SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of June 2,
2003, by and among Valence Technology, Inc., a Delaware corporation, with
headquarters located at 0000 Xxxxxx Xxxxx Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx
00000 (the "COMPANY"), and the investors listed on the Schedule of Buyers
attached hereto (individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company has authorized a new series of convertible preferred
shares of the Company, the terms of which are set forth in the certificate of
designations for such series of preferred shares (the "CERTIFICATE OF
DESIGNATIONS") in the form attached hereto as EXHIBIT A (together with any
convertible preferred shares issued in replacement thereof in accordance with
the terms thereof, the "PREFERRED SHARES"), which Preferred Shares shall be
convertible into shares of the Company's Common Stock, par value $.001 per share
(the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in accordance with
the terms of the Certificate of Designations;
B. Dividends are payable on the Preferred Shares, which at the option of
the Company, subject to certain conditions, may be paid in shares of Common
Stock ("DIVIDEND SHARES");
C. Each Buyer wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement, (i) that aggregate face
amount of Preferred Shares set forth opposite such Buyer's name in column (3) on
the Schedule of Buyers (which aggregate face amount for all Buyers shall be
$10,000,000) and (ii) warrants, in substantially the form attached hereto as
EXHIBIT B (the "WARRANTS"), to acquire that number of shares of Common Stock set
forth opposite such Buyer's name in column (4) on the Schedule of Buyers (as
exercised, collectively, the "WARRANT SHARES");
D. The Company and each Buyer is executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 ACT"), and Rule 506 of
Regulation D ("REGULATION D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the 1933 Act to the extent necessary to
issue the Preferred Shares, the Conversion Shares, the Warrants, the Warrant
Shares and the Dividend Shares (the "Securities");
E. Upon the consummation of the transactions contemplated by this
Agreement, the parties hereto shall execute and deliver a Registration Rights
Agreement, substantially in the form attached hereto as EXHIBIT C (the
"REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company will agree to
provide certain registration rights with respect to the Registrable Securities
(as defined in the Registration Rights Agreement) under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws.
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NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
(a) PURCHASE OF PREFERRED SHARES AND WARRANTS.
(i) PREFERRED SHARES AND WARRANTS. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections
6(a) and 7(a) below, the Company shall issue and sell to each
Buyer, and each Buyer severally, but not jointly, agrees to
purchase from the Company on the Closing Date (as defined below),
a face amount of Preferred Shares, as is set forth opposite such
Buyer's name in column (3) on the Schedule of Buyers, along with
Warrants to acquire that number of Warrant Shares set forth
opposite such Buyer's name in column (4) on the Schedule of
Buyers (the "CLOSING").
(ii) CLOSING. The Closing shall occur on the Closing Date at
the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000.
(v) PURCHASE PRICE. The purchase price for each Buyer (the
"PURCHASE PRICE") of the Preferred Shares and related Warrants to
be purchased by each such Buyer at the Closing shall be equal to
$1.00 for each $1.00 of face amount of Preferred Shares being
purchased by such Buyer at the Closing. The parties agree and
acknowledge that $9,997,000 of the aggregate purchase price is
allocable to the purchase and sale of the Preferred Shares and
that $3,000 of the aggregate purchase price is allocable to the
purchase and sale of the Warrants.
(b) CLOSING DATE. The date and time of the Closing (the "CLOSING
DATE") shall be 10:00 a.m., New York Time, on the date hereof after
notification of satisfaction (or waiver) of the conditions to the
Closing set forth in Sections 6(a) and 7(a) below (or such later time
or date as is mutually agreed to by the Company and each Buyer).
(c) FORM OF PAYMENT. On the Closing Date, (i) each Buyer shall
pay its Purchase Price to the Company for the Preferred Shares and
Warrants to be issued and sold to such Buyer at the Closing, by wire
transfer of immediately available funds in accordance with the
Company's written wire instructions, and (ii) the Company shall
deliver to each Buyer, the Preferred Shares (in the face amounts as
such Buyer shall request) which such Buyer is then purchasing along
with the Warrants (in the amounts as such Buyer shall request) such
Buyer is purchasing, duly executed on behalf of the Company and
registered in the name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
(a) NO PUBLIC SALE OR DISTRIBUTION. Such Buyer is (i) acquiring
the Preferred Shares and the Warrants and (ii) upon conversion of the
Preferred Shares and exercise of the Warrants will acquire the
Conversion Shares issuable upon conversion of the Preferred Shares and
the Warrant Shares issuable upon exercise of the Warrants, for its own
account and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act; PROVIDED, HOWEVER, that by
making
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the representations herein, such Buyer does not agree to hold any of
the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the 1933
Act.
(b) ACCREDITED INVESTOR STATUS. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying in part upon
the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of such Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
(d) INFORMATION. Such Buyer and its advisors, if any, have been
furnished with 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 such Buyer. Such Buyer
and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer's
right to rely on the Company's representations and warranties
contained herein. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition
of the Securities.
(e) NO GOVERNMENTAL REVIEW. Such Buyer understands that no United
States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Securities or the fairness or suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the
merits of the offering of the Securities.
(f) TRANSFER OR RESALE. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have
not been and are not being registered under the 1933 Act or any state
securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) such
Buyer shall have delivered to the Company an opinion of counsel, in a
generally acceptable form, to the effect that such Securities to be
sold, assigned or transferred may be sold, assigned or transferred
pursuant to an exemption from such registration, or (C) such Buyer
shall have satisfied the requirements of Rule 144(k) promulgated under
the 1933 Act, as amended (or a successor rule thereto); (ii) any sale
of the Securities made in reliance on Rule 144 or Rule 144A
promulgated under the 1933 Act, as amended (or a successor rule
thereto) (collectively, "RULE 144"), may be made only in accordance
with the terms of Rule 144 and further, if Rule 144 is not applicable,
any resale of the Securities under circumstances in which the seller
(or the Person (as defined in Section 3(r)) through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in
the 0000 Xxx) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder; and
(iii) neither the Company nor any other Person
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is under any obligation to register the Securities under the 1933 Act
or any state securities laws or to comply with the terms and
conditions of any exemption thereunder. The Securities may be pledged
in connection with a bona fide margin account or other loan secured by
the Securities and such pledge of Securities shall not be deemed to be
a transfer, sale or assignment of the Securities hereunder, and no
Buyer effecting a pledge of Securities shall be required to provide
the Company with any notice thereof or otherwise make any delivery to
the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, this Section 2(f); PROVIDED,
that in order to make any sale, transfer or assignment of Securities,
such Buyer and its pledgee makes such disposition in accordance with
or pursuant to a registration statement or an exemption under the 1933
Act.
(g) LEGENDS. Such Buyer understands that the certificates or
other instruments representing the Preferred Shares and the Warrants
and, until such time as the sale of the Registrable Securities have
been registered under the 1933 Act as contemplated by the Registration
Rights Agreement, the stock certificates representing the Registrable
Securities, except as set forth below, shall bear any legend as
required by the "blue sky" laws of any state and a restrictive legend
in substantially the following form (and a stop-transfer order may be
placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN][THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT
TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of the
Securities upon which it is stamped, if, unless otherwise required by
state securities laws, (i) such Securities are registered for sale
under the 1933 Act, (ii) in connection with a sale, assignment or
other transfer, such holder provides the Company with an opinion of
counsel, in a generally acceptable form, to the effect that such sale,
assignment or transfer of the Securities may be made without
registration under the 1933 Act, or (iii) such holder provides the
Company with reasonable assurance that the Securities can be sold,
assigned or transferred pursuant to Rule 144.
