SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”) is dated
as of March 28, 2008, between T3 Motion, Inc., a Delaware corporation (the
“Company”), and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and each Purchaser agree as
follows:
ARTICLE
I.
DEFINITIONS
1.1 Definitions. In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms have the meanings set forth in this Section
1.1:
“Acquiring Person”
shall have the meaning ascribed to such term in Section 4.5.
“Action” shall have
the meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person as such terms are
used in and construed under Rule 405 under the Securities Act.
“Board of Directors”
means the board of directors of the Company.
“Business Day” means
any day except Saturday, Sunday, any day which is a federal legal holiday in the
United States or any day on which banking institutions in the State of New York
are authorized or required by law or other governmental action to close and,
upon the Company becoming listed or quoted on a Trading Market, except any day
that the Common Stock is not trading on the Trading Market.
“Closing” means the
closing of the purchase and sale of the Securities pursuant to Section
2.1.
“Closing Date” means
the Business Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to (i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities have been satisfied or
waived.
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“Closing Statement”
means the Closing Statement in the form Annex A attached
hereto.
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means
the common stock of the Company, par value $0.001 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed into.
“Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
“Company Counsel”
means Xxxxxxxxxx & Xxxxx LLP, with offices located at 00000 Xxxxxxxx
Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx, XX 00000.
“Disclosure Schedules”
means the Disclosure Schedules of the Company delivered concurrently
herewith.
“Discounted Purchase
Price” shall have the meaning ascribed to such term in Section
4.18.
“Discussion Time”
shall have the meaning ascribed to such term in Section 3.2(f).
“Effective Date” means
the date that the initial Registration Statement filed by the Company pursuant
to the Registration Rights Agreement is first declared effective by the
Commission.
“Evaluation Date”
shall have the meaning ascribed to such term in Section 3.1(r).
“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
consultants (but if to consultants, not to exceed 500,000 in any 12 month
period, subject to adjustment for reverse and forward stock splits and the
like), officers or directors of the Company pursuant to any stock or option plan
duly adopted for such purpose, by a majority of the non-employee members of the
Board of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise, exchange or
conversion price of such securities, (c) up to 1,000,000 shares issuable to
institutional lenders to the Company in connection with a loan transaction, and
(d) securities issued pursuant
to acquisitions or strategic transactions approved by a majority of the
disinterested 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 in a business synergistic with the business of the Company and in 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.
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“FWS” means Xxxxxxx
Xxxxxxxxx & Xxxxx LLP with offices located at 000 Xxxxxxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
“GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).
“Indebtedness” shall
have the meaning ascribed to such term in Section 3.1(w).
“Intellectual Property
Rights” shall have the meaning ascribed to such term in Section
3.1(o).
“Legend Removal Date”
shall have the meaning ascribed to such term in Section 4.1(c).
“Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.
“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).
“Participation
Maximum” shall have the meaning ascribed to such term in Section
4.12(a).
“Per Share Purchase
Price” equals $1.54, subject to adjustment for reverse and forward stock
splits, stock dividends, stock combinations and other similar transactions of
the Common Stock that occur after the date of this Agreement.
“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.
“Pre-Notice” shall
have the meaning ascribed to such term in Section 4.12(b).
“Pro Rata Portion”
shall have the meaning ascribed to such term in Section 4.12(e).
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“Proceeding” means an
action, claim, suit, investigation or proceeding (including, without limitation,
an informal investigation or partial proceeding, such as a deposition), whether
commenced or threatened.
“Purchaser Party”
shall have the meaning ascribed to such term in Section 4.8.
“Registration Rights
Agreement” means the Registration Rights Agreement, dated the date
hereof, among the Company and the Purchasers, in the form of Exhibit A attached
hereto.
“Registration
Statement” means a registration statement meeting the requirements set
forth in the Registration Rights Agreement and covering the resale by the
Purchasers of the Shares and the Warrant Shares.
“Reporting Date” shall
have the meaning ascribed to such term in Section 4.19.
“Required Approvals”
shall have the meaning ascribed to such term in Section 3.1(e).
“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.
“Securities” means the
Shares, the Warrants and the Warrant Shares.
“Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Series A Warrants”
means, collectively, the Series A Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which
Warrants shall be exercisable immediately and have a term of exercise equal to
five years and an exercise price equal to $1.08, subject to adjustment therein,
in the form of Exhibit
C attached hereto.
“Series B Warrants”
means, collectively, the Series B Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which
Warrants shall be exercisable immediately and have a term of exercise equal to
five years and an exercise price equal to $1.77, subject to adjustment therein,
in the form of Exhibit
C attached hereto.
“Series C Warrants”
means, collectively, the Series C Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which
Warrants shall be exercisable immediately and have a term of exercise equal to
five years and an exercise price equal to $2.00, subject to adjustment therein,
in the form of Exhibit
C attached hereto.
