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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Among
HAWKER PACIFIC AEROSPACE
and
THE INVESTORS SIGNATORY HERETO
Dated as of December 10, 1999
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CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated
as of December 10, 1999, among Hawker Pacific Aerospace, a California
corporation (the "COMPANY"), and the investors signatory hereto (each such
investor is a "PURCHASER" and all such investors are, collectively, the
"PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchasers and the Purchasers,
severally and not jointly, desire to purchase from the Company, shares of the
Company's 8% Series C Convertible Preferred Stock (the "PREFERRED STOCK"), which
are convertible into shares of the Company's common stock, no par value (the
"COMMON STOCK").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy are hereby acknowledged, the Company and the Purchasers agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 THE CLOSING.
(a) THE CLOSING. (i) Subject to the terms and conditions set forth
in this Agreement, the Company shall issue and sell to the Purchasers and the
Purchasers shall, severally and not jointly, purchase 300 shares of Preferred
Stock (the "SHARES") for an aggregate purchase price of $3,000,000. The closing
of the purchase and sale of the Shares (the "CLOSING") shall take place at the
offices of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP ("XXXXXXXX
XXXXXXXXX"), 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, immediately
following the execution hereof or such later date as the parties shall agree.
The date of the Closing is hereinafter referred to as the "CLOSING DATE."
(ii) At the Closing, the parties shall deliver or shall cause to be
delivered the following: (A) the Company shall deliver to each Purchaser (1)
stock certificates, registered in the name of such Purchaser, representing a
number of Shares equal to the quotient obtained by dividing the purchase price
indicated below such Purchaser's name on the signature page to this Agreement by
10,000, (2) a Common Stock purchase warrant, in the form of EXHIBIT D,
registered in the name of such Purchaser, pursuant to which such Purchaser shall
have the right at any time and from time to time thereafter through the fifth
anniversary of the Closing Date to acquire the number of shares of Common Stock
indicated below such Purchaser's name on the signature page to this
(collectively, the "WARRANTS"), (3) the legal opinion of Xxxx & Xxxxx
Professional Corporation, counsel to the Company in the form of EXHIBIT C, and
(4) all other documents, instruments and writings required to have been
delivered at or prior to the Closing Date by the Company pursuant to this
Agreement, including an executed Registration Rights Agreement, dated the date
hereof, among the Company and the Purchasers, in the form of EXHIBIT B (the
"REGISTRATION RIGHTS AGREEMENT") the Irrevocable Transfer Agent Instructions, in
the form of EXHIBIT E, delivered to and
acknowledged by the Company's transfer agent (the "TRANSFER AGENT
INSTRUCTIONS"), and a letter agreement, dated the date hereof, among the Company
and the Purchasers, in the form of EXHIBIT F (the "LETTER AGREEMENT"); and (B)
each Purchaser shall deliver (1) the purchase price indicated below such
Purchaser's name on the signature page to this Agreement in United States
dollars in immediately available funds by wire transfer to an account designated
in writing by the Company for such purpose, and (2) all documents, instruments
and writings required to have been delivered at or prior to the Closing Date by
such Purchaser pursuant to this Agreement, including, without limitation, an
executed Registration Rights Agreement and Letter Agreement.
1.2 TERMS OF PREFERRED STOCK. The Preferred Stock shall have the
rights preferences and privileges set forth in EXHIBIT A, and shall be
incorporated into a Certificate of Determination (the "CERTIFICATE OF
DETERMINATION") which shall be filed on or prior to the Closing Date by the
Company with the Secretary of State of the State of California, in form and
substance mutually agreed to by the parties.
1.3 CERTAIN DEFINED TERMS. For purposes of this Agreement,
"CONVERSION PRICE," "ORIGINAL ISSUE DATE" and "TRADING DAY" shall have the
meanings set forth in EXHIBIT A; "BUSINESS DAY" shall mean any day except
Saturday, Sunday and any day which shall be a federal legal holiday or a day on
which banking institutions in the State of New York or the State of California
are authorized or required by law or other governmental action to close;
"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.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of California, with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in SCHEDULE
2.1(A) (collectively the "SUBSIDIARIES"). 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 (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation 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, individually or in the aggregate, (x) adversely
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affect the legality, validity or enforceability of the Securities (as defined
below) or any of this Agreement, the Registration Rights Agreement, the Letter
Agreement, the Transfer Agent Instructions or the Warrants (collectively, the
"TRANSACTION DOCUMENTS"), (y) have or result in a material adverse effect on the
results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (z) adversely impair
the Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (x), (y) or (z), a "MATERIAL ADVERSE
EFFECT").
(b) 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 thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents has been duly executed by the Company and, when
delivered (or filed, as the case may be) in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective articles
of incorporation, by-laws or other charter documents.
