Exhibit 4.1
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (the "Agreement") is dated as of March 22, 2005,
by and between CORNELL CAPITAL PARTNERS, LP, a Delaware limited partnership (the
"Buyer"), and SMARTIRE SYSTEMS INC., a corporation organized and existing under
the laws of the Yukon Territory (the "Company").
Recitals:
WHEREAS, the Company and Buyer entered into a Securities Purchase Agreement (the
"Securities Purchase Agreement"); a Convertible Debenture in the amount of Two
Million Five Hundred Thousand Dollars ($2,500,000) (the "Convertible
Debenture"); a Security Agreement (the "Security Agreement"); an Investor
Registration Rights Agreement (the "Investor Registration Rights Agreement"); an
Escrow Agreement (the "Escrow Agreement"); and an Irrevocable Transfer Agent
Instructions (the "Irrevocable Transfer Agent Instructions"), all of which are
dated December 15, 2004 as well as a Promissory Note in the amount of Three
Hundred Fifty Thousand Dollars ($350,000) dated February 9, 2005 (the
"Promissory Note") (collectively, the Securities Purchase Agreement, Convertible
Debentures issued thereto, the Security Agreement, the Investor Registration
Rights Agreement, the Escrow Agreement, Irrevocable Transfer Agent Instructions,
and Promissory Note are referred to as the "Transaction Documents.") The parties
to the Transaction Documents have terminated the Transaction Documents pursuant
to the Termination Agreement of even date herewith between Buyer and the
Company, and the respective rights and obligations contained therein, are
expressly superseded by this Agreement.
WHEREAS, The parties have reached an agreement to make an additional
investment in the Company in an amount equal to One Million One Hundred Fifty
thousand Dollars ($1,150,000), and the Company shall issue and sell to the
Buyers shares of Series A Convertible Preferred Stock, no par value per share
(the "Series A Preferred Stock"), all in accordance with the terms hereof.
THEREFORE, Upon the execution of this Agreement subject to the terms,
restrictions and conditions of this Agreement, the Buyer shall acquire, and the
Company shall sell, issue and deliver to the Buyer twenty five thousand (25,000)
shares of Series A Preferred Stock (the "Buyer's Stock"), which shall have the
right and designations set forth on Exhibit "A" hereto. Agreement:
NOW, THEREFORE, in consideration of the mutual premises herein set forth
and certain other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. ISSUANCE OF SHARES AND RELATED TRANSACTIONS.
1.1. Issuance of Shares. At Closing (as defined below), subject to
the terms, restrictions and conditions of this Agreement, the Buyer shall
acquire, and the Company shall sell, issue and deliver to the Buyer twenty five
thousand (25,000) shares of Series A Preferred Stock (the "Buyer's Stock"),
which shall have the right and designations set forth on Exhibit "A" hereto. All
Buyer's Stock and the Common Stock into which such Buyer's Stock is convertible
shall be free and clear of all liens, claims, pledges, mortgages, restrictions,
obligations, security interests and encumbrances of any kind, nature and
description (collectively, "Encumbrances").
1.2. Purchase Price. The purchase price (the "Purchase Price") for
the Buyer's Stock shall be equal to Four Million ($4,000,000) of which Two
Million Eight Hundred Fifty Thousand Dollars has been previously funded pursuant
to the Transaction Documents and One Million One Hundred Fifteen Thousand
Dollars ($1,115,000) shall be paid to the Company in immediately available funds
on the Closing Date (as set forth in Section 1.3 hereof. The Purchase Price
shall be reduced by the fees described in Section 12.9 hereof.
1.3. Closing. The parties to this Agreement shall consummate the
transactions contemplated by this Agreement and the Company shall issue and sell
to the Buyer, as provided herein, and the Buyer shall purchase up to Four
Million Dollars ($4,000,000) of Series A Preferred Stock which shall have the
right and designations set forth on Exhibit "A" hereto of which One Million One
Hundred Fifteen Thousand Dollars ($1,115,000) shall be funded on the fifth (5th)
business day following the date hereof (the "Closing") (referred to as the
"Closing"); provided, in no event shall the Closings occur prior to the
satisfaction of the conditions precedent set forth in Sections 7, 8 and 9
hereof. The date of Closing is referred to herein as the "Closing Date." The
Closing shall take place at the offices of counsel to the Buyer, or at such
other place as may be mutually agreed upon by the Buyer and the Company. At the
Closings, the Company shall deliver to the Buyer certificates representing the
Buyer's Stock.
