NOTE PURCHASE AGREEMENT
This
Note
Purchase Agreement (the "Agreement") is made effective as of [DATE],
between TECHNOCONCEPTS INC. (the "Company"), and
the
investors listed on the Schedule of Investors attached as Exhibit A hereto
(the
"Investors").
The
Company has authorized the sale and issuance of Series A Secured Subordinated
Promissory Notes, substantially in the form attached hereto as Exhibit B
(each a
"Note" and, collectively, the "Notes"), in the principal amount of up to
$10,000,000.00.
Subject
to the terms and conditions of this Agreement, each of the Investors, severally
and not jointly, agrees to purchase at the Closing, and the Company agrees
to
sell and issue to each of the Investors, severally and not jointly, at the
Closing, the Notes in the principal amount specified opposite his name on
Exhibit A hereto for a purchase price equal to the principal amount of the
Note
to be purchased by such Investor.
1.3
Closing
The
purchase and sale of the Notes being purchased by the Investors shall take
place
at the offices of the Company by delivery to each of the Investors from the
Company a Note in the principal amount set forth opposite his name on Exhibit
A
against delivery to the Company by the Investor of a certified or cashier's
check or wire transfer payable to the Company in the full amount of the
principal amount of such Note. Upon
delivery of all of the Notes, the Closing shall occur at the offices of the
Company, or such other location as
the
Company and the Investors who propose to purchase a majority in interest
of the
Notes shall
mutually
agree. The Company shall not be required to wait for the Closing but shall
instead settle individual Note transactions for each Investor as mutual
deliveries for each transaction are completed.
1.4
Interest Rate
The
outstanding principal balance of each of the Notes shall bear interest from
the
date of the Closing until payment in full is made at a rate per annum equal
eight (8%) percent, but shall not exceed the maximum rate of interest allowed
by
applicable law. The Company shall pay all accrued interest on the outstanding
principal balance of the Notes on the date that the principal amount of the
Notes shall become due as provided in Section 1.5 of this
Agreement.
1.5
Term and Extensions
All
outstanding principal and interest shall be due and payable on the date that
is
the earlier of: (i) one (1) year after the date of the settlement of the
individual Note transaction (the “Maturity Date”) or
(ii)
sale of the Company or sale of substantially all of the Company’s
assets.
1.6
Prepayment
The
Company may at its sole option, at any time, prepay the Notes, in full or
in
part. Each prepayment shall be accompanied by the payment of interest on
the
amount prepaid. Any prepayment shall be made to each holder of the Notes
on a
pro-rata basis as nearly as practicable to the proportion of the principal
amount of the outstanding Notes held by such holder.
1.7
Subordination and Security Interest and Financing
Statements
(a)
The
indebtedness evidenced by the Notes (and the security interest in the Collateral
granted to the Investors as described below) shall be subordinate, to the
extent
more fully set forth in Section 12 of the Notes, to the principal of (and
premium, if any) and unpaid interest on, (i) the
Company’s 7%
Secured Convertible Debentures
issued
on or about November 18, 2004, (ii) any indebtedness,
currently outstanding, of the Company or with respect to which the Company
is a
guarantor, (iii) any indebtedness, hereafter created, to banks or insurance
companies regularly engaged in the business of lending money, which is for
money
borrowed by the Company or a subsidiary of the Company, whether or not secured,
which does not exceed $5,000,000 and (iv) any deferrals, renewals or extensions
of any such indebtedness or any debentures, notes or other evidence of
indebtedness issued in exchange for such indebtedness (collectively, the
"Senior
Indebtedness").
(b)
The
term "Collateral" as used in this Agreement means and includes all assets
of the
Company, now or hereafter acquired by the Company, and the proceeds thereof
including but not limited to proceeds of insurance covering the Collateral
and
any and all accounts receivable, inventory, equipment, money, goods, chattel
paper, deposit accounts or other tangible and intangible property of the
Company, together with the products and proceeds thereof. The Company hereby
grants to each of the Investors, on a pari
passu
basis
amongst the Investors, a security interest in the Collateral to secure the
payment of the Notes and the performance by the Company of each and all of
its
obligations under this Agreement and the Notes; provided, however, that such
security interest shall be subordinated, to the extent provided herein, to
any
security interest in the Collateral that may be granted with respect to the
Senior Indebtedness. Notwithstanding anything to the contrary contained herein
or in any agreement, whether written or oral, prior hereto, the security
interest of each Investor in the Collateral shall be an undivided interest
in
the Collateral and the relative extent of each Investor's security interest
in
the Collateral at any time in proportion to that of other Investors shall
be
determined by dividing the principal amount (with accrued interest) of such
Investors' Note by the aggregate principal amount (with accrued interest)
of all
Investors' outstanding Notes. Upon any Event of Default (as defined in Section
4
of the Note), each holder of such Notes, or such holder's agent, shall have
and
may exercise any and all remedies of a secured party under the New York Uniform
Commercial Code, and any other remedies available at law or equity, with
respect
to the Collateral.
(c)
The
Company hereby represents, warrants and covenants to the Investors as follows:
(i)
Except for the Senior Indebtedness and as disclosed in Exhibit D hereto,
all of
the Collateral is owned by the Company free from any liens, encumbrances
or
security interests which rank on a parity with or prior to the security interest
granted in this Section and the Company, until such time as the Notes have
been
paid in full, will keep the Collateral free and clear of any additional liens,
encumbrances or security interests. The Company shall not file a voluntary
petition for bankruptcy under any chapter of the United States Bankruptcy
Code
within 365 days of the date hereof.
(ii)
The
Company will properly maintain and care for the Collateral and will not waste
or
destroy the Collateral or any part thereof. The Company will maintain such
insurance covering the Collateral as is customary for businesses similar
to the
business of the Company’s and, at the request of the Investors, deliver such
policies of insurance to the Investors and, subject to any rights of the
holders
of the Senior Indebtedness, name the Investors as loss payees of such insurance.
(iii)
The
Company has not and, except for any security interest granted to the Investors
and to the holders of any Senior Indebtedness, will not execute as debtor
thereunder any security agreement or financing statement covering any of
the
Collateral. Notwithstanding the foregoing, the Company may execute a security
agreement or financing statement covering the Collateral in any subsequent
debt
or equity financing; provided that such security interest granted is entirely
subordinated to the Investor’s security interest created herein; but provided
further that the Company may grant a pro
tanto
security
interest that is not so subordinated in an amount equal to the portion of
the
Notes that, at the time, is or has been repaid.
(iv)
The
Company will not sell, contract for the sale of or otherwise dispose of any
of
the Collateral except in the ordinary course of business.
(v)
The
Company will promptly notify each Investor in writing of any event which
affects
the value of a material portion of the Collateral, the ability of the Company
or
the Investors to dispose of the Collateral, and the rights and remedies of
the
Investors in relation thereto, including, but not limited to, the levy of
any
legal process against the Collateral and the adoption of any marketing order,
arrangement or procedure affecting the Collateral, whether government or
otherwise.
(d)
The
Company shall not encumber the Collateral in any manner inconsistent with
the
rights of the Investors hereunder.
1.8
Payments and Records
Each
payment to an Investor under this Agreement shall be made at the Company's
principal place of business. Principal, interest, and all other sums owing
to
each Investor under this Agreement shall be evidenced by entries in records
maintained by each Investor on the schedule attached to the Note and shall
also
be maintained by the Company in its records. Each payment on, and any other
credits with respect to, principal, interest and all other sums outstanding
under this Agreement shall be evidenced by entries in such records.
Except
as
set forth under the corresponding section of the disclosure schedules delivered
to the Investors concurrently herewith (the “Disclosure Schedules”) which
Disclosure Schedules shall be deemed a part hereof, the Company represents
and
warrants to the Investors as follows:
The
Company is a corporation duly organized and existing under, and by virtue
of,
the laws of the State of Colorado and is in good standing under such laws.
The
Company has all requisite corporate power and authority to own its properties
and assets and to carry on its business as presently conducted and as proposed
to be conducted.
The
capitalization of the Company is as described in the Company’s most recent
periodic report filed with the SEC. The Company has not issued any capital
stock
since such filing other than pursuant to the exercise of employee stock options
under the Company’s Equity Incentive Plan, the issuance of shares of Common
Stock to employees pursuant to the Company’s employee stock purchase plan and
pursuant to the conversion or exercise of outstanding Common Stock Equivalents.
No person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated herein. The issuance and sale of the Notes will not obligate
the
Company to issue shares of Common Stock or other securities to any Person
(other
than the Investors) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities. All of the outstanding shares of capital stock of the Company
are validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding
shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required
for the
issuance and sale of the Securities. There are no stockholders agreements,
voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.