(c) CAPITALIZATION. The number of authorized, issued and
outstanding capital stock of the Company is set forth in SCHEDULE 2.1(C). No
shares of Common Stock are entitled to preemptive or similar rights, nor is any
holder of the Common Stock entitled to preemptive or similar rights arising out
of any agreement or understanding with the Company by virtue of any of the
Transaction Documents. Except as a result of the purchase and sale of the Shares
and the Warrants and except as disclosed in SCHEDULE 2.1(C), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into 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
securities or rights convertible or exchangeable into shares of Common Stock. To
the knowledge of the Company, except as specifically disclosed in the SEC
Reports (as defined below) or in filed Schedule 13-D's or 13-G's or SCHEDULE
2.1(C), no Person or group of related Persons beneficially owns (as determined
pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")), or has the right to acquire by agreement with or
by obligation binding upon the Company, in excess of 5% of the Common Stock.
(d) ISSUANCE OF THE SHARES AND THE WARRANTS. The Shares and the
Warrants are duly authorized and, when issued and paid for in accordance with
the terms hereof, will be duly and validly issued, fully paid and nonassessable,
free and clear of all liens, encumbrances and rights of first refusal of any
kind (collectively, "LIENS"). The Company has on the date hereof and will, at
all times while the Shares and the Warrants are outstanding, maintain an
adequate reserve of duly authorized shares of Common Stock, reserved for
issuance to the holders of the Shares and the
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Warrants, to enable it to perform its conversion, exercise and other obligations
under this Agreement, the Certificate of Designation and the Warrants. Such
number of reserved and available shares of Common Stock is not less than the sum
of (i) 200% of the number of shares of Common Stock which would be issuable upon
conversion in full of the Shares, assuming that the Shares are outstanding for
three (3) years and that such conversion occurred on the Original Issue Date (as
defined in Exhibit A) at the Conversion Price, and (ii) the number of shares of
Common Stock issuable upon exercise of the Warrants (such number of shares of
Common Stock as contemplated in clauses (i)-(ii), the "INITIAL MINIMUM"). All
such authorized shares of Common Stock shall be duly reserved for issuance to
the holders of the Shares and the Warrants. The shares of Common Stock issuable
upon conversion of the Shares and upon exercise of the Warrants are collectively
referred to herein as the "UNDERLYING SHARES." The Shares, the Warrants and the
Underlying Shares are collectively referred to herein as, the "SECURITIES." When
issued in accordance with the Certificate of Designation and the Warrants, the
Underlying Shares will be duly authorized, validly issued, fully paid and
nonassessable, free and clear of all Liens.
(e) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate of
incorporation, bylaws or other charter documents (each as amended through the
date hereof), or (ii) subject to obtaining the Required Approvals (as defined
below), conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) 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), as could not, individually or in the aggregate, have or
result in a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the aggregate, would
reasonably be expected to have or result in a Material Adverse Effect.
(f) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor any
Subsidiary is 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 filing of the Certificate of
Designation with the Secretary of State of California, (ii) the filings required
pursuant to Section 3.11, (iii) the filing with the Securities and Exchange
Commission (the "Commission") of a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale of the Underlying Shares by the Purchasers (the "UNDERLYING SHARES
REGISTRATION STATEMENT"), (iv) the
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application(s) to the Nasdaq National Market ("NASDAQ") for the listing of the
Underlying Shares for trading on the NASDAQ (and with any other national
securities exchange or market on which the Common Stock is then listed), (v)
applicable Blue Sky filings and (vi) in all other cases where the failure to
obtain such consent, waiver, authorization or order, or to give such notice or
make such filing or registration could not have or result in, individually or in
the aggregate, a Material Adverse Effect (collectively, the "REQUIRED
APPROVALS").
(g) LITIGATION; PROCEEDINGS. Except as set forth in SCHEDULE
2.1(G), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, 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)
would reasonably be expected to, individually or in the aggregate, have or
result in a Material Adverse Effect.
(h) NO DEFAULT OR VIOLATION. Except as set forth in SCHEDULE
2.1(H), neither the Company nor any Subsidiary (i) is in default under or in
violation of (and no event has occurred which has not been waived which, 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 in violation of any statute,
rule or regulation of any governmental authority except as would reasonably be
expected to, not individually or in the aggregate, have or result in a Material
Adverse Effect.
(i) PRIVATE OFFERING. Assuming the accuracy of the representations
and warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby are
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"). Neither the Company nor any Person acting on its
behalf has taken or is, to the knowledge of the Company, contemplating taking
any action which could subject the offering, issuance or sale of the Securities
to the registration requirements of the Securities Act including soliciting any
offer to buy or sell the Securities by means of any form of general solicitation
or advertising.
(j) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange Act
for the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing materials
being collectively referred to herein as the "SEC REPORTS" and, together with
the Schedules to this Agreement, the "DISCLOSURE MATERIALS") on a timely basis
or has received a valid extension of such time of filing and has filed any such
SEC Reports prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of
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the Commission promulgated thereunder, 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 light of the circumstances under which they were made, not
misleading. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Reports. 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 generally accepted accounting principles applied on a consistent
basis during the periods involved ("GAAP"), except as may be otherwise specified
in such financial statements or the notes thereto, 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. Since September
30, 1999, except as specifically disclosed in the SEC Reports, (a) there has
been no event, occurrence or development that has or that would reasonably be
expected to result in a Material Adverse Effect, (b) the Company has not
incurred any liabilities (contingent or otherwise) other than (x) liabilities
incurred in the ordinary course of business consistent with past practice and
(y) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (c) the Company has not altered its method of accounting or the
identity of its auditors and (d) the Company has not declared or made any
payment or distribution of cash or other property to its stockholders or
officers or directors (other than in compliance with existing Company stock
option plans) with respect to its capital stock, or purchased, redeemed (or made
any agreements to purchase or redeem) any shares of its capital stock.