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(h) AUTHORIZATION; VALIDITY; ENFORCEMENT. This Agreement has
been, and the Registration Rights Agreement shall have been by the
Closing Date, duly and validly authorized, executed and delivered on
behalf of such Buyer and shall constitute the legal, valid and binding
obligations of such Buyer enforceable against such Buyer in accordance
with their respective terms, except as such enforceability may be
limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar
laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(i) RESIDENCY. Such Buyer is a resident of that country and state
specified below its address on the Schedule of Buyers.
(j) ORGANIZATION. Such Buyer duly organized and validly existing
in good standing under the laws of the jurisdiction of its
organization, and has the requisite power and authorization to execute
and deliver this Agreement and to consummate the transaction
contemplated hereby.
(k) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by such Buyer and the
consummation by such Buyer of the transactions contemplated hereby and
thereby will not (i) result in a violation of the constituent
documents of such Buyer or (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which such Buyer is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or
decree applicable to such Buyer or by which any property or asset of
such Buyer is bound or affected, except in the case of clauses (ii)
and (iii), for such breaches or defaults as would not be reasonably
expected to have a material adverse effect on such Buyer's ability to
consummate the transactions contemplated hereby.
(l) NO SHORT SALES. During the one month period prior to the date
hereof, such Buyer has not engaged in short sales of the Common Stock
in amounts that exceed the sum of the number of shares of Common Stock
held by such Buyer and its affiliates and the number of shares of
Common Stock issuable pursuant to the exercise or conversion of any
other security (without regard to limitations on exercise or
conversion contained therein, if any) held by such Buyer and its
affiliates.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
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(a) ORGANIZATION AND QUALIFICATION. The Company and its
"SUBSIDIARIES" (which for purposes of this Agreement means any entity
in which the Company, directly or indirectly, owns at least 10% of the
capital stock or holds a comparable equity or similar interest) are
entities duly organized and validly existing in good standing under
the laws of the jurisdiction in which they are organized, and have the
requisite corporate or other power and authorization to own their
properties and to carry on their business as now being conducted.
Other than Valence Technology (Nevada), Inc., a wholly-owned
Subsidiary, the Company does not have any domestic "Significant
Subsidiaries" as defined in Regulation S-X promulgated by the SEC.
Each of the Company and its Subsidiaries is duly qualified as a
foreign entity to do business and is in good standing in every
jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing
would not reasonably be expected to have a Material Adverse Effect. As
used in this Agreement, "MATERIAL ADVERSE EFFECT" means any material
adverse effect on the business, properties, assets, operations,
results of operations, condition (financial or otherwise) or prospects
of the Company and its Subsidiaries, taken as a whole, or on the
transactions contemplated hereby or by the agreements and instruments
to be entered into in connection herewith, or on the authority or
ability of the Company to perform its obligations under the
Transaction Documents (as defined below). The Company has no
Subsidiaries except as set forth on Schedule 21.1 of the Company's
Annual Report on Form 10-K for the year ended March 31, 2002 filed
with the SEC on July 2, 2002 (the "PRIOR 10Q").
(b) AUTHORIZATION; ENFORCEMENT; VALIDITY. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Preferred Shares, the
Registration Rights Agreement, the Irrevocable Transfer Agent
Instructions (as defined in Section 5(b)), the Warrants and each of
the other agreements entered into by the parties hereto in connection
with the transactions contemplated by this Agreement (collectively,
the "TRANSACTION DOCUMENTS") and to issue the Securities in accordance
with the terms hereof and thereof. The execution and delivery of the
Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Preferred Shares
and the Warrants and the reservation for issuance and the issuance of
the Conversion Shares and the Warrant Shares issuable upon conversion
or exercise thereof, as the case may be, have been duly authorized by
the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or
its stockholders. This Agreement and the other Transaction Documents
of even date herewith have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of
the Company enforceable against the Company in accordance with their
respective terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of applicable creditors'
rights and remedies. As of the Closing, the Transaction Documents
dated after the date hereof and required to have been executed and
delivered with respect to the Closing shall have been duly executed
and delivered by the Company, and shall constitute the legal, valid
and binding obligations of the Company enforceable against the Company
in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditor's rights and remedies.
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(c) ISSUANCE OF SECURITIES. The Preferred Shares and Warrants are
duly authorized and, upon issuance in accordance with the terms
hereof, shall be free from all taxes, liens and charges with respect
to the issue thereof. As of the Closing, a number of shares of Common
Stock shall have been duly authorized and reserved for issuance which
equals 5,500,000. Upon conversion or exercise in accordance with the
Preferred Shares or the Warrants, as the case may be, and upon
issuance of Dividend Shares as dividends on the Preferred Shares, the
Conversion Shares, the Warrant Shares and the Dividend Shares,
respectively, will be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue
thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. Assuming the accuracy of each of the
representations and warranties of Buyer contained in Section 2, the
issuance by the Company of the Securities is exempt from registration
under the 1933 Act.
(d) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Preferred Shares
and Warrants and reservation for issuance and issuance of the
Conversion Shares, the Dividend Shares and the Warrant Shares) will
not (i) result in a violation of the certificate of incorporation, any
certificate of designations, preferences and rights of any outstanding
series of preferred stock or bylaws of the Company or any Subsidiary
or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to
which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations
and the rules and regulations of the Principal Market) applicable to
the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected.
(e) CONSENTS. All consents, authorizations, orders, filings and
registrations which the Company is required as of the Closing Date to
obtain to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents in accordance with their
terms have been obtained or effected on or prior to the Closing Date.
The Company and its Subsidiaries are unaware of any facts or
circumstances which might reasonably be expected to prevent the
Company from obtaining or effecting any of the foregoing. The Company
is not in violation of the listing requirements of the Principal
Market and has no knowledge of any facts which would reasonably lead
to delisting or suspension of the Common Stock in the foreseeable
future.
(f) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES. The
Company acknowledges and agrees that each Buyer is acting solely in
the capacity of arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and
that no Buyer is an officer or director of the Company. The Company
further acknowledges that no Buyer 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 hereby and
thereby, and any advice given by a Buyer or any of its representatives
or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to
such Buyer's purchase of the Securities. The
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Company further represents to each Buyer that the Company's decision
to enter into the Transaction Documents has been based solely on (i)
the independent evaluation by the Company and its representatives and
(ii) each Buyer's representations, warranties, covenants and other
terms contained in the Transaction Documents.
(g) NO GENERAL SOLICITATION; PLACEMENT AGENT'S FEES. Neither the
Company, nor any of its affiliates, nor any Person acting on its or
their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection
with the offer or sale of the Securities. The Company shall be
responsible for the payment of any placement agent's fees, financial
advisory fees, or brokers' commissions (other than for persons engaged
by any Buyer or its investment advisor) relating to or arising out of
the transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense
(including, without limitation, attorney's fees and out-of-pocket
expenses) arising in connection with any such claim. The Company
acknowledges that it has engaged X.X. Xxxxxxx & Sons, Inc. as
placement agent (the "AGENT") in connection with the sale of the
Preferred Shares and the Warrants. Other than the Agent, the Company
has not engaged any placement agent or other agent in connection with
the sale of the Preferred Shares and the Warrants.