2.3
Authorization
All
corporate action on the part of the Company and its directors necessary for
the
sale and issuance of the Notes and the performance of the Company's obligations
under this Agreement and the Notes will be taken prior to the Closing. This
Agreement and the Notes are valid, binding and enforceable obligations of
the
Company, subject to the laws of general application relating to bankruptcy,
insolvency, and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies. The Notes, when
issued in compliance with the provisions of this Agreement, will be validly
issued, and will be free of any liens or encumbrances, assuming the Investors
take the Notes with no notice thereof, other
than any liens or encumbrances created by or imposed on the Holder; provided,
however, that the Notes may be subject to restrictions on transfer under
applicable state and/or federal securities laws. The shares issued upon exercise
of the Warrant, when issued in compliance with the provisions of the Warrant,
will be validly issued, fully paid and nonassessable, and will be free of
any
liens or encumbrances, assuming that the Investors take said shares with
no
notice thereof, other than any liens or encumbrances created or imposed on
the
holder; provided, however, that such shares will be subject to restrictions
on
transfer under state and/or federal securities laws.
No
consent, approval or authorization of or designation, declaration or filing
with
any governmental authority on the part of the Company is required in connection
with the valid execution and delivery of this Agreement, or the offer, sale
or
issuance of the Notes, except qualification or registration (or taking such
action as may be necessary to secure an exemption from qualification or
registration requirements, if available) of the offer and sale of the Notes
under applicable federal and state securities regulations, which filings
and
qualifications or registrations, if required, will be accomplished in a timely
manner.
2.5
SEC Reports; Financial Statements
The
Company has filed all reports required to be filed by it under the Securities
Act of 1933, as amended, (the “Securities Act”) and the Securities Exchange Act
of 1934 (the “Exchange Act”), including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period
as
the Company was required by law to file such material) (the foregoing materials,
including the Exhibits thereto, being collectively referred to herein as
the
“SEC Reports”) on a timely basis or has received a valid extension of such time
of filing and has filed any such SEC Reports prior to the expiration of any
such
extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Securities Exchange Commission (the
“Commission”) promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and
the
rules and regulations of the Commission with respect thereto as in effect
at the
time of filing. Such financial statements have been prepared in accordance
with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified
in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and
fairly
present in all material respects the financial position of the Company and
its
consolidated subsidiaries as of and for the dates thereof and the results
of
operations and cash flows for the periods then ended, subject, in the case
of
unaudited statements, to normal, immaterial, year-end audit
adjustments.
The
Company is not in violation of any provisions of its Certificate of
Incorporation or Bylaws or in violation or default of any provision of any
instrument, judgment, order, writ, decree or contract to which it is a party
or
by which it is bound or any provision of federal or state statute, rule or
regulation applicable to the Company, where such violation or default would
have
a material adverse effect on the financial condition or results of operations
of
the Company, and the consummation of the transactions contemplated hereby
will
not result in any such violation or default or require any consent under
(which
consent has not been obtained) or be in conflict with or constitute, with
or
without the passage of time and giving of notice, either a violation or default
under any such material provision, instrument, judgment, order, writ, decree
or
contract or an event which results in the creation of any lien charge or
encumbrance upon any assets of the Company.
No
person
is entitled, directly or indirectly, to compensation from the Company by
reason
of any contract or understanding or contact with the Company, as a finder
or
broker in connection with this sale and purchase of the Notes contemplated
by this Agreement. The Company agrees to indemnify and hold the Investors
harmless against and in respect of any claim of brokerage or other commissions
or similar fees relative to this Agreement or the transactions contemplated
hereby which arise as a result of a contract or understanding made by the
Company with any such broker or finder in connection with this sale and purchase
of the Notes contemplated by this Agreement.
This
Agreement and the Exhibits hereto and the documents provided to the Investors
in
connection with the purchase of the Notes do not contain any untrue statement
of
a material fact.
Each
Investor hereby represents and warrants to the Company with respect to the
purchase of such Investor's Note as follows:
Such
Investor has full legal capacity, power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. Each of this Agreement
and the Note issued to the Investor is a valid and binding obligation of
the
Investor, enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and general principles
of equity.
Such
Investor understands that the shares
of
stock to which the Investor shall be entitled upon the exercise of a Warrant
(“Underlying
Stock”) are “restricted securities” and have not been registered under the
Securities Act or any applicable state securities law and is acquiring the
Underlying Stock as principal for its own account and not with a view to
or for
distributing or reselling such Underlying Stock or any part thereof, has
no
present intention of distributing any of such Underlying Stock and has no
arrangement or understanding with any other persons regarding the distribution
of such Underlying Stock (this representation and warranty not limiting such
Investor’s right to sell the Underlying Stock pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
securities laws). Such Investor is acquiring the Underlying Stock hereunder
in
the ordinary course of its business. Such Investor does not have any agreement
or understanding, directly or indirectly, with any Person to distribute any
of
the Underlying Stock.
3.3
Investor Status
At
the
time such Investor was offered the Notes, Warrants, and/or Underlying Stock,
it
was, and at the date hereof it is, and on each date on which it exercises
any
Warrants it will be either: (i) an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii)
a
“qualified institutional buyer” as defined in Rule 144A(a) under the Securities
Act. Such Investor is not required to be registered as a broker-dealer under
Section 15 of the Exchange Act.
3.4
Experience of Such Investor
Each
Investor, either alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as to
be
capable of evaluating the merits and risks of the prospective investment
in the
Notes, Warrants, and/or Underlying Stock, and has so evaluated the merits
and
risks of such investment. Such Investor is able to bear the economic risk
of an
investment in the Underlying Stock and, at the present time, is able to afford
a
complete loss of such investment.
3.5
General Solicitation
Such
Investor is not purchasing the Notes, Warrants, or Underlying Stock as a
result
of any advertisement, article, notice or other communication regarding the
Notes, Warrants, and/or Underlying Stock published in any newspaper, magazine
or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
3.6
Short Sales
Each
Investor represents that prior to 8:30 a.m. EDT on the Trading Day immediately
following the date of this Agreement, neither it nor any Person over which
the
Investor has direct or indirect control, have made any purchases or sales
of, or
granted any option for the purchase of or entered into any hedging or similar
transaction with the same economic effect as a short sale, of the Common
Stock
of the Company, and that it will not enter into any such transaction while
it
holds the Notes, Warrants, and/or Underlying Stock.
3.7
Reliance on Exemptions
Each
Investor understands that the Notes, Warrants, and/or Underlying Stock 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 Investor’s
compliance with, the representations, warranties, agreements, acknowledgements
and understandings of such Investor set forth herein in order to determine
the
availability of such exemptions and the eligibility of such Investor to acquire
the Notes, Warrants, and/or Underlying Stock.
3.8
Information
Each
Investor 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 Notes, Warrants, and/or Underlying
Stock
which have been requested by such Investor. Such Investor 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
Investor or its advisors, if any, or its representatives shall modify, amend
or
affect such Investor’s right to rely on the Company’s representations and
warranties contained herein. Such Investor understands that its investment
in
the Notes, Warrants, and/or Underlying Stock involves a high degree of risk
and
such Investor is able to bear the risk of losing its investment in the Notes,
Warrants, and/or Underlying Stock. Such Investor 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 Notes, Warrants,
and/or Underlying Stock. Such Investor has (i) such knowledge and experience,
and has made investments of a similar nature, so as to be aware of the risks
and
uncertainties inherent in the transactions contemplated by this Agreement,
and
(ii) independently and without reliance upon the Company, and based on such
information as such Investor has deemed appropriate, made its own analysis
and
decision to enter into this Agreement. Such Investor acknowledges that the
Company has not given such Investor any investment advice, credit information
or
opinion on whether the purchase of the Notes, Warrants, and/or Underlying
Stock
is prudent.
3.9
No Governmental Review
Such
Investor 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 Notes, Warrants, and/or Underlying Stock nor have such
authorities passed upon or endorsed the merits of the offering of the Notes,
Warrants, and/or Underlying Stock.
Each
Investor represents and warrants to the Company that no person is entitled,
directly or indirectly, to compensation from such Investor by reason of any
contract
or understanding or contact with the Investor, as a finder or broker in
connection with the sale and purchase of the Note contemplated by this
Agreement. The Investor agrees to indemnify and hold the Company harmless
against and in respect of any claim for brokerage or other commissions or
similar fees relative to this Agreement or the transactions contemplated
hereby
which arises as a result of a contract or understanding made by such Investor
with any such broker or finder in connection with the sale and purchase of
the
Note contemplated by this Agreement.
Upon
the
Closing, the Company shall issue to each Investor a warrant for the purchase
of
common stock of the Company, in substantially the form attached hereto as
Exhibit C (the "Warrant"), as follows:
(a)
The
Company shall issue to each Investor a Warrant to purchase that number of
shares
of common stock as is equal to the original principal amount of such Investor's
Note.
(b)
The
Company shall issue the Warrants in accordance with this Section
4.1 within five (5) days after the Closing Date.