(k) INVESTMENT COMPANY. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(l) CERTAIN FEES. Except for certain fees payable to Brighton
Capital, Ltd. by the Company, no fees or commissions will be payable by the
Company to any broker, financial advisor or consultant, finder, placement agent,
investment banker, or bank with respect to the transactions contemplated by this
Agreement. The Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall indemnify and
hold harmless the Purchasers, their employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as such fees
and expenses are incurred.
(m) SOLICITATION MATERIALS. Neither the Company nor any Person
acting on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
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(n) FORM S-3 ELIGIBILITY. The Company is eligible to register
securities for resale with the Commission under Form S-3 promulgated under the
Securities Act.
(o) EXCLUSIVITY. The Company shall not issue and sell the Shares
to any Person other than the Purchasers other than with the specific prior
written consent of the Purchasers.
(p) SENIORITY. Except the Series B Junior Participating Preferred
Stock, no class of equity securities of the Company is senior to the Shares in
right of payment, whether upon liquidation or dissolution, or otherwise.
(q) LISTING AND MAINTENANCE REQUIREMENTS. The Company has not, in
the two years preceding the date hereof, received notice (written or oral) from
the NASDAQ or any other stock exchange, market or trading facility on which the
Common Stock is or has been listed (or on which it has been quoted) to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such exchange or 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 listings and maintenance requirements.
(r) PATENTS AND TRADEMARKS. The Company and its Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights
(collectively, the "INTELLECTUAL PROPERTY RIGHTS") which are necessary or
material for use in connection with their respective business as described in
the SEC Reports and as contemplated to be conducted, and which the failure to so
have would have a Material Adverse Effect. Neither the Company nor any
Subsidiary has received a written notice that the Intellectual Property Rights
used by the Company or its Subsidiaries violates or infringes upon the rights of
any Person, to the best knowledge of the Company. All such Intellectual Property
Rights are enforceable and to the best knowledge of the Company, there is no
existing infringement by another Person of any of the Intellectual Property
Rights.
(s) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as set
forth on SCHEDULE 6(B) to the Registration Rights Agreement, the Company has not
granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied. No
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents.
(t) REGULATORY PERMITS. The Company and its Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the failure to possess
such permits would reasonably be expected to, individually or in the aggregate,
have or result in a Material Adverse Effect ("MATERIAL PERMITS"), and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
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(u) LABOR RELATIONS. Except as set forth in SCHEDULE 2.1(U), No
material labor problem exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company.
(v) TITLE. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them which is
material to the business of the Company and its Subsidiaries and good and
marketable personal property owned by them which is material to the business of
the Company and its Subsidiaries, in each case free and clear of all Liens,
except for Liens as do not affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its Subsidiaries. Any real property and facilities held under lease
by the Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such property
and buildings by the Company and its Subsidiaries.
(w) DISCLOSURE. The Company confirms that it has not provided any
of the Purchasers or its agents or counsel with any information that constitutes
or would constitute material non-public information. The Company understands and
confirms that the Purchasers shall be relying on the foregoing representations
in effecting transactions in securities of the Company. All disclosure provided
to the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished by or
on behalf of the Company are true and correct and do 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.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby for itself and for no other Purchaser, represents and warrants 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 the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement, the Letter Agreement and the Registration
Rights Agreement 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.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the Securities
as principal for its own account for investment purposes only and not with a
view to or for distributing or reselling such Securities or any part thereof,
without prejudice, however, to such Purchaser's right, subject to the provisions
of this Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act and in compliance with
applicable federal and state securities laws or under
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an exemption from such registration. Nothing contained herein shall be deemed a
representation or warranty by such Purchaser and such Purchaser makes no such
representations or warranties to hold Securities for any amount of time.
(c) PURCHASER STATUS. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and at each exercise date
under the Warrants, it will be, an "accredited investor" as defined in Rule
501(a) under the Securities Act. Such Purchaser has not been formed solely for
the purpose of acquiring the Securities.
(d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) ABILITY OF PURCHASER TO BEAR RISK OF 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.
(f) ACCESS TO INFORMATION. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and 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 Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which 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
Disclosure Materials and the Company's representations and warranties contained
in the Transaction Documents.
(g) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of or subsequent to 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.
(h) RELIANCE. Such Purchaser understands and acknowledges that (i)
the Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
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The Company acknowledges and agrees that no Purchaser makes or has
made representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration under the Securities Act. Notwithstanding
the foregoing, the Company, without requiring a legal opinion as described in
the immediately preceding sentence, hereby consents to and agrees to register on
the books of the Company and with any transfer agent for the securities of the
Company any transfer of Securities by a Purchaser to an Affiliate of such
Purchaser or to one or more funds or managed accounts under common management
with such Purchaser, and any transfer among any such Affiliates or one or more
funds or managed accounts, provided that the transferee certifies to the Company
that it is an "accredited investor" within the meaning of Rule 501(a) under the
Securities Act and that it is acquiring the Securities solely for investment
purposes (subject to the qualifications hereof). 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 and the
Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE 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.
