BRIDGE LOAN AGREEMENT
Exhibit
10.1
THIS
BRIDGE LOAN
AGREEMENT, dated as of July 26, 2007, is entered into by and between
RIM SEMICONDUCTOR COMPANY, a Utah corporation with headquarters
located at 000 XX 000xx Xxx., Xxxxx 000, Xxxxxxxx, XX 00000 (the “Company”), and
each individual or entity named on an executed counterpart of the signature
page
hereto (each such signatory is referred to as a “Lender”) (each agreement with a
Lender being deemed a separate and independent agreement between the Company
and
such Lender, except that each Lender acknowledges and consents to the rights
granted to each other Lender [each, an “Other Lender”] under such agreement and
the Transaction Agreements, as defined below, referred to
therein).
W
I T N E S S E T H:
WHEREAS,
the Company
and the Lender are executing and delivering this Agreement in accordance with
and in reliance upon the exemption from securities registration for offers
and
sales to accredited investors afforded, inter alia, by Rule
506 under Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
as amended (the “1933 Act”), and/or Section 4(2) of the 1933 Act;
and
WHEREAS,
each Lender
wishes to lend funds in the amount of the Purchase Price (as defined below)
to
the Company, subject to and upon the terms and conditions
of this Agreement and acceptance of this Agreement by the Company, the repayment
of which will be represented by a Senior Secured Promissory Note of
the Company (the “Note”), on the terms and conditions referred to herein;
and
WHEREAS,
in connection
with the loan to be made by the Lender, the Company has agreed to issue the
Note
and the Issued Shares (as defined below) to the Lender;
NOW
THEREFORE, in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the parties agree as follows:
1. AGREEMENT
TO PURCHASE; PURCHASE PRICE.
a. Purchase.
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(i) Subject
to the terms and conditions of this Agreement and the other Transaction
Agreements (as defined below), the Lender hereby agrees to loan to the Company
the principal amount specified on the Lender’s signature page of this Agreement
(the “Purchase Price”), out of the aggregate amount being loaned by all Lenders
of US $1,000,000 (the “Aggregate Purchase Price”).
(ii) The
obligation to repay the loan of the relevant Purchase Price from the Lender
shall be evidenced by the Company’s issuance of one or more Notes to the Lender
in the principal amount of one hundred ten percent (110%) of the Purchase Price
paid by the Lender on or in connection with the Closing Date. Each
Note shall be payable on the earlier of (A) the date (the “Stated Maturity
Date”) which is one hundred fifty (150) days after the Closing Date
or (B) the date on which the New Transaction Threshold (as defined in the Note)
occurs. Each Note shall be in the form of Annex I
annexed hereto. Repayment of the Note shall be secured under
the terms of a Security Interest Agreement between the Company, as debtor,
and
the Lender, as secured party (the “Security Interest Agreement”), substantially
in the form annexed hereto as Annex V.
(iii) In
consideration of the loan to be made by each Lender, the Company agrees to
issue to each Lender the Issued Shares on the Closing
Date. Additional provisions relating to the Issued Shares are
provided below.
(iv) The
loan to be made by the Lender and the issuance of the Note and the Issued Shares
to the Lender and the other transactions contemplated hereby are sometimes
referred to herein and in the other Transaction Agreements as the purchase
and
sale of the Securities (as defined below), and are referred to collectively
as
the “Transactions.”
b. Certain
Definitions. As used herein, each of the following
terms has the meaning set forth below, unless the context otherwise
requires:
“Affiliate”
means,
with respect to a
specific Person referred to in the relevant provision, another Person who or
which controls or is controlled by or is under common control with such
specified Person.
“Certificates”
means
the ink-signed
Note and the Issued Share Certificates, each duly executed by the Company and
issued on the Closing Date in the name of the Lender.
“Closing
Date” means the date of the
closing of the Transactions, as provided herein.
“Company
Control Person”
means each director, executive officer, promoter, and such other
Persons as may be deemed in control of the Company pursuant to Rule 405 under
the 1933 Act or Section 20 of the 1934 Act (as defined below).
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“Disclosure
Annex” means Annex
IV to this Agreement; provided, however, that the Disclosure Annex
shall be arranged in sections corresponding to the identified Sections of this
Agreement, but the disclosure in any such section of the Disclosure Annex shall
qualify other provisions in this Agreement to the extent that it would be
readily apparent to an informed reader from a reading of such section of the
Disclosure Annex that it is also relevant to other provisions of this
Agreement.
“Escrow
Agent” means Xxxxxxx &
Xxxxxx LLP, the escrow agent identified in the Joint Escrow Instructions
attached hereto as Annex II (the “Joint Escrow
Instructions”).
“Escrow
Funds” means the Purchase Price
delivered to the Escrow Agent as contemplated by Sections 1(c) and (d)
hereof.
“Escrow
Property” means the Escrow
Funds and the Certificates delivered to the Escrow Agent as contemplated by
Section 1(c) hereof.
“Holder”
means
the Person holding the
relevant Securities at the relevant time.
“Issued
Share Certificates” means one
or more stock certificates issued by the Company in the name of the Lender
representing, in the aggregate, the relevant Issued Shares.
“Issued
Shares” means, for each Lender,
(i) 10,000,000 shares of Common Stock, multiplied by (ii) the Lender’s Allocable
Share; the Issued Shares are to be issued on the Closing Date.
“Last
Audited Date” means October 31,
2006.
“Lender
Control Person” means each
director, executive officer, promoter, and such other Persons as may be deemed
in control of the Lender pursuant to Rule 405 under the 1933 Act or Section
20
of the 1934 Act.
“Lender’s
Allocable Share” means the
fraction, of which the numerator is the Lender’s Purchase Price and the
denominator is the Aggregate Purchase Price.
“Material
Adverse Effect” means an
event or combination of events, which individually or in the aggregate, would
reasonably be expected to (x) adversely affect the legality, validity or
enforceability of the Securities or any of the Transaction Agreements,
(y) have or result in a material adverse effect on the results of
operations, assets, or financial condition of the Company and its subsidiaries,
taken as a whole, or (z) adversely impair the Company's ability to perform
fully
on a timely basis its material obligations under any of the Transaction
Agreements or the transactions contemplated thereby.
“New
Common Stock” means shares of
Common Stock and/or securities convertible into, and/or other rights exercisable
for, Common Stock, which are offered or sold in a New Transaction.
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“New
Investor” means the third party
investor, purchaser or lender (howsoever denominated) in a New
Transaction.