(h) NO INTEGRATED OFFERING. None of the Company, its
Subsidiaries, any of their affiliates, and any Person acting on 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 require registration of any of the Securities
under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the
1933 Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of any exchange or
automated quotation system on which any of the securities of the
Company are listed or designated. None of the Company, its
Subsidiaries, their affiliates and any Person acting on their behalf
will take any action or steps referred to in the preceding sentence
that would require registration of any of the Securities under the
1933 Act or cause the offering of the Securities to be integrated with
other offerings.
(i) DILUTIVE EFFECT. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the
Preferred Shares and the Warrant Shares issuable upon exercise of the
Warrants will increase in certain circumstances. The Company further
acknowledges that, subject to the terms and conditions of the
Transaction Documents, its obligation to issue Conversion Shares upon
conversion of the Preferred Shares in accordance with this Agreement
and the Preferred Shares and its obligation to issue the Warrant
Shares upon exercise of the Warrants in accordance with this Agreement
and the Warrants is, in each case, absolute and unconditional
regardless of the dilutive effect that such issuance may have on the
ownership interests of other stockholders of the Company.
(j) APPLICATION OF TAKEOVER PROTECTIONS; RIGHTS AGREEMENT. The
Company and its board of directors have taken all necessary action, if
any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a
rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation (as defined in Section 3(q)) or the laws
of the state of its incorporation which is or could become applicable
to any Buyer as a result of the transactions contemplated by this
Agreement,
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including, without limitation, the Company's issuance of the
Securities and any Buyer's ownership of the Securities. The Company
has not adopted a stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Common Stock or a
change in control of the Company.
(k) SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31, 2001,
the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to
the reporting requirements of the 1934 Act (all of the foregoing filed
prior to the date hereof, or in connection with the Closing subsequent
to the date hereof, filed prior to the date of the Closing, and all
exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC DOCUMENTS"). The Company has
delivered to the Buyers or their respective representatives true,
correct and complete copies of the SEC Documents not available on the
XXXXX system. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to
the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as may be disclosed by the Company
in its Annual Report on Form 10-K for the year ended March 31, 2003
(the "NEXT 10K"), no other information provided by or on behalf of the
Company to the Buyers which is not included in the SEC Documents
contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein, in
the light of the circumstance under which they are or were made, not
misleading.
(l) ABSENCE OF CERTAIN CHANGES. Since December 31, 2002, there
has been no material adverse change and no material adverse
development in the business, properties, operations, condition
(financial or otherwise), results of operations or prospects of the
Company or its Subsidiaries; provided, that any adjustments to the
carrying value of the Company's tangible or intangible assets on its
balance sheets (resulting from its periodic review in connection with
its annual audit) relating to the potential transition by the Company
to alternative battery constructions shall not be deemed to constitute
a breach of this Section 3(l). Since December 31, 2002, the Company
has not (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $100,000 outside of the
ordinary course of business or (iii) had capital expenditures,
individually or in the aggregate, in excess of $1,500,000. The Company
has not taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge or reason to believe that
its creditors intend to
9
initiate involuntary bankruptcy proceedings or any actual knowledge of
any fact which would reasonably lead a creditor to do so. The Company
is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be
Insolvent (as defined below). For purposes of this Section 3(l),
"INSOLVENT" means (i) the Company is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (ii) the Company intends to
incur or believes that it will incur debts that would be beyond its
ability to pay as such debts mature or (iii) the Company has
unreasonably small capital with which to conduct the business in which
it is engaged as such business is now conducted and is proposed to be
conducted.
(m) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. No event, liability, development or circumstance has
occurred or exists, or is contemplated to occur, with respect to the
Company or its Subsidiaries or their respective business, properties,
prospects, operations or financial condition, that would be required
to be disclosed by the Company under applicable securities laws on a
registration statement on Form S-1 filed with the SEC relating to an
issuance and sale by the Company of its Common Stock and which has not
been publicly announced.
(n) CONDUCT OF BUSINESS; REGULATORY PERMITS. Neither the Company
nor its Subsidiaries is in violation of any term of or in default
under its Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of
preferred stock of the Company or Bylaws or their organizational
charter or bylaws, respectively (except, with respect to the
Subsidiaries, for violations that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect).
Neither the Company nor any of its Subsidiaries is in violation of any
judgment, decree or order or any statute, ordinance, rule or
regulation applicable to the Company or its Subsidiaries, and neither
the Company nor any of its Subsidiaries will conduct its business in
violation of any of the foregoing, except for violations which would
not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect. Without limiting the generality of the
foregoing, the Company is not in violation of any of the material
rules, regulations or requirements of The Nasdaq SmallCap Market (the
"PRINCIPAL MARKET") and has no knowledge of any facts or circumstances
which would reasonably lead to delisting or suspension of the Common
Stock by the Principal Market in the foreseeable future. Except for
communications and events relating to the listing of the Common Stock
being moved from The Nasdaq National Market to The Nasdaq SmallCap
Market on or about August 23, 2002, since December 31, 2001, (i) the
Common Stock has been designated for quotation or listed on the
Principal Market, (ii) trading in the Common Stock has not been
suspended by the SEC or the Principal Market and (iii) the Company has
received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or delisting of the Common
Stock from the Principal Market. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary
to conduct their respective businesses, except where the failure to
possess such certificates, authorizations or permits would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit.
(o) FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of
its
10
Subsidiaries, nor any director, officer, agent, employee or other
Person acting on behalf of the Company or any of its Subsidiaries has,
in the course of its actions for, or on behalf of, the Company (i)
used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.
(p) TRANSACTIONS WITH AFFILIATES. Except as disclosed on the
Prior 10K, the Company's Schedule 14A filed with the SEC on July 19,
2002, or any of the Company's Quarterly Reports on Form 10Q filed with
the SEC since the Prior 10K was filed and other than the grant of
stock options pursuant to compensation or similar arrangements with
officers, directors or employees, none of the officers, directors or
employees of the Company is presently a party to any transaction with
the Company or any of its Subsidiaries (other than for ordinary course
services as employees, officers or 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 such
officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such
officer, director, or employee has a substantial interest or is an
officer, director, trustee or partner.