The
per
share exercise price of the Warrants shall be $1.00.
Warrants
issued pursuant to this Section 4 will terminate upon the fifth anniversary
of
the date of the issuance.
The
Note
and the Warrant shall not be sold, assigned, transferred or pledged except
upon
the conditions specified in this Section 5, which conditions
are intended to ensure compliance with the provisions of the Securities Act
(as
defined below). Each Investor will cause any proposed Investor, assignee,
transferee, or pledgee of the Note and/or the Warrant held by the Investor
to
agree to take and hold such securities subject to the provisions and upon
the
conditions specified in this Section 5.
As
used
in this Agreement, the following terms shall have the following respective
meanings:
"Commission"
shall mean the Securities and Exchange Commission or any other federal agency
at
the time administering the Securities Act.
"Holder"
shall mean a holder of a Note, Warrant, and/or Underlying Stock.
"Restricted
Securities" shall mean the securities of the Company required to bear the
legend
set forth in Section 5.3 hereof.
"Requisite
Holders" shall mean the holders of more than 50% of the outstanding principal
amount of the Notes.
Each
certificate or note representing a Note, Warrant, and/or Underlying Stock
issued
in respect of the Warrant upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of this Agreement) be stamped or otherwise
imprinted with a legend in substantially the following form (in addition
to any
legend required under applicable state securities laws):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH
REGISTRATION UNLESS THE TRANSFER IS IN ACCORDANCE WITH RULE 144 OR A SIMILAR
RULE AS THEN IN EFFECT UNDER THE ACT OR UNLESS THE CORPORATION RECEIVES AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR
TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF
THE ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES
AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY
OF THE
CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
Each
Investor and each Holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Note, Warrant
or
Underlying Stock in order to implement the restrictions on transfer established
in this Section 5.3.
The
Holder of each certificate representing Restricted Securities by acceptance
thereof agrees to comply in all respects with the provisions of this Section
5.4. Prior to any proposed sale, assignment, transfer or pledge of any
Restricted Securities, unless there is in effect a registration statement
under
the Securities Act covering the proposed transfer, the Holder thereof shall
given written notice to the Company of such Holder's intention to effect
such
transfer, sale, assignment or pledge. Each such notice shall describe the
manner
and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and shall be accomplished at such Holder's expense by
either
(i) an unqualified written opinion of legal counsel who shall be, and whose
legal opinion shall be, reasonably satisfactory to the Company, addressed
to the
Company, to the effect that the proposed transfer of the Restricted Securities
may be effected without registration under the Securities Act, or (ii) a
"no
action" letter from the Commission to the effect that the transfer of such
securities without registration will not result in a recommendation by the
staff
of the Commission that action be taken with respect thereto, whereupon the
Holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered
by
the Holder to the Company. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legend set forth in Section
5.3 above, except that such certificate shall not bear such restrictive legend
if, in the opinion of counsel for such Holder and the Company, such legend
is
not required in order to establish compliance with any provisions of the
Securities Act.
Note
Purchase Agreement - Page 9 of 36
This
Agreement and the Note shall in all respects be governed by and construed
and enforced in accordance with the laws of the State of New York, as such
laws
apply to contracts entered into and wholly to be performed within such
state.
THE
SALE
OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN
REGISTERED WITH THE SECURITIES COMMISSION OF ANY STATE AND THE ISSUANCE OF
SUCH
SECURITIES OR THE PAYMENT AND RECEIPT OF ANY PART OF THE CONSIDERATION THEREFROM
PRIOR TO SUCH REGISTRATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM REGISTRATION PURSUANT TO THE RELEVANT STATE SECURITIES LAWS. THE RIGHTS
OF
ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON REGISTRATION
BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.
The
representations, warranties, covenants and agreements made herein shall survive
any investigation made by the Investors and the closing of the transactions
contemplated hereby.
Except
as
otherwise provided herein, the provisions hereof shall inure to the benefit
of,
and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto, provided, however, that the rights
of the
Investors to purchase the Notes shall not be assignable without the consent
of
the Company and provided further that the Company may not assign its rights
hereunder.
This
Agreement, the Notes and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof, and no party shall be liable
or
bound to any other party in any manner by any warranties, representations
or
covenants except as specifically set forth herein or therein. Except as
expressly provided herein, neither this Agreement nor any term hereof may
be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought; provided,
however,
that
the Requisite Holders may, with the Company's prior written consent, waive,
modify or amend any provisions hereof.
Note
Purchase Agreement - Page 10 of 36
All
notices and other communications required or permitted hereunder shall be
in
writing and shall be mailed by registered or certified mail, postage prepaid,
or
otherwise delivered by hand, by messenger or by telecopy, addressed (a) if
to an
Investor, at the Investor's address set forth on Exhibit A hereto, or at
such
other address as the Investor shall have furnished to the Company in writing
or
(b) if to any other Holder of a Note, at such address as such Holder shall
have
furnished the Company in writing, or, until any such Holder so furnishes
an
address to the Company, then to and at the address of the last Holder of
the
Note, who has so furnished an address to the Company or (c) if to the Company,
one copy should be sent to its principal executive offices located at 0000
Xxxxxxxxx Xxxx., Xxx Xxxx, XX 00000, and addressed to the attention of the
Chief
Financial Officer, or to such other address as the Company shall have furnished
to the Investors. Each such notice or other communication shall for all purposes
of this Agreement be treated as effective or having been given when delivered
if
delivered personally, by messenger or by telecopy, or, if sent by mail, at
the
earlier of its receipt or 72 hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail,
addressed
and mailed as aforesaid.
Except
as
expressly provided herein, no delay or omission to exercise any right, power
or
remedy accruing to any Holder of a Note, upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy
of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default
be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character
on
the part of any Holder of any breach or default under this Agreement, or
any
waiver on the part of any Holder of any provisions or conditions of this
agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative
and
not alternative.
This
Agreement may be executed in any number of counterparts, each of which shall
be
enforceable against the party or parties actually executing such counterparts,
and all of which together shall constitute one instrument.
In
the
event that any provision of this Agreement becomes or is declared by a court
of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision.
Note
Purchase Agreement - Page 11 of 36
The
titles and subtitles used in this Agreement are used for convenience only
and
are not considered in construing or interpreting this Agreement.
6.12
Confidentiality
The
parties hereto agree that the existence of this Agreement and of any Notes
and
Warrants issued hereunder, and the terms hereof, shall be held in the strictest
confidence and shall not be disclosed to any third party unless (a) such
disclosure is required by law, or (b) such disclosure is agreed upon in writing
by the Investor and the Company.
[SIGNATURE
PAGES FOLLOW]
Note
Purchase Agreement - Page 12 of 36
|
|
Address
for Notice:
0000
Xxxxxxxxx Xxxx, Xxxxx 000
Xxx
Xxxx, XX 00000
|
|
By:__________________________________________
Name:
Xxxxxxx X. Xxxxxxx
Title:
Chief Executive Officer
|
|
|
With
a copy to (which shall not constitute notice):
Xxxxx
Xxxxx, Esq.
0000
Xxxxxxx Xxxx X 00xx Xx
Xxx
Xxxxxxx, XX 00000
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES FOR PURCHASERS FOLLOW]
Note
Purchase Agreement - Page 13 of 36
[PURCHASER
SIGNATURE PAGES TO TECHNOCONCEPTS NOTE PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Note Purchase Agreement
to be
duly executed by their respective authorized signatories as of the date first
indicated above.
Name
of
Investing Entity:
_______________________________________________________________________________
Signature
of Authorized Signatory of Investing Entity:
_________________________________________________________
Name
of
Authorized Signatory:
___________________________________________________________________________
Title
of
Authorized Signatory:
____________________________________________________________________________
Email
Address of Authorized
Entity:________________________________________________________________________
Address
for Notice of Investing Entity:
Address
for Delivery of Securities for Investing Entity (if not same as
above):
Subscription
Amount: $_______________________________
Warrant
Shares: ____________________________________
EIN
Number: [PROVIDE
THIS UNDER SEPARATE COVER]
[SIGNATURE
PAGES CONTINUE]
Note
Purchase Agreement - Page 14 of 36
EXHIBIT
A
Schedule
of Investors
|
Name
|
Principal
Amount
|
Interest
|
Maturity
|
Warrants
|
Exercise
Price
|
|
$
|
8%
|
$1.00
|
|||
Note
Purchase Agreement - Page 15 of 36
EXHIBIT
B
Form
of Note
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH
REGISTRATION UNLESS THE TRANSFER IS IN ACCORDANCE WITH RULE 144 OR A SIMILAR
RULE AS THEN IN EFFECT UNDER THE ACT OR UNLESS THE CORPORATION RECEIVES AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR
TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF
THE ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES
AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION
AT
THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
Subordinated
Secured Promissory Note
| $_____________________ |
[
D
A T E ]
|
Los
Angeles, California
For
value
received, TECHNOCONCEPTS INC., a Colorado corporation (the "Company"), promises
to pay to the undersigned (the "Holder"), the principal sum of the amount
written above, together with interest from the date of this Note on the unpaid
principal balance as provided in Section 2 below. This Note is subject to
the
following terms and conditions.