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Underlying Shares shall not contain the legend set forth above nor
any other legend if the conversion of Shares and exercise of the Warrants or
other issuances of Underlying Shares as contemplated hereby by the Certificate
of Designation or the Warrants, occurs at any time while an Underlying Shares
Registration Statement is effective under the Securities Act or, in the event
there is not an effective Underlying Shares Registration Statement at such time
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 the legal
opinion included in the Transfer Agent Instructions to the Company's transfer
agent on the day that the Underlying Shares Registration Statement is declared
effective by the Commission (the "EFFECTIVE DATE"). The Company agrees that if
any Underlying Shares are issued with a legend in accordance with this Section
3.1(b), it will, within three (3) Trading Days (i) after request therefor by a
Purchaser, and (ii) after the stock certificate for such legended Underlying
Shares are received by the Company's Transfer Agent, provide such Purchaser with
a new certificate or certificates representing such Underlying Shares, free from
such legend at such time as such legend would not have been required under this
Section 3.1(b) had such issuance occurred on the date of such request. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions of transfer set
forth in this Section.
3.2 ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the
issuance of the Underlying Shares upon (i) conversion of the Shares in
accordance with the terms of the Certificate of Designation, and (ii) exercise
of the Warrants in accordance with their terms, will 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 obligation
to issue Underlying Shares upon (x) conversion of the Shares in accordance with
the terms of the Certificate of Designation, and (y) exercise of the Warrants
pursuant to the terms thereof, is unconditional and absolute, subject to the
limitations set forth herein, in the Certificate of Designation or pursuant to
the Warrants, regardless of the effect of any such dilution.
3.3 FURNISHING OF INFORMATION. As long as the Purchasers own Securities,
the Company covenants 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. So long as the
Purchasers own 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) promulgated under the
Securities Act such information as is required for the Purchasers to sell the
Securities under Rule 144 promulgated under the Securities Act. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell Underlying Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in this Section. Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer as
to whether it has complied with such requirements.
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3.4 INTEGRATION. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate of the Company shall, 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 in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers.
3.5 INCREASE IN AUTHORIZED SHARES. If on any date the Company would be,
if a notice of conversion or exercise (as the case may be) were to be delivered
on such date, precluded from issuing the sum of (i) 200% of the number of
Underlying Shares then issuable upon conversion in full of the Shares and (ii)
the number of Underlying Shares issuable upon exercise in full of the Warrants
(the "CURRENT REQUIRED MINIMUM") due to the unavailability of a sufficient
number of authorized but unissued or reserved shares of Common Stock, then the
Board of Directors of the Company shall promptly (and in any case, within 30
Business Days from such date, which date may be extended with the consent of 51%
of the number of Series C Preferred Stock outstanding) prepare and mail to the
stockholders of the Company proxy materials requesting authorization to amend
the Company's articles of incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue to at least such number of
shares as is reasonably adequate to enable the Company to comply with its
issuance, conversion, exercise and reservation of shares obligations as set
forth in this Agreement, the Certificate of Designation and the Warrants (the
sum of (x) the number of shares of Common Stock then outstanding plus all shares
of Common Stock issuable upon exercise of all outstanding options, warrants and
convertible instruments, and (y) the Current Required Minimum, is deemed for
purposes hereof to be a reasonable number). In connection therewith, the Board
of Directors shall (a) adopt proper resolutions authorizing such increase, (b)
recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the stockholders no later than the earlier to occur of the 60th day after
delivery of the proxy materials relating to such meeting but, in any event, not
more than the 90th day after request by a holder of Securities to issue the
number of Underlying Shares in accordance with the Certificate of Designation
and Warrants) and (c) within five (5) Business Days of obtaining such
stockholder authorization, file an appropriate amendment to the Company's
articles of incorporation to evidence such increase.
3.6 LISTING OF UNDERLYING SHARES. The Company shall (i) in the time and
manner required by NASDAQ and such other exchange, market or quotation system on
which the Common Stock is traded, but in any event, not later than the fifth
(5th) Business Day following the Closing Date prepare and file with the NASDAQ
(and such other national securities exchange or market or trading or quotation
facility on which the Common Stock is then listed) an additional shares listing
application covering a number of shares of Common Stock which is not less than
the Initial Minimum, (b) take all steps necessary to cause such shares of Common
Stock to be approved for listing in the NASDAQ (as well as on any such other
national securities exchange or market or trading or quotation facility on which
the Common Stock is then listed) as soon as possible thereafter, and (c) provide
to the Purchasers evidence of such listing, and the Company shall maintain the
listing of its Common Stock thereon. If the number of Underlying Shares issuable
upon conversion in full of the then outstanding Shares and upon exercise of the
then unexercised portion of the Warrants exceeds 85% of the number of Underlying
Shares previously listed on account
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thereof with NASDAQ (and any such other required exchanges), then the Company
shall take the necessary actions to immediately list a number of Underlying
Shares as equals no less than the then Current Required Minimum
(b) The Company shall maintain a reserve of shares of Common Stock
for issuance upon conversion of the Shares and upon exercise in full of the
Warrants in accordance with this Agreement, the Certificate of Designation and
the Warrants, respectively, in such amount as may be required to fulfill its
obligations in full under the Transaction Documents, which reserve shall equal
no less than the then Current Required Minimum.
