SECURITIES PURCHASE AGREEMENT
Exhibit 99.1
This
Securities Purchase Agreement (this “Agreement”) is dated
as of December 1, 2009, by and among VLOV, Inc., a Nevada corporation (the
“Company”), and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and
collectively, the “Purchasers”);
and
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, and Regulation D promulgated thereunder
(“Regulation
D”), 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:
“Action” shall have
the meaning ascribed to such term in Section 3.1(j).
“Affiliate” means a
Person that, directly or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person
specified.
“Aggregate Purchase
Price” shall have the meaning ascribed to such term in Section
2.1.
"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.
“Closing” shall have
the meaning ascribed to such term in Section 2.1.
“Closing Date” shall
have the meaning ascribed to such term in Section 2.1.
“Commission” means the
United States Securities and Exchange Commission.
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“Common Shares” means
the shares of Common Stock delivered to the Purchasers at the Closing in
accordance with Section 2.2(a) hereof.
“Common Stock” means
the common stock of the Company, par value $0.00001 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.
“Control” (including
the terms “Controlled
by” and “under
common Control with”) means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise.
“Disclosure Schedules”
shall mean the schedules attached hereto, including the schedules as described
in Sections 3.1 and 3.2.
“Effective Date” means
the date that the Registration Statement filed by the Company pursuant to
Section 4.18 is first declared effective by the Commission.
“Escrow Agent” means
Xxxxxxxxxx & Xxxxx LLP.
“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
the Purchase Price 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(q).
“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
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“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, and (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.
“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(z).
“Intellectual Property
Rights” shall have the meaning ascribed to such term in Section
3.1(o).
“Liens” means any
mortgage, lien, pledge, charge, restriction, security interest, encumbrance,
right of first refusal, preemptive right, option, lease, sublease or other
restriction or encumbrance of any kind.
“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).
“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.
“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.
“Purchase Price”
means, as to each Purchaser, the aggregate amount to be paid for the number of
Common Shares purchased hereunder as specified below such Purchaser’s name on
the signature page of this Agreement and next to the heading “Purchase Price,”
in United States dollars and in immediately available funds.
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“Purchaser Party”
shall have the meaning ascribed to such term in Section 4.10.
“Registration
Statement” means a registration statement meeting the requirements set
forth in Section 4.18.
“Required Approvals”
shall have the meaning ascribed to such term in Section 3.1(e).
"Required Holders"
means the Purchasers holding a majority of the Common Shares.
“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
Common Shares and the Warrants, and the Warrant Shares.
“Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“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
$2.86 per share of Common Share.
“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 and
such knowledge that the management of the Company would have obtained after a
reasonable inquiry or investigation under the circumstances.
“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 NYSE Amex Equities, the Nasdaq Capital
Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange or the OTC Bulletin Board.
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“Transaction
Documents” means this Agreement, the Warrants, the Escrow 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
Transfer Online, the current transfer agent of the Company, with a mailing
address of 000 XX Xxxxx Xxxxxx, 0xx Xxxxx, Xxxxxxxx, XX 00000 and a facsimile
number of (000) 000-0000, and any successor transfer agent of the
Company.
“Warrants” means,
collectively, the Common Stock purchase warrants delivered to the Purchasers at
the Closing in accordance with Section 2.2(a) hereof, with each Warrant
exercisable immediately for one share of Common Stock and having a term of
exercise equal to three years and an exercise price equal to $3.43, subject to
adjustment therein, in the form of Exhibit B attached
hereto.