“New
Transaction” means
(i)
the
offer or sale of New Common Stock by or on behalf of the Company to a New
Investor, and/or
(ii)
the
grant of a security interest in or pledge of (x) any or all of the Company’s
assets by the Company and/or (y) shares of the Company’s Common Stock or
securities convertible into or exercisable for the Company’s Common Stock by any
other party in connection with a transaction in which the Company borrows or
is
otherwise obligated to pay funds to a third party, and/or
(iii)
the
offer or sale to existing holders of any Company securities (each, an “Existing
Securityholder”) of additional New Common Stock or the offer of more beneficial
terms with respect to any existing securities of the Company held by an Existing
Securityholder in exchange for the forbearance, modification or relinquishment
of any rights such Existing Securityholder may have, and/or
(iv)
the
offer by the Company to any Existing Securityholder of a reduction in the
conversion price of any security convertible into Common Stock or a reduction
in
the exercise price of any right exercisable for Common Stock
in
a
transaction offered or consummated after the date hereof; provided, however,
that it is specifically understood that the term “New Transaction” (1) includes,
but is not limited to, a sale of Common Stock or of a security convertible
into
Common Stock or an equity or credit line transaction, but (2) does not include
(a) the issuance of Common Stock upon the exercise or conversion of options,
warrants or convertible securities outstanding on the date hereof, or in respect
of any other financing agreements as in effect on the date hereof and identified
in the Disclosure Annex or the Company SEC Documents (provided the relevant
instrument or document is not amended after the date hereof), (b) the issuance
of Common Stock pursuant to an employee stock option plan of the Company, such
stock option plan having been properly approved by the shareholders of the
Company, (c) the issuance of Common Stock pursuant to a non-employee director
or
consultants’ stock option plan of the Company, (d) the issuance of Common Stock
upon the exercise of any options or warrants referred to in the preceding
clauses of this paragraph (provided the relevant instrument is not amended
after
the date hereof), or (e) the issuance of shares to a Strategic
Partner.
“Person”
means
any living person or any
entity, such as, but not necessarily limited to, a corporation,
partnership or trust.
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“Principal
Trading Market” means the
Over the Counter Bulletin Board or such other market on which the Common Stock
is principally traded at the relevant time, but shall not included the “pink
sheets.”
“Securities”
means
the Note and the
Issued Shares (provided, however, that the parties acknowledge that the use
of
such term is for convenience only, and is not intended to suggest that the
Note
is a “security,” as such term is used in the 1933 Act).
“Shares”
means
the shares of Common
Stock representing any of the Issued Shares.
“State
of Incorporation” means
Utah.
“Strategic
Partner” means a third
party, whether or not currently affiliated with the Company, which party (i)
is
engaged in a business which is the business in which the Company is engaged
or a
similar or related business, and (ii) either (a) (1) subsequently purchases
equity securities of the Company (or securities convertible into equity
securities of the Company) or (2) is issued such equity securities (or such
convertible securities) in consideration of services rendered or to be rendered
to the Company, or (b) enters into an agreement for one or more of the
following: the licensing by the Company of all or any portion of its technology
to such third party, the licensing by such third party of all or any portion
of
its technology to the Company, or any other coordination of all or a portion
of
their respective business activities or operations by the Company and such
third
party.
“Trading
Day” means any day during
which the Principal Trading Market shall be open for business.
“Transfer
Agent” means, at any time,
the transfer agent for the Company’s Common Stock.
“Transaction
Agreements” means this
Bridge Loan Agreement, the Note, the Security Interest Agreement, the Joint
Escrow Instructions, and the Issued Shares, and includes all ancillary documents
referred to in those agreements.
c. Form
of Payment; Delivery of Certificates.
(i) The
Lender shall pay the Purchase Price by delivering immediately available good
funds in United States Dollars to the Escrow Agent no later than the date prior
to the Closing Date.
(ii) No
later than the Closing Date, but in any event promptly following payment by
the
Lender to the Escrow Agent of the Purchase Price, the Company shall
deliver the Certificates, each duly executed on behalf of the Company and issued
in the name of the Lender, to the Escrow Agent.
(iii) By
signing this Agreement, each of the Lender and the Company, subject to
acceptance by the Escrow Agent, agrees to all of the terms and conditions of,
and becomes a party to, the Joint Escrow Instructions, all of the provisions
of
which are incorporated herein by this reference as if set forth in
full.
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d. Method
of Payment. Payment into escrow of the Purchase Price shall
be made by wire transfer of funds to:
XX
Xxxxxx Xxxxx Bank
000
Xxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
ABA#
000000000
For
credit to the account of Xxxxxxx
& Prager llp
Account
No.: [To be provided to the Lender by Xxxxxxx &
Xxxxxx llp]
Re: Rim
7/07
Bridge/[Insert Name of Lender]
2. LENDER
REPRESENTATIONS,
WARRANTIES, ETC.; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION.
The
Lender represents and warrants to,
and covenants and agrees with, the Company as follows:
a. Without
limiting Lender's right to sell the Securities pursuant to an effective
registration statement, if any, or otherwise in compliance with the 1933 Act,
the Lender is purchasing the Securities for its own account for investment
only
and not with a view towards the public sale or distribution thereof and not
with
a view to or for sale in connection with any distribution thereof.
b. The
Lender is (i) an “accredited investor” as that term is defined in Rule 501 of
the General Rules and Regulations under the 1933 Act by reason of Rule
501(a)(3), (ii) experienced in making investments of the kind described in
this
Agreement and the related documents, (iii) able, by reason of the business
and
financial experience of its officers (if an entity) and professional advisors
(who are not affiliated with or compensated in any way by the Company or any
of
its Affiliates or selling agents), to protect its own interests in connection
with the transactions described in this Agreement, and the related documents,
and to evaluate the merits and risks of an investment in the Securities, and
(iv) able to afford the entire loss of its investment in the
Securities.
c. All
subsequent offers and sales of the Securities by the Lender shall be made either
pursuant to registration of the relevant Securities under the 1933 Act or
pursuant to an exemption from registration.
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d. The
Lender understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of the 1933
Act and state securities laws and that the Company is relying upon the truth
and
accuracy of, and the Lender's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Lender set forth herein
in
order to determine the availability of such exemptions and the eligibility
of
the Lender to acquire the Securities.
e. The
Lender and its advisors, if any, have been furnished with or have been given
access to all materials relating to the business, finances and operations of
the
Company and materials relating to the offer and sale of the Securities which
have been requested by the Lender, including those set forth on any annex
attached hereto. The Lender and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its management and have received
complete and satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, the Lender has also had the
opportunity to obtain and to review the Company's filings on XXXXX listed on
Annex VI hereto (the documents listed on such Annex VI, to the
extent available on XXXXX or otherwise provided to the Lender as indicated
on
said Annex VI, collectively, the “Company's SEC Documents”).
f. The
Lender understands that its investment in the Securities involves a high degree
of risk.
g. The
Lender hereby represents that, in connection with its purchase of the
Securities, it has not relied on any statement or representation by the Company
or any of its officers, directors and employees or any of its attorneys or
agents, except as specifically set forth herein.
h. The
Lender understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities.
i. This
Agreement and the other Transaction Agreements to which the Lender is a party,
and the transactions contemplated thereby, have been duly and validly
authorized, executed and delivered on behalf of the Lender and are valid and
binding agreements of the Lender enforceable in accordance with their respective
terms, subject as to enforceability to general principles of equity and to
bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.
3. COMPANY
REPRESENTATIONS, ETC. The Company represents and warrants
to the Lender as of the date hereof and as of the Closing Date that, except
as
otherwise provided in the Disclosure Annex or in the Company’s SEC
Documents:
a. Rights
of Others Affecting the Transactions. There are no
preemptive rights of any shareholder of the Company, as such, to acquire the
Note or the Issued Shares. No party has a currently exercisable right
of first refusal which would be applicable to any or all of the transactions
contemplated by the Transaction Agreements.
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b. Status. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Incorporation and has the requisite corporate
power to own its properties and to carry on its business as now being
conducted. The Company is duly qualified as a foreign corporation to
do business and is in good standing in each jurisdiction where the nature of
the
business conducted or property owned by it makes such qualification necessary,
other than those jurisdictions in which the failure to so qualify would not
have
or result in a Material Adverse Effect. The Company has registered
its stock and is obligated to file reports pursuant to Section 12 or Section
15(d) of the Securities and Exchange Act of 1934, as amended (the “1934
Act”). The Common Stock is quoted on the Principal Trading
Market. The Company has received no notice, either oral or written,
with respect to the continued eligibility of the Common Stock for such quotation
on the Principal Trading Market, and the Company has maintained all requirements
on its part for the continuation of such quotation.
c. Authorized
Shares.