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“Shares” means the
shares of Common Stock issued or issuable to each Purchaser pursuant to this
Agreement.
“Short Sales” means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act (but shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock), nor shall Short Sale include any short sale
or hedge against any basket of securities traded on any public market, whether
or not such basket includes the Common Stock.
“Subscription Amount”
means, as to each Purchaser, the aggregate amount to be paid for Shares and
Warrants purchased hereunder as specified below such Purchaser’s name on the
signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.
“Subsequent Financing”
shall have the meaning ascribed to such term in Section 4.12(a).
“Subsequent Financing
Notice” shall have the meaning ascribed to such term in Section
4.12(b).
“Subsidiary” means any
subsidiary of the Company as set forth on Schedule 3.1(a), and
shall, where applicable, also include any direct or indirect subsidiary of the
Company formed or acquired after the date hereof.
“To the knowledge of the
Company” means the actual knowledge of the management of the
Company.
“Trading
Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American
Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange or the OTC Bulletin
Board.
“Transaction
Documents” means this Agreement, the Warrants, the Registration Rights
Agreement and any other documents or agreements executed in connection with the
transactions contemplated hereunder.
“Transfer Agent” means
the transfer agent of the Company and any successor transfer agent of the
Company.
“Variable Rate
Transaction” shall have the meaning ascribed to such term in Section
4.13(b).
“VWAP” means, for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted for trading as reported by Bloomberg L.P. (based on a Business Day
from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time); (b)
if the OTC Bulletin
Board is not a Trading Market, the volume weighted average price of the Common
Stock for such date (or the nearest preceding date) on the OTC Bulletin Board;
(c) if the Common Stock is not then listed or quoted for trading on the OTC
Bulletin Board and if prices for the Common Stock are then reported in the “Pink
Sheets” published by Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Purchasers of a majority in interest of
the Shares then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid equally by the Purchasers and the
Company.
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“Vision” means Vision
Opportunity Master Fund, Ltd.
“Warrants” means,
collectively, the Series A Warrants, the Series B Warrants and the Series C
Warrants.
“Warrant Shares” means
the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE
II.
PURCHASE
AND SALE
2.1 Closing. On
the Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by
the parties hereto, the Company agrees to sell, and the Purchasers, severally
and not jointly, agree to purchase, up to an aggregate of $6,000,000
of Shares and Warrants. Each Purchaser shall deliver to the Company
via wire transfer or a certified check immediately available funds equal to its
Subscription Amount and the Company shall deliver to each Purchaser its
respective Shares and a Warrant as determined pursuant to Section
2.2(a), and the Company and each Purchaser shall deliver the other items
set forth in Section 2.2 deliverable at the Closing. Upon
satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3,
the Closing shall occur at the offices of FWS or such other location as the
parties shall mutually agree.
2.2 Deliveries.
(a) On
or prior to the Closing Date, the Company shall deliver or cause to be delivered
to each Purchaser the following:
(i)
this Agreement duly executed by the Company;
(ii) a
legal opinion of Company Counsel, substantially in the form of Exhibit B attached
hereto;
(iii) a
certificate evidencing a number of Shares equal to such Purchaser’s Subscription
Amount divided by the Per Share Purchase Price, registered in the name of such
Purchaser;
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(iv) a
Series A Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 1/3 of such Purchaser’s Subscription
Amount divided by the Per Share Purchase Price;
(v)
a Series B Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 1/3 of such Purchaser’s Subscription
Amount divided by the Per Share Purchase Price;
(vi) a
Series C Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 1/3 of such Purchaser’s Subscription
Amount divided by the Per Share Purchase Price;
(vii) an
officer’s certificate from the Chief Executive Officer, dated as of the Closing
Date, certifying and setting forth (i) 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, (ii) a copy of the resolutions of the
Company authorizing the execution, delivery and performance of this Agreement
and (iii) 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;
(viii) a
copy of the Company’s September 30, 2007 financial statements; and
(ix) the
Registration Rights Agreement duly executed by the Company.
(b) On
or prior to the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:
(i)
this Agreement duly executed by such Purchaser;
(ii)
such Purchaser’s Subscription Amount by wire transfer; and
(iii)
the Registration Rights Agreement duly executed by such Purchaser.
2.3 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:
(i)
the accuracy in all material respects on the Closing Date of the representations
and warranties of the Purchasers contained herein;
(ii) all
obligations, covenants and agreements of each Purchaser required to be performed
at or prior to the Closing Date shall have been performed; and
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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;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the Company since the
date hereof; and
(v) from
the date hereof to the Closing Date, a banking moratorium shall not have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Securities at the Closing.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1 Representations and
Warranties of the Company. Except as set forth in the Disclosure
Schedules, which Disclosure Schedules shall be deemed a part hereof and shall
qualify any representation or otherwise made herein to the extent of the
disclosure contained in the corresponding section of the Disclosure Schedules,
the Company hereby makes the following representations and warranties to each
Purchaser:
(a) Subsidiaries. All
of the direct and indirect subsidiaries of the Company are set forth on Schedule
3.1(a). The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities. If the Company has no subsidiaries, all other references
to the Subsidiaries or any of them in the Transaction Documents shall be
disregarded.