“Warrant Shares” means
the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE
II
PURCHASE
AND SALE
2.1 Closing. Upon
the terms and subject to the conditions set forth herein, the Company agrees to
sell, and the Purchasers agree, severally and not jointly, to purchase (i) the
number of Common Shares set forth opposite each Purchaser's name on the
Purchaser signature page attached hereto at a per share purchase price equal to
the Stated Value, for up to an aggregate of 699,301 Common Shares with an
aggregate Purchase Price of up to $2,000,000.86 (the “Aggregate Purchase
Price”), and (ii) the number of Warrants as determined pursuant to
Section 2.2(a)(iv) for no additional consideration, up to an aggregate of
349,651 Warrants. Subject to the satisfaction or waiver of the
conditions set forth in Section 2.2, the purchase and sale of
the Common Shares and Warrants shall take place at a closing (the
"Closing") on
or before November 25, 2009, provided that the Company may, at its sole
discretion, extend the Closing to December 1, 2009 (the “Closing
Date”). On or before the Closing Date, each Purchaser shall
deliver to the Escrow Agent via wire transfer or a certified check of
immediately available funds equal to their Purchase Price, and the Company shall
deliver to each Purchaser their respective Common Shares and Warrants as
determined pursuant to Section 2.2(a)(iv) and the other items set forth in
Section 2.2(a) 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 the Escrow Agent with offices located at 00000 Xxxxxxxx Xxxx., Xxxxx
000, Xxx Xxxxxxx, XX 00000, or such other location as the parties shall mutually
agree.
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2.2
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Deliveries.
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(a) On
the Closing Date, the Company shall deliver or cause to be delivered to each
Purchaser the following:
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(i)
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this
Agreement duly executed by the
Company;
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(ii) a
legal opinion of the Company’s counsel addressed to the Purchasers, in
substantially the form of Exhibit B attached
hereto;
(iii) an
irrevocable instruction letter signed by the Company’s Chief Executive Officer
instructing the Transfer Agent to issue a certificate evidencing a number of
Common Shares equal to such Purchaser’s Purchase Price divided by the Stated
Value, registered in the name of such Purchaser;
(iv) 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 Purchase Price divided
by the Stated Value, which warrant shall have an exercise price equal to $3.43,
subject to adjustment therein;
(v) the
Escrow Agreement duly executed by the Company;
(vi) an
officer’s certificate from the Company’s 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
(vii) a
Good Standing Certificate of 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 Purchase Price by wire transfer or a certified check of immediately
available funds to the Escrow Agent pursuant to the instructions set forth on
Exhibit C
attached hereto;
(iii) the
Escrow Agreement duly executed by such Purchaser; and
(iv) the
Confidential Investor Questionnaire attached as Exhibit D hereto duly
completed and executed by such Purchaser.
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2.3
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Closing
Conditions.
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(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 in all
material respects; and
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(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 shall have been performed in all material
respects;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;
(iv) the
Purchasers shall be satisfied in their sole discretion with the results of their
due diligence investigations;
(v) there
shall have been no Material Adverse Effect with respect to the Company since the
date hereof; and
(vi) 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).
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, 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.
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(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, its Board of Directors or its stockholders in connection therewith
other than in connection with the 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.
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(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, and (iii) 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”);
at or prior to the Closing.
(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 Documents. The Common Shares and Warrant
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
Common Shares and Warrant Shares.
(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 hereof. Except as
a result of the purchase and sale of the Securities and except as set for on
Schedule
3.1(g), 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. 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.
(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 received a valid extension of such time of filing and
has
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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.
(j) Litigation. There
is no Proceeding 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 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.
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(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 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.
-11-
(p) 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 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.
(q) 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.
(r) 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.
-12-
(s) 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.
(t) Registration
Rights. Other than the registration rights set forth herein of
the Purchasers and the Persons set forth on Schedule 3.1(t), no
Person has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
(u) 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.
(v) 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 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 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.
(w) Solvency. Based
on the consolidated financial condition of the Company as of the Closing Date
before 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(w) 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 $100,000
(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 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 $100,000 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.
-13-
(x) 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.
(y) 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.
(z) 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.
(aa) 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
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.
(bb) 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.
-14-
(cc) 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.
(dd) Employee
Benefits. Except as set forth on Schedule 3.1(dd),
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.