(i) The
authorized capital stock of the Company consists of (x) 900,000,000 shares
of
Common Stock, $0.001 par value per share, of which approximately 446,030,653
are
outstanding as of July 24, 2007, and (y) 15,000,000 shares of preferred stock,
$0.01 par value per share, none of which are issued or outstanding.
(ii) There
are no outstanding securities which are convertible into shares of Common Stock,
whether such conversion is currently exercisable or exercisable only upon some
future date or the occurrence of some event in the future. If any
such securities are listed on the Disclosure Annex, the number or amount of
each
such outstanding convertible security and the conversion terms are set forth
in
said Disclosure Annex.
(iii) All
issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable. The Company has
sufficient authorized and unissued shares of Common Stock as would be necessary
to effect the issuance of the Shares on the Closing Date, were the Issued Shares
converted on that date (assuming the provisions of Appendix I to the Note were
then effective).
(iv) As
of the Closing Date, the Issued Shares shall have been duly authorized by all
necessary corporate action on the part of the Company, and, when issued upon
a
conversion of the Note in accordance with its terms, will have been duly and
validly issued, fully paid and non-assessable and will not subject the Holder
thereof to personal liability by reason of being such Holder.
d. Transaction
Agreements and Stock. This Agreement and each of the other
Transaction Agreements, and the transactions contemplated thereby, have been
duly and validly authorized by the Company, this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the Note and
each of the other Transaction Agreements, when executed and delivered by the
Company, will be, valid and binding agreements of the Company enforceable in
accordance with their respective terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium, and other
similar laws affecting the enforcement of creditors' rights
generally.
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e. Non-contravention. The
execution and delivery of this Agreement and each of the other Transaction
Agreements by the Company, the issuance of the Securities, and the consummation
by the Company of the other transactions contemplated by this Agreement, the
Note and the other Transaction Agreements do not and will not conflict with
or
result in a breach by the Company of any of the terms or provisions of, or
constitute a default under (i) the certificate of incorporation or by-laws
of
the Company, each as currently in effect, (ii) any indenture, mortgage, deed
of
trust, or other material agreement or instrument to which the Company is a
party
or by which it or any of its properties or assets are bound, including any
listing agreement for the Common Stock except as herein set forth, or (iii)
to
its knowledge, any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have or result in a Material Adverse
Effect.
f. Approvals. No
authorization, approval or consent of any court, governmental body, regulatory
agency, self-regulatory organization, or stock exchange or market or the
shareholders of the Company is required to be obtained by the Company for the
issuance and sale of the Securities to the Lender as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained.
g. Filings. None
of the Company’s SEC Documents contained, at the time they were filed, any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements made therein
in light of the circumstances under which they were made, not
misleading. Since June 1, 2006, the Company has filed all annual and
quarterly reports required to be filed by the Company with the SEC under Section
13(a) or 15(d) of the 1934 Act.
h. Absence
of Certain Changes. Since the Last Audited Date, there has
been no Material Adverse Effect, except as disclosed in the Company’s SEC
Documents. Since the Last Audited Date, except as provided in the Company’s SEC
Documents, the Company has not (i) incurred or become subject to any material
liabilities (absolute or contingent) except liabilities incurred in the ordinary
course of business consistent with past practices; (ii) discharged or satisfied
any material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to shareholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts owed to the Company
by any third party or claims of the Company against any third party,
except in the ordinary course of business consistent with past practices; (v)
waived any rights of material value, whether or not in the ordinary course
of
business, or suffered the loss of any material amount of existing business;
(vi)
made any increases in employee compensation, except in the ordinary course
of
business consistent with past practices; or (vii) experienced any material
problems with labor or management in connection with the terms and conditions
of
their employment.
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i. Full
Disclosure. To the best of the Company’s knowledge, there is
no fact known to the Company (other than general economic conditions known
to
the public generally or as disclosed in the Company’s SEC Documents) that has
not been disclosed in writing to the Lender that would reasonably be expected
to
have or result in a Material Adverse Effect.
j. Absence
of Litigation. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board or body pending or, to
the
knowledge of the Company, threatened against or affecting the Company before
or
by any governmental authority or nongovernmental department, commission, board,
bureau, agency or instrumentality or any other person, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, any of the Transaction
Agreements. The Company is not aware of any valid basis for any such
claim that (either individually or in the aggregate with all other such events
and circumstances) could reasonably be expected to have a Material Adverse
Effect. There are no outstanding or unsatisfied judgments, orders, decrees,
writs, injunctions or stipulations to which the Company is a party or by which
it or any of its properties is bound, that involve the transaction contemplated
herein or that, alone or in the aggregate, could reasonably be expect to have
a
Material Adverse Effect.
k. Absence
of Events of Default. Except as set forth in Section 3(e)
hereof, (i) neither the Company nor any of its subsidiaries is in default in
the
performance or observance of any material obligation, agreement, covenant or
condition contained in any material indenture, mortgage, deed of trust or other
material agreement to which it is a party or by which its property is bound,
and
(ii) no Event of Default (or its equivalent term), as defined in the respective
agreement to which the Company or its subsidiary is a party, and no event which,
with the giving of notice or the passage of time or both, would become an Event
of Default (or its equivalent term) (as so defined in such agreement), has
occurred and is continuing, which would have a Material Adverse
Effect.
l. Absence
of Certain Company Control Person Actions or Events. To the
Company’s knowledge, none of the following has occurred during the past five (5)
years with respect to a Company Control Person:
(1)
A
petition under the federal bankruptcy laws or any state insolvency law was
filed
by or against, or a receiver, fiscal agent or similar officer was appointed
by a
court for the business or property of such Company Control Person, or any
partnership in which he was a general partner at or within two years before
the
time of such filing, or any corporation or business association of which he
was
an executive officer at or within two years before the time of such
filing;
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(2)
Such
Company Control Person was convicted in a criminal proceeding or is a named
subject of a pending criminal proceeding (excluding traffic violations and
other
minor offenses);
(3)
Such
Company Control Person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or otherwise
limiting, the following activities:
(i)
acting as an investment advisor, underwriter, broker or dealer in securities,
or
as an affiliated person, director or employee of any investment company, bank,
savings and loan association or insurance company, as a futures commission
merchant, introducing broker, commodity trading advisor, commodity pool
operator, floor broker, any other Person regulated by the Commodity Futures
Trading Commission (“CFTC”) or engaging in or continuing any conduct or practice
in connection with such activity;
(ii)
engaging in any type of business practice; or
(iii)
engaging in any activity in connection with the purchase or sale of any security
or commodity or in connection with any violation of federal or state securities
laws or federal commodities laws;
(4)
Such
Company Control Person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal or state authority
barring, suspending or otherwise limiting for more than 60 days the right of
such Company Control Person to engage in any activity described in paragraph
(3)
of this item, or to be associated with Persons engaged in any such activity;
or
(5)
Such
Company Control Person was found by a court of competent jurisdiction in a
civil
action or by the CFTC or SEC to have violated any federal or state securities
law, and the judgment in such civil action or finding by the CFTC or SEC has
not
been subsequently reversed, suspended, or vacated.
