common Stock issued
upon
conversion of any shares of preferred stock of the Company; (2) shares of Common
Stock and/or preferred stock and/or warrants and/or options (and the Common
Stock or preferred stock issued upon the exercise of such warrants and/or
options) issued before or after the Closing Date to directors, officers,
employees, consultants and other advisors of the Company and which are approved
by at least a majority of the Board of Directors of the Company; and (3) shares
of Common Stock or preferred stock or other rights issued in connection with
any
stock dividends, combinations, splits, recapitalizations and the
like.
“Adjusted
Initial Shares” means the Initial Shares, as adjusted by the Company for any
stock dividend, combination, split, recapitalization and the like with respect
to the Initial Shares occurring after the Closing Date.
“Adjusted
Purchase Price” means US$1.40 per share of Common Stock, as
adjusted by the Company for any stock dividend, combination, split,
recapitalization and the like with respect to the Initial Shares occurring
after
the Closing Date.
“Aggregate
Consideration” shall mean: (1) to the extent it consists of cash, the net
amount of cash received by the Company after deduction of any underwriting
or
similar commissions, compensation or concessions paid or allowed by the Company
in connection with such issue or sale; (2) to the extent it consists of property
other than cash, the fair value of such property as determined by the Board
of
Directors of the Company; and (3) if shares of Common Stock or preferred stock
are issued or sold together with other stock or securities or other assets
of
the Company for a consideration that covers both, the portion of the
consideration so received that may be determined by the Board of Directors
of
the Company to be allocable to such shares of Common Stock or preferred
stock.
13
“Make-Whole
Number” means (1)
the quotient of the Purchase Price divided by the Diluted Purchase Price minus
(2) the Adjusted Initial Shares.
5.8 AMEX
Listing. Following the Closing, the Company shall take
commercially reasonable efforts to cause the Common Stock to be listed for
trading on the American Stock Exchange within three years from the Closing
Date.
6. CONDITIONS.
6.1 Conditions
Precedent to the Obligations of the Purchaser. The obligation of
the Purchaser to acquire Securities at the Closing is subject to the
satisfaction or waiver by the Purchaser, at or before the Closing, of each
of
the following conditions:
(a) Representations
and Warranties. The representations and warranties of the Company
contained herein shall be true and correct in all material respects as of the
date when made and as of the Closing as though made on and as of such date
(except for those representations and warranties that speak only as of a
specified date, which shall be true and correct as of such specified
date);
(b) Performance. The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to
the
Closing;
(c) No
Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;
(d) Material
Adverse Changes. Since the date of execution of this Agreement,
no event or series of events shall have occurred that reasonably would
reasonably be expected to have or result in a Material Adverse Effect;
and
(e) Stockholder
Approval. The issuance of the Initial Shares and the Warrant
shall have been approved by the holders of a majority of the shares of the
outstanding Common Stock in accordance with all applicable requirements of
the
Delaware General Corporation Law and the 0000 Xxx.
6.2 Conditions
Precedent to the Obligations of the Company. The obligation of
the Company to sell Securities at the Closing is subject to the satisfaction
or
waiver by the Company, at or before the Closing, of each of the following
conditions:
(a) Representations
and Warranties. The representations and warranties of the
Purchaser contained herein shall be true and correct in all material respects
as
of the date when made and as of the Closing Date as though made on and as of
such date;
14
(b) Performance. The
Purchaser shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Purchaser at or
prior to the Closing;
(c) No
Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;
(d) No
Material Adverse Effect. Since the date of execution of this
Agreement, no event or series of events shall have occurred that reasonably
would reasonably be expected to have or result in a Material Adverse Effect;
and
(e) Stockholder
Approval. The issuance of the Initial Shares and the Warrant
shall have been approved by the holders of a majority of the shares of the
outstanding Common Stock in accordance with all applicable requirements of
the
Delaware General Corporation Law and the 1934 Act.
7. MISCELLANEOUS.
7.1 Entire
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.
7.2 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 facsimile or e-mail at the facsimile number
or
e-mail address specified in this Section 7.2 prior to 18:30 (New York
City time) on a Trading Day, (b) the Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at
the
facsimile number specified in this Agreement later than 18:30 (New York City
time) on any date and earlier than 24:00 (New York City time) on such date,
(c) the Trading Day following the date of mailing, if sent by 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 follows:
|
If
to the
Company:
|
0000
Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx,
XX 00000
Attn: Tae
Heum
Jeong
Fax
No.: (000)
000-0000
E-Mail:
xxx@xxxxxx.xxx
|
|
With
a copy to:
|
Xxxxxxxxxx
& Xxxxx LLP
0000
Xxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx,
X.X. 00000
Attn: Xxxx
Xxx
Fax
No.: (000) 000-0000
E-Mail:
xxxx@xxxxxxxxxx.xxx
|
|
If
to the Purchaser:
|
Kumho
Investment Bank
Premier
Place Building
00
Xxxxx-Xxxx
Xxxx-Xx,
Xxxxx, 000-000, Xxxxx
Fax
No.: 00-0-0000-0000
Email:
xxxxx@xxxxxxxxxx.xxx
Attn: Jong
Xxx Xxx, CEO
|
or
such
other address as may be designated in writing hereafter, in the same manner,
by
such Person.
15
7.3 Amendments;
Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed by the Company. 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 either party to exercise
any right hereunder in any manner impair the exercise of any such
right.
7.4 Construction. 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. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules
of
strict construction will be applied against any party.
7.5 Successors
and Assigns. Except as otherwise expressly provided herein, the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their successors and permitted assigns.
7.6 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 that each Indemnitee is an intended third-party
beneficiary of Section 5.4.
7.7 GOVERNING
LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
REPUBLIC OF KOREA WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF THE SEOUL CENTRAL DISTRICT COURT OF THE
REPUBLIC OF KOREA, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN (INCLUDING WITH RESPECT 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, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF 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 WARRANT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND THE PURCHASER HEREBY
WAIVE ALL RIGHTS TO A TRIAL BY JURY.
16
7.8 Survival. The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery and/or exercise of the Securities for
a
period of one year; provided, however, that if the Purchaser sells or
transfers 50% or more the Initial Shares to any third party, the
representations, warranties and covenants made by the parties under this
Agreement immediately shall cease to be effective.
7.9 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, 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 signature page
were an original thereof.
7.10 Severability. If
any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
7.11 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, 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 and customary and reasonable
indemnity, if requested. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Securities.
17
7.12 Remedies. In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, the Purchaser 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 described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of
any such obligation the defense that a remedy at law would be
adequate.
7.13 Adjustments
in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the holder thereof
to
receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per
share
shall be amended to appropriately account for such event.
[Signature
page follows]
18
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
|
The
Company
|
||
|
By:
|
/s/ Xxxxx X. Xxx | |
|
Name:
|
Xxxxx X. Xxx | |
|
Title:
|
CEO
|
|
|
The
Purchaser
|
||
|
Kumho
Investment Bank
|
||
|
By:
|
/s/ Xxxxxxxx Xxx | |
|
Name:
|
Xxxxxxxx
Xxx
|
|
|
Title:
|
General
Manager
|
|
[Signature
page to Securities Purchase Agreement]
19