Subject
to Section 3, the principal and all accrued interest under this Note shall
be
due and payable upon demand by the Holder at any time after date that is
the
earlier of: (i) one (1) year after the date of the settlement of the individual
Note transaction (the “Maturity Date”)
or (ii)
sale of the Company or sale of substantially all of the Company’s
assets.
Notwithstanding the foregoing, the entire unpaid principal sum of this Note,
together with all accrued interest thereon, shall become immediately due
and
payable upon the occurrence of an Event of Default (as hereinafter
defined).
The
outstanding principal will bear interest at the rate of eight (8%) percent
per
annum.
Interest
on the outstanding principal shall be payable at the rate set forth above
and
shall be payable at such time as the outstanding principal amount hereof
is
otherwise due and payable. Interest shall be computed on the basis of a three
hundred sixty (360)-day year and actual days elapsed.
Note
Purchase Agreement - Page 16 of 36
If
at any
time, the rate of interest, together with all amounts which constitute interest
and which are reserved, charged or taken by the Holder as compensation for
fees,
services or expenses incidental to the making, negotiating or collection
of any
advance evidenced hereby, shall be deemed by any competent court of law,
governmental agency or tribunal to exceed the maximum of rate of interest
permitted to be charged by the Holder to the Company, then, during such time
as
such rate of interest would be deemed excessive, that portion of each sum
paid
attributable to that portion of such interest rate that exceeds the maximum
rate
of interest so permitted shall be deemed a voluntary prepayment of
principal.
All
payments shall be made in lawful money of the United States of America at
such
place as the Holder hereof may from time to time designate in writing to
the
Company. Payment shall be credited first to the accrued interest then due
and
payable and the remainder applied to principal. At any time following the
determination of the terms of the next Equity Financing, the Company shall
have
the right to prepay this Note, in whole or in part, prior to the Maturity
Date
without penalty.
The
occurrence of any of the following shall constitute an "Event of Default"
hereunder:
The
Company shall fail to pay (i) any principal payment on the due date hereunder
or
(ii) any interest or other payment required pursuant to the terms hereof
on the
date due and such payment shall not have been made within twenty (20) days
of
Company's receipt of Holder's written notice to the Company of such failure
to
pay; or
The
Company shall fail to observe or perform any covenant, obligation, condition
or
agreement contained herein (other than those covenants specified in Section
5(a)
of this Note) and (i) such failure shall continue for twenty (20) days, or
(ii)
if such failure is not curable within such twenty (20) day period, but is
reasonably capable of cure within 180 days, either (A) such failure shall
continue for 180 days or (B) Company shall not have commenced a cure in a
manner
reasonably satisfactory to Holder within the initial 45 day period;
or
The
Company shall (i) apply for or consent to the appointment of a receiver,
trustee, liquidator or custodian of itself or of all or a substantial part
of
its property, (ii) be unable, or admit in writing its inability, to pay its
debts generally as they mature, (iii) make a general assignment for the benefit
of its or any of its creditors, (iv) be dissolved or liquidated in full or
in
part, (v) become insolvent (as such term may be defined or interpreted pursuant
to any applicable statute), (vi) commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself
or
its debts pursuant to any bankruptcy, insolvency or other similar law now
or
hereafter in effect or consent to any such relief or to the appointment of
or
taking possession of its property by any official in an involuntary case
or
other proceeding commenced against it, or (vii) take any action for the purpose
of
effecting any of the foregoing; or
Note
Purchase Agreement - Page 17 of 36
Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the
Company or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization
or
other relief with respect to the Company or the debts thereof pursuant to
any
bankruptcy, insolvency or other similar law now or hereafter in effect shall
be
commenced and an order for relief entered or such proceeding shall not be
dismissed or discharged within 180 days of commencement.
5.
Security Interest.
Performance
by the Company of its obligations hereunder is secured by a security interest
in
certain Collateral of the Company pursuant to the terms set forth in Section
1.7
of the Note Purchase Agreement.
Upon
the
occurrence or existence of any Event of Default and at any time thereafter
during the continuance of such Event of Default, Holder may, by written notice
to the Company, declare all outstanding obligations payable by the Company
hereunder to be immediately due and payable without presentment, demand,
protest
or any other notice of any kind, all of which are hereby expressly waived.
In
addition to the foregoing remedies, upon the occurrence or existence of any
Event of Default, Holder may exercise any other right, power or
remedy
granted to it hereunder or pursuant to applicable law. The Company agrees
to pay
all taxes levied or assessed upon the outstanding principal against any holder
of this Note and to pay all reasonable costs, including attorneys' fees,
costs
relating to the appraisal and/or valuation of assets and all other costs
and
expenses incurred in the collection, protection, defense, preservation, or
enforcement of this Note or any endorsement of this Note or in any litigation
arising out of the transactions of which this Note or any endorsement of
this
Note is a part.
The
terms
and conditions of this Note shall inure to the benefit of and be binding
upon
the respective successors and assigns of the parties. Notwithstanding the
foregoing, the Holder may not assign, pledge, or otherwise transfer this
Note
without the prior written consent of the Company, except for transfers to
affiliates of the Holder. Subject to the preceding sentence, this Note may
be
transferred only upon surrender of the original Note for registration of
transfer, duly endorsed, or accompanied by a duly executed written instrument
of
transfer in form satisfactory to the Holder. Thereupon, a new note for the
same
principal amount and interest will be issued to, and registered in the name
of,
the transferee. Interest and principal are payable only
to
the registered holder of this Note. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by the Company without the prior written
consent
of Holder except in connection with an assignment in whole to a successor
corporation to the Company, provided that such successor corporation acquires
all or substantially all of the Company's property and assets and provided
further that none of the Holder's rights hereunder are
impaired.
Note
Purchase Agreement - Page 18 of 36
This
Note
and all acts and transactions pursuant hereto and the rights and obligations
of
the parties hereto shall be governed, construed and interpreted in accordance
with the laws of the State of New York, without giving effect to principles
of
conflicts of law.
Any
notice required or permitted by this Note shall be in writing and shall be
deemed sufficient upon delivery, when delivered personally or by a
nationally-recognized delivery service (such as Federal Express or UPS),
or five
(5) days after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, addressed to the party to be notified at such
party's address as set forth below or as subsequently modified by written
notice.
Any
term
of this Note may be amended or waived only with the written consent of the
Company and holders of in excess of 50% of the principal amount of notes
issued
on about the date of the Note, provided that all such notes are amended,
waived
or modified in a like manner. Any amendment or waiver effected in accordance
with this Section 10 shall be binding upon the Company, the Holder and each
transferee of the Note.
In
no
event shall any shareholder, officer or director of the Company be liable
for
any amounts due or payable pursuant to this Note.
The
indebtedness evidenced by this Note is hereby expressly subordinated, to
the
extent and in the manner hereinafter set forth, in right of payment to the
prior
payment in full of all the Company's Senior Indebtedness.
"Senior
Indebtedness" shall mean the principal of (and premium, if any) and unpaid
interest on, (i) the Company’s 7%
Secured Convertible Debentures
issued
on or about November 18, 2004, (ii) any indebtedness, currently outstanding,
of
the Company or with respect to which the Company is a guarantor, (iii) any
indebtedness, hereafter created, to banks or insurance companies regularly
engaged in the business of lending money, which is for money borrowed by
the
Company or a subsidiary of the Company, whether or not secured, which does
not
exceed $5,000,000 and (iv) any deferrals, renewals or extensions of any such
indebtedness or any debentures, notes or other evidence of indebtedness issued
in exchange for such Senior Indebtedness.
Upon
any
receivership, insolvency, assignment for the benefit of creditors, bankruptcy,
reorganization, or arrangements with creditors (whether or not pursuant to
bankruptcy or other insolvency laws), sale of all or substantially all of
the
assets, dissolution, winding-up, liquidation, or any other marshalling of
the
assets and liabilities of the Company, or in the event this Note shall be
declared due and payable upon the occurrence of an Event of Default, (i)
no
amount shall be paid by the Company in respect of the principal of or interest
on this Note at the time outstanding, unless and until the principal of and
interest on the Senior Indebtedness then outstanding shall be paid in full,
and
(ii) no claim or proof of claim shall be filed with the Company by or on
behalf
of the holder of this Note which shall assert any right to receive any payments
in respect of the principal of and interest on this Note except subject to
the
payment in full of the principal of and interest on all of the Senior
Indebtedness then outstanding. Any payment by, or distribution of assets
of, the
Company of any kind or character, whether in cash, property or securities,
to
which the holder of this Note would be entitled except for the provisions
of
this Section shall be paid or delivered by the person making such payment
or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee
or otherwise, directly to the holders of Senior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior Indebtedness
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness held or represented by each,
to the
extent necessary to make payment in full of all Senior Indebtedness remaining
unpaid after giving effect to any concurrent payment or distribution (or
provision therefor) to the holders of such Senior Indebtedness.