(q) EQUITY CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (x) 100,000,000 shares of
Common Stock, of which as of the date hereof, 71,726,833 are issued
and outstanding (none of which are treasury shares), 9,545,306 shares
are reserved for issuance pursuant to the Company's stock option and
purchase plans and 3,236,629 shares are reserved for issuance pursuant
to securities (other than the Preferred Shares and the Warrants)
exercisable or exchangeable for, or convertible into, shares of Common
Stock, and (y) 10,000,000 shares of preferred stock, of which as of
the date hereof, 15,000 are issued and none are outstanding. All of
such outstanding shares have been, or upon issuance will be, validly
issued and are fully paid and nonassessable. Except as disclosed on
the Prior 10K, the Company's Schedule 14A filed with the SEC on July
19, 2002, or any of the Company's Quarterly Reports on Form 10Q filed
with the SEC since the Prior 10K was filed: (i) no shares of the
Company's capital stock are subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by
the Company; (ii) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its Subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible
into, or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing
Indebtedness (as defined in Section 3(r)) of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or
may become bound; (iv) there are no financing statements securing
obligations in any material
11
amounts, either singly or in the aggregate, filed in connection with
the Company; (v) there are no agreements or arrangements under which
the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the
Registration Rights Agreement); (vi) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a
security of the Company or any of its Subsidiaries (except the
Preferred Shares); (vii) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered
by the issuance of the Securities; (viii) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements
or any similar plan or agreement; and (ix) the Company and its
Subsidiaries have no liabilities or obligations required to be
disclosed in the SEC Documents (as defined herein) but not so
disclosed in the SEC Documents, other than (with respect to each of
(i) through (ix) above) which, individually or in the aggregate, do
not or would not reasonably be expected to have a Material Adverse
Effect. The Company has furnished to the Buyer true, correct and
complete copies of the Company's Certificate of Incorporation, as
amended and as in effect on the date hereof (together with any
certificate of designations of any outstanding series of preferred
stock of the Company, the "CERTIFICATE OF INCORPORATION"), and the
Company's Bylaws, as amended and as in effect on the date hereof (the
"BYLAWS"), and the terms of all securities convertible into, or
exercisable or exchangeable for, Common Stock and the material rights
of the holders thereof in respect thereto.
(r) INDEBTEDNESS AND OTHER CONTRACTS. Neither the Company nor any
of its Subsidiaries (i) except as disclosed in the financial
statements included in the Last 10K and each Quarterly Report on Form
10-Q filed by the Company since the filing of the Last 10K (including
the notes thereto), has any outstanding Indebtedness (as defined
below), (ii) except as disclosed in the Last 10K and each Quarterly
Report on Form 10-Q filed by the Company since the filing of the Last
10K, is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to
such contract, agreement or instrument would reasonably be expected to
result in a Material Adverse Effect, (iii) is in violation of any term
of or in default under any contract, agreement or instrument relating
to any Indebtedness, except where such violations and defaults would
not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any
contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company's officers, has
or is expected to have a Material Adverse Effect. For purposes of this
Agreement: (x) "INDEBTEDNESS" of any Person means, without duplication
(A) all indebtedness for borrowed money, (B) all obligations issued,
undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other similar
instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E)
all indebtedness created or arising under any conditional sale or
other title retention agreement, or incurred as financing, in either
case with respect to any property or assets acquired with the proceeds
of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are
limited to repossession or sale of such property), (F) all monetary
obligations under any leasing
12
or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered
thereby, is classified as a capital lease, (G) all indebtedness
referred to in clauses (A) through (F) above secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, change,
security interest or other encumbrance upon or in any property or
assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (H)
all Contingent Obligations in respect of indebtedness or obligations
of others of the kinds referred to in clauses (A) through (G) above;
(y) "CONTINGENT OBLIGATION" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of
another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide
assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected
(in whole or in part) against loss with respect thereto; and (z)
"PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or
agency thereof.
(s) ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by the Principal Market, any court,
public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or
affecting the Company, the Common Stock or any of the Company's
Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, except (i) as
disclosed under Item 3 ("Legal Proceedings") of the Company's Prior
10-K or (ii) such as are not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(t) INSURANCE. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the
Company and its Subsidiaries are engaged. Neither the Company nor any
such Subsidiary has been refused any insurance coverage sought or
applied for and neither the Company nor any such 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 at a cost that would not have a Material Adverse Effect.
(u) EMPLOYEE RELATIONS. (i) Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or
employs any member of a union. The Company and its Subsidiaries
believe that their relations with their employees are good. No
executive officer of the Company (as defined in Rule 501(f) of the
0000 Xxx) has notified the Company that such officer intends to leave
the Company or otherwise terminate such officer's employment with the
Company. No executive officer of the Company, 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, non-competition agreement, or any
other contract or agreement or any restrictive covenant, and, to the
knowledge of the Company, the continued employment of each such
executive officer does not subject the
13
Company or any of its Subsidiaries to any material liability with
respect to any of the foregoing matters.
(ii) The Company and its Subsidiaries are in compliance with
all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and
conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in
the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(v) TITLE. The Company and its Subsidiaries have good and
marketable title to all personal property owned by them which is
material to the business of the Company and its Subsidiaries, in each
case free and clear of all liens, encumbrances and defects except (i)
mortgages on the Company's manufacturing facility in Northern Ireland,
(ii) assets pledged under security agreements between the Company and
Xxxx & Xxxx Enterprises, LLC and/or its affiliates, (iii) liens for
taxes not yet delinquent, (iv) mechanics' and materialmen's liens (and
other similar liens), and liens under operating and similar
agreements, to the extent the same relate to expenses incurred in the
ordinary course of business and that are not yet due, (v) that are
routine Governmental Approvals, or (vi) such as do not materially
affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and any
of its Subsidiaries. Except as disclosed under Item 2 ("Properties")
in the Prior 10K, neither the Company nor any of its Subsidiaries owns
any real property. Any real property and facilities held under lease
by the Company and any of its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are
not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
Subsidiaries.
(w) INTELLECTUAL PROPERTY RIGHTS. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all
trademarks, trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and
other intellectual property rights ("INTELLECTUAL PROPERTY RIGHTS")
necessary to conduct their respective businesses as now conducted.
None of the Company's Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate within two years
from the date of this Agreement, except for those which would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. The Company does not have any knowledge of
any infringement by the Company or its Subsidiaries of Intellectual
Property Rights of others. There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company, being
threatened, against the Company or its Subsidiaries regarding its
Intellectual Property Rights except such as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect. The Company does not have any knowledge of any facts or
circumstances which might give rise to any of the foregoing
infringements or claims, actions or proceedings. The Company and its
Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their intellectual
properties.
(x) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are
in compliance with any and all Environmental Laws (as hereinafter
defined), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to
14
conduct their respective businesses and (iii) are in compliance with
all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect. The term
"ENVIRONMENTAL LAWS" means all federal, state, local or foreign laws
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without
limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, "HAZARDOUS
Materials") into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders,
permits, plans or regulations issued, entered, promulgated or approved
thereunder.
(y) SUBSIDIARY RIGHTS. The Company or one of its Subsidiaries has
the unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive dividends and distributions on, all capital
securities of its material Subsidiaries as owned by the Company or
such Subsidiary.
(z) TAX STATUS. The Company and each of its Subsidiaries (i) has
made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is
subject, (ii) has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due
on such returns, reports and declarations, except those being
contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim.
(aa) INTERNAL ACCOUNTING CONTROLS. The Company and each of its
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 generally
accepted accounting principles and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities is
permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to
any difference.
(bb) XXXXXXXX-XXXXX ACT. The Company is in compliance with any
and all applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that
are effective as of the date hereof, and any and all applicable rules
and regulations promulgated by the SEC thereunder that are effective
as of the date hereof, except where such noncompliance would not have
a Material Adverse Effect.