2. ADDITIONAL AGREEMENTS.
2.1. Agreement to Register the Common Stock. The Company shall
register the Common Stock underlying the Series A Preferred Stock with the SEC
pursuant to the terms of a Registration Rights Agreement of even date herewith
between the Company and the Buyer.
2.2. Transfer Agent Agreement. Contemporaneously with the execution
and delivery of this Agreement, the parties hereto are executing and delivering
an Irrevocable Transfer Agent Instructions.
2.3. Access and Inspection, Etc. The Company shall allow the Buyer
and its authorized representatives full access during normal business hours from
and after the date hereof and prior to the Closing Date to all of the
properties, books, contracts, commitments and records of the Company for the
purpose of making such investigations as the Buyer may reasonably request in
connection with the transactions contemplated hereby, and shall cause the
Company to furnish Buyer such information concerning its affairs as Buyer may
reasonably request. The Company has caused and shall cause its personnel to
assist the Buyer in making such investigation and shall use their best efforts
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to cause the counsel, accountants, engineers and other non-employee
representatives of the Company to be reasonably available to Buyer for such
purposes.
2.4. Public Announcements. The parties will consult with each other
before issuing any press releases or otherwise making any public statement with
respect to this Agreement or any of the transactions contemplated hereby and no
party will issue any such press release or make any such public statement
without the prior written consent of the other parties, except as may be
required by law or by the rules and regulations of any governmental authority or
securities exchange.
2.5. Best Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties shall use its best efforts in good faith to
take or cause to be taken as promptly as practicable all reasonable actions that
are within its power to cause to be fulfilled those conditions precedent to its
obligations or the obligations of the other parties to consummate the
transactions contemplated by this Agreement that are dependent upon its actions.
2.6. Further Assurances. The parties shall deliver any and all other
instruments or documents required to be delivered pursuant to, or necessary or
proper in order to give effect to, the provisions of this Agreement, including,
without limitation, to issue the Buyer's Stock and to consummate the
transactions contemplated by this Agreement.
3. NEGATIVE COVENANTS. The following covenants shall remain in
effect for so long as seventy five percent (75%) of the stated value of the
Series A Preferred Stock is outstanding .
3.1. Lock-up Agreement. On the date hereof, the Company shall obtain
from each officer and director of the Company a lock-up agreement. Such lock-up
agreement shall prohibit sales of the Company's Common Stock until the
Registration Statement has been declared effective by the Securities and
Exchange Commission, other than in connection with 10b-5(1) trading plans.
3.2. Use of Proceeds. The Company covenants to the Buyer that the
net proceeds to be received by the Company in this transaction shall be used to
fund general corporate purposes.
3.3. No Merger or Sale of Business. The Company hereby agrees that
it will not merge or consolidate with any person or entity, or sell, lease or
otherwise dispose of its assets or the assets of Target other than in the
ordinary course of business involving an aggregate consideration of more than
ten percent (10%) of the book value of its or the Target's assets on a
consolidated basis in any 12 month period, or liquidate, dissolve, recapitalize
or reorganize.
3.4. No Indebtedness. The Company shall not incur any indebtedness
for borrowed money or become a guarantor or otherwise contingently liable for
any such indebtedness except for trade payables or purchase money obligations
incurred in the ordinary course of business.
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3.5. No Other Registration Statements. Except as disclosed in
Schedule 3.7 and the filing of the registration statements contemplated in this
transaction (the "Permitted Registration Statements"), the Company shall not
file any other registration statements on any form (including but not limited to
forms X-0, XX-0, X-0 and S-8) without the prior written consent of the Buyer.