(ee) Correctness of
Representations and Information. The Company represents that the
representations and warranties of this Section 3.1 are true and correct as of
the date hereof and, unless the Company otherwise notifies the Purchasers prior
to the Closing Date, shall be true and correct as of the Closing
Date.
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 to which it is a party and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of the Transaction
Documents to which it is a party and performance by such Purchaser of the
transactions contemplated by the Transaction Documents to which it is a party
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.
-15-
(b) Investment
Representation. Such Purchaser is purchasing the Securities
for its own account for investment and not with a view to distribute or sell in
violation of the Securities Act or any state securities laws or rules and
regulations promulgated thereunder. Such Purchaser has been advised
and understands that neither the Common Shares, the Warrants, nor the Warrant
Shares have been registered under the Securities Act or under the “blue sky”
laws of any jurisdiction and may be resold only if registered pursuant to the
provisions of the Securities Act or if an exemption from registration is
available, except under circumstances where neither such registration nor such
an exemption is required by law.
(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 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 Purchaser is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act, and is not affiliated with
any broker-dealer registered under Section 15 of the Exchange Act.
(d) Experience of Such
Purchaser. Such Purchaser, either alone or together with its
representatives (who satisfy all of the affiliation, financial experience,
acknowledgment and disclosure conditions set forth under Rule 501(h) of
Regulation D), 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. 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).
-16-
(g) Certain
Fees. No brokerage or finder’s fees or commissions are or will
be payable by the Purchasers 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 3.2(g) 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 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.
(i) No Government
Review. Such Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits thereof.
(j) Legends. The Company
shall issue the Securities to such Purchaser without any legend except as
described in Section 4.1(b) below. Such Purchaser covenants that, in
connection with any transfer of Common Shares or Warrant Shares by such
Purchaser pursuant to the Registration Statement, it will comply with the
applicable prospectus delivery requirements of the Securities Act, provided that
copies of a current prospectus relating to such effective registration statement
are or have been supplied to such Purchaser.
(k) Rule
144. Such Purchaser understands that there is no public
trading market for the Warrants, that none is expected to develop, and that the
Common Shares and the Warrants must be held indefinitely unless and until such
Common Shares and Warrants, or if applicable, the Warrant Shares received upon
exercise thereof are registered under the Securities Act or an exemption from
registration is available. Such Purchaser has been advised or is
aware of the provisions of Rule 144 promulgated under the Securities Act,
including the limitations on the availability thereof.
-17-
(l) Reliance by the
Company. Such Purchaser
understands that the Securities are being offered and sold in reliance on a
transactional exemption from the registration requirements of federal and state
securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments and
understandings of such Purchaser set forth herein in order to determine the
applicability of such exemptions and the suitability of such Purchaser to
acquire the Securities, including the Warrant Shares issuable
upon exercise thereof.
(m) Correctness of
Representations and Information. Such Purchaser represents that the
representations and warranties of this Section 3.2 and the information provided
by such Purchaser on the signature page hereof are true and correct as of the
date hereof and, unless such Purchaser otherwise notifies the Company prior to
the Closing Date, shall be true and correct as of the Closing Date.
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. As a condition of transfer, any such transferee
shall agree in writing to be bound by the terms of this Agreement and shall have
the rights of a Purchaser under this 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. 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, 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 Section 4.18 hereof, 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.
-18-
(c) Certificates
evidencing the Common Shares or Warrant 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 Common Shares or Warrant 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. 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 five Trading Days
following the delivery by a Purchaser to the Company or the Transfer Agent of a
certificate representing the Common Shares or Warrant Shares, as applicable,
issued with a restrictive legend, 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 the Common Shares or Warrant Shares subject to legend removal hereunder
shall be transmitted by the Transfer Agent to the Purchaser as directed by such
Purchaser.
(d) 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 the 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 Warrant 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.