m. No
Undisclosed Liabilities or Events. To the best of the
Company’s knowledge, the Company has no liabilities or obligations other than
those disclosed in the Transaction Agreements or the Company's SEC Documents
or
those incurred in the ordinary course of the Company's business since the Last
Audited Date, or which individually or in the aggregate, do not or would not
have a Material Adverse Effect. No event or circumstance has occurred or exists
with respect to the Company or its properties, business, operations, condition
(financial or otherwise), or results of operations, which, under applicable
law,
rule or regulation, requires public disclosure or announcement prior to the
date
hereof by the Company but which has not been so publicly announced or
disclosed. There are no proposals currently under consideration or
currently anticipated to be under consideration by the Board of Directors or
the
executive officers of the Company which proposal would (x) change the articles
or certificate of incorporation or other charter document or by-laws of the
Company, each as currently in effect, with or without shareholder approval,
which change would reduce or otherwise adversely affect the rights and powers
of
the shareholders of the Common Stock or (y) materially or substantially change
the business, assets or capital of the Company, including its interests in
subsidiaries.
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n. No
Integrated Offering. Neither the Company nor any of its
Affiliates nor any Person acting on its or their behalf has, directly or
indirectly, at any time since January 1, 2007, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
o. Dilution. The
Issued Shares may have a dilutive effect on the ownership interests of the
other
shareholders (and Persons having the right to become shareholders) of the
Company. The Company's executive officers and directors have studied
and fully understand the nature of the Securities being sold hereby and
recognize that they have such a potential dilutive effect. The board
of directors of the Company has concluded, in its good faith business judgment,
that such issuance is in the best interests of the Company.
p. Fees
to Brokers, Finders and Others. The Company has taken no
action which would give rise to any claim by any Person for brokerage
commission, finder's fees or similar payments by Lender relating to this
Agreement or the transactions contemplated hereby. Notwithstanding
the foregoing, the Company acknowledges that it has agreed to pay the Due
Diligence Fees to each Due Diligence Reviewer (as those terms are defined in
Annex VII hereto) for providing due diligence services to the
Lenders in connection with the transactions contemplated
hereby. Except for such fees arising as a result of any agreement or
arrangement entered into by the Lender without the knowledge of the Company
(a “Lender’s Fee”), Lender shall have no obligation with respect to
such fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this paragraph that may be due in connection
with the transactions contemplated hereby. The Company shall
indemnify and hold harmless each of the Lender, its employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees (other than a Lender’s Fee).
q. Confirmation. The
Company confirms that all statements of the Company contained herein shall
survive acceptance of this Agreement by the Lender for a period of three (3)
years from the Closing Date. The Company agrees that, if any events
occur or circumstances exist prior to the release of the Purchase Price to
the
Company which would make any of the Company’s representations, warranties,
agreements or other information set forth herein materially untrue or materially
inaccurate as of such date, the Company shall immediately notify the Lender
(directly or through its counsel, if any) and the Escrow Agent in writing prior
to such date of such fact, specifying which representation, warranty or covenant
is affected and the reasons therefor.
12
4. CERTAIN
COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer
Restrictions. The Lender acknowledges that (1) the
Securities have not been and are not being registered under the provisions
of
the 1933 Act and the Shares have not been and are not being registered under
the
1933 Act, and may not be transferred unless (A) subsequently registered
thereunder or (B) the Lender shall have delivered to the Company an opinion
of
counsel, reasonably satisfactory in form, scope and substance to the Company,
to
the effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (2) any sale of
the
Securities made in reliance on Rule 144 promulgated under the 1933 Act may
be
made only in accordance with the terms of said Rule and further, if said Rule
is
not applicable, any resale of such Securities under circumstances in which
the
seller, or the Person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the
SEC
thereunder; and (3) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or, except as
specifically contemplated by the Transaction Agreements, to comply with the
terms and conditions of any exemption thereunder.
b. Restrictive
Legend. The Lender acknowledges and agrees that, until such
time as the relevant Shares have been registered under the 1933 Act and sold
in
accordance with an effective registration statement, the certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED
FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
c. Filings. The
Company undertakes and agrees to make all filings required to be made by it
in
connection with the sale of the Securities to the Lender under the 1933 Act,
the
1934 Act or any United States state securities laws and regulations thereof
applicable to the Company, or by any domestic securities exchange or trading
market, and, unless such filing is publicly available on the SEC’s XXXXX system
(via the SEC’s web site at no additional charge), to provide a copy thereof to
the Lender promptly after such filing.
13
d. Reporting
Status. So long as the Lender beneficially owns any of the
Securities and for at least twenty (20) Trading Days thereafter, the Company
shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act, shall take all reasonable action
under its control to ensure that adequate current public information with
respect to the Company, as required in accordance with Rule 144(c)(2) of the
1933 Act, is publicly available, and shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination. So long as
the Lender beneficially owns any of the Issued Shares, the Company will take
all
reasonable action under its control to maintain the continued listing and
quotation and trading of its Common Stock (including, without limitation, all
Shares) on the Principal Trading Market or a listing on the NASDAQ Capital
or
National Markets and, to the extent applicable to it, will comply in all
material respects with the Company’s reporting, filing and other obligations
under the by-laws or rules of the Principal Trading Market and/or the National
Association of Securities Dealers, Inc., as the case may be, applicable to
it.
e. Use
of Proceeds. The Company will use the proceeds received
hereunder (i) first, as provided in Annex VII attached hereto,
and (ii) then, for general corporate purposes.
f. Issued
Shares. The Company agrees to issue the Issued Shares to the
Lender on the Closing Date.
g. Certain
Agreements. Any other provision of this Agreement or any of
the other Transaction Agreements to the contrary notwithstanding, the Company
shall not engage in any offers, sales or other transactions of its securities
which would adversely affect the exemption from registration available for
the
transactions contemplated by the Transaction Agreements.
h. Rule
144. With a view to making available to the Holder the
benefits of Rule 144 promulgated under the 1933 Act or any other similar rule
or
regulation of the SEC that may at any time permit Holder to sell securities
of
the Company to the public without registration (collectively, “Rule 144"), the
Company agrees to:
(i) make
and keep public information available, as those terms are understood and defined
in Rule 144;
(ii) file
with the SEC in a timely manner all reports and other documents required of
the
Company under the 1933 Act and the 1934 Act; and
(iii) furnish
to the Holder so long as such party owns Issued Shares, promptly upon request,
(A) a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (B) if not available
on
the SEC’s XXXXX system, a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the Company and
(C)
such other information as may be reasonably requested to permit the Holder
to
sell such securities pursuant to Rule 144 without registration; and
14
(iv) at
the request of any Holder then holding Issued Shares, give the Transfer Agent
instructions (supported by an opinion of Company counsel, if required or
requested by the Transfer Agent) to the effect that, upon the Transfer Agent’s
receipt from such Holder of
(A)
a
certificate (a “Rule 144 Certificate”) certifying (1) that the Holder’s holding
period (as determined in accordance with the provisions of Rule 144) for the
Shares which the Holder proposes to sell (the “Securities Being Sold”) is not
less than one (1) year and (2) as to such other matters as may be appropriate
in
accordance with Rule 144 under the Securities Act, and
(B)
an
opinion of counsel acceptable to the Company (for which purposes it is agreed
that Xxxxxxx & Xxxxxx LLP shall be deemed acceptable if not given by Company
counsel) that, based on the Rule 144 Certificate, Securities Being Sold may
be
sold pursuant to the provisions of Rule 144, even in the absence of an effective
registration statement,
the
Transfer Agent is to effect the transfer of the Securities Being Sold and issue
to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent’s books and records (except to the
extent any such legend or restriction results from facts other than the identity
of the relevant Holder, as the seller or transferor thereof, or the status,
including any relevant legends or restrictions, of the shares of the Securities
Being Sold while held by the Lender). If the Transfer Agent
reasonably requires any additional documentation at the time of the transfer,
the Company shall deliver or cause to be delivered all such reasonable
additional documentation as may be necessary to effectuate the issuance of
an
unlegended certificate.