3.6. Restriction on Issuance of the Capital Stock. Except as
disclosed in Schedule 3.8 so long as any Series A Preferred Stock is
outstanding, the Company shall not, without the prior written consent of the
Buyer(s), issue or sell (i) shares of Common Stock or Preferred Stock (ii) any
warrant, option, right, contract, call, or other security instrument granting
the holder thereof, the right to acquire Common Stock , or (iii) enter into any
security instrument granting the holder a security interest in any and all
assets of the Company.
4. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE COMPANY.
To induce Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, the Company represents and warrants to and
covenants with the Buyer as follows:
4.1. Organization; Compliance. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the Yukon
Territory. The Company is: (a) entitled to own or lease its properties and to
carry on its business as and in the places where such business is now conducted,
and (b) duly licensed and qualified in all jurisdictions where the character of
the property owned by it or the nature of the business transacted by it makes
such license or qualification necessary, except where the failure to do so would
not result in a material adverse effect on the Company.
4.2. Capitalization and Related Matters.
(a) The Company has an authorized capital consisting of an unlimited
number of shares of Common Stock and 25,000 shares of Series A Preferred Stock,
of which 239,251,467 shares of Common Stock and nil shares of Preferred Stock
are issued and outstanding as of the date hereof (excluding the Buyer's Stock).
All Common Stock is duly and validly issued, fully paid and nonassessable. No
Common Stock (i) was issued in violation of the preemptive rights of any
shareholder, or (ii) is held as treasury stock.
(b) Except as set forth in the Company's Form 10-QSB for the quarter
ended January 31, 2005 and the Company's Form 10-KSB for the year ended July 31,
2004 (the "SEC Documents"), there are no outstanding any securities convertible
into Common Stock or any other capital stock of the Company nor any rights to
subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, such capital stock or
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securities convertible into such capital stock (collectively, "Securities
Rights"). The Company: (i) is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any of its capital
stock; or (ii) has no liability for dividends or other distributions declared or
accrued, but unpaid, with respect to any capital stock.
(c) The Company is not a party to any agreement, understanding or
arrangement, direct or indirect, relating to any class or series of the
Company's capital stock, including, without limitation, any voting agreement,
restriction on resale, shareholder agreement or registration rights agreement.
4.3. Subsidiaries and Investments.
(a) The SEC Documents disclose with respect to each Subsidiary (as
defined below) (i) its name, (ii) the jurisdiction of its organization, (iii)
the number of its authorized shares or other equity interests, (iv) the number
of its outstanding shares or other equity interests of each class or series, and
(v) the name of the owner and the number and percentage of outstanding shares or
other equity interests of each class or series of such Subsidiary owned of
record and, if different, owned beneficially by the Company and any other
person. All of the outstanding capital stock and other equity interests of each
of the Subsidiaries is validly issued, fully paid and nonassessable and was
issued in compliance with all applicable federal and state securities or "blue
sky" laws and regulations. There are no Securities Rights relating to any shares
of capital stock, other equity interests or other securities of any of the
Subsidiaries. The Company and the Subsidiaries have good, marketable and
exclusive title to the shares or other equity interests disclosed in the SEC
Documents as being owned by each of them, free and clear of all Encumbrances.
All rights and powers to vote such shares or other equity interests are held
exclusively by the Company, directly or indirectly through one or more of the
Subsidiaries, as the case may be. Each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has the corporate power and authority to own
or lease its properties and to carry on its business as now conducted. For the
purposes hereof, a "Subsidiary" means any corporation, limited liability
company, partnership, joint venture or other entity in which the Company owns,
directly or indirectly, more than 20% of the outstanding voting securities or
equity interests.
(b) Except as disclosed in SEC Documents, the Company does not
own, nor has it ever owned, any equity interest in any corporation, limited
liability company, partnership, joint venture or other entity.
4.4. Execution; No Inconsistent Agreements; Etc.
(a) This Agreement is a valid and binding agreement of the
Company, enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy or similar laws affecting the enforcement of
creditors' rights generally, and the availability of equitable remedies.
(b) The execution and delivery of this Agreement by the
Company does not, and the consummation of the transactions contemplated hereby
will not, constitute a breach or violation of the charter or bylaws of the
Company, or a default under any of the terms, conditions or provisions of (or an
act or omission that would give rise to any right of termination, cancellation
or acceleration under) any note, bond, mortgage, lease, indenture, agreement or
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obligation to which the Company is a party, pursuant to which the Company
otherwise receives benefits, or to which any of the properties of the Company is
subject.