Note
Purchase Agreement - Page 19 of 36
The
consolidation of the Company with, or the merger of the Company into, another
corporation or the liquidation or dissolution of the Company following the
sale,
conveyance or lease of its property as an entirety, or substantially as an
entirety, to another corporation shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section.
No
payment on account of principal of or interest on this Note shall be made
and
this Note shall not be redeemed or purchased, either directly or indirectly,
by
the Company or any subsidiary if (i) at the time of such payment or immediately
after giving effect thereto there shall exist under any Senior Indebtedness
or
any agreement pursuant to which any Senior Indebtedness is issued (including
in
each case Senior Indebtedness incurred directly or indirectly in connection
with
any renewal, extension or refunding of Senior Indebtedness with respect to
money
borrowed) any condition, event or act which constitutes a default (which
default
shall not have been cured or waived) or which, with notice or lapse of time,
or
both, would constitute a default, or (ii) full payment of all amounts then
due
and payable to the holders of Senior Indebtedness other than any lease which
is
not required to be capitalized on the balance sheet of the Company under
generally accepted accounting principles shall not then have been made or
duly
provided for. In
the
event that any payment by, or distribution of assets of, the Company of any
kind
or character, whether in cash, property or securities, shall be received
by the
holder of this Note before all Senior Indebtedness is paid in full, contrary
to
the provisions of this Section, such payment or distribution shall be held
in
trust for the benefit of and shall be paid over to the holders of such Senior
Indebtedness for application to the payment of all Senior Indebtedness remaining
unpaid until all such Senior Indebtedness shall have been paid in full, after
giving effect to any concurrent payment or distribution (or provision therefor)
to the holders of such Senior Indebtedness.
In
any
case, cash, securities or other property otherwise payable or deliverable
to the
Holder of this Note shall have been applied to the payment of Senior
Indebtedness, then and in each such case, upon the payment in full of all
Senior
Indebtedness, the Holder of this Note shall be subrogated to the rights of
the
holders of Senior Indebtedness to receive all further payments and distributions
made on Senior Indebtedness until all principal of and interest on this Note
shall have been paid in full; and no such payments or distributions to the
holder of this Note by reason of such subrogation of cash, securities or
other
property which otherwise would be payable or distributable to the holders
of
Senior Indebtedness shall, as between the Company and its creditors (other
than
the holders of Senior Indebtedness), on the one hand, and the holder of this
Note, on the other, be deemed to be a payment by the Company on account of
this
Note.
Note
Purchase Agreement - Page 20 of 36
Nothing
contained in this Section shall impair, as between the Company and the Holder
of
this Note, the obligation of the Company, which is absolute and unconditional,
to pay to the holder hereof the principal hereof and interest hereon as and
when
the same become due and payable, or shall prevent the holder of this Note
from
exercising all rights, power and remedies otherwise provided herein or therein
or by applicable law, all subject to the rights, if any, of the holders of
Senior Indebtedness under this Section to receive cash, securities or other
properties otherwise payable or deliverable to the holder of this Note.
The
terms
"paid in full" and "payment in full" as used in this Section with respect
to
Senior Indebtedness mean the receipt, in cash or securities (taken at their
market value at the time of the receipt thereof), of the principal amount
of the
Senior Indebtedness (and any premium due thereon) and full interest thereon
to
the date of such payment of principal and all other amounts due to holders
of
Senior Indebtedness pursuant to the sections of the instruments
providing therefor.
To
the
extent permitted by generally accepted accounting principles, the Company
will
treat, account and report the Note as debt and not equity for accounting
purposes and with respect to any returns filed with federal, state or local
tax
authorities.
IN
WITNESS WHEREOF, the Company has caused this Note to be issued as of the
date
first written above.
COMPANY:
TechnoConcepts
Inc.
By:
_________________________________
Xxxxxxx
X. Xxxxxxx, Chairman & CEO
AGREED
TO
AND ACCEPTED:
HOLDER:
By:
_________________________________
Name:
Title:
Note
Purchase Agreement - Page 21 of 36
EXHIBIT
C
Form
of Warrant
NEITHER
THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE
"ACT") AND THIS WARRANT CANNOT BE SOLD OR TRANSFERRED, AND THE SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR TRANSFERRED,
UNLESS AND UNTIL (i) THEY ARE SO REGISTERED OR, (ii) RULE 144, RULE 144A
OR ANY
SUCCESSOR RULE UNDER THE ACT PERMITS SUCH SALE OR TRANSFER, OR (iii) UNLESS
SUCH
REGISTRATION IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH EXERCISE,
SALE
OR TRANSFER UNDER ANY OTHER EXEMPTION UNDER THE ACT, PROVIDED THAT THE HOLDER
OF
THIS WARRANT OR SHARES OF COMMON STOCK ISSUABLE HEREUNDER DELIVERS TO THE
COMPANY AN OPINION OF HOLDER'S COUNSEL THAT AN EXEMPTION FROM REGISTRATION
UNDER
THE ACT IS AVAILABLE.
WARRANT
TO PURCHASE COMMON STOCK OF
THIS
CERTIFIES that, for value received, ________________________ (herein called
"Holder") is entitled, upon the terms and subject to the limitations on exercise
and the conditions hereinafter set forth, at any time on or prior to the
close
of business on the five year anniversary of the effective date of this Warrant
(the “Termination Date”) but not thereafter, to subscribe for and purchase from
TechnoConcepts, Inc. (herein called the "Company") a corporation organized
and
existing under the laws of the State of Colorado, at the price of $1.00 per
share (the "Warrant Exercise Price"), ________________ fully paid and
nonassessable shares of the Company’s Common Stock, no par value per share,
subject to adjustment as set forth in Section 3 below.
This
Warrant is subject to the following provisions, terms and
conditions:
1. Exercise;
Issuance of Certificates; Payment for Shares.
(a)
The
rights represented by this Warrant may be exercised by the Holder hereof,
in
whole or in part (but not as to a fractional share) at the principal office
of
the Company (or such office or agency of the Company as it may from time
to time
reasonably designate) at any time prior to the Termination Date, and
(i)
by
payment to the Company by certified check or bank draft of the Warrant Exercise
Price for such shares, or
Note
Purchase Agreement - Page 22 of 36
(ii)
by
“cashless exercise”; only if at any time after one year from the date of
issuance of this Warrant there is no effective Registration Statement
registering the resale of the Warrant Shares by the Holder, then this Warrant
may also be exercised at such time by means of a “cashless exercise” in which
the Holder shall be entitled to receive a certificate for the number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:
|
(A)
=
|
the
VWAP on the Trading Day immediately preceding the date of such
election;
|
| (B) = | the Exercise Price of this Warrant, as adjusted; and |
| (X) = | the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise. |
“VWAP”
means, for any date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a Trading
Market, the daily volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the primary Trading Market on which
the
Common Stock is then listed or quoted as reported by Bloomberg Financial
L.P.
(based on a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using
the
VAP function; (b) if the Common Stock is not then listed or quoted on the
Trading Market and if prices for the Common Stock are then reported in the
“Pink
Sheets” published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price
per
share of the Common Stock so reported; or (c) in all other cases, the fair
market value of a share of Common Stock as determined by a nationally
recognized-independent appraiser selected in good faith by Purchasers holding
a
majority of the principal amount of Debentures then outstanding.
or
(iii)
by
a combination of the foregoing methods of payment selected by the Holder
of this
Warrant.
The
notice accompanying the Warrant shall also set forth the number of shares
remaining subject to the Warrant. The Company shall not be obligated to issue
fractional shares of Common Stock upon exercise of this Warrant but shall
pay to
the Holder an amount in cash equal to the Current Market Price per share
multiplied by such fraction (rounded to the nearest cent). The Company agrees
that the shares so purchased shall be deemed to be issued to the Holder as
the
record owner of such shares as of the close of business on the date on which
a
properly executed notice of exercise of this Warrant shall have been surrendered
by facsimile, physical delivery, or other reasonable medium of delivery and
payment made for such shares as aforesaid. Subject to the provisions of the
next
succeeding Section and this Section 1, certificates for the shares of stock
so
purchased shall be delivered to the Holder within two business days after
the
rights represented by this Warrant shall have been so exercised along with
receipt by the Company of the physical Warrant or a duly executed Affidavit
of
Lost Warrant, and, unless this Warrant has expired, a new Warrant representing
the number of shares, if any, with respect to which this Warrant shall not
then
have been exercised or surrendered shall also be delivered to the Holder
hereof
within two business days.