-19-
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.
4.5 Exercise
Procedures. The form of Notice of Exercise included in the
Warrants sets forth the totality of the procedures required of the Purchasers in
order to exercise the Warrants. No additional information or
instructions shall be required of the Purchasers to exercise their
Warrants. The Company shall honor exercises of the Warrants and shall
deliver Warrant 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 fourth
Trading Day immediately following the Closing Date, issue a Current Report on
Form 8-K, disclosing the material terms of the Agreement and the transactions
contemplated hereby and thereby and including the Transaction Documents as
exhibits thereto as required by the Commission.
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.
-20-
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.
4.9 Use of
Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes.
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, agents, successors and
permitted assigns (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 to which it is a party 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
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
to which it is a party or from such Purchaser Party’s fraud, gross negligence,
willful misconduct or malfeasance.
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4.11 Reservation and Listing of
Securities. 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.
4.12 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 applicable 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.
4.13 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.
4.14 Registration
Rights.
(a) “Mandatory
Registration”
(i) No
later than December 17, 2009 (the “Required Filing
Date”), the Company shall file a Registration Statement on Form S-1 (or
any similar or successor forms promulgated by the Commission) to register the
Registrable Securities (as defined herein) (the actual date of such filing, the
“Filing Date”),
and use its best efforts to cause the Registration Statement to be declared
effective by the date (the “Required Effective
Date”) which is not later than the earlier of (x) ninety (90) calendar
days after the Required Filing Date (or one hundred fifty (150) calendar days in
the event the Registration Statement receives a “full review” or the Commission
issues comments related to Rule 415) or (y) three (3) Business Days after oral
or written notice to the Company or its counsel from the Commission that it may
be declared effective; provided that the
amount of Registrable Securities shall be limited to not less than 100% of the
maximum amount (“Rule
415 Amount”) of the Registrable Securities which may be included in a
single registration statement without exceeding registration limitations imposed
by the Commission pursuant to Rule 415 of the Securities Act; for purposes
hereof, the term “Registrable Securities” shall include the Common Shares and
Warrant Shares, as well as the shares of Common Stock issued to the Persons set
forth on Schedule
3.1(t) (or issuable from conversion or exercise of any securities of the
Company held by such Persons) as of the Required Filing
Date;
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(ii) the
Company will pay all expenses associated with the registration, including,
without limitation, filing and printing fees, and the Company’s counsel and
accounting fees and expenses, costs, if any, associated with clearing the
Registrable Securities for sale under applicable state securities
laws;
(iii) the
Company shall have the right to delay, including, without limitation, by
delaying the filing or effectiveness of the Registration Statement, the
disclosure of material, non-public information concerning the Company the
disclosure of which at the time is not, in the reasonable opinion of the Company
in the best interest of the Company and, as applicable, suspend sales of
Registrable Securities under an effective registration statement or suspend
trading of its securities on any exchange; and
(iv) the
Company will use commercially reasonable efforts to cause the Registration
Statement to remain continuously effective for a period (the “Effectiveness
Period”) that will terminate upon the earlier of (x) the date on which
all the Registrable Securities covered by the Registration Statement have been
sold or (y) the date on which all the Registrable Securities covered by the
Registration Statement may be sold immediately without registration under the
Securities Act and without volume restrictions pursuant to Rule 144(b), as
determined by reputable United States securities counsel to the Company pursuant
to a written opinion letter to such effect, addressed and acceptable to the
Transfer Agent and the affected Purchasers, and will advise the
Purchasers when the Effectiveness Period has expired with respect to the
Purchasers.