3.7 CONVERSION AND EXERCISE PROCEDURES. The Transfer Agent Instructions,
Conversion Notice in the form set forth as EXHIBIT G and Notice of Exercise
under the Warrants set forth the totality of the procedures with respect to the
conversion of the Shares and exercise of the Warrants, including the form of
legal opinion, if necessary, that shall be rendered to the Company's transfer
agent and such other information and instructions as may be reasonably necessary
to enable the Purchasers to convert their Shares and exercise their Warrants as
contemplated in the Certificate of Designation and the Warrants (as applicable).
3.8 NOTICE OF BREACHES. Each of the Company and the Purchasers shall
give prompt written notice to the other of any breach by it of any
representation, warranty or other agreement contained in any Transaction
Document, as well as any events or occurrences arising after the date hereof
which would reasonably be likely to cause any representation or warranty or
other agreement of such party, as the case may be, contained therein to be
incorrect or breached as of the Closing Date. However, no disclosure by either
party pursuant to this Section shall be deemed to cure any breach of any
representation, warranty or other agreement contained in any Transaction
Document.
3.9 CONVERSION AND EXERCISE OBLIGATIONS OF THE COMPANY. The Company
shall honor conversions of the Shares and exercises of the Warrants and shall
deliver Underlying Shares in accordance with the respective terms, conditions
and time periods set forth in the Certificate of Designation and the Warrants.
3.10 SUBSEQUENT FINANCING AND REGISTRATIONS. (a) The Company shall not,
until the earlier to occur of (i) the date on which 85% of the Shares shall have
been converted, or (ii) the 180th days following the Effective Date, PROVIDED,
that such 180th day period shall be extended for the number of Trading Days
during such period (A) in which trading in the Common Stock is suspended by the
NASDAQ or such market or quotation system on which the Common Stock is then
listed, or (B) during which the Underlying Shares Registration Statement is not
effective, or (C) during which the prospectus included in the Underlying Shares
Registration Statement may not be used by the holders thereof for the resale of
Underlying Shares, directly or indirectly, without the prior written consent of
the Purchasers, offer, sell, grant any option to purchase, or otherwise dispose
of (or announce any offer, sale, grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities including the issuance of any debt or other instrument at any time
over life thereof convertible into or exchangeable for Common Stock, or any
other transaction intended to be exempt or not subject to registration under the
Securities Act, at a purchase price per share of
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Common Stock lower then the then applicable Per Share Market Value (a
"SUBSEQUENT PLACEMENT"), except for an additional financing by the Purchasers,
or any other third party as the Company and the Purchasers shall agree, of the
Company's Series D Preferred Stock in the aggregate sum of up to $1,000,000.
(b) Except for Underlying Shares and other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company permitted pursuant to Schedule 6(b) of
the Registration's Rights Agreement to be registered, in the Underlying Shares
Registration Statement in accordance with the Registration Rights Agreement, the
Company shall not, for a period of not less than 90 Trading Days after the
Effective Date, without the prior written consent of the Purchasers (i) issue or
sell any of its or any of its Affiliates' equity or equity-equivalent securities
pursuant to Regulation S promulgated under the Securities Act, or (ii) file a
registration statement for the issuance or resale of any securities of the
Company, except for a Form S-4 or successor form in connection with a Change of
Control Transaction where the Company has complied with its obligations
hereunder in connection therewith, including pursuant to Section 5(c)(viii) and
Section 7 of the Certificate of Designation. Any days after the Effective Date
that a Purchaser is not permitted or unable to utilize the prospectus or
otherwise to resell Underlying Shares under the Underlying Shares Registration
Statement shall be added to such 90 Trading Day period for the purposes of this
Section.
3.11 CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY. The Company shall
(i) within one (1) Business Day of the Closing Date, issue a press release
acceptable to the Purchasers (and Purchasers shall timely approve such press
release) disclosing the transactions contemplated hereby, (ii) file with the
Commission such disclosure as the Company determines is required to disclose the
transaction contemplated hereby in accordance with applicable securities laws,
and (iii) timely file with the Commission a Form D promulgated under the
Securities Act as required under Regulation D promulgated under the Securities
Act and provide a copy thereof to the Purchasers promptly after the filing
thereof. The Company shall, no less than one (1) Business Days prior to the
filing of any disclosure required by clauses (ii) and (iii) above, provide a
copy thereof to the Purchasers. The Company and the Purchasers shall consult
with each other in issuing any press releases or otherwise making public
statements or filings and other communications with the Commission or any
regulatory agency or stock market or trading facility with respect to the
transactions contemplated hereby and neither party shall issue any such press
release or otherwise make any such public statement, filings or other
communications pertaining to the transactions contemplated hereby without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law and such consent can not reasonably be expected to
be received prior to the time required to complete such filing or make such
statement in accordance with such applicable law, in which such case the
disclosing party shall provide the other party with prior notice of such public
statement, filing or other communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of a Purchaser, or include the name
of a Purchaser in any filing with the Commission, or any regulatory agency,
trading facility or stock market without the prior written consent of such
Purchaser, except to the extent such disclosure (but not any disclosure as to
the controlling Persons thereof) is required by law, in which case the Company
shall provide such Purchaser with prior
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notice of such disclosure.