Note
Purchase Agreement - Page 23 of 36
(b)
For
the purpose of any computation under this Section the "Current Market Price"
at
any date (the "Computation Date") shall be deemed to be the average of the
daily
closing prices of the Common Stock for ten consecutive trading days ending
the
trading day immediately prior to the Computation Date. The closing price
for
each day shall be the last reported sale price or, in case no such reported
sale
takes place on such date, the average of the last reported asked prices,
in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed if that is the principal market for
the
Common Stock or if not listed or admitted to trading on any national securities
exchange or if such national securities exchange is not the principal market
for
the Common Stock, the closing bid prices reported by NASDAQ or its successor,
if
any, or such other generally accepted source of publicly reported bid and
asked
quotations as the Company may reasonably designate. If the price of the Common
Stock is not so reported or the Common Stock is not publicly traded, the
Current
Market Price per share as of any Computation Date shall be determined by
the
Board of Directors in good faith, on such basis as it considers appropriate,
and
such determination shall be described in a duly adopted board resolution
certified by the Company's secretary or assistant secretary.
(c)
Exercise
Limitations;
Holder’s
Restrictions.
The
Holder shall not have the right to exercise any portion of this Warrant,
pursuant to Section 2(c) or otherwise, to the extent that after giving effect
to
such issuance after exercise, the Holder (together with the Holder’s
affiliates), as set forth on the applicable Notice of Exercise, would
beneficially own in excess of 4.99% of the number of shares of the Common
Stock
outstanding immediately after giving effect to such issuance. For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially
owned by the Holder and its affiliates shall include the number of shares
of
Common Stock issuable upon exercise of this Warrant with respect to which
the
determination of such sentence is being made, but shall exclude the number
of
shares of Common Stock which would be issuable upon (A) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned by the
Holder
or any of its affiliates and (B) exercise or conversion of the unexercised
or
nonconverted portion of any other securities of the Company (including, without
limitation, any other Debentures or Warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 2(d), beneficial ownership
shall be calculated in accordance with Section 13(d) of the Exchange Act,
it
being acknowledged by Holder that the Company is not representing to Holder
that
such calculation is in compliance with Section 13(d) of the Exchange Act
and
Holder is solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained in this
Section 2(d) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder) and of which a portion
of
this Warrant is exercisable shall be in the sole discretion of such Holder,
and
the submission of a Notice of Exercise shall be deemed to be such Holder’s
determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder) and of which portion of this Warrant is
exercisable, in each case subject to such aggregate percentage limitation,
and
the Company shall have no obligation to verify or confirm the accuracy of
such
determination. For purposes of this Section 2(d), in determining the number
of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent
Form 10-QSB or Form 10-KSB, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company’s Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder
the
number of shares of Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect
to
the conversion or exercise of securities of the Company, including this Warrant,
by the Holder or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. The provisions of this Section
2(d) may be waived by the Holder upon, at the election of the Holder, not
less
than 61 days’ prior notice to the Company, and the provisions of this Section
2(d) shall continue to apply until such 61st
day (or
such later date, as determined by the Holder, as may be specified in such
notice
of waiver).
Note
Purchase Agreement - Page 24 of 36
2. Shares
to be Fully Paid; Reservation of Shares.
The
Company covenants and agrees:
(a) That
all
Common Stock which may be issued upon the exercise of the rights represented
by
this Warrant, will, upon issuance, be fully paid and nonassessable and free
from
all pre-emptive rights, and taxes, liens and charges with respect to the
issuance thereof;
(b) Without
limiting the generality of the foregoing, that the Company will from time
to
time take all such action as may be necessary to assure that the par value
per
share of the Common Stock is at all times equal to or less than the then
effective Warrant Exercise Price per share of the Common Stock issuable pursuant
to this Warrant;
(c) That
during the period within which the rights represented by this Warrant may
be
exercised, the Company will at all times have authorized and reserved for
the
purpose of the issuance upon exercise of the rights evidenced by this Warrant,
a
sufficient number of shares of Common Stock to provide for the exercise of
the
rights represented by this Warrant;
(d) That
the
Company will take all such action as may be necessary to assure that the
Common
Stock issuable upon the exercise hereof may be so issued without violation
of
any applicable law or regulation or of any requirements of any domestic
securities exchange or market upon which any capital stock of the Company
may be
listed or traded;
(e) That
the
Company will not take any action if the total number of shares of Common
Stock
issuable after such action and upon exercise of all warrants and other rights
to
purchase or acquire Common Stock, together with all shares of Common Stock
then
outstanding, would exceed the total number of shares of Common Stock then
authorized by the Company's Certificate of Incorporation. In the event any
stock
or securities of the Company other than Common Stock are issuable upon the
exercise hereof, the Company will take or refrain from taking any action
referred to in clauses (a) through (e) of this Section 2 as though such clauses
applied to such other shares or securities then issuable upon the exercise
hereof;
Note
Purchase Agreement - Page 25 of 36
(f)
The
Company has all requisite corporate power and authority to execute and deliver
this Warrant; the execution and delivery of this Warrant have been duly and
validly authorized by the Company's Board of Directors and no other corporate
proceedings on the part of the Company are necessary to authorize this Warrant;
this Warrant has been duly and validly executed and delivered by the Company
and
constitutes a legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms;
(g) No
order,
permit, consent, approval, license, authorization or validation of, and no
registration or filing of notice with, any governmental entity is necessary
to
authorize or permit, or is required in connection with, the execution, delivery
or performance of this Warrant or the consummation by the Company of the
transactions contemplated hereby; and
(h) Neither
the execution, delivery nor compliance by the Company with any of the provisions
hereof will (i) violate, conflict with or result in any breach of any provision
of the Company's charter documents, (ii) result in a violation or breach
or
termination of, or constitute a default under or conflict with any provision
of,
any note, bond, mortgage, indenture, license, lease, agreement or other
instrument or obligation to which the Company is subject, or (iii) violate
any
judgment, order, writ, injunction, decree, award, statute, rule or regulation
to
which the Company is subject.
3. Adjustment
of Shares Issuable or Warrant Exercise Price.
The
above
provisions are subject to the following:
(a)
If
the
Company shall pay a dividend or make a distribution in shares of its Common
Stock, subdivide (split) its outstanding shares of Common Stock, combine
(reverse split) its outstanding shares of Common Stock, issue by
reclassification of its shares of Common Stock any shares or other securities
of
the Company, or distribute to holders of its Common Stock any securities
or any
assets of the Company or of another entity, the number of shares of Common
Stock
or other securities the Holder hereof is entitled to purchase pursuant to
this
Warrant immediately prior thereto shall be adjusted so that the Holder shall
be
entitled to receive upon exercise the number of shares of Common Stock or
other
securities or assets which such Holder would have owned or would have been
entitled to receive after the happening of any of the events described above
had
this Warrant been exercised in full immediately prior to the happening of
such
event, and the Warrant Exercise Price per share shall be correspondingly
adjusted and the aggregate price upon exercise for all Warrants issuable
hereunder after giving effect to such adjustment shall not exceed the aggregate
amount payable upon exercise of such Warrant prior to such adjustment. An
adjustment made pursuant to this Section 3 shall become effective immediately
after the record date in the case of a stock dividend or other distribution
and
shall become effective immediately after the effective date in the case of
a
subdivision, combination or reclassification. The Holder of this Warrant
shall
be entitled to participate in any subscription or other rights offering made
to
holders of shares of Common Stock as if such Holder had purchased the full
number of shares as to which this Warrant remains unexercised immediately
prior
to the record date for such subscription rights offering. If the Company
is
consolidated or merged with or into another corporation or entity or if all
or
substantially all of its assets are conveyed to another corporation or entity
this Warrant shall thereafter be exercisable for the purchase of the kind
and
number of shares of stock or other securities or property, if any, receivable
upon such consolidation, merger or conveyance by a Holder of the number of
shares of Common Stock of the Company which could have been purchased on
the
exercise of this Warrant in full immediately prior to such consolidation,
merger
or conveyance; and, in any such case, appropriate adjustment (as determined
in
good faith by the Board of Directors) shall be made in the application of
the
provisions herein set forth with respect to the rights and interests thereafter
of the Holder of this Warrant to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of
the
number of shares of Common Stock the Holder of this Warrant is entitled to
purchase) shall thereafter be applicable, as nearly as possible, in relation
to
any shares of Common Stock or other securities or other property thereafter
deliverable upon the exercise of this Warrant.
Note
Purchase Agreement - Page 26 of 36
The
Company shall not effect any such consolidation, merger or conveyance, unless
upon or prior to the consummation thereof the successor corporation, or if
the
Company shall be the surviving corporation in any such transaction and is
not
the issuer of the shares of stock or other securities or property to be
delivered to holders of shares of the Common Stock outstanding at the effective
time thereof, then such issuer shall assume by written instrument the obligation
to deliver to the Holder such shares of stock, securities, cash or other
property as the Holder shall be entitled to purchase in accordance with the
foregoing provisions.