i. Available
Shares. The Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, a number of shares (the
“Minimum Available Shares”) at least equal to one hundred percent (100%) of the
number of shares which would be issuable upon conversion of the outstanding
Notes held by all Holders (in each case, whether such Note were originally
issued to the Holder, the Lender or to any other party). For the
purposes of such calculations, the Company should assume that the Note were
then
convertible without regard to any conditions or restrictions which might limit
any Holder’s right to convert the Note held by any Holder.
j. Publicity,
Filings, Releases, Etc. Each of the parties agrees that it
will not disseminate any information relating to the Transaction Agreements
or
the transactions contemplated thereby, including issuing any press releases,
holding any press conferences or other forums, or filing any reports
(collectively, “Publicity”), without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither
party will include in any such Publicity any statement or statements or other
material to which the other party reasonably objects, unless in the reasonable
opinion of counsel to the party proposing such statement, such statement is
legally required to be included. In furtherance of the foregoing, the
Company will provide to the Lender drafts of the applicable text of the first
filing of a Current Report on Form 8-K or a Quarterly or Annual Report on Form
10-Q or 10-K (or equivalent SB forms) intended to be made with the SEC which
refers to the Transaction Agreements or the transactions contemplated thereby
as
soon as practicable (but at least two (2) Trading Days before such filing will
be made) and will not include in such filing any statement or statements or
other material to which the other party reasonably objects, unless in the
reasonable opinion of counsel to the party proposing such statement, such
statement is legally required to be included. Notwithstanding the
foregoing, each of the parties hereby consents to the inclusion of the text
of
the Transaction Agreements in filings made with the SEC as well as any
descriptive text accompanying or part of such filing which is accurate and
reasonably determined by the Company’s counsel to be legally required.
Notwithstanding, but subject to, the foregoing provisions of this Section 4(j),
the Company will, after the Closing Date, promptly issue a press release and
file a Current Report on Form 8-K or, if appropriate, a quarterly or annual
report on the appropriate form, referring to the transactions contemplated
by
the Transaction Agreements.
15
k. New
Equity Transactions; Right to Subscribe; Payment by
Offset. Any other provision of this Agreement or any of the
other Transaction Agreements to the contrary notwithstanding, if prior to the
payment in full of the Note, the Company offers any New Transaction for the
issuance of shares of the Company’s Common Stock or securities convertible into
or exercisable for shares of Common Stock (each such transaction, a “New Equity
Transaction,” which term includes any such transaction currently anticipated to
be made by the Company or currently being negotiated by the Company, whether
or
not any binding agreements have been entered into in connection therewith)
to
any third party (each, a “New Party”), where the aggregate purchase price
(howsoever denominated) of all New Parties for such securities is $2,000,000
or
more, the Company shall give the Lender at least three (3) Trading Days’ notice
thereof and give the opportunity to subscribe to the New Equity Transaction
on
the same terms as any other New Party, except that the Lender may elect to
make
all or a portion of the Lender’s payment therefor by an offset against all or a
portion of the amount due to the Lender from the Company under the Transaction
Agreements. The Company agrees that, if the Lender, in the
Lender’s sole discretion, elects to participate in the New Equity Transaction
and, in connection with the consummation thereof, the Lender makes the
representation that the Lender is an accredited investor, the Company will
accept the subscription of the Lender to the New Equity Transaction and make
such offset, if any. Any offset so made shall be deemed the
equivalent as if the Lender had made the cash payment of such amount in
connection with the New Equity Transaction and the Company had made the payment
on account of its obligations to the Lender. Any provision of any New
Equity Transaction to the contrary notwithstanding, (X) the Lender shall not
be
obligated to convert its Note into any other security of the Company and may
demand payment of all or a part of amounts due to it from the Company in cash
and (Y) the Lender shall have a security interest in the Collateral (as defined
in the Security Interest Agreement) until such time as the such security
interest shall terminate in accordance with the provisions of the Security
Interest Agreement.
5. TRANSFER
AGENT INSTRUCTIONS.
a. The
Company warrants that, with respect to the Securities, other than the stop
transfer instructions to give effect to Section 4(a) hereof, it will give the
Transfer Agent no instructions inconsistent with instructions to issue the
Issued Shares and to issue Common Stock from time to time upon conversion of
the
Note in such amounts as specified from time to time by the Company to the
Transfer Agent, bearing the restrictive legend specified in Section 4(b) of
this
Agreement, registered in the name of the Lender or its nominee and in such
denominations to be specified by the Holder. Except as so provided, the Shares
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the other Transaction
Agreements. Nothing in this Section shall affect in any way the
Lender's obligations and agreement to comply with all applicable securities
laws
upon resale of the Securities. If the Lender provides the Company
with an opinion of counsel reasonably satisfactory to the Company (unless waived
by the Company) that registration of a resale by the Lender of any of the
Securities in accordance with clause (1)(B) of Section 4(a) of this Agreement
is
not required under the 1933 Act, the Company shall (except as provided in clause
(2) of Section 4(a) of this Agreement) permit the transfer of the Securities
and, in the case of the shares issuable on conversion of the Note, promptly
instruct the Company's Transfer Agent to issue one or more certificates for
Common Stock without legend in such name and in such denominations as specified
by the Lender. The delivery of such certificates shall be effected
within three (3) Trading Days after the Lender’s request (such third day, a
“Delivery Date”).
16
b. Subject
to the provisions of this Agreement, the Company will permit the Lender, if
relevant, to convert the Note in the manner contemplated by the
Note. If the provisions of Appendix I to the Note are applicable,
then the term “Shares” as used herein shall be deemed to refer to include the
shares issuable pursuant to such provisions.
c. (i) The
Company understands that a delay in the issuance of the Shares of Common Stock
beyond the Delivery Date (as defined in the Note, as the case may be) could
result in economic loss to the Lender. As compensation to the Lender
for such loss, the Company agrees to pay late payments to the Lender for late
issuance of Shares upon exercise or conversion in accordance with the following
schedule (where “No. Business Days Late” refers to the number of Trading Days
which is beyond two (2) Trading Days after the Delivery Date):
| Late Payment For Each $10,000 | |||
| No. Business Days Late | of Principal and Interest of the Note | ||
|
1
|
$100
|
||
|
2
|
$200
|
||
|
3
|
$300
|
||
|
4
|
$400
|
||
|
5
|
$500
|
||
|
6
|
$600
|
||
|
7
|
$700
|
||
|
8
|
$800
|
||
|
9
|
$900
|
||
|
10
|
$1,000
|
||
|
>10
|
$1,000
+ $200 for each Business Day Late beyond 10
days
|
||
The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand as the Lender’s exclusive remedy (other than the
following provisions of this Section 5(c)) for such
delay. Furthermore, in addition to any other remedies which may be
available to the Lender, in the event that the Company fails for any reason
to
effect delivery of such shares of Common Stock by close of business on the
tenth
Trading Day after the Delivery Date, the Lender will be entitled to revoke
the
relevant Notice of Conversion by delivering a notice to such effect to the
Company, whereupon the Company and the Lender shall each be restored to their
respective positions immediately prior to delivery of such Notice of Conversion;
provided, however, that an amount equal to any payments contemplated by this
Section 5(c) which have accrued through the date of such revocation notice
shall
remain due and owing to such Exercising Holder (as defined below)
notwithstanding such revocation.