3.12 TRANSFER OF INTELLECTUAL PROPERTY RIGHTS. Except in connection with
the sale of all or substantially all of the assets of the Company, the Company
shall not transfer, sell or otherwise dispose of any Intellectual Property
Rights, or allow any of the Intellectual Property Rights to become subject to
any Liens, or fail to renew such Intellectual Property Rights (if renewable and
it would otherwise lapse if not renewed), without the prior written consent of
the Purchasers.
3.13 USE OF PROCEEDS. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes. Pending
application of the proceeds of this placement in the manner permitted hereby,
the Company will invest such proceeds in interest bearing accounts and/or
short-term, investment grade interest bearing securities.
3.14 REIMBURSEMENT. If any Purchaser, other than by reason of its gross
negligence or willful misconduct, fraud, or misrepresentation, becomes involved
in any capacity in any action, proceeding or investigation brought by or against
any Person, including stockholders of the Company, in connection with or as a
result of the consummation of the transactions contemplated by Transaction
Documents, the Company will reimburse such Purchaser for its reasonable legal
and other expenses (including the cost of any investigation and preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred. In addition, other than with respect to any matter in
which any of the Purchasers is a named party, the Company will pay such
Purchaser the charges, as reasonably determined by such Purchaser, for the time
of any officers or employees of such Purchaser devoted to appearing and
preparing to appear as witnesses, assisting in preparation for hearings, trials
or pretrial matters, or otherwise with respect to inquiries, hearings, trials,
and other proceedings relating to the subject matter of this Agreement. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct, fraud or misrepresentation of the applicable Purchaser or
entity in connection with the transactions contemplated by this Agreement.
3.15 SHAREHOLDERS RIGHTS PLAN. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
any shareholders rights plan or in any way could be deemed to trigger the
provisions of such plan by virtue of receiving Securities under the Transaction
Documents.
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3.16 DELIVERY OF STOCK CERTIFICATES. (i) If stock certificate or
certificates as registered by Section 5(b)(i) of the Certificate of
Determination are not delivered to or as directed by the applicable Purchaser by
the third (3rd) Trading Day after the Conversion Date (as defined in the
Certificate of Determination), the Purchaser shall be entitled to elect by
written notice to the Company at any time on or before its receipt of such
certificate or certificates thereafter, to rescind such conversion, in which
event the Company shall immediately return the certificates representing the
shares of Preferred Stock tendered for conversion and Purchaser shall
immediately return any certificates representing the converted shares of Common
Stock which may be in transit to arrive after such 3rd Trading Day (such
certificates being deemed void ab initio.)
(ii) If the Company fails to deliver to the Purchaser such
certificate or certificates pursuant to Section 5(b)(i) of the Certificate of
Determination, PROVIDED, that the certificate representing the shares of
Preferred Stock to be converted have actually been delivered to the Company, by
the third (3rd) Trading Day after the Conversion Date, the Company shall pay to
such Purchaser, in cash, as liquidated damages and not as a penalty, $5,000 for
each Trading Day after such third (3rd) Trading Day until such certificates are
delivered. Nothing herein shall limit a Purchaser's right to pursue actual
damages for the Company's failure to deliver certificates representing shares of
Common Stock upon conversion within the period specified herein and such
Purchaser shall have the right to pursue all remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.
(iii) In addition to any other rights available to the Purchaser, if
the Company fails to deliver to the Purchaser such certificate or certificates
pursuant to Section 5(b)(i)of the Certificate of Determination, by the third
(3rd) Trading Day after the Conversion Date, and if after such third (3rd)
Trading Day the Purchaser purchases (in an open market transaction or otherwise)
Common Stock to deliver in satisfaction of a sale by such Purchaser of the
Underlying Shares which the Purchaser was entitled to receive upon such
conversion (a "BUY-IN"), then the Company shall (A) pay in cash to the Purchaser
the amount by which (x) the Purchaser's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the
product of (1) the aggregate number of shares of Common Stock that such
Purchaser was entitled to receive from the conversion at issue multiplied by (2)
the market price of the Common Stock at the time of the sale giving rise to such
purchase obligation and (B) at the option of the Purchaser, either return the
shares of Preferred Stock for which such conversion was not honored or deliver
to such Purchaser the number of shares of Common Stock that would have been
issued had the Company timely complied with its conversion and delivery
obligations under Section 5(b)(i) of the Certificate of Determination. For
example, if the Purchaser purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted conversion of shares
of Preferred Stock with respect to which the market price of the Underlying
Shares on the date of conversion totaled $10,000, under clause (A) of the
immediately preceding sentence the Company shall be required to pay the
Purchaser $1,000. The Purchaser shall provide the Company written notice
indicating the amounts payable to the Purchaser in respect of the Buy-In.
Nothing herein shall limit a Purchaser's right to pursue actual damages for the
Company's failure to deliver certificates representing shares of Common Stock
upon conversion within the period specified herein and such
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Purchaser shall have the right to pursue all remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.