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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
(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. Neither the
Company nor any Subsidiary is in violation or default of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a
material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse
Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.
(c) Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals. Each
Transaction Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof 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 of the
Transaction Documents by the Company and the consummation by the Company of the
other transactions 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 4.4 of this Agreement, (ii)
the filing with the Commission of the Registration Statement, (iii)
application(s) to each applicable Trading Market for the listing of the
Securities for trading thereon in the time and manner required thereby and (iv)
the filing of Form D with the Commission and such filings as are required to be
made under applicable state securities laws (collectively, the “Required
Approvals”).
(f) Issuance of the
Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents. The 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 the maximum number of shares of Common Stock issuable pursuant to this
Agreement and the Warrants.
(g) Capitalization. The
capitalization of the Company is as set forth on Schedule 3.1(g).
Immediately prior to the Closing, the number of shares of Common Stock
outstanding on a fully-diluted basis shall be 47,107,893. No Person has any
right of first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the
Securities, there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire any
shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock
Equivalents. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under any of such securities. All of the outstanding shares of capital
stock of the Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities. No further
approval or authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.
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(h) Financial
Statements. The reviewed financial statements for the nine
month period ended September 30, 2007 are attached hereto on Schedule 3.1(h). Such
financial statements have been prepared in accordance with United States
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
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;
Undisclosed Events, Liabilities or Developments. Since the
date of the latest audited financial statements included attached hereto as
Schedule
3.1(h), except as specifically disclosed on Schedule 3.1(i): (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.
(j) Litigation. There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely 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.
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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 as 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.
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(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 necessary
or material for use in connection with their respective businesses and which the
failure to so have could have a Material Adverse Effect (collectively, the
“Intellectual Property
Rights”). Neither the Company nor any Subsidiary has received
a notice (written or otherwise) that any of the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights. The Company and
its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where
failure to do so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(p) Insurance. The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to the aggregate Subscription Amount. Neither
the Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.
(q) Transactions With Affiliates
and Employees. 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.
(r) Internal Accounting
Controls. 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.
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(s) Certain
Fees. No brokerage or finder’s fees or commissions are or will
be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by the Transaction Documents. The
Purchasers shall have no obligation with respect to any fees or with respect to
any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by the Transaction Documents.
(t) Registration
Rights. Other than each of the Purchasers, no Person has any
right to cause the Company to effect the registration under the Securities Act
of any securities of the Company.
(u) 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, non-public 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 press releases disseminated by the Company during the twelve
months preceding the date of this Agreement taken as a whole do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made and when made, not
misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 3.2 hereof.
(v) No Integrated
Offering. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company under
circumstances which would require this offering to be registered under Section 5
of the Securities Act.
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(w) Solvency. Based
on the consolidated financial condition of the Company as of the Closing Date,
after giving effect to the receipt by the Company of the proceeds from the sale
of the Securities hereunder: (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature, (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof, and (iii) the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its liabilities when such amounts are required to be
paid. The Company does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt). The Company has no
knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing
Date. Schedule 3.1(aa) sets forth as of the date thereof all
outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
or for which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, “Indebtedness” means
(x) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.
(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.
-15-
(aa) Accountants. The
Company’s accounting firm is set forth on Schedule 3.1(aa) of
the Disclosure Schedules. To the knowledge and belief of the Company,
such accounting firm: (i) is a registered public accounting firm as required by
the Exchange Act and (ii) shall express its opinion with respect to the
financial statements to be included in the Company’s Annual Report for the year
ending December 31, 2007.
(bb) No Disagreements with
Accountants and Lawyers.There are no disagreements of any kind 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.
(cc)
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.
(dd) Manufacturing and Marketing
Rights. Neither the Company nor its Subsidiaries is not bound
by any agreement that affects the Company’s or its Subsidiaries’ exclusive right
to develop, manufacture, assemble, distribute, market or sell its respective
products.
(ee) 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.
-16-
(ff) Minute Books. The
minute books of the Company and its Subsidiaries made available to the
Purchasers contain a complete summary of all meetings of directors and
stockholders since the time of incorporation.
(gg) Elections. To
the Company’s knowledge, all elections and notices permitted by Section 83(b) of
the Internal Revenue Code and any analogous provisions of applicable state tax
laws have been timely filed by all employees who have purchased shares of the
Common Stock under agreements that provide for the vesting of such shares of
Common Stock.