4.5. Corporate Records. The statutory records, including the stock
register and minute books of the Company, fully reflect all issuances, transfers
and redemptions of its capital stock, correctly show and will correctly show the
total number of shares of its capital stock issued and outstanding on the date
hereof and on the Closing Date, the charter or other organizational documents
and all amendments thereto, and bylaws as amended and currently in force.
4.6. Financial Statements.
(a) The SEC Documents contain (i) the consolidated audited
balance sheet of the Company as of July 31, 2004, and the consolidated audited
consolidated profit and loss statement of the Company for the fiscal year ended
July 31, 2004 and (ii) the consolidated unaudited balance sheet of the Company
as of January 31, 2005 and the consolidated unaudited profit and loss statement
of the Company for the six months ended January 31, 2005 (the balance sheet as
of July 31, 2004 is hereinafter referred to as the "January 31, 2005 Company
Balance Sheet"). All the foregoing financial statements, and any financial
statements delivered pursuant to subsection (c) below, are referred to herein
collectively as the "Company Financial Statements."
(b) The Company Financial Statements have been and will be
prepared in accordance with U.S. GAAP, applied on a consistent basis (except
that the unaudited statements do not contain all the disclosures required by
GAAP), and fairly reflect and will reflect in all material respects the
financial condition of the Company as at the dates thereof and the results of
the operations of the Company for the periods then ended.
4.7. Liabilities. The Company has no material debt, liability or
obligation of any kind, whether accrued, absolute, contingent or otherwise,
except: (a) those reflected on the 2005 Company Balance Sheet, including the
notes thereto, and (b) liabilities incurred in the ordinary course of business
since July 31, 2004, none of which have had or will have a material adverse
effect on the financial condition of the Company.
4.8. Absence of Changes. Except as described in the SEC Documents
and in the other Schedules to this Agreement, from __________ to the date of
this Agreement:
(a) there has not been any adverse change in the business, assets,
liabilities, results of operations or financial condition of the Company or in
its relationships with suppliers, customers, employees, lessors or others other
than changes in the ordinary course of business, none of which, singularly or in
the aggregate, have had or will have a material adverse effect on the business,
properties or financial condition of the Company; and
(b) the Company has complied with the covenants and restrictions set
forth in Section 6 to the same extent as if this Agreement had been executed on,
and had been in effect since, July 1, 2004.
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4.9. Title to Properties. The Company has good and marketable title
to all of its properties and assets, real and personal, including, but not
limited to, those reflected in the 2003 Company Balance Sheet (except as since
sold or otherwise disposed of in the ordinary course of business, or as
expressly provided for in this Agreement), free and clear of all Encumbrances of
any kind or character except: (a) those securing liabilities of the Company
incurred in the ordinary course (with respect to which no material default
exists); (b) liens of 2004 real estate and personal property taxes; and (c)
imperfections of title and Encumbrances, if any, which, in the aggregate (i) are
not substantial in amount; (ii) do not detract from the value of the property
subject thereto or impair the operations of the Company or; and (iii) do not
have a material adverse effect on the business, properties or assets of the
Company.
4.10. Compliance With Law. The business and activities of the
Company has at all times been conducted in accordance with its articles of
incorporation and bylaws and any applicable law, regulation, ordinance, order,
License (defined below), permit, rule, injunction or other restriction or ruling
of any court or administrative or governmental agency, ministry, or body, except
where the failure to do so would not result in a material adverse effect on the
Company.