15
4. COVENANTS.
(a) BEST EFFORTS. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
(b) FORM D AND BLUE SKY. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to
provide a copy thereof to each Buyer promptly after such filing. The
Company shall, on or before the Closing Date, 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 Buyers at
the Closing pursuant to this Agreement under applicable securities or
"Blue Sky" laws of the states of the United States (or to obtain an
exemption from such qualification), and shall provide evidence of any
such action so taken to the Buyers on or prior to the Closing Date.
The Company shall make all filings and reports relating to the offer
and sale of the Securities required under applicable securities or
"Blue Sky" laws of the states of the United States following the
Closing Date.
(c) REPORTING STATUS. Until the date on which the Investors (as
defined in the Registration Rights Agreement) shall have sold all the
Conversion Shares, Dividend Shares and Warrant Shares and none of the
Preferred Shares or Warrants is outstanding, (the "REPORTING PERIOD"),
the Company shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company 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
otherwise permit such termination.
(d) USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Securities for working capital purposes and not for the
repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries.
(e) FINANCIAL INFORMATION. The Company agrees to send the
following to each Investor during the Reporting Period (i) unless the
following are filed with the SEC through XXXXX and are available to
the public through the XXXXX system, within one (1) Business Day after
the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form
8-K and any registration statements (other than on Form S-8) or
amendments filed pursuant to the 1933 Act, (ii) on the same day as the
release thereof, facsimile copies of all press releases issued by the
Company or any of its Subsidiaries, and (iii) copies of any notices
and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or
giving thereof to the stockholders.
(f) LISTING. The Company shall promptly secure the listing of all
of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated
quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so
long as any other shares of Common Stock shall be so listed, such
listing of all Registrable Securities from time to time issuable under
the terms of the Transaction Documents. The Company shall maintain the
Common Stock's authorization for quotation on the Principal Market.
Neither the Company nor any of its Subsidiaries shall take any action
which would be reasonably expected
16
to result in the delisting or suspension of the Common Stock on the
Principal Market. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(f).
(g) FEES. Subject to Section 8 below, at the Closing, the Company
shall pay a nonaccountable expense allowance of $40,000 to The
Riverview Group LLC (a Buyer) or its designee(s), which amount shall
be withheld by Buyer from its Purchase Price at the Closing. The
Company shall be responsible for the payment of any placement agent's
fees, financial advisory fees, or broker's commissions relating to or
arising out of the transactions contemplated hereby, including,
without limitation, any fees or commissions payable to the Agent. The
Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, reasonable
attorney's fees and out-of-pocket expenses) arising in connection with
claim relating to any such payment. Except as otherwise set forth in
this Agreement or in the Registration Rights Agreement, each party to
this Agreement shall bear its own expenses in connection with the sale
of the Securities to the Buyers.
(h) PLEDGE OF SECURITIES. The Company acknowledges and agrees
that the Securities may be pledged by an Investor (as defined in the
Registration Rights Agreement) in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by
such Securities. The pledge of the Securities shall not be deemed to
be a transfer, sale or assignment of the Securities hereunder, and no
Investor effecting a pledge of Securities shall be required to provide
the Company with any notice thereof or otherwise make any delivery to
the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(f) of this
Agreement; provided that an Investor and its pledgee shall be required
to comply with the provisions of Section 2(f) hereof in order to
effect a sale, transfer or assignment of Securities to such pledgee.
The Company hereby agrees to execute and deliver such documentation as
a pledgee of Securities may reasonably request in connection with a
pledge of such Securities to such pledgee by an Investor.
(i) DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION. As
soon as practicable on the first Trading Day following the Closing
Date, the Company shall file a Current Report on Form 8-K describing
the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act, and attaching the
material Transaction Documents (including, without limitation, this
Agreement (and all schedules to this Agreement), the form of the
Certificate of Designations, the form of Warrant and the form of the
Registration Rights Agreement) as exhibits to such filing (including
all attachments, the "8-K FILING"). From and after the filing of the
8-K Filing with the SEC, no Buyer shall be in possession of any
material, nonpublic information received from the Company, any of its
Subsidiaries or any of its respective officers, directors, employees
or agents, that is not disclosed in the 8-K Filing. The Company shall
not, and shall cause each of its Subsidiaries and its and each of
their respective officers, directors, employees and agents, not to,
provide any Buyer with any material nonpublic information regarding
the Company or any of its Subsidiaries from and after the filing of
the 8-K Filing with the SEC without the express written consent of
such Buyer; PROVIDED, HOWEVER, that an attempt by the Company to
comply with the provisions of Section 4(m) hereof shall not be deemed
to violate this Section 4(i). Subject to the foregoing, neither the
Company nor any Buyer shall issue any press releases or any other
public statements with respect to the transactions contemplated
hereby; PROVIDED, HOWEVER, that the Company shall be entitled, without
the prior
17
approval of any Buyer, to make any press release or other public
disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and
(ii) as is required by applicable law and regulations, including the
applicable rules and regulations of the Principal Market (provided
that in the case of clause (i) each Buyer shall be consulted by the
Company (although the consent of such Buyer shall not be required) in
connection with any such press release or other public disclosure
prior to its release).
(j) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS. So long as any
Preferred Shares are outstanding, the Company shall not, directly or
indirectly, redeem, or declare or pay any cash dividend or
distribution on, the Common Stock without the prior express written
consent of the holders of Preferred Shares representing not less than
two-thirds of the aggregate face amount of the then outstanding
Preferred Shares.
(k) ADDITIONAL SECURITIES; ADDITIONAL REGISTRATION STATEMENTS.
For so long as any Buyer beneficially owns any Securities, the Company
will not issue any Preferred Shares other than to the Buyers as
contemplated hereby and the Company shall not issue any other
securities that would case a breach or default under the Certificate
of Designations. Until such time as the Registration Statement (as
defined in the Registration Rights Agreement) is declared effective by
the SEC, the Company will not file a registration statement under the
1933 Act relating to securities that are not the Securities.
(l) CORPORATE EXISTENCE. So long as any Buyer beneficially owns
any Preferred Shares or Warrants, the Company shall maintain its
corporate existence and shall not sell all or substantially all of the
Company's assets, except in the event of a merger or consolidation or
sale of all or substantially all of the Company's assets, where the
surviving or successor entity in such transaction (i) assumes the
Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly
traded corporation whose common stock is quoted on or listed for
trading on the Principal Market, the New York Stock Exchange, the
American Stock Exchange or The Nasdaq National Market.