(b)
If
at any
time the Company shall issue any shares of Common Stock, or securities
convertible into Common Stock, for a consideration per share consisting solely
of cash (which consideration, in the case of securities convertible into
Common
Stock, shall be the price per share of the Common Stock as a function of
the
price per unit of the other securities) less than the lower of the Warrant
Price
in effect immediately prior to the issuance of such Common Stock, the Warrant
Price in effect immediately prior to each such issuance shall immediately
(except as provided in this Section 3) be adjusted to a price equal to said
consideration per share.
(c) Notwithstanding
the foregoing, no adjustment to the Warrant Price will be made:
(i)
Upon
the
grant or exercise of options to purchase Common Stock, or the issuance of
Common
Stock, to officers, employees and directors of, or consultants to, the Company
pursuant to arrangements, contracts or plans approved by the Board of Directors
for compensatory purposes; or
(ii) Upon
the
exercise of warrants to purchase Common Stock outstanding on the date hereof,
upon the issuance or exercise of this Warrant, or upon the exercise of any
Convertible Debenture dated as of November 18, 2004, or upon the issuance
or
exercise of any securities contained therein; or
(iii) Upon
the
conversion of Preferred Stock;
Note
Purchase Agreement - Page 27 of 36
(vii) Any
determination as to whether an adjustment in the Warrant Price in effect
hereunder is required pursuant to this Section 3, or as to the amount of
any
such adjustment, if required, shall be binding upon the Holder and the Company
if made in good faith by the Board of Directors of the Company.
4. Notice
of Adjustment.
Upon
any
adjustment of the number of shares of Common Stock issuable upon exercise
of
this Warrant or the Warrant Exercise Price, then and in each such case, the
Company shall give written notice thereof by first class mail, postage prepaid,
addressed to the Holder at the address of such Holder as shown on the books
of
the Company and pursuant to Section 16, which notice shall state the Warrant
Exercise Price resulting from such adjustment and the increase or decrease,
if
any, in the number of shares purchasable at such price upon the exercise
of this
Warrant, setting forth in reasonable detail the method of calculation and
the
facts upon which such calculation is based.
5. Other
Notices.
In
case
at any time prior to the Termination Date:
(a) The
Company shall declare any cash dividend upon its Common Stock payable in
stock
or make any special dividend or other distribution (other than regular cash
dividends) to the Holders of its Common Stock;
(b) The
Company shall offer for subscription to the Holders of any of its Common
Stock
any additional shares of Common Stock of any class or other rights;
(c) There
shall be any capital reorganization or reclassification of the capital stock
of
the Company or consolidation or merger of the Company with or sale of all
or
substantially of its assets to another corporation or entity; or
(d)
There
shall be a voluntary or involuntary dissolution, liquidation or winding up
of
the Company;
Then
in
any one or more of said cases the Company shall give by first class mail
postage
prepaid, addressed to the Holder of this Warrant at the address of such Holder
as shown on the books of the Company, pursuant to Section 16, (i) at least
20
days prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger or sale, dissolution, liquidation
or
winding and (ii) in the case of such reorganization or reclassification,
consolidation, merger or sale, dissolution, liquidation or winding up, at
least
20 days prior written notice of the date when the same shall take place.
Any
notice required by clause (i) shall also specify in the case of any such
dividend, distribution or subscription rights the date on which the holders
of
Common Stock shall be entitled thereto and a notice required by clause (ii)
shall also specify the date on which the holders of the Common Stock shall
be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, merger or sale,
dissolution, liquidation or winding up as the case may be.
Note
Purchase Agreement - Page 28 of 36
6. Issue
Tax.
The
issuance of certificates for shares of Common Stock upon the exercise of
this
Warrant shall be made without charge to the Holder for any issuance tax in
respect thereof, provided that the Company shall not be required to pay any
tax
which may be payable in respect of any transfer involved in the issuance
and
delivery of any certificate in a name other that of the Holder of the Warrant
exercised.
7. Closing
of Books.
The
Company will at no time close its transfer books against the transfer of
this
Warrant or of any shares of Common Stock issued or issuable upon the exercise
of
this Warrant in any matter which interferes with a timely exercise of this
Warrant. The Company will not, by any action, seek to avoid the observance
or
performance of any of the terms of this Warrant, but will at all times in
good
faith seek to carry out all such terms and take all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
impairment.
8. No
Voting Rights.
This
Warrant shall not entitle the Holder hereof to any voting rights or other
rights
as a stockholder of the Company.
9. Transfers.
Prior
to
any transfer or attempted transfer of any securities (except a transfer by
a
Holder to an affiliate, subsidiary, employee or shareholder of the Holder),
the
Holder shall give written notice to the Company of such Holder's intention
to
effect such transfer. Holder will not transfer or dispose of this Warrant
and
will not sell or transfer any securities except pursuant to (i) an effective
registration statement under the Act, (ii) Rule 144, Rule 144A or any successor
rule under the Act permitting such sale or transfer or (iii) any other exemption
under the Act provided that the Holder delivers an opinion of Holder's counsel
reasonably satisfactory to counsel to the Company that an exemption from
registration under the Act is available. Each certificate evidencing the
securities issued upon such transfer shall bear the restrictive legend set
forth
on the first page of this Warrant modified to delete references to the Warrant,
if appropriate, unless in the reasonable opinion of Holder's counsel such
legend
is not required in order to insure compliance with the Act.
10. Rights
to Register
(a) At
any
time after the date of this Warrant, the holders at least fifty-one (51%)
percent of the shares of Common Stock issuable upon exercise of the Warrants
associated with the Company’s Series A Secured Subordinated Promissory Notes
(the "Registrable Securities") request that the Company file a Registration
Statement for the Registrable Securities, the Company will use its best efforts
to cause such shares to be registered; provided, however, that the Company
shall
not be obligated to effect any such registration prior to 120 days from the
date
of Closing. The Company shall not be obligated to effect more than one (1)
registration under this demand right provision.
Note
Purchase Agreement - Page 29 of 36
(b) If
at any
time 120 days after the date of this Warrant the Company proposes to register
any of its securities under the Securities Act by registration on Forms X-0,
X-0
or S-3 or any successor or similar forms (except registrations on such Forms
solely for registration of shares in connection with an employee benefit
plan or
a merger or consolidation) in an underwritten public offering that will effect
a
broad distribution of the shares to be so registered, whether or not for
sale
for its own account, it will each such time give prompt written notice to
the
Holder of its intention to do so and of such Holder's rights under this Section
10. Upon the written request of Holder made within 20 days after the receipt
of
any such notice (which request shall specify the number of Warrants and/or
shares of Common Stock issued as a result of the exercise of this Warrant
or
issuable upon exercise of this Warrant (the "Registrable Securities") intended
to be disposed of by the Holder), the Company will use its reasonable efforts
to
effect the registration under the Securities Act in such underwritten public
offering of all Registrable Securities which the Company has been so requested
to register by Holder.
(c) If
the
managing underwriter for any underwritten offering in a registration pursuant
to paragraph 10(b) shall inform the Company and the Holder requesting such
registration
by letter of its belief that the number of securities requested to be included
in such registration would materially adversely affect its ability to effect
such offering, then the Company will include in such registration, to the
extent
of the number which the Company is so advised can be sold in (or during the
time
of) such offering, first, all securities proposed by the Company to be sold
for
its own account, and second, such Registrable Securities and other securities
of
the Company requested to be included in such registration, pro rata on the
basis
of the number of shares of such securities so proposed to be sold and so
requested to be included; provided, however, if such other securities are
being
offered for the account of persons exercising their“demand”
registration rights, any reduction of such other securities shall be made
after
all Registrable Securities have been excluded from such registration.
11. Obligations
of the Company
Whenever
required under Section 10 to use its best efforts to effect the registration
of
any Registrable Securities, the Company shall, as expeditiously as
possible:
(a) Prepare
and file with the Securities and Exchange Commission ("SEC") a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and keep such
registration statement effective for up to six months.
Note
Purchase Agreement - Page 30 of 36
(b) Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration
statement, and use its best efforts to cause each such amendment to become
effective, as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by the such
registration statement.
(c) Furnish
to the Holder such reasonable number of copies of a prospectus, including
any
preliminary prospectus, in conformity with the requirements of the Securities
Act, and any amendments or supplements prepared pursuant to Section 10 and
such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
(d) Use
its
best efforts to register or qualify the securities covered by such registration
statement under such other securities or Blue Sky laws of such jurisdictions
as
shall be reasonably requested by the Holder, provided that the Company shall
not
be required in connection therewith or as a condition thereto to qualify
to do
business or to file a general consent to service of process in any such states
or jurisdiction.