(hh) Accounts
Receivable. All accounts receivable of the Company and its
Subsidiaries that are reflected on the Company’s and its Subsidiaries’ balance
sheets or interim balance sheets or on the accounting records of the Company and
its Subsidiaries as of the Closing Date (collectively, the “Accounts Receivable”)
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. Unless paid
prior to the Closing Date, the Accounts Receivable are or will be as of the
Closing Date current and collectible net of the respective reserves shown on the
balance sheet or interim balance sheet or on the accounting records of the
Company and its Subsidiaries as of the Closing Date (which reserves are adequate
and calculated consistent with past practice and, in the case of the reserve as
of the Closing Date, will not represent a greater percentage of the Accounts
Receivable as of the Closing Date than the reserve reflected in the interim
balance sheet represented of the Accounts Receivable reflected therein and will
not represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). Subject to such reserves, each of the Accounts
Receivable either has been or will be collected in full without any set-off,
within ninety days after the day on which it must becomes due and payable. There
is no contest, claim, or right of set-off, other than returns in the ordinary
course of business, under any agreement and/or contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Schedule
3.1(pp) contains a complete and accurate list of all Accounts Receivable
as of the date of the interim balance sheet, which list sets forth the aging of
such Accounts Receivable.
(ii) Inventory. All
inventory of the Company and the Subsidiaries, whether or not reflected in the
balance sheet or interim balance sheet, consists of a quality and quantity
usable and salable in the ordinary course of business, except for obsolete items
and items of below standard quality, all of which have been written off or
written down to net realizable value in the balance sheet or interim balance
sheet or on the accounting records of the Company and the Subsidiaries as of the
Closing Date, as the case may be. All inventories not written off have been
priced at the lower of cost or market on the last in, first out basis. The
quantities of each item of inventory (whether raw materials, work-in-process, or
finished goods) are not excessive, but are reasonable in the present
circumstances of the Company and the Subsidiaries.
(jj) Returns. Neither
the Company nor any Subsidiary has had any of its products returned by a
purchaser thereof, other than minor, nonrecurring warranty
problems.
-17-
(kk) Employee
Benefits. Except as set forth on Schedule 3.1(qq),
neither the Company nor any Subsidiary has (nor for the two years preceding the
date hereof has had) any plans which are subject to ERISA. “ERISA” means the
Employee Retirement Income Security Act of 1974 or any successor law and the
regulations and rules issued pursuant to that act or any successor
law.
3.2 Representations and
Warranties of the Purchasers. Each Purchaser, for itself and
for no other Purchaser, hereby represents and warrants as of the date hereof and
as of the Closing Date to the Company as follows:
(a) Organization;
Authority. Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate or similar action on the part of
such Purchaser. Each Transaction Document to which it is a party has
been duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(b) Own
Account. Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
(this representation and warranty not limiting such Purchaser’s right to sell
the Securities pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws) in violation of the
Securities Act or any applicable state securities law. Such Purchaser
is acquiring the Securities hereunder in the ordinary course of its
business.
(c) Purchaser
Status. At the time such Purchaser was offered the Securities,
it was, and as of the date hereof it is, and on each date on which it 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.
-18-
(d) Experience of Such
Purchaser. Such Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. Such Purchaser is able to bear the
economic risk of an investment in the Securities and, at the present time, is
able to afford a complete loss of such investment.
(e) General
Solicitation. Such Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
(f) Certain
Fees. No brokerage or finder’s fees or commissions are or will
be payable by the Purchaser to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by the Transaction Documents. The
Company shall have no obligation with respect to any fees or with respect to any
claims made by or on behalf of other Persons for fees of a type contemplated in
this Section that may be due in connection with the transactions contemplated by
the Transaction Documents.
(g) 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.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an Affiliate of a Purchaser or in connection with a pledge as contemplated
in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and the Registration
Rights Agreement and shall have the rights of a Purchaser under this Agreement
and the Registration Rights Agreement.
-19-
(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:
THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge would not be subject to
approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection
therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party
of Securities may reasonably request in connection with a pledge or transfer of
the Securities, including, if the Securities are subject to registration
pursuant to the Registration Rights Agreement, the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) under the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.
-20-
(c) Certificates
evidencing the Shares and Warrant Shares shall not contain any legend (including
the legend set forth in Section 4.1(b) hereof), (i) following any sale of the
Shares and Warrant Shares pursuant to an effective registration statement
(including the Registration Statement) covering the resale of such security,
(ii) following any sale of such Shares or Warrant Shares pursuant to Rule 144,
(iii) if such Shares or Warrant Shares are eligible for sale under Rule 144,
without the requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Underlying Shares and
without volume or manner-of-sale restrictions, or (iv) if such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Transfer Agent promptly after the Effective Date if required by
the Transfer Agent to effect the removal of the legend hereunder. If
all or any portion of a Warrant is exercised at a time when such Warrant Shares
shall be issued free of all legends. The Company agrees that
following the Effective Date or at such time as such legend is no longer
required under this Section 4.1(c), it will, no later than three Business Days
following the delivery by a Purchaser to the Transfer Agent of a certificate
representing Shares or Warrant Shares, as the case may be, issued with a
restrictive legend (such third Business Day, the “Legend Removal
Date”), deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and other
legends. The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section 4. Certificates for Securities subject to
legend removal hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System 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 Securities as set forth in
this Section 4.1 is predicated upon the Company’s reliance upon this
understanding.