(m) RIGHT OF PARTICIPATION. (i) For a period of 12 months
following the Closing Date, the Company shall not issue, sell or
exchange, agree or obligate itself to issue, sell or exchange or
reserve or set aside for issuance, sale or exchange (a "FUTURE
ISSUANCE"), (A) any shares of Common Stock, (B) any other equity
security of the Company, including without limitation shares of
preferred stock, (C) any debt security of the Company (other than debt
with no equity feature), including without limitation any debt
security which by its terms is convertible into or exchangeable for
any equity security of the Company, (D) any security of the Company
that is a combination of debt and equity, or (E) any option, warrant
or other right to subscribe for, purchase or otherwise acquire any
such equity security or any such debt security of the Company, unless
in each case the Company shall have first offered to sell one-half of
the aggregate amount of such securities (in all respect upon identical
terms and conditions, including, without limitation, unit price and
interest rates) (the "OFFERED SECURITIES") to the Buyers as follows:
The Company shall offer to sell to each Buyer (1) that portion of the
Offered Securities as the number of shares of Common Stock (including
all shares of capital stock convertible
18
into or exercisable for Common Stock on an as-converted and
as-exercised basis) then held by such Buyer and acquired pursuant to
the terms of the Transaction Documents, bears to the total number of
shares of Common Stock (including all shares of capital stock
convertible into or exercisable for Common Stock on an as-converted
and as-exercised basis) held on such date by all Buyers and acquired
pursuant to the terms of the Transaction Documents (the "BASIC
Amount"), and (2) such additional portion of the Offered Securities as
such Buyer shall indicate it will purchase should the other Buyers
subscribe for less than their Basic Amounts (the "UNDERSUBSCRIPTION
AMOUNT"), at a price and on such other terms as shall have been
specified by the Company in writing delivered to such Buyer (the
"OFFER"), which Offer by its terms shall remain open and irrevocable
for a period of twenty (20) days from receipt of the Offer.
(ii) Notice of each Buyer's intention to accept, in whole or in
part, any Offer made pursuant to Section 4(m)(i) shall be evidenced by
a writing signed by such Buyer and delivered to the Company prior to
the end of the 20-day period of such Offer, setting forth such of the
Buyer's Basic Amount as such Buyer elects to purchase and, if such
Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount as such Buyer shall elect to purchase (the
"NOTICE OF ACCEPTANCE"). If the Basic Amounts subscribed for by all
Buyers are less than the total Offered Securities then each Buyer who
has set forth Undersubscription Amounts in its Notice of Acceptance
shall be entitled to purchase all Undersubscription Amounts it has
subscribed for; PROVIDED, HOWEVER, that should the Undersubscription
Amounts subscribed for exceed the difference between the Offered
Securities and the Basic Amounts subscribed for (the "AVAILABLE
UNDERSUBSCRIPTION AMOUNT"), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that
portion of the Available Undersubscription Amount as the
Undersubscription Amount subscribed for by such Buyer bears to the
total Undersubscription Amounts subscribed for by all Buyers, subject
to rounding by the Board of Directors of the Company to the extent it
deems reasonably necessary.
(iii) PERMITTED SALES OF REFUSED SECURITIES. If Notices of
Acceptance are not given by the Buyers in respect of all the Offered
Securities, the Company shall have sixty (60) days from the expiration
of the period set forth in Section 4(m)(i) to close the sale of all or
any part of such Offered Securities as to which a Notice of Acceptance
has not been given by the Buyer (the "REFUSED SECURITIES") (as well as
the other securities proposed to be issued in a Future Issuance) to
any other Person or Persons, but only for cash and otherwise in all
respects upon terms and conditions, including, without limitation,
unit price and interest rates, which are no more favorable, in the
aggregate, to such other Person or Persons or less favorable to the
Company than those set forth in the Offer.
(iv) REDUCTION IN AMOUNT OF OFFERED SECURITIES. If the Company
shall propose to sell less than all the Refused Securities (any such
sale to be in the manner and on the terms specified in Section
4(m)(iii) above), then each Buyer may, at its sole option and in its
sole discretion, reduce the number or other units of the Offered
Securities specified in its Notice of Acceptance to an amount which
shall be not less than the amount of the Offered Securities which such
Buyer elected to purchase pursuant to Section 4(m)(ii) multiplied by a
fraction, (A) the numerator of which shall be the amount of Offered
Securities which the Company actually proposes to sell, and (B) the
denominator of which shall be the amount of all Offered Securities. In
the event that any Buyer so elects to reduce the number or amount of
Offered Securities specified in its Notice of Acceptance, the Company
may not sell or otherwise dispose of more than the reduced amount of
the Offered Securities until such securities have been offered to the
Buyers in accordance with Section 4(m).
19
(v) CLOSING. Upon each closing under this Section 4(m), which
shall include full payment to the Company, the Buyer shall purchase
from the Company, and the Company shall sell to the Buyer the number
of Offered Securities specified in the Notices of Acceptance, as
reduced pursuant to Section 4(m)(iv) if the Buyers have so elected,
upon the terms and conditions specified in the Offer. The purchase by
the Buyers of any Offered Securities is subject in all cases to the
preparation, execution and delivery by the Company and the Buyers of a
purchase agreement relating to such Offered Securities reasonably
satisfactory in form and substance to the Buyers and their respective
counsel.
(vi) FURTHER SALE. In each case, any securities proposed to be
issued in a Future Issuance that are not purchased by the Buyers or
other Person or Persons in accordance with Section 4 may not be sold
or otherwise disposed of until they are again offered to the Buyers to
the same extent, and under the procedures specified in, Section 4(m).
(vii) EXCEPTION. The rights of the Buyers under this Section 4(m)
shall not apply to: (A) Common Stock issued as a stock dividend to
holders of Common Stock or upon any subdivision or combination of
shares of Common Stock, (B) shares of Common Stock issued upon
exercise of the Warrants, conversion of the Preferred Shares or issued
upon conversion or exercise of any other currently outstanding
securities of the Company pursuant to the terms of such securities,
(C) securities of the Company issued in connection with any existing
or future investment facilities related to Xxxx Xxxx or any of his
affiliates, (D) compensation or similar arrangements with employees,
officers, directors, consultants or service providers (which, in the
case of consultants or service providers, does not involve any cash
payment by such consultant or service provider), (E) securities issued
in connection with bona fide, arm's length strategic partnerships or
joint ventures in which there is a significant commercial relationship
with the Company, (F) securities issued in connection with bona fide,
arm's length acquisitions of intellectual property rights, (G)
securities issued pursuant to the bona fide, arm's length acquisition
of another Person by the Company by consolidation, merger, purchase of
all or substantially all of the assets, or other reorganization in
which the Company acquires, in a single transaction or series of
related transactions, the business or all or substantially all of the
assets of such other Person or fifty percent (50%) or more of the
voting power of such other Person or fifty percent (50%) or more of
the equity ownership of such other Person and (H) underwritten public
offerings.
(n) RESERVATION OF SHARES. The Company shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance,
no less than the sum of 200% of (1) the number of shares of Common Stock
issuable upon conversion of, or as payment for dividends on, the Preferred
Shares issued at the Closing and (2) the number of shares of Common Stock
issuable upon exercise of the Warrants issued at the Closing.
(o) CONDUCT OF BUSINESS. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would
not result, either individually or in the aggregate, in a Material Adverse
Effect.