17
(ii) If,
by the close of business on the fifth Trading Day after the Delivery Date,
the
Company fails for any reason to deliver the Shares to be issued upon conversion
of the Note, and after such fifth Trading Day, the Holder of the Note being
converted (each, an “Exercising Holder”) purchases, in an arm’s-length open
market transaction or otherwise, shares of Common Stock (the “Covering Shares”)
in order to make delivery in satisfaction of a sale of Common Stock by the
Exercising Holder (the “Sold Shares”), which delivery such Exercising Holder
anticipated to make using the Shares to be issued upon such exercise (a
“Buy-In”), the Exercising Holder shall have the right, in addition to and not in
lieu of all other amounts contemplated in other provisions of the Transaction
Agreements, including, but not limited to, the provisions of the immediately
preceding Section 5(c)(i), the Buy-In Adjustment Amount (as defined
below). The “Buy-In Adjustment Amount” is the amount equal to the
number of Sold Shares multiplied by the excess, if any, of (x) the Exercising
Holder's total purchase price per share (including brokerage commissions, if
any) for the Covering Shares over (y) the net proceeds per share (after
brokerage commissions, if any) received by the Exercising Holder from the sale
of the Sold Shares. The Company shall pay the Buy-In Adjustment
Amount to the Exercising Holder in immediately available funds immediately
upon
demand by the Exercising Holder. By way of illustration and not in
limitation of the foregoing, if the Exercising Holder purchases shares of Common
Stock having a total purchase price (including brokerage commissions) of $11,000
to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Exercising Holder will be $1,000.
d. The
Holder of the Note shall be entitled to exercise its exercise privilege with
respect to the Note notwithstanding the commencement of any case under 11 U.S.C.
§101 et seq. (the “Bankruptcy Code”). In the event
the Company is a debtor under the Bankruptcy Code, the Company hereby waives,
to
the fullest extent permitted, any rights to relief it may have under 11 U.S.C.
§362 in respect of such holder’s exercise privilege. The Company
hereby waives, to the fullest extent permitted, any rights to relief it may
have
under 11 U.S.C. §362 in respect of the conversion of the Note. The Company
agrees, without cost or expense to such Holder, to take or to consent to any
and
all action necessary to effectuate relief under 11 U.S.C. §362.
e. The
Company will authorize the Transfer Agent to give information relating to the
Company directly to the Holder or the Holder’s representatives upon the request
of the Holder or any such representative, to the extent such information relates
to (i) the status of shares of Common Stock issued or claimed to be issued
to
the Holder in connection with a Notice of Conversion, or (ii) the aggregate
number of outstanding shares of Common Stock of all shareholders (as a group,
and not individually) as of a current or other specified date. At the
request of the Holder, the Company will provide the Holder with a copy of the
authorization so given to the Transfer Agent.
6. CLOSING
DATE.
a. The
Closing Date shall occur on the date which is the first Trading Day after each
of the conditions contemplated by Sections 7 and 8 hereof shall have either
been
satisfied or been waived by the party in whose favor such conditions
run.
b. The
closing of the Transactions shall occur on the Closing Date at the offices
of
the Escrow Agent and shall take place no later than 3:00 P.M., New York time,
on
such day or such other time as is mutually agreed upon by the Company and the
Lender.
c. Notwithstanding
anything to the contrary contained herein, the Escrow Agent will be authorized
to release the Escrow Funds to the Company and to others and to release the
other Escrow Property on the Closing Date upon satisfaction of the conditions
set forth in Sections 7 and 8 hereof and as provided in the Joint Escrow
Instructions.
18
7. CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL.
The
Lender understands that the
Company's obligation to sell the Note and the Issued Shares to the Lender
pursuant to this Agreement on the Closing Date is conditioned upon:
a. The
execution and delivery of this Agreement by the Lender;
b. Delivery
by the Lender to the Escrow Agent of good funds as payment in full of an amount
equal to the Purchase Price in accordance with this Agreement;
c. The
accuracy on such Closing Date of the representations and warranties of the
Lender contained in this Agreement, each as if made on such date, and the
performance by the Lender on or before such date of all covenants and agreements
of the Lender required to be performed on or before such date; and
d. There
shall not be in effect any law, rule or regulation prohibiting or restricting
the transactions contemplated hereby, or requiring any consent or approval
which
shall not have been obtained.
8. CONDITIONS
TO THE LENDER'S OBLIGATION TO PURCHASE.
The
Company understands that the
Lender's obligation to purchase the Note and the Issued Shares on the Closing
Date is conditioned upon:
a. The
execution and delivery of this Agreement and the other Transaction Agreements
by
the Company;
b. Delivery
by the Company to the Escrow Agent of the Certificates in accordance with this
Agreement;
c. The
accuracy in all material respects on the Closing Date of the representations
and
warranties of the Company contained in this Agreement, each as if made on such
date, and the performance by the Company on or before such date of all covenants
and agreements of the Company required to be performed on or before such
date;
d. On
the Closing Date, the Lender shall have received an opinion of counsel for
the
Company, dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Lender, substantially to the effect set forth in
Annex III attached hereto;
e. There
shall not be in effect any law, rule or regulation prohibiting or restricting
the transactions contemplated hereby, or requiring any consent or approval
which
shall not have been obtained; and
f. From
and after the date hereof to and including the Closing Date, each of the
following conditions will remain in effect: (i) the trading of the Common Stock
shall not have been suspended by the SEC or on the Principal Trading Market;
(ii) trading in securities generally on the Principal Trading Market shall
not
have been suspended or limited; (iii) no minimum prices shall been established
for securities traded on the Principal Trading Market; and (iv) there shall
not
have been any material adverse change in any financial market.
19
9. INDEMNIFICATION
AND REIMBURSEMENT.
a. (i) The
Company agrees to indemnify and hold harmless the Lender and its officers,
directors, employees, and agents, and each Lender Control Person from and
against any losses, claims, damages, liabilities or expenses incurred
(collectively, “Damages”), joint or several, and any action in respect thereof
to which the Lender, its partners, Affiliates, officers, directors, employees,
and duly authorized agents, and any such Lender Control Person becomes subject
to, resulting from, arising out of or relating to any misrepresentation, breach
of warranty or nonfulfillment of or failure to perform any covenant or agreement
on the part of Company contained in this Agreement, as such Damages are
incurred, except to the extent such Damages result primarily from Lender's
failure to perform any covenant or agreement contained in this Agreement or
the
Lender's or its officer’s, director’s, employee’s, agent’s or Lender Control
Person’s illegal or willful misconduct, gross negligence, recklessness or bad
faith (in each case, as determined by a non-appealable judgment to
such effect) in performing its obligations under this Agreement.