4.2 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 on or before the 300th calendar day following the date hereof.
Until the earliest of the time that (i) no Purchaser owns Securities or (ii) the
Warrants have expired, 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.
-21-
4.3 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 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 to the Purchasers for purposes of the rules and
regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent
transaction.
4.4 Publicity. The
Company and each Purchaser shall consult with each other in issuing any other
press releases with respect to the transactions contemplated hereby, and neither
the Company nor any Purchaser shall issue any such press release nor otherwise
make any such public statement without the prior consent of the Company, with
respect to any press release of any Purchaser, or without the prior consent of
each Purchaser, with respect to any press release of the Company, which consent
shall not unreasonably be withheld or delayed, except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except (a) as
required by federal securities law in connection with (i) any registration
statement contemplated by the Registration Rights Agreement and (ii) the filing
of final Transaction Documents (including signature pages thereto) with the
Commission and (b) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the Purchasers with
prior notice of such disclosure permitted under this clause (b).
4.5 Shareholder Rights
Plan. No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an
“Acquiring Person” under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, by virtue of receiving Securities under the Transaction
Documents or under any other agreement between the Company and the
Purchasers.
4.6 Non-Public
Information. If at any time the Company becomes subject to the
reporting provisions of the Exchange Act, the Company covenants and agrees that
neither it, nor any other Person acting on its behalf, will provide any
Purchaser or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms
that each Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.
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4.7 Use of
Proceeds. Except as set forth on Schedule 4.7 attached
hereto or as required by Section 4.21, the Company shall use the net proceeds
from the sale of the Securities hereunder for working capital purposes and shall
not use such proceeds for: (a) the satisfaction of any portion of the Company’s
debt (other than payment of trade payables in the ordinary course of the
Company’s business and prior practices), (b) the redemption of any Common Stock
or Common Stock Equivalents or (c) the settlement of any outstanding
litigation.
4.8 Indemnification of
Purchasers. Subject to the provisions of this Section
4.8, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser
Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of its
own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of such separate counsel, a material conflict on any
material issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for the
reasonable fees and expenses of no more than one such separate
counsel. The Company will not be liable to any Purchaser Party under
this Agreement (y) for any settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; or (z) to the extent, but only to the extent that a loss, claim, damage
or liability is attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such Purchaser
Party in this Agreement or in the other Transaction Documents or from such
Purchaser Party’s fraud, gross negligence, willful misconduct or
malfeasance.
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4.9 Reservation of Common
Stock. As of the date hereof, the Company has reserved and the Company
shall continue to reserve and keep available at all times, free of preemptive
rights, a sufficient number of shares of Common Stock for the purpose of
enabling the Company to issue Shares pursuant to this Agreement and Warrant
Shares pursuant to any exercise of the Warrants.
4.10 Listing of Common
Stock. After the Reporting Date, Company hereby agrees to use best
efforts to maintain the listing of the Common Stock on a Trading Market, and as
soon as reasonably practicable following the Closing (but not later than the
earlier of 60 days calendar after the Effective Date and the first anniversary
of the Closing Date) to list all of the Shares and Warrant Shares on such
Trading Market. The Company further agrees, if the Company applies to have the
Common Stock traded on any other Trading Market, it will then include in such
application all of the Shares and Warrant Shares, and will take such other
action as is necessary to cause all of the Shares and Warrant Shares to be
listed on such other Trading Market as promptly as possible. The
Company will then take all action reasonably necessary to continue the listing
and trading of its Common Stock on a Trading Market and will comply in all
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of the Trading Market.
4.11 Equal Treatment of
Purchasers. No consideration (including any modification of
any Transaction Document) shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties to
the Transaction Documents. For clarification purposes, this provision
constitutes a separate right granted to each Purchaser by the Company and
negotiated separately by each Purchaser, and is intended for the Company to
treat the Purchasers as a class and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.
4.12 Participation in Future
Financing.
(a) From
the date hereof until the date that is the 18 month anniversary of the Effective
Date, upon any issuance by the Company or any of its Subsidiaries of Common
Stock, Common Stock Equivalents for cash consideration, Indebtedness (or a
combination of units hereof) (a “Subsequent
Financing”), each Purchaser shall have the right to participate in the
Subsequent Financing up to an amount equal to that percentage of the Subsequent
Financing (the “Participation
Maximum”) equal to the Purchaser’s percentage ownership of the then
outstanding share of Common Stock on a fully converted and exercised basis
(ignoring for such purposes any limitations therein) divided by the Company’s
outstanding Common Stock on a fully diluted basis, on the same terms, conditions
and price provided for in the Subsequent Financing.