(v) If
(A) the Registration Statement is not filed on or before the Required Filing
Date, (B) the Registration Statement is not declared effective on or before the
Required Effective Date, (C) the Registration Statement is not declared
effective within three (3) Business Days after receipt by the Company or its
attorneys of a written or oral communication from the Commission that the
Registration Statement will not be reviewed or that the Commission has no
further comments, or (D) the Registration Statement is declared effective but
shall thereafter cease to be effective for a period of time which shall exceed
25 days in the aggregate per year (defined as a period of 365 days commencing on
the date the Registration Statement is declared effective) or more than 15
consecutive days at any one time (each such event referred to in clauses A
through D of this Section 4.14(a)(v), a “Non-Registration
Event”), then the Company shall deliver to the holder of Registrable
Securities, as liquidated damages (“Liquidated Damages”),
an amount equal to one percent (1.0%) of the aggregate Purchase Price of the
Securities owned of record by such holder and an additional one percent (1.0%)
of the aggregate Purchase Price of the Securities owned of record by such holder
for each subsequent thirty (30) day period (pro rata for any period less than
thirty days) which are subject to such Non-Registration Event, but in no event
shall Liquidated Damages exceed 10.0% of the Purchase Price. The
Company must pay the Liquidated Damages in cash. The Liquidated
Damages must be paid on the first Business Day immediately following the
Non-Registration Event and on each 30th day
thereafter or shorter part thereof for which Liquidated Damages are payable.
Notwithstanding the foregoing, the Company shall not be liable to any Purchaser
under this Section 4.14(a)(v) for any events or delays occurring as a
consequence of the acts or omissions of such Purchaser contrary to the
obligations undertaken by the Purchasers in this Agreement.
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(b) Purchaser
Information. Each Purchaser shall (A) furnish to the Company such
information regarding itself, the Registrable Securities, other securities of
the Company held by it and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably requested by the Company to effect
and maintain the effectiveness of the Registration Statement, (B) execute such
documents in connection with the Registration Statement as the Company may
reasonably request, and (C) immediately discontinue disposition of Registrable
Securities pursuant to any registration statement upon notice from the Company
of (x) the issuance of any stop order or other suspension of effectiveness of
the Registration Statement by the Commission, or the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
by the applicable regulatory authorities or (y) the happening of any event, as
promptly as practicable after becoming aware of such event, as a result of which
the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading or
(z) the failure of the prospectus included in the Registration Statement,
as then in effect, to comply with the requirements of the Securities Act until
the Purchaser’s receipt of a supplemented or amended prospectus or receipt of
notice that no supplement or amendment is required.
(c) Indemnification and
Contribution.
(i) In
the event of a registration of any Registrable Securities under the Securities
Act pursuant to this Section 4.14, the Company will, to the extent permitted by
law, indemnify and hold harmless each Purchaser, its officers, directors and
other person, if any, who controls such Purchaser within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such Purchaser or such controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances when made, and will subject to the
provisions of Section 4.14(c)(iii) reimburse such Purchaser and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
such Purchaser or any such controlling person to the extent that any such
damages arise out of or are based upon an untrue statement or omission made in
any preliminary prospectus if (i) such Purchaser failed to send or deliver a
copy of the final prospectus delivered by the Company to such Purchaser with or
prior to the delivery of written confirmation of the sale by such Purchaser to
the person asserting the claim from which such damages arise, (ii) the final
prospectus would have corrected such untrue statement or alleged untrue
statement or such omission or alleged omission, or (iii) to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by any Purchaser or any controlling person
in writing
specifically for use in the Registration Statement or
prospectus.
-24-
(ii) In
the event of a registration of any of the Registrable Securities under the
Securities Act pursuant to this Section 4.14, each Purchaser severally but not
jointly will, to the extent permitted by law, indemnify and hold harmless the
Company, and each person, if any, who controls the Company within the meaning of
the Securities Act, each officer of the Company who signs the Registration
Statement, and each director of the Company, against all losses, claims, damages
or liabilities, joint or several, to which the Company or such officer, director
or controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and each such officer, director and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that such Purchaser will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Purchaser, as such, furnished in writing to the Company by such Purchaser
specifically for use in the Registration Statement or prospectus, and provided,
further, however, that the liability of such Purchaser hereunder shall be
limited to the net proceeds actually received by such Purchaser from the sale of
Registrable Securities covered by the Registration Statement.