4.11. Taxes. The Company has duly filed all material federal, state,
local and foreign tax returns and reports, and all returns and reports of all
other governmental units having jurisdiction with respect to taxes imposed on it
or on its income, properties, sales, franchises, operations or employee benefit
plans or trusts, all such returns were complete and accurate when filed, and all
taxes and assessments payable by the Company have been paid to the extent that
such taxes have become due. All taxes accrued or payable by the Company for all
periods through July 31, 2004 have been accrued or paid in full, whether or not
due and payable and whether or not disputed. The Company has withheld proper and
accurate amounts from its employees for all periods in full compliance with the
tax withholding provisions of applicable foreign, federal, state and local tax
laws. There are no waivers or agreements by the Company for the extension of
time for the assessment of any taxes. The tax returns of the Company have never
been examined by any authority or other administrative body or court of any
state or country. There are not now any examinations of the income tax returns
of the Company pending, or any proposed deficiencies or assessments against the
Company of additional taxes of any kind. The Company shall duly and timely
prepare and file all material federal, state, local and foreign tax returns and
reports for 2004, and all returns and reports of all other governmental units
having jurisdiction with respect to taxes imposed on the Company or on its
income, properties, sales, franchises, operations or employee benefit plans or
trusts, and all such returns will be complete and accurate when filed.
4.12. Real Properties. The Company does not have an interest in any
real property, except for the Leases (as defined below).
4.13. Leases of Real Property. All leases pursuant to which the
Company is lessee or lessor of any real property (the "Leases") are listed in
the SEC Documents and are valid and enforceable in accordance with their terms.
There is not under any of such leases (a) any material default or any claimed
material default by the Company or any event of default or event which with
notice or lapse of time, or both, would constitute a material default by the
Company and in respect to which the Company has not taken adequate steps to
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prevent a default on its part from occurring, or (b) to the knowledge of the
Company, any material default by any lessee of the Company or any event of
default or event which with notice or lapse of time, or both, would constitute a
material default by any lessee. The copies of the Leases heretofore furnished to
Buyer are true, correct and complete, and such Leases have not been modified in
any respect since the date they were so furnished, and are in full force and
effect in accordance with their terms. The Company is lawfully in possession of
all real properties of which they are a lessee (the "Leased Properties").
4.14. Contingencies. Except as disclosed in the SEC Documents, there
are no actions, suits, claims or proceedings pending, or to the knowledge of the
Company threatened against, by or affecting, the Company in any court or before
any arbitrator or governmental agency that may have a material adverse effect on
the Company or which could materially and adversely affect the right or ability
of the Company to consummate the transactions contemplated hereby. To the
knowledge of the Company, there is no valid basis upon which any such action,
suit, claim, or proceeding may be commenced or asserted against it. There are no
unsatisfied judgments against the Company and no consent decrees or similar
agreements to which the Company is subject and which could have a material
adverse effect on the Company.
4.15. Products Liability; Warranties; Insurance. The Company will
have not loss, damage, liability, fine, penalty, cost and expense (each, a
"Liability") that is not fully covered by insurance relating to any product
manufactured, distributed or sold by the Company prior to the Closing, whether
or not such Liability is related to products that are defective or improperly
designed or manufactured or are in breach of any express or implied product
warranty.
4.16. Intellectual Property Rights.
(a) The Company owns and possesses all right, title and interest in
and to, or has a valid license to use, all of the Proprietary Rights (as defined
below) necessary for the operation of its business as presently conducted and
none of such Proprietary Rights have been abandoned;
(b) no claim by any third party contesting the validity,
enforceability, use or ownership of any such Proprietary Rights has been made,
is currently outstanding or, to the knowledge of the Company, is threatened, and
to the knowledge of the Company there is no reasonable basis for any such claim;
(c) neither the Company nor any registered agent of any of the
foregoing has received any notice of, nor is the Company aware of any reasonable
basis for an allegation of, any infringement or misappropriation by, or conflict
with, any third party with respect to such Proprietary Rights, nor has the
Company, or any registered agent of any of them received any claim of
infringement or misappropriation of or other conflict with any Proprietary
Rights of any third party;
(d) the Company has not infringed, misappropriated or otherwise
violated any Proprietary Rights of any third parties, and the Company is not
aware of any infringement, misappropriation or conflict which will occur as a
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result of the continued operation of the Company as presently operated and as
contemplated to be operated or as a result of the consummation of the
transactions contemplated hereby; and
(e) all employees who have contributed to or participated in the
conception and/or development of all or any part of the Proprietary Rights which
are not licensed to the Company from a third party either (i) have been party to
a "work-for-hire" arrangement or agreement with the Company, in accordance with
applicable federal and state law, that has accorded the Company full, effective,
exclusive, and original ownership of all tangible and intangible property
thereby arising, or (ii) have executed appropriate instruments of assignment in
favor of the Company as assignee that have conveyed to the Company full,
effective and exclusive ownership of all tangible and intangible property
thereby arising.