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(b) At
least 5 Business Days prior to the closing of the Subsequent Financing, the
Company shall deliver to each Purchaser a written notice of its intention to
effect a Subsequent
Financing (“Pre-Notice”), which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a “Subsequent Financing
Notice”). Upon the request of a Purchaser, and only upon a request
by such Purchaser, for a Subsequent Financing Notice, the Company shall
promptly, but no later than 3 Business Days after such request, deliver a
Subsequent Financing Notice to such Purchaser. The Subsequent Financing
Notice shall describe in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be raised thereunder and the
Person or Persons through or with whom such Subsequent Financing is proposed to
be effected and shall include a term sheet or similar document relating thereto
as an attachment.
(c) Any
Purchaser desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York City time)
on the fifth (5th) Business Day after all of the Purchasers have received
the Pre-Notice that the Purchaser is willing to participate in the Subsequent
Financing, the amount of the Purchaser’s participation, and that the Purchaser
has such funds ready, willing, and available for investment on the terms set
forth in the Subsequent Financing Notice. If the Company receives no
notice from a Purchaser as of such fifth (5th) Business Day, such Purchaser
shall be deemed to have notified the Company that it does not elect to
participate.
(d) If
by 5:30 p.m. (New York City time) on the fifth (5th)
Business Day after all of the Purchasers have received the Pre-Notice,
notifications by the Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to participate) is, in the
aggregate, less than the total amount of the Subsequent Financing, then the
Company may effect the remaining portion of such Subsequent Financing on the
terms and with the Persons set forth in the Subsequent Financing
Notice.
(e) The
Company must provide the Purchasers with a second Subsequent Financing Notice,
and the Purchasers will again have the right of participation set forth above in
this Section 4.12, if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set forth in
such Subsequent Financing Notice within 30 Business Days after the date of the
initial Subsequent Financing Notice.
(f) Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of (i) an Exempt
Issuance, or (ii) an underwritten public offering of Common Stock.
4.13 Subsequent Equity
Sales.
(a) From
the date hereof until such time as the earlier of (i) the date that no Purchaser
holds any of the Securities and (ii) 3 years from the date hereof, the Company
shall be prohibited from effecting or entering into an agreement to effect any
Subsequent Financing involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company issues or sells (i)
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon and/or varies with the trading prices of or quotations
for the shares of Common Stock at any time after the initial issuance of such
debt or equity securities or (B) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the initial issuance of
such debt or equity security or upon the occurrence of specified or contingent
events directly or indirectly related to the business of the Company or the
market for the Common Stock or (ii) enters into any agreement, including, but
not limited to, an equity line of credit, whereby the Company may sell
securities at a future determined price. Any Purchaser shall be
entitled to obtain injunctive relief against the Company to preclude any such
issuance, which remedy shall be in addition to any right to collect
damages.
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(b) Notwithstanding
the foregoing, this Section 4.13 shall not apply in respect of an Exempt
Issuance, except that no Variable Rate Transaction shall be an Exempt
Issuance.
4.14 Short Sales and
Confidentiality After The Date Hereof. Each Purchaser, severally and
not jointly with the other Purchasers, covenants that neither it, nor any
Affiliate acting on its behalf or pursuant to any understanding with it, will
execute any Short Sales during the period commencing at the Discussion Time and
ending at the time that the transactions contemplated by this Agreement are
first publicly announced as described in Section 4.4. Each Purchaser,
severally and not jointly with the other Purchasers, covenants that until such
time as the transactions contemplated by this Agreement are publicly disclosed
by the Company as described in Section 4.4, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and the
information included in the Transaction Documents and the Disclosure
Schedules. Until all of the Purchaser’s Securities are sold, neither the
Purchaser nor its agents, representatives and affiliates shall in any manner
whatsoever enter into or effect, directly or indirectly, any Short Sale or
hedging transaction which establishes a net short position with respect to the
Common Stock. Except as set forth in the preceding sentence, no Purchaser makes
any representation, warranty or covenant hereby that it will not engage in Short
Sales in the securities of the Company after the time that the transactions
contemplated by this Agreement are first publicly announced as described in
Section 4.4. 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 covenant 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.
4.15 Form D; Blue Sky
Filings. The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of any Purchaser. The Company shall take
such action as the Company shall reasonably determine is necessary in order to
obtain an exemption for, or to qualify the Securities for, sale to the
Purchasers at the Closing under applicable securities or “Blue Sky” laws of the
states of the United States, and shall provide evidence of such actions promptly
upon request of any Purchaser.