(iii) Promptly
after receipt by an indemnified party hereunder of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified party other
than under this Section 4.14(c)(iii) and shall only relieve it from any
liability which it may have to such indemnified party under this Section
4.14(c)(iii), except and only if and to the extent the indemnifying party is
prejudiced by such omission. In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 4.14(c)(iii) for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party,
the indemnified parties, as a group, shall have the right to select one separate
counsel and to assume such legal defenses and otherwise to participate in the
defense of such action, with the reasonable expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
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(iv) In
order to provide for just and equitable contribution in the event of joint
liability under the Securities Act in any case in which either (i) a Purchaser,
or any controlling person of a Purchaser, makes a claim for indemnification
pursuant to this Section 4.14(c) but it is judicially determined (by the entry
of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 4.14(c) provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of such
Purchaser or such controlling person in circumstances for which indemnification
is not provided under this Section 4.14(c); then, and in each such case, the
Company and such Purchaser will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from
others) in such proportion so that such Purchaser is responsible only for the
portion represented by the percentage that the public offering price of its
securities offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, provided,
however, that, in any such case, (y) such Purchaser will not be required to
contribute any amount in excess of the public offering price of all such
securities sold by it pursuant to such registration statement; and (z) no person
or entity guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
ARTICLE
V
MISCELLANEOUS
5.1 Termination. This
Agreement may be terminated by the Company without any obligations if the
Closing has not been consummated on or before the Closing Date; provided, however, that such
termination will not affect the right of any party to xxx for any breach by the
other party (or parties). This Agreement may be terminated by the
Purchasers if they are not satisfied in their sole discretion with the results
of their due diligence investigations.
5.2 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.
5.3 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.
-26-
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 facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (Las Vegas, Nevada 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. (Las Vegas, Nevada 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 Required Holders 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 or its rights to acquire the Securities, including, but not
limited to the registration rights set forth in Section 4.18, provided that such
transferee agrees to be bound, with respect to the transferred Securities, by
the provisions of the Transaction Documents that apply to the
Purchasers.
5.8 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.
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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
Nevada, 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 Las Vegas,
Nevada. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Las Vegas,
Nevada, 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, 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. Sections
3.1, 3.2, Article IV, Sections 5.7, 5.9, 5.10 and 5.13 through 5.16 shall
survive the Final 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 an exercise of the Warrants, the Purchaser shall be
required to return any shares of Common Stock subject to any such rescinded
exercise notice.
-28-
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 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 of the Transaction Documents to which it is a party. For
reasons of administrative convenience only, Purchasers and their respective
counsel have chosen to communicate with the Company through the Escrow
Agent. The Escrow Agent does not represent the Purchasers. 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.
-29-
5.18 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.
5.19 Construction. Whenever
required by the context of this Agreement, the singular shall include the plural
and the plural shall include the singular. The parties agree that
each of them and/or their respective counsel has reviewed and had an opportunity
to revise the Transaction Documents to which they are a party 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 to which they are a party or any amendments
hereto.
5.20 WAIVER 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)
-30-
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.
|
VLOV,
INC.
|
Address for Notice:
No
0000-0000 Xxxxxxxxxx Xxxx
|
|
By:__________________________________________
Name: Xxxxxxxx
Xx
Title: Chief
Executive Officer
With
a copy to (which shall not constitute notice):
|
Shishi
City, Fujian Province
People’s
Republic of China
Fax: x00-000-00000000
|
|
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]
-31-
[PURCHASER
SIGNATURE PAGES TO 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):
Purchase
Price:________________________________________
Common
Shares:______________________________________
Warrant
Shares:______________________________________
Social
Security/EIN
Number: _________________________________
-32-