(f) As used herein, the term "Proprietary Rights" means all
proprietary information of the Company, as the case may be, including all
patents, patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice), all trademarks, service
marks, trade dress, trade names, corporate names, domain names, copyrights, all
trade secrets, confidential information, ideas, formulae, compositions,
know-how, processes and techniques, drawings, specifications, designs, logos,
plans, improvements, proposals, technical and computer data, documentation and
software, financial, business and marketing plans, and related information and
all other proprietary, industrial or intellectual property rights relating to
the business of the Company, including those proprietary, industrial or
intellectual property rights found at the Company's websites listed in the SEC
Documents.
(g) The consummation of the transactions contemplated by this
Agreement will not adversely affect the right of the Company to continue to use
the Proprietary Rights. To the extent that the registration of any Proprietary
Right is required by law, such Proprietary Right has been duly and validly
registered or filed, and any fees that are necessary to maintain in force any
Proprietary Rights or registrations thereof have been paid. The SEC Documents
sets forth a list and description of the copyrights, trademarks, service marks,
trade dress, trade names and domain names used or held by the Company and, where
appropriate, the date, serial or registration number, and place of any
registration thereof.
4.17. Material Contracts. The SEC Documents contain a complete list
of all contracts of the Company that involve consideration in excess of the
equivalent of $25,000 or have a term of one year or more (the "Material
Contracts"). Except as disclosed in the SEC Documents: (a) the Company has
performed all material obligations to be performed by them under all such
contracts, and is not in material default thereof, and (b) no condition exists
or has occurred which with the giving of notice or the lapse of time, or both,
would constitute a material default by the Company or accelerate the maturity
of, or otherwise modify, any such contract, and (c) all such contracts are in
full force and effect. No material default by any other party to any of such
contracts is known or claimed by the Company to exist.
4.18. Employee Benefit Matters.
(a) Except as disclosed in the SEC Documents, the Company does not
provide, nor is it obligated to provide, directly or indirectly, any benefits
for employees other than salaries, sales commissions and bonuses, including, but
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not limited to, any pension, profit sharing, stock option, retirement, bonus,
hospitalization, insurance, severance, vacation or other employee benefits
(including any housing or social fund contributions) under any practice,
agreement or understanding.
(b) Each employee benefit plan maintained by or on behalf of the
Company or any other party (including any terminated pension plans) which covers
or covered any employees or former employees of the Company (collectively, the
"Employee Benefit Plan") is listed in the SEC Documents. The Company has
delivered to Buyer true and complete copies of all such plans and any related
documents. With respect to each such plan: (a) no litigation, administrative or
other proceeding or claim is pending, or to the knowledge of the Company,
threatened or anticipated involving such plan; (b) there are no outstanding
requests for information by participants or beneficiaries of such plan; and (c)
such plan has been administered in compliance in all material respects with all
applicable laws and regulations.
(c) The Company has timely made payment in full of all contributions
to all of the Employee Benefit Plans which the Company was obligated to make
prior to the date hereof; and there are no contributions declared or payable by
the Company to any Employee Benefit Plan which, as of the date hereof, has not
been paid in full.
4.19. Possession of Franchises, Licenses, Etc. The Company: (a)
possesses all material franchises, certificates, licenses, permits and other
authorizations (collectively, the "Licenses") from governmental authorities,
political subdivisions or regulatory authorities that are necessary for the
ownership, maintenance and operation of its business in the manner presently
conducted; (b) are not in violation of any provisions thereof; and (c) have
maintained and amended, as necessary, all Licenses and duly completed all
filings and notifications in connection therewith.