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4.16 Capital
Changes. Until the one year anniversary of the Closing Date,
the Company shall not undertake a reverse stock split or reclassification of the
Common Stock without the prior written consent of the Purchasers holding a
majority in interest of the Shares, other than the reverse split approved by the
Company’s stockholders on October 23, 2007.
4.17 Delivery of Securities After
Closing. The Company shall deliver, or cause to be delivered,
the respective Securities purchased by each Purchaser to such Purchaser within 3
Business Days of the Closing Date.
4.18 Per Share Purchase Price
Protection. From the date hereof until the date that is the 3
year anniversary of the Effective Date, if in connection with a Subsequent
Financing, the Company or any Subsidiary shall issue any Common Stock or Common
Stock Equivalents entitling any person or entity to acquire shares of Common
Stock at an effective price per share less than the Per Share Purchase Price
(subject to reverse and forward stock splits and the like) (the “Discounted Purchase
Price,” as further defined below), the Company shall issue to such
Purchaser that number of additional shares of Common Stock equal to (a) the
Subscription Amount paid by such Purchaser at the Closing divided by the
Discounted Purchase Price, less (b) the Shares issued to such Purchaser at the
Closing pursuant to this Agreement and pursuant to this Section
4.18. The term “Discounted Purchase
Price” shall mean the Per Share Purchase Price reduced by multiplying the
Per Share Purchase Price by a fraction, the numerator of which is the number of
shares of Common Stock issued and outstanding immediately prior to the
Subsequent Financing plus the number of shares of Common Stock which the
offering price for such Subsequent Financing would purchase at the then Per
Share Purchase Price, and the denominator of which shall be the sum of the
number of shares of Common Stock issued and outstanding immediately prior to the
Subsequent Financing plus the number of shares of Common Stock so issued or
issuable in connection with the Subsequent Financing. The sale of
Common Stock Equivalents shall be deemed to have occurred at the time of the
issuance of the Common Stock Equivalents and the Discounted Purchase Price
covered thereby shall also include the actual exercise or conversion price
thereof at the time of the conversion or exercise (in addition to the
consideration per share of Common Stock underlying the Common Stock Equivalents
received by the Company upon such sale or issuance of the Common Stock
Equivalents). In the case of any Subsequent Financing involving a
Variable Rate Transaction or an “MFN Transaction” (as defined below), the
Discounted Purchase Price shall be deemed to be the lowest actual conversion or
exercise price at which such securities are converted or exercised in the case
of a Variable Rate Transaction, or the lowest adjustment price in the case of an
MFN Transaction. If shares are issued for a consideration other than
cash, the per share selling price shall be the fair value of such consideration
as determined in good faith by the Board of Directors of the
Company. The term “MFN Transaction”
shall mean a transaction in which the Company issues or sells any securities in
a capital raising transaction or series of related transactions which grants to
an investor the right to receive additional shares based upon future
transactions of the Company on terms more favorable than those granted to such
investor in such offering. The Company shall not refuse to issue a
Purchaser additional Shares hereunder based on any claim that such Purchaser or
any one associated or affiliated with such Purchaser has been engaged in any
violation of law, agreement or for any other reason, unless an injunction from a
court, on notice, restraining and or enjoining an issuance hereunder shall have
been sought and obtained. Nothing herein shall limit a Purchaser’s
right to pursue actual damages for the Company's failure to deliver Shares
hereunder and such Purchaser shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive
relief. Notwithstanding anything to the contrary herein, this Section
4.18 not apply in respect of an Exempt Issuance. Additionally, prior
to any issuance to a Purchaser pursuant to this Section 4.18, such Purchaser
shall have the right to irrevocably defer such issuances to such Purchaser under
this Section 4.18, in whole or in part, for continuous periods of not less than
75 days.
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4.19 Quotation of Common Stock on
a Trading Market. The Company shall use its best efforts to
qualify the Common Stock for quotation on a Trading Market as soon as
practicable, but in no event later than the later of (a) May 30, 2009 or (b) the
90th
day after the effectiveness of the registration statement on Form S-1
registering some or all of the Common Stock (such date, the “Reporting Date” and
such event, the “Liquidity Event”);
provided, that if (i) there is material non-public information regarding the
Company which the Board of Directors reasonably determines not to be in the
Company's best interest to disclose and which the Company is not otherwise
required to disclose, or (ii) there is a significant business opportunity
(including, but not limited to, the acquisition or disposition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer or other similar transaction) available to the Company which the Board of
Directors reasonably determines not to be in the Company's best interest to
disclose, then the Company may postpone the Reporting Date for a period not to
exceed thirty (30) consecutive days. If the Company is not publicly trading on a
Trading Market by the Reporting Date, the Exercise Price shall be reduced by 10%
of the then Exercise Price and the Company shall be required to issue additional
Shares to the Purchasers Pursuant to Section 4.19 as if a Subsequent Financing
had occurred on the Reporting date and the Discounted Purchase Price for such
purpose is 10% of the then effective Per Share Purchase Price and, for each
fiscal quarter thereafter during which the Liquidity Event has not yet occurred,
on the last day of each such quarter the Company shall reduce the then Exercise
Price by an additional 10% per quarter and effect an adjustment pursuant to
Section 4.19 as provided for above until the Liquidity Event is consummated and
the Common Stock is publicly trading and listed for quotation on a Trading
Market. The Reporting Date shall be extended that number of days for
(i) any banking or trading market moratorium, declared either by the United
States or New York State authorities, any material outbreak or escalation of
hostilities or other national or international calamity of such magnitude in its
effect on, or any material adverse change in, any financial market; or (ii) any
period of time during which FINRA reviews a Form 211 application, including any
amended applications, with respect to the Company submitted by a market
maker.