(iv) (A) Notwithstanding anything herein to the contrary, the
Company shall have the right, exercisable by notice to the Purchasers, to pay
the initial $100,000 of the liquidated damages, if any, that accrue from the
Closing Date under this Section 3.16 and Section 3(a)(ii) of the Registration
Rights Agreement, in one or more of the following: (i) cash, (ii) unregistered
shares of Common Stock determined by dividing the amount of liquidated damages
at issue by the Conversion Price determined at (A) the date that such liquidated
damages were incurred, (B) the date of the filing of the registration statement
covering the resale by the Purchasers of such shares, and (C) the date that the
registration rights covering the resale of such shares by the Purchasers is
declared effective by the Commission; whichever of (A), (B) or (C) yields the
lowest Conversion Price, and (iii) through a promissory note, bearing interest
at the annual rate of 12% or the maximum lowest rate as is permitted under
applicable laws related to usury, payable in full upon the earlier to occur of
270 days from the date of issuance thereof and the occurrence of a Change of
Control Transaction (as defined in the Certificate of Determination).
(B) The Company shall have the right, exercisable by notice
to the Purchasers to pay liquidated damages over the initial $100,000, if any,
that accrue from the Closing Date under this Section 3.16 and Section 3(a)(ii)
of the Registration Rights Agreement, in one or more of the following: (i) cash,
(ii) registered shares of Common Stock determined by dividing the amount of
liquidated damages at issue by the Conversion Price determined the date that
such liquidated damages were incurred.
3.17 REDEMPTION UPON TRIGGERING EVENTS.
(a) Upon the occurrence of a Triggering Event as defined in this
Section), each Purchaser shall (in addition to all other rights it may have
hereunder or under applicable law), have the right, exercisable at the sole
option of such Purchaser, to require the Company to redeem all or a portion of
the Preferred Stock and the Underlying Shares issued in respect of conversions
hereunder not more than 45 Trading Days prior to the date of the Triggering
Event and then held by such Purchaser for a redemption price, in cash, equal to
the sum of (i) the Mandatory Redemption Amount (as defined below) plus (ii) the
product of (A) the number of Underlying Shares issued in respect of conversions
hereunder and then held by the Purchaser and (B) the Per Share Market Value on
the date such redemption is demanded or the date the redemption price hereunder
is paid in full, whichever is greater (such sum, the "REDEMPTION PRICE"). The
Mandatory Redemption Amount payable upon the occurrence of a Triggering Event
pursuant to Section 3.17 (c)(ix), shall be equal to the Change of Control Amount
(as defined in Section 8 of the Certificate of Determination).
(b) All Mandatory Redemption Amounts and the Change of Control
Amount shall be due and payable within five (5) Trading Days of the date on
which the notice for the payment therefor is provided by a Purchaser. If the
Company fails to pay either the Mandatory Redemption Amount or the Change of
Control Amount hereunder in full pursuant to this Section on the date such
amount is due in accordance with this Section, the Company will pay interest
thereon at a rate of
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18% per annum (or the lesser amount permitted by applicable law), accruing daily
from such date until the Redemption Price or Change of Control Amount (as
applicable), plus all such interest thereon, is paid in full. For purposes of
this Section, a share of Preferred Stock is outstanding until such date as the
Purchaser shall have received Underlying Shares upon a conversion (or attempted
conversion) thereof that meets the requirements hereof.
(c) A "Triggering Event" means any one or more of the following
events (whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):
(i) the failure of an Underlying Shares Registration
Statement to be declared effective by the Commission on or prior to the 180th
day after the Original Issue Date;
(ii) if, during the Effectiveness Period, the effectiveness
of the Underlying Shares Registration Statement lapses for any reason for more
than an aggregate of ten (10) Trading Days, or the Purchaser shall not be
permitted to resell Registrable Securities under the Underlying Shares
Registration Statement for more than an aggregate of ten (10) Trading Days
(which need not be consecutive Trading Days);
(iii) the failure of the Common Stock to be listed for trading
on the NASDAQ or on a Subsequent Market or the suspension of the Common Stock
from trading on the NASDAQ or on a Subsequent Market, in either case, for more
than three (3) Trading Days (which need not be consecutive Trading Days);
(iv) the Company shall fail for any reason to deliver
certificates representing Underlying Shares issuable upon a conversion hereunder
that comply with the provisions hereof prior to the tenth (10th) Trading Days
after the Conversion Date (provided the stock certificates for the Preferred
Stock is delivered to the Company) or the Company shall provide notice to any
Purchaser, including by way of public announcement, at any time, of its
intention not to comply with requests for conversion of any Preferred Stock in
accordance with the terms hereof;
(v) the Company shall redeem more than a de minimis number
of Common Stock or other Junior Securities (other than redemptions of Underlying
Shares) except as specifically permitted hereunder;
(vi) an Event shall not have been cured to the satisfaction
of the Purchasers prior to the expiration of sixty (60) days from the Event Date
relating thereto (other than an Event pursuant to Section 3(a)(ii) of the
Registration Rights Agreement);
(vii) the Company shall fail for any reason to pay in full the
amount of cash due pursuant to a Buy-In within seven (7) days after notice
therefor is delivered hereunder;
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(viii) the Company shall fail to have available a sufficient
number of authorized and unreserved shares of Common Stock to issue to such
Purchaser upon a conversion hereunder; or
(ix) the Company shall be a party to any Change of Control
Transaction, shall agree to sell (in one or a series of related transactions) in
excess of 50% of its assets (whether or not such sale would constitute a Change
of Control Transaction).