(ii) The
Company hereby agrees that, if the Lender, other than by reason of its gross
negligence, illegal or willful misconduct,, (x) becomes involved in any capacity
in any action, proceeding or investigation brought by any shareholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by this Agreement or the other Transaction Agreements,
or if the Lender is impleaded in any such action, proceeding or investigation
by
any Person, or (y) becomes involved in any capacity in any action, proceeding
or
investigation brought by the SEC, any self-regulatory organization or other
body
having jurisdiction, against or involving the Company or in connection with
or
as a result of the consummation of the transactions contemplated by this
Agreement or the other Transaction Agreements, or (z) is impleaded in any such
action, proceeding or investigation by any Person, then in any such case, the
Company shall indemnify, defend and hold harmless the Lender from and against
and in respect of all losses, claims, liabilities, damages or expenses resulting
from, imposed upon or incurred by the Lender, directly or indirectly, and
reimburse such Lender for its reasonable legal and other expenses (including
the
cost of any investigation and preparation) incurred in connection therewith,
as
such expenses are incurred. The indemnification and reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same
terms
and conditions to any Affiliates of the Lender who are actually named in such
action, proceeding or investigation, and partners, directors, agents, employees
and Lender Control Persons (if any), as the case may be, of the Lender and
any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, the
Lender, any such Affiliate and any such Person. The Company also
agrees that neither the Lender nor any such Affiliate, partner, director, agent,
employee or Lender Control Person shall have any liability to the Company or
any
Person asserting claims on behalf of or in right of the Company in connection
with or as a result of the consummation of this Agreement or the other
Transaction Agreements, except as may be expressly and specifically provided
in
or contemplated by this Agreement.
20
b. All
claims for indemnification by any Indemnified Party (as defined below) under
this Section shall be asserted and resolved as follows:
(i)
In the event any claim or demand in respect of which any Person claiming
indemnification under any provision of this Section (an “Indemnified Party”)
might seek indemnity under paragraph (a) of this Section is asserted against
or
sought to be collected from such Indemnified Party by a Person other than a
party hereto or an Affiliate thereof (a “Third Party Claim”), the Indemnified
Party shall deliver a written notification, enclosing a copy of all papers
served, if any, and specifying the nature of and basis for such Third Party
Claim and for the Indemnified Party's claim for indemnification that is being
asserted under any provision of this Section against any Person (the
“Indemnifying Party”), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a “Claim Notice”) with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that
the
Indemnifying Party's ability to defend has been prejudiced by such failure
of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified
Party
as soon as practicable within the period ending thirty (30) calendar days
following receipt by the Indemnifying Party of either a Claim Notice or an
Indemnity Notice (as defined below) (the “Dispute Period”) whether the
Indemnifying Party disputes its liability or the amount of its liability to
the
Indemnified Party under this Section and whether the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such
Third
Party Claim. The following provisions shall also apply.
(x) If
the Indemnifying Party notifies the Indemnified Party within the Dispute Period
that the Indemnifying Party desires to defend the Indemnified Party with respect
to the Third Party Claim pursuant to this paragraph (b) of this Section, then
the Indemnifying Party shall have the right to defend, with counsel reasonably
satisfactory to the Indemnified Party, at the sole cost and expense of the
Indemnifying Party, such Third Party Claim by all appropriate proceedings,
which
proceedings shall be vigorously and diligently prosecuted by the Indemnifying
Party to a final conclusion or will be settled at the discretion of the
Indemnifying Party (but only with the consent of the Indemnified Party in the
case of any settlement that provides for any relief other than the payment
of
monetary damages or that provides for the payment of monetary damages as to
which the Indemnified Party shall not be indemnified in full pursuant to
paragraph (a) of this Section). The Indemnifying Party shall have full control
of such defense and proceedings, including any compromise or settlement thereof;
provided, however, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnifying Party's delivery
of the notice referred to in the first sentence of this subparagraph (x), file
any motion, answer or other pleadings or take any other action that the
Indemnified Party reasonably believes to be necessary or appropriate protect
its
interests; and provided further, that if requested by the Indemnifying Party,
the Indemnified Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying Party in contesting
any Third Party Claim that the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to this
subparagraph (x), and except as provided in the preceding sentence, the
Indemnified Party shall bear its own costs and expenses with respect to such
participation. Notwithstanding the foregoing, the Indemnified Party may take
over the control of the defense or settlement of a Third Party Claim at any
time
if it irrevocably waives its right to indemnity under paragraph (a) of this
Section with respect to such Third Party Claim.
21
(y) If
the Indemnifying Party fails to notify the Indemnified Party within the Dispute
Period that the Indemnifying Party desires to defend the Third Party Claim
pursuant to paragraph (b) of this Section, or if the Indemnifying Party gives
such notice but fails to prosecute vigorously and diligently or settle the
Third
Party Claim, or if the Indemnifying Party fails to give any notice whatsoever
within the Dispute Period, then the Indemnified Party shall have the right
to
defend, at the sole cost and expense of the Indemnifying Party, the Third Party
Claim by all appropriate proceedings, which proceedings shall be prosecuted
by
the Indemnified Party in a reasonable manner and in good faith or will be
settled at the discretion of the Indemnified Party (with the consent of the
Indemnifying Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that if
requested by the Indemnified Party, the Indemnifying Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing provisions
of
this subparagraph (y), if the Indemnifying Party has notified the Indemnified
Party within the Dispute Period that the Indemnifying Party disputes its
liability or the amount of its liability hereunder to the Indemnified Party
with
respect to such Third Party Claim and if such dispute is resolved in favor
of
the Indemnifying Party in the manner provided in subparagraph(z) below, the
Indemnifying Party will not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this subparagraph (y) or of the
Indemnifying Party's participation therein at the Indemnified Party's request,
and the Indemnified Party shall reimburse the Indemnifying Party in full for
all
reasonable costs and expenses incurred by the Indemnifying Party in connection
with such litigation. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party pursuant
to this subparagraph (y), and the Indemnifying Party shall bear its own costs
and expenses with respect to such participation.
(z) If
the Indemnifying Party notifies the Indemnified Party that it does not dispute
its liability or the amount of its liability to the Indemnified Party with
respect to the Third Party Claim under paragraph (a) of this Section or fails
to
notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability or the amount of its liability to
the
Indemnified Party with respect to such Third Party Claim, the amount of Damages
specified in the Claim Notice shall be conclusively deemed a liability of the
Indemnifying Party under paragraph (a) of this Section and the Indemnifying
Party shall pay the amount of such Damages to the Indemnified Party on demand.
If the Indemnifying Party has timely disputed its liability or the amount of
its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.
22
(ii) In
the event any Indemnified Party should have a claim under paragraph (a) of
this
Section against the Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver a written notification of a claim
for
indemnity under paragraph (a) of this Section specifying the nature of and
basis
for such claim, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such claim
(an
“Indemnity Notice”) with reasonable promptness to the Indemnifying Party. The
failure by any Indemnified Party to give the Indemnity Notice shall not impair
such party's rights hereunder except to the extent that the Indemnifying Party
demonstrates that it has been irreparably prejudiced thereby. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute
the
claim or the amount of the claim described in such Indemnity Notice or fails
to
notify the Indemnified Party within the Dispute Period whether the Indemnifying
Party disputes the claim or the amount of the claim described in such Indemnity
Notice, the amount of Damages specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under paragraph (a)
of
this Section and the Indemnifying Party shall pay the amount of such Damages
to
the Indemnified Party on demand. If the Indemnifying Party has timely disputed
its liability or the amount of its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute; provided, however, that it the dispute
is not resolved within thirty (30) days after the Claim Notice, the Indemnifying
Party shall be entitled to institute such legal action as it deems
appropriate.
c. The
indemnity agreements contained herein shall be in addition to (i) any cause
of
action or similar rights of the indemnified party against the indemnifying
party
or others, and (ii) any liabilities the indemnifying party may be subject
to.