(p) EXCHANGE CAP. The Company shall not be obligated to issue any
Conversion Shares, Dividend Shares, Warrant Shares or other shares of
Common Stock to any
20
Buyer pursuant to any of the Transaction Documents if the issuance of such
shares of Common Stock would exceed that number of shares of Common Stock
that the Company may issue to such Buyer without breaching the Company's
obligations under the rules or regulations of the Principal Market of the
Common Stock on the Issuance Date (including without limitation NASD
Marketplace Rule 4350(i)), or any market or exchange where the Common Stock
subsequently trades (the "EXCHANGE CAP"), except that such limitation shall
not apply in the event that the Company (A) obtains the approval of its
shareholders as required by the applicable rules of the Principal Market
for issuances of Common Stock in excess of such amount or (B) obtains a
written opinion from outside counsel to the Company that such approval is
not required, which opinion shall be reasonably satisfactory to the holders
of the Securities representing at least 50% of the shares of Common Stock
underlying the Securities then outstanding. Until such approval is
obtained, no Buyer shall be issued, upon exercise of any of its rights
under the Transaction Documents, shares of Common Stock in an amount
greater than the product of the Exchange Cap multiplied by a fraction, the
numerator of which is the total number of shares of Common Stock underlying
the Securities issued to such Buyer pursuant to this Agreement on the
Closing Date and the denominator of which is the aggregate number of shares
of Common Stock underlying all the Securities issued to all the Buyers
pursuant to this Agreement on the Closing Date (with respect to each
Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Buyer
shall sell or otherwise transfer any of such Buyer's Warrants or Preferred
Shares, the transferee shall be allocated a pro rata portion of such
Buyer's Exchange Cap Allocation, and the restrictions of the prior sentence
shall apply to such transferee with respect to the portion of the Exchange
Cap Allocation allocated to such transferee. In the event that any holder
of Warrants or Preferred Shares shall exercise all of such holder's rights
under the Transaction Documents into a number of shares of Common Stock
which, in the aggregate, is less than such holder's Exchange Cap
Allocation, then the difference between such holder's Exchange Cap
Allocation and the number of shares of Common Stock actually issued to such
holder shall be allocated to the respective Exchange Cap Allocations of the
remaining holders of Securities on a pro rata basis in proportion to the
shares of Common Stock underlying the Securities then held by each such
holder.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) REGISTER. The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate
by notice to each holder of Preferred Shares or Warrants), a register for
the Preferred Shares and the Warrants, in which the Company shall record
the name and address of the Person in whose name the Preferred Shares and
the Warrants have been issued (including the name and address of each
transferee), the face amount of Preferred Shares held by such Person and
the number of Warrant Shares issuable upon exercise of the Warrants held by
such Person. The Company shall keep the register open and available at all
times during business hours for inspection of any Buyer or its legal
representatives.
(b) TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to
issue certificates or credit shares to the applicable balance accounts at
DTC, registered in the name of each Buyer or its respective nominee(s), for
the Conversion Shares, the Dividend Shares, if any, and the Warrant Shares
in such amounts as specified from time to time by each Buyer to the Company
upon
21
conversion of the Preferred Shares or exercise of the Warrants in the form
of EXHIBIT D attached hereto (the "IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS"). The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5(b),
and stop transfer instructions to give effect to Sections 2(f) and 2(g)
hereof, will be given by the Company to its transfer agent, and that the
Securities 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 Documents. If a Buyer effects a sale, assignment or
transfer of the Securities in accordance with Section 2(f), the Company
shall permit the transfer and shall promptly instruct its transfer agent to
issue one or more certificates or credit shares to the applicable balance
accounts at DTC in such name and in such denominations as specified by such
Buyer to effect such sale, transfer or assignment. In the event that such
sale, assignment or transfer involves Conversion Shares, Dividend Shares or
Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or in compliance with Rule 144, the transfer agent
shall issue such Securities to the Buyer, assignee or transferee, as the
case may be, without any restrictive legend. The Company acknowledges that
a breach by it of its obligations hereunder will cause irreparable harm to
a Buyer. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5(b) will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 5(b), that a Buyer shall be entitled, in
addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or
other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Preferred Shares and the related Warrants to each Buyer at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer and each other Buyer shall have executed each of
the Transaction Documents to which it is a party and delivered the
same to the Company.
(ii) Such Buyer and each other Buyer shall have delivered to the
Company the Purchase Price (less, in the case of The Riverview Group
LLC, the amounts withheld pursuant to Section 4(g)) for the Preferred
Shares and the related Warrants being purchased by such Buyer and each
other Buyer at the Closing by wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.
(iii) The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and
such Buyer shall have performed, satisfied and complied in all
material respects (except for covenants, agreements and conditions
that are qualified by materiality, which shall be complied with in all
respects) with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the Closing Date; PROVIDED, HOWEVER, that a
Buyer's loss of status as an "Accredited Investor" shall not relieve
the
22
Company of its obligation to deliver the Securities. The Company shall
have received a certificate, executed by an authorized representative,
dated as of the Closing Date, to the foregoing effect in the form
attached hereto as EXHIBIT G1.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Preferred
Shares and the related Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion
by providing the Company with prior written notice thereof:
(i) The Company shall have executed and delivered to such Buyer
(i) each of the Transaction Documents and (ii) the Preferred Shares
(in such face amounts as such Buyer shall request in writing) and the
related Warrants (in such amounts as such Buyer shall request in
writing) being purchased by such Buyer at the Closing pursuant to this
Agreement.
(ii) Such Buyer shall have received the opinion of Akin Gump
Xxxxxxx Xxxxx & Xxxx LLP, the Company's counsel, dated as of the
Closing Date, in substantially the form of EXHIBIT E attached hereto.
(iii) The Company shall have delivered to such Buyer a copy of
the Irrevocable Transfer Agent Instructions, in the form of EXHIBIT F
attached hereto, which instructions shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(iv) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and of
Valence Technology (Nevada), Inc. in each such corporation's state of
incorporation issued by the Secretary of State of such state of
incorporation as of a date within 10 days of the Closing Date.
(v) The Company shall have delivered to such Buyer a certificate
evidencing the Company's qualification as a foreign corporation and
good standing issued by the Secretary of State of the State of Texas
as of a date within 10 days of the Closing Date.
(vi) The Company shall have delivered to such Buyer a certified
copy of the Certificate of Incorporation as certified by the Secretary
of State of the State of Delaware within 10 days of the Closing Date.
(vii) The Company shall have delivered to such Buyer a
certificate, executed by an Assistant Secretary of the Company and
dated as of the Closing Date, as to (i) the resolutions consistent
with Section 3(b) as adopted by the Company's Board of Directors in a
form reasonably acceptable to such Buyer (the "RESOLUTIONS"), (ii) the
Certificate of Incorporation and (iii) the Bylaws, each as in effect
at the Closing, in the form attached hereto as EXHIBIT F.
(viii) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing Date
as though made at that time
23
(except for representations and warranties that speak as of a specific
date) and the Company shall have performed, satisfied and complied in
all material respects (except for covenants, agreements and conditions
that are qualified by materiality, which shall be complied with in all
respects) with the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with
by the Company at or prior to the Closing Date. Such Buyer shall have
received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Closing Date, to the foregoing effect and as
to such other matters as may be reasonably requested by such Buyer in
the form attached hereto as EXHIBIT G2.
(ix) The Company shall have delivered to such Buyer a letter from
the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the Closing Date.
(x) The Common Stock (I) shall be designated for quotation or
listed on the Principal Market and (II) shall not have been suspended
by the SEC or the Principal Market from trading on the Principal
Market nor shall suspension by the SEC or the Principal Market have
been threatened either (A) in writing by the SEC or the Principal
Market or (B) by falling below the minimum listing maintenance
requirements of the Principal Market.
(xi) The Company shall have obtained all governmental, regulatory
or third party consents and approvals, if any, necessary for the sale
of the Preferred Shares and the Warrants.