For the purposes of this Section the following terms shall have the
meaning set forth herein: "CHANGE OF CONTROL TRANSACTION" means the occurrence
of any of (i) an acquisition after the date hereof by an individual or legal
entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the
Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Company, by contract or otherwise) of in
excess of 33% of the voting securities of the Company, (ii) a replacement at one
time or over time of more than one-half of the members of the Company's board of
directors which is not approved by a majority of those individuals who are
members of the board of directors on the date hereof (or by those individuals
who are serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of the members
of the board of directors who are members on the date hereof), (iii) the merger
of the Company with or into another entity that is not wholly-owned by the
Company, consolidation or sale of all or substantially all of the assets of the
Company in one or a series of related transactions, or (iv) the execution by the
Company of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii) or (iii).
"MANDATORY REDEMPTION AMOUNT" for each share of Preferred Stock means the sum of
(i) the greater of (A) 125% of the Stated Value and (B) the product of (a) the
Per Share Market Value on the Trading Day immediately preceding (x) the date of
the Triggering Event or the Conversion Date, as the case may be, or (y) the date
of payment in full by the Company of the applicable redemption price, whichever
is greater, and (b) the Conversion Ratio calculated on the date of the
Triggering Event, or the Conversion Date, as the case may be, and (ii) all other
amounts, costs, expenses and liquidated damages due in respect of such share of
Preferred Stock.
ARTICLE IV
MISCELLANEOUS
4.1 FEES AND EXPENSES. At the Closing the Company shall reimburse
the Purchasers for their legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by paying to Xxxxxxxx
Xxxxxxxxx $25,000 for the preparation and negotiation of the Transaction
Documents. The amount contemplated by the immediately preceding sentence shall
be retained by the Purchasers and shall not be delivered to the Company at the
Closing. Other than the amounts contemplated in the immediately preceding
sentence, and except as otherwise set forth in the Registration Rights
Agreement, 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 stamp and other taxes
and duties levied in connection with the issuance of the Securities.
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4.2 ENTIRE AGREEMENT; AMENDMENTS. 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.
4.3 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 (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
if to the Company: Hawker Pacific Aerospace
00000 Xxxxxxx Xxx,
Xxx Xxxxxx, Xxxxxxxxxx 00000
Facsimile No.:(000) 000-0000 and (000) 000-0000
Attn: Chief Financial Officer
With copies to: Xxxx & Xxxxx Professional Corporation
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx Xxxx Xxxxxxx, Esq.
Xxxxxxx X. Xxxxx, Esq.
If to a Purchaser: To the address set forth under such Purchaser's
name on the signature pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Purchasers or, in the case of a waiver, by the party against
whom enforcement of any such waiver 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 other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
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4.5 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.
4.6 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 the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder without the consent of the Company. This
provision shall not limit any Purchaser's right to transfer securities or
transfer or assign rights under the Registration Rights Agreement.
4.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
4.8 GOVERNING LAW. The corporate laws of the State of California shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the 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. 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 manner permitted by law.
4.9 SURVIVAL. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and conversion or
exercise (as the case may be) of the Shares and the Warrants.
4.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
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4.11 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.12 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents. Each of the Company and the Purchasers agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
4.13 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document is several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
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 with respect to such obligations or
the transactions contemplated by the Transaction Document. 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.
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SIGNATURE PAGES FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Preferred Stock Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
HAWKER PACIFIC AEROSPACE.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Executive Vice President
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASERS FOLLOWS]
DEEPHAVEN PRIVATE PLACEMENT
TRADING LTD.
By: /s/ Xxxxx Xxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxx
Title: Managing Partner
Purchase Price for Shares to be acquired
at Closing: $3 million
Number of Shares underlying Warrant: 125,000
Address for Notice:
Deephaven Private Placement Trading Ltd.
c/o Deephaven Capital Management LLC
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxxxxx
With copies to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 and (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxx X. Xxxxx, Esq.
EXHIBIT G
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of 8% Series C
Convertible Preferred Stock indicated below, into shares of Common Stock, no par
value (the "COMMON STOCK"), of Hawker Pacific Aerospace, a California
corporation (the "COMPANY"), according to the conditions hereof, as of the date
written below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
Holder for any conversion, except for such transfer taxes, if any.
Conversion calculations:
---------------------------------------------------
Date to Effect Conversion
---------------------------------------------------
Number of shares of Preferred Stock to be Converted
---------------------------------------------------
Stated Value of shares of Preferred Stock to be
Converted
---------------------------------------------------
Number of shares of Common Stock to be Issued
---------------------------------------------------
Applicable Conversion Price
---------------------------------------------------
Signature
---------------------------------------------------
Name
---------------------------------------------------
Address