10. JURY
TRIAL WAIVER. The Company and the Lender hereby waive a
trial by jury in any action, proceeding or counterclaim brought by either of
the
Parties hereto against the other in respect of any matter arising out or in
connection with the Transaction Agreements.
11. GOVERNING
LAW: MISCELLANEOUS.
a. (i) This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of Delaware for contracts to be wholly performed in such state and
without giving effect to the principles thereof regarding the conflict of
laws. Each of the parties consents to the exclusive jurisdiction of
the federal courts whose districts encompass any part of the City of Wilmington
or the state courts of the State of Delaware sitting in the City of Wilmington
in connection with any dispute arising under this Agreement or any of the other
Transaction Agreements and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions or
to any claim that such venue of the suit, action or proceeding is improper.
To
the extent determined by such court, the Company shall reimburse the Lender
for
any reasonable legal fees and disbursements incurred by the Lender in
enforcement of or protection of any of its rights under any of the Transaction
Agreements. Nothing in this Section shall affect or limit any right
to serve process in any other manner permitted by law.
(ii) The
Company and the
Lender acknowledge and agree that irreparable damage would occur in the event
that any of the provisions of this Agreement or the other Transaction Agreements
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of
this
Agreement and the other Transaction Agreements and to enforce specifically
the
terms and provisions hereof and thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
23
b. Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as
a
waiver thereof.
c. This
Agreement shall inure to the benefit of and be binding upon the successors
and
assigns of each of the parties hereto.
d. All
pronouns and any variations thereof refer to the masculine, feminine or neuter,
singular or plural, as the context may require.
e. A
facsimile transmission of this signed Agreement shall be legal and binding
on
all parties hereto.
f. This
Agreement may be signed in one or more counterparts, each of which shall be
deemed an original.
g. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
h. If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
i. This
Agreement may be amended only by an instrument in writing signed by the party
to
be charged with enforcement thereof.
j. This
Agreement supersedes all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof.
k. All
dollar amounts referred to or contemplated by this Agreement or any other
Transaction Agreement shall be deemed to refer to US Dollars, unless otherwise
explicitly stated to the contrary.
12. NOTICES. Any
notice required or permitted hereunder shall be given in writing (unless
otherwise specified herein) and shall be deemed effectively given on the
earliest of
(a)
the date delivered, if delivered by
personal delivery as against written receipt therefor or by confirmed facsimile
transmission,
(b)
the fifth Trading Day after
deposit, postage prepaid, in the United States Postal Service by registered
or
certified mail, or
(c)
the third Trading Day after mailing
by domestic or international express courier, with delivery costs and fees
prepaid,
in
each
case, addressed to each of the other parties thereunto entitled at the following
addresses (or at such other addresses as such party may designate by ten (10)
days’ advance written notice similarly given to each of the other parties
hereto):
24
|
COMPANY:
|
At
the address set forth at the head of this
Agreement.
|
Attn:
President
Telephone
No.: (000)
000-0000
Telecopier
No.: (000)
000-0000
with
a copy to:
Xxxxx
Xxxxxx, P.C.
Attn:
Xxxxxxxx Xxxxxxx,
Esq.
900
Three Galleria Tower
000000
Xxxx Xxxx
Xxxxxx,
XX 00000
Telephone
No.: (000)
000-0000
Telecopier
No.: (000)
000-0000
|
LENDER:
|
At
the address set forth on the signature page of this
Agreement.
|
with
a copy to:
Xxxxxxx
& Prager llp, Esqs.
00
Xxxxxxxx
Xxxxx
000
Xxx
Xxxx, XX 00000
Attn:
Xxxxxx X. Xxxxxxxx,
Esq.
Telephone
No.: (000)
000-0000
Telecopier
No. (000)
000-0000
|
ESCROW
AGENT:
|
Xxxxxxx
& Prager llp, Esqs.
|
00
Xxxxxxxx
Xxxxx
000
Xxx
Xxxx, XX 00000
Attn:
Xxxxxx Xxxxxxx,
Esq.
Telephone
No.: (000)
000-0000
Telecopier
No. (000)
000-0000
13. SURVIVAL
OF REPRESENTATIONS AND WARRANTIES. The Company’s and the Lender’s
representations and warranties herein shall survive the execution and delivery
of this Agreement and the delivery of the Certificates and the payment of the
Purchase Price, and shall inure to the benefit of the Lender and the Company
and
their respective successors and assigns.
[Balance
of page intentionally left blank]
25
IN
WITNESS WHEREOF,
with respect to the Purchase Price specified below, this Agreement has been
duly
executed by the Lender and the Company as of the date set first above
written.
| PURCHASE PRICE: | $500,000.00 |
|
LENDER:
|
|
|
Address
0xx
Xxxxx,
Xxxxxxx Xxxxx
Xxxxxxxxxx
Xx., Xxxx Xxxx
Xxxxxxx
|
Double
U Master Fund LP
Printed
Name of Lender
|
| By: /s/[illegible] | |
|
Telecopier
No. (000) 000-0000
|
(Signature of Authorized Person) |
|
Navigator
Management Ltd.
Authorized
Signatory
|
|
|
British
Virgin Islands
Jurisdiction
of Incorporation
or
Organization
|
Printed Name and Title |
COMPANY
RIM
SEMICONDUCTOR COMPANY
By:
/s/Xxxx
Xxxxx
(Signature
of Authorized Person)
Xxxx
Xxxxx, President &
CEO
Printed
Name and Title
IN
WITNESS WHEREOF,
with respect to the Purchase Price specified below, this Agreement has been
duly
executed by the Lender and the Company as of the date set first above
written.
| PURCHASE PRICE: | $500,000.00 |
|
LENDER:
|
|
|
Address
0000
Xxx Xxxxxxx Xxxx Xxxxx 000
Xxxxxxxx,
Xxx Xxxx 00000
|
Professional
Offshore Opportunity Fund, Ltd.
Printed
Name of Lender
|
|
By:
/s/Xxxx X. Xxxxxxx
|
|
|
Telecopier
No. (000) 000-0000
|
(Signature
of Authorized Person)
|
| Xxxx X. Xxxxxxx | |
|
British
Virgin Islands
Jurisdiction
of Incorporation
or
Organization
|
Printed Name and Title |
COMPANY
RIM
SEMICONDUCTOR COMPANY
By:
/s/Xxxx
Xxxxx
(Signature
of Authorized Person)
Xxxx
Xxxxx, President &
CEO
Printed
Name and Title
|
ANNEX
I
|
FORM
OF NOTE
|
|
ANNEX
II
|
JOINT
ESCROW INSTRUCTIONS
|
|
ANNEX
III
|
OPINION
OF COUNSEL OF COMPANY
|
|
ANNEX
IV
|
COMPANY
DISCLOSURE
|
|
ANNEX
V
|
SECURITY
INTEREST AGREEMENT
|
|
ANNEX
VI
|
COMPANY’S
SEC DOCUMENTS AVAILABLE ON XXXXX
|
|
ANNEX
VII
|
USE
OF PROCEEDS
|