4.20 Audited Financial
Statements. Within 30 days of the date hereof, the Company
shall deliver to the Purchasers the audited financial statements, including
balance sheets, for the Company’s 2007 fiscal year and thereafter the Company
shall promptly deliver to the Purchasers all audited and un-audited financial
statements as soon as they are prepared by the Company until the Effective
Date.
4.21 Repayment of Immersive Media
Corp. The Company shall use the proceeds from the sale
of the Securities and/or the proceeds from the next financing done by the
Company with proceeds of at least, in the aggregate, $2 million, to repay in
full the Company’s 12% promissory note due December 31, 2008 to Immersive Media
Corp.
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ARTICLE V.
MISCELLANEOUS
5.1 Termination.
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the Closing has not been consummated on or before April 15, 2008;
provided, however, that no such
termination will affect the right of any party to xxx for any breach by the
other party (or parties).
5.2 Fees and
Expenses. At the Closing, the Company has agreed to reimburse
Vision the non-accountable sum of (a) $35,000 for its legal fees and expenses,
and (b) $30,000 for its due diligence fees and expenses. The Company shall
deliver to each Purchaser, prior to the Closing, a completed and executed copy
of the Closing Statement, attached hereto as Annex
A. 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.
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. (Los Angeles time) on a
Business Day, (b) the next Business 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 Business Day
or later than 5:30 p.m. (Los Angeles time) on any Business Day, (c) the 2nd
Business 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 or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Purchasers holding at least 67% of the Shares then
outstanding or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right.
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5.6 Headings. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
5.7 Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each Purchaser (other
than by merger). Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such Purchaser assigns or transfers
any Securities, provided such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions of the Transaction
Documents that apply to the “Purchasers.”
5.8 No Third-Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.8.
5.9 Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
5.10 Survival. The
representations and warranties contained herein shall survive the Closing and
the delivery of the Securities for the applicable statute of
limitations..
5.11 Execution. This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall
become effective
when counterparts have been signed by each party and delivered to the other
party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original
thereof.
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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 a Warrant, the Purchaser shall be
required to return any shares of Common Stock subject to with any such rescinded
exercise notice.
5.14 Replacement of
Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction. The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.
5.15 Remedies. In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers and the Company will
be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
5.16 Payment Set
Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
-31-
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. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FWS. FWS does not
represent all of the Purchasers but only Vision. The Company has elected to
provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do so
by the Purchasers.
5.18 Liquidated
Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been
canceled.
5.19 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.
5.20 Construction. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.
5.21 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)
-32-
IN WITNESS WHEREOF, the parties hereto
have caused this Securities Purchase Agreement to be duly executed by their
respective authorized signatories as of the date first indicated
above.
|
|
Address for
Notice:
0000 Xxxxxx
Xxxxxx
Xxxxx Xxxx, Xxxxxxxxxx
00000
|
|
By:__________________________________________
Name:
Ki Nam
Title:
Chief Executive Officer
With
a copy to (which shall not constitute notice):
|
Fax:
(000) 000-0000
|
|
Xxxxxxxxxx
& Xxxxx LLP
00000
Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile:
(000) 000-0000
Attention:
Xxxx X. Hong
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
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[PURCHASER
SIGNATURE PAGES TO T3 SECURITIES PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name of
Purchaser: ________________________________________________________
Signature of Authorized Signatory of
Purchaser: __________________________________
Name of
Authorized Signatory:
____________________________________________________
Title of
Authorized Signatory:
_____________________________________________________
Email
Address of Authorized Signatory:
______________________________________________
Fax
Number of Authorized Signatory:
________________________________________________
Address
for Notice of Purchaser:
Address
for Delivery of Securities for Purchaser (if not same as address for
notice):
Subscription
Amount: $_________________
Shares:
_________________
Series A
Warrant Shares: __________________
Series B
Warrant Shares: __________________
Series C
Warrant Shares: __________________
[SIGNATURE
PAGES CONTINUE]
-34-