(xii) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request.
8. TERMINATION. In the event that the Closing shall not have occurred
with respect to a Buyer on or before five (5) Business Days from the date
hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching
party's failure to waive such unsatisfied condition(s)), the nonbreaching
party shall have the option to terminate this Agreement with respect to
such breaching party at the close of business on such date without
liability of any party to any other party; PROVIDED, HOWEVER, this if this
Agreement is terminated pursuant to this Section 8, the Company shall
remain obligated to reimburse the non-breaching Buyers for the expenses
described in Section 4(g) above.
9. MISCELLANEOUS.
(a) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions concerning
the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdictions) that
would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the
non-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
24
herein, 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
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address
for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR
THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING
OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which 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; provided that a facsimile
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were
an original, not a facsimile signature.
(c) HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) SEVERABILITY. 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 in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction.
(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all other
prior oral or written agreements between the Buyers, the Company, their
affiliates and Persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the holders of Preferred Shares
representing 50% or more of the aggregate face amount of the Preferred
Shares, or, if prior to the Closing Date, the Company and the Buyers listed
on the Schedule of Buyers as being obligated to purchase 50% or more of the
aggregate face amount of the Preferred Shares. No provision hereof may be
waived other than by an instrument in writing signed by the party against
whom enforcement is sought. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Preferred
Shares then outstanding. No consideration 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 also is
offered to all of the parties to the Transaction Documents, holders of
Preferred Shares or holders of the Warrants, as the case may be. The
Company has not, directly or indirectly, made any agreements with any
25
Buyers relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction
Documents.
(f) NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be
in writing and will be deemed to have been delivered: (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with an overnight courier service, in each case properly
addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
If to the Company:
Valence Technology, Inc.
Xxxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, President and CEO
with a copy to:
Akin Gump Xxxxxxx Xxxxx & Xxxx LLP
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: C.N. Xxxxxxxx Xxxxxxx, III
If to the Transfer Agent:
EquiServe Trust Company, N.A.
Blue Hills Office Park
000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxx (Re: VALENCE TECHNOLOGY)
If to a Buyer, to its address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer's representatives as set
forth on the Schedule of Buyers, or to such other address and/or facsimile
number and/or to the attention of such other Person as the recipient party
has specified by written notice given to each other party five (5) days
prior to the effectiveness of such change. Written confirmation of receipt
(A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender's
facsimile machine containing the time, date, recipient facsimile number and
an
26
image of the first page of such transmission or (C) provided by an
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in
accordance with clause (i), (ii) or (iii) above, respectively.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares or the Warrants.
The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the holders of Preferred
Shares representing 50% or more of the aggregate face amount of the
Preferred Shares then outstanding, including by merger or consolidation,
except pursuant to a Change of Control (as defined in Section 5 of the
Preferred Shares) with respect to which the Company is in compliance with
Section 5 of the Preferred Shares and Section 4(b) of the Warrants. A Buyer
may assign some or all of its rights hereunder without the consent of the
Company; PROVIDED that such assignment is in compliance with applicable
securities laws and this Agreement and PROVIDED, FURTHER, that if such
assignment is not to an affiliate and does not include at least 50 or more
Preferred Shares in a single transaction, such assignment will be subject
to the prior written approval of the Company, and upon consummation of a
permitted assignment and the written agreement of such assignee (in form
and substance reasonably satisfactory to the Company) to the terms and
conditions of this Agreement, such assignee shall be deemed to be a Buyer
hereunder with respect to such assigned rights.
(h) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
(i) SURVIVAL. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5
and 9 shall survive the Closing. Each Buyer shall be responsible only for
its own representations, warranties, agreements and covenants hereunder.
(j) FURTHER ASSURANCES. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
(k) INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company's other obligations under
the Transaction Documents, the Company shall defend, protect, indemnify and
hold harmless each Buyer and each other holder of the Securities and all of
their stockholders, partners, members, officers, directors, employees and
direct or indirect investors and any of the foregoing Persons' agents or
other representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the "INDEMNITEES") from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective
of whether any such Indemnitee is a party to the action for which
27
indemnification hereunder is sought), and including reasonable attorneys'
fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by any
Indemnitee as a result of, or arising out of, or relating to (a) any
material inaccuracy of any representation or warranty made by the Company
in the Transaction Documents, (b) any material breach of any covenant,
agreement or obligation of the Company contained in the Transaction
Documents or (c) any cause of action, suit or claim brought or made against
such Indemnitee by a third party (including for these purposes a derivative
action brought on behalf of the Company) and arising out of or resulting
from (i) the execution, delivery, performance or enforcement of the
Transaction Documents, (ii) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the issuance
of the Securities, (iii) any disclosure made by such Buyer pursuant to
Section 4(i), or (iv) the status of such Buyer or holder of the Securities
as an investor in the Company (other than in connection with any action
such Buyer may have taken or may have failed to taken). To the extent that
the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. Except as otherwise set forth herein, the mechanics
and procedures with respect to the rights and obligations under this
Section 9(k) shall be the same as those set forth in Section 6 of the
Registration Rights Agreement.
(l) NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.
(m) REMEDIES. Each Buyer and each holder of the Securities shall have
all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders
have under any law. Any Person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically
(without posting a bond or other security), to recover damages by reason of
any breach of any provision of this Agreement and to exercise all other
rights granted by law. Furthermore, the Company recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under this Agreement, any remedy at law may prove to be
inadequate relief to the Buyers. The Company therefore agrees that the
Buyers shall be entitled to seek temporary and permanent injunctive relief
in any such case without the necessity of proving actual damages and
without posting a bond or other security.
(n) PAYMENT SET ASIDE. To the extent that the Company makes a payment
or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Buyers enforce or exercise their rights
hereunder or 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.
28
[SIGNATURE PAGE FOLLOWS]
29
IN WITNESS WHEREOF, each Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
VALENCE TECHNOLOGY, INC. THE RIVERVIEW GROUP LLC
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxx Xxxxxx
------------------------------- ------------------------------------
Name: Xxxxxxx X. Xxxxxxxx Name: Xxxxx Xxxxxx
Title: Chief Executive Officer Title: Chief Operating Officer
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5)
AGGREGATE AGGREGATE
FACE AMOUNT NUMBER OF LEGAL REPRESENTATIVE'S
ADDRESS AND OF PREFERRED WARRANT ADDRESS AND
BUYER FACSIMILE NUMBER SHARES SHARES FACSIMILE NUMBER
----------------------------------------------------------------------------------------------------------------
The Riverview Group LLC 000 Xxxxx Xxxxxx, $10,000,000 $352,900 Xxxxxxx Xxxx & Xxxxx LLP
8th floor 000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Manager Attention: Xxxxxxx Xxxxx, Esq.
Facsimile: (000)000-0000 Facsimile: (000)000-0000
Telephone: (000)000-0000 Telephone: (000)000-0000
Residence: New York
EXHIBITS
Exhibit A Form of Certificate of Designations
Exhibit B Form of Warrants
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Irrevocable Transfer Agent Instructions
Exhibit E Form of Opinion
Exhibit F Form of Secretary's Certificate
Exhibit G1 Form of Authorized Representative's Certificate
Exhibit G2 Form of Officers Certificate