(e) Enter
into and perform its obligations under an underwriting agreement, in usual
and
customary form, with the managing underwriter of such offering. The Holder
shall
also enter into and perform its obligations under such an agreement, including
furnishing any opinion of counsel or entering into a lock-up agreement
reasonably requested by the managing underwriter.
(f) Notify
the Holder of Registrable Securities covered by such registration statement,
at
any time when a prospectus relating thereto covered by such registration
statement is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or
omits to state a material fact required to be stated therein or necessary
to
make the statements therein not misleading in the light of the circumstances
then existing and promptly file such amendments and supplements which may
be
required pursuant to Section 10 on account of such event and use its best
efforts to cause each such amendment and supplement to become effective.
(g) Apply
for
listing and use its best efforts to list the Registrable Securities being
registered on any national securities exchange on which a class of the Company's
equity securities are listed or, if the Company does not have a class of
equity
securities listed on a national securities exchange, apply for qualification
and
use its best efforts to qualify the Registrable Securities being registered
for
inclusion on the automated quotation system of the National Association of
Securities Dealers, Inc.
It
shall
be a condition precedent to the obligations of the Company to take any action
pursuant to Section 10 that Holder shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended
method
of disposition of such securities as shall be required to effect the
registration of its Registrable Securities.
Note
Purchase Agreement - Page 31 of 36
All
expenses (other than underwriting discounts and commissions, transfer taxes,
if
any, and fees and disbursements of counsel to the Holder) relating to
Registrable Securities incurred in connection with the registrations, filings
or
qualifications pursuant to Section 10 including (without limitation) all
registration, filing and qualification fees, printing and accounting fees,
and
fees and disbursements of counsel for the Company shall be borne by the
Company.
12. Indemnification.
The
Company will indemnify and hold harmless each Holder and any underwriter
(as
defined in the Act) for such Holder and each person, if any, who controls
the
Holder or underwriter within the meaning of the Act against any losses, claims,
damages or liabilities (or actions in respect thereof), joint or several,
to
which the Holder or underwriter or such controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) are caused by any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement under which the securities were registered under the Act, any
preliminary prospectus or prospectus contained therein, or any amendment
or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will reimburse
the
Holder, underwriter and each such controlling person for any legal or other
expenses reasonably incurred by the Holder, underwriter or such controlling
person in connection with investigating or defending any such loss, claim,
damage, expense or liability or action; provided, however, that the Company
will
not be liable in any such case to the extent that any such loss, claim, damage,
expense or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with written information furnished by the Holder or underwriter in writing
specifically for use in the preparation thereof.
Each
Holder will indemnify and hold harmless the Company, each of its directors,
each
of its officers who have signed said Registration Statement, and each person,
if
any, who controls the Company within the meaning of the Act, against any
losses,
claims, damages or liabilities to which the Company, or any such director,
officer or controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) are caused by any untrue or alleged untrue statement of any material
fact contained in said Registration Statement, said preliminary prospectus
or
prospectus, or amendment or amendments or supplements thereto, or arise out
of
or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; in each case to the extent, but only to the extent,
that
such untrue statement or alleged untrue statement or omission or alleged
omission was so made in reliance upon and in conformity with written information
furnished by the Holder specifically for use in the preparation thereof;
and
will reimburse any legal or other expenses reasonably incurred by the Company
or
any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action.
It
shall be a condition of the Company under Section 11 above that the Holder
confirm to the Company in writing, prior to the effective date of any
Registration Statement in which are included securities of such Holder, the
agreement of such Holder as set forth in the previous sentence.
Note
Purchase Agreement - Page 32 of 36
Promptly
after receipt by an indemnified party pursuant hereto of notice of any claim
or
the commencement of any action to which indemnity would apply, such indemnified
party will, if a claim thereof is to be made against the indemnifying party
pursuant hereto, notify the indemnifying party of such claim or action; but
the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than hereunder.
In case such action is brought against any indemnified party, and it notifies
the indemnifying party of the commencement thereof, the indemnifying party
will
be entitled to participate in, and, to the extent that it may wish, jointly
with
any other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, provided, however, that
any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the
fees
and expenses of such counsel shall be at the expense of such person and not
of
the indemnifying party unless (a) the indemnifying party has agreed to pay
such
fees or expenses, or (b) the indemnifying party shall have failed to assure
the
defense of such claim and employ counsel reasonably satisfactory to such
indemnified party, or (c) in the reasonable judgment of such indemnified
party a
conflict of interest may exist between such indemnified party and the
indemnifying party with respect to such claims (in which case, if the
indemnified party notifies the indemnifying part in writing that such
indemnified party elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such claim on behalf of such indemnified party.)
13. Rights
and Obligations Survive Exercise Of Warrant.
The
rights and obligations of the Company, of the Holder of this Warrant and
of the
Holder of the shares of Common Stock issuable upon exercise of this Warrant
contained herein shall survive the exercise of this Warrant.
14. Descriptive
Headings and Governing Law.
The
descriptive headings of the several Sections of this Warrant are inserted
for
convenience only and do not constitute a part of this Warrant. This Warrant
is
being delivered and is intended to be performed in the State of California
and
shall be construed and enforced in accordance with such law and the rights
of
the Holder shall be governed by the law of such state.
15. Rule
144.
The
Company covenants that if it has registered any class of securities under
the
Securities Exchange Act of 1934 (the “34 Act”) it will file, on a timely basis,
the reports required to be filed by it under the Act and the 34 Act, and
the
rules and regulations adopted by the Commission thereunder, and it will take
such further action as the Holder may reasonably request, all to the extent
required from time to time to enable such Holder to sell securities without
registration under the Act within the limitation of the conditions provided
by
(a) Rule 144 and Rule 144A under the Act, as such Rules may be amended from
time
to time, or (b) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of the Holder the Company will deliver to such
Holder a written statement verifying that it has complied with such information
and requirements.
Note
Purchase Agreement - Page 33 of 36
The
Company represents and warrants to the Holder that except as otherwise required
by law the shares of Common Stock issuable upon exercise of the Warrant may
be
publicly sold by the Holder pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended ( the “Rule”) one year after the date of
issuance of the Warrant, subject to compliance with (i) paragraphs (c), (e)
and
(h) of the Rule, and (ii) paragraphs (f) or (g) of the Rule.
16. Notices.
All
notices and other communications required or permitted hereunder shall be
in
writing and shall be mailed by first class mail, postage prepaid, or delivered
either by hand or by messenger, addressed (a) if to the Company, to the
principal offices of the Company, to the attention of its General Counsel,
0000
Xxxxxxxxx Xxxx., Xxxxx #000, Xxx Xxxx, XX 00000, or (b) if to the Holder,
to
such address as the Holder shall have furnished to the Company, or such other
address as the Holder shall have furnished to the Company. All such notices
of
communications shall be deemed given when actually delivered by hand or
messenger or, if mailed, three days after deposit in the U.S. Mail.
17. Successors
and Assigns.
All
covenants, agreements, representations and warranties contained in this Warrant
shall bind the parties hereto and their respective successors and
assigns.
18.
No
Inconsistent Agreements.
The
Company has not previously entered into, and will not on or after the date
of
this Warrant enter into, any agreement with respect to its securities which
is
inconsistent with the terms of this Warrant, including any agreement which
impairs or limits the rights granted to the Holder in this Warrant, or which
otherwise conflicts with the provisions hereof or would preclude the Company
from discharging its obligations hereunder.
19. Nonwaiver
and Expenses.
No
course
of dealing or any delay or failure to exercise any right hereunder on the
part
of either party shall operate as a waiver of such right or otherwise prejudice
the other party’s rights, powers or remedies, notwithstanding the fact that all
of Holder’s rights hereunder terminate on the Termination Date.
20. Severability.
In
the
event than any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
Note
Purchase Agreement - Page 34 of 36
21. Entire
Agreement.
This
Warrant constitutes the entire agreement of the parties with respect to the
subject matter hereof.
22. Amendment.
Any
provision of this Warrant may be amended, waived or modified by a writing
signed
by the Company and the Holder.
23. Confidentiality.
The
parties hereto agree that the existence of this Warrant, and the terms hereof,
shall be held in the strictest confidence and shall not be disclosed to any
third party unless (a) such disclosure is required by law, or (b) such
disclosure is agreed upon in writing by the Holder and the Company.
DATED
effective as of: _________________
| TECHNOCONCEPTS, INC. | ||
| |
|
|
| By: | ||
|
XXXXXXX X. XXXXXXX |
||
| Chairman & CEO | ||
Note
Purchase Agreement - Page 35 of 36
EXHIBIT
D
LIENS,
ENCUMBRANCES OR SECURITY INTERESTS
-NONE-
Note
Purchase Agreement - Page 36 of 36