4.20. Environmental Matters. Except as disclosed in the SEC
Documents: (i) the Company is not in violation, in any material respect, of any
Environmental Law (as defined below); (ii) the Company has received all permits
and approvals with respect to emissions into the environment and the proper
collection, storage, transport, distribution or disposal of Wastes (as defined
below) and other materials required for the operation of its business at present
operating levels; and (iii) the Company is not liable or responsible for any
material clean up, fines, liability or expense arising under any Environmental
Law, as a result of the disposal of Wastes or other materials in or on the
property of the Company (whether owned or leased), or in or on any other
property, including property no longer owned, leased or used by the Company. As
used herein, (a) "Environmental Laws" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation
and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air
Act, as amended, the Clean Water Act, as amended, any other "Superfund" or
"Superlien" law or any other federal, or applicable state or local statute, law,
ordinance, code, rule, regulation, order or decree (foreign or domestic)
regulating, relating to, or imposing liability or standards of conduct
concerning, Wastes, or the environment; and (b) "Wastes" means and includes any
hazardous, toxic or dangerous waste, liquid, substance or material (including
petroleum products and derivatives), the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental Law.
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4.21. Agreements and Transactions with Related Parties. Except as
disclosed on the SEC Documents and Schedule 3.2, the Company is not, and since
_________ has not been, a party to any contract, agreement, lease or transaction
with, or any other commitment to, (a) a shareholder, (b) any person related by
blood, adoption or marriage to shareholder, (c) any director or officer of the
Company, (d) any corporation or other entity in which any of the foregoing
parties has, directly or indirectly, at least five percent (5.0%) beneficial
interest in the capital stock or other type of equity interest in such
corporation or other entity, or (e) any partnership in which any such party is a
general partner or a limited partner having a five percent (5%) or more interest
therein (any or all of the foregoing being herein referred to as a "Related
Party" and collectively as the "Related Parties"). Without limiting the
generality of the foregoing, except as set forth in the SEC Documents, (a) no
Related Party, directly or indirectly, owns or controls any assets or properties
which are or have since __________ been used in the business of the Company, and
(b) no Related Party, directly or indirectly, engages in or has any significant
interest in or connection with any business: (i) which is or which within the
last two (2) years has been a competitor, customer or supplier of, or has done
business with, the Company, or (ii) which as of the date hereof sells or
distributes products or provides services which are similar or related to the
products or services of the Company.
4.22. Business Practices. Except as disclosed in the SEC Documents,
the Company has not, at any time, directly or indirectly, made any contributions
or payment, or provided any compensation or benefit of any kind, to any
municipal, county, state, federal or foreign governmental officer or official,
or any other person charged with similar public or quasi-public duties, or any
candidate for political office. The Company's books, accounts and records
(including, without limitation, customer files, product packaging and invoices)
accurately describe and reflect, in all material respects, the nature and amount
of the Company's products, purchases, sales and other transactions. Without
limiting the generality of the foregoing, the Company has not engaged, directly
or indirectly, in: (a) the practice known as "double-invoicing" or the use or
issuance of pro-forma or dummy invoices; or (b) the incorrect or misleading
labeling, marketing or sale of refurbished goods as new goods.
4.23. Shareholder Matters. None of the matters set forth in this
Agreement require the approval of the Company's shareholders.
4.24. Full Disclosure. No representation or warranty of the Company
contained in this Agreement, and none of the statements or information
concerning the Company contained in this Agreement and the Schedules, contains
or will contain any untrue statement of a material fact nor will such
representations, warranties, covenants or statements taken as a whole omit 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.
5. REPRESENTATIONS AND WARRANTIES OF BUYER.
To induce the Company to enter into this Agreement and to consummate
the transactions contemplated hereby, the Buyer represents and warrants to and
covenants with the Company as follows:
11
5.1. Organization. Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of Delaware. The
Buyer has all requisite power and authority to execute, deliver and carry out
the terms of this Agreement and the consummation of the transactions
contemplated herein.
5.2. Execution; No Inconsistent Agreements; Etc.
(a) The execution and delivery of this Agreement and the performance
of the transactions contemplated hereby have been duly and validly authorized
and approved by Buyer and this Agreement is a valid and binding agreement of
Buyer, enforceable against Buyer in accordance with its terms, except as such
enforcement may be limited by bankruptcy or similar laws affecting the
enforcement of creditors' rights generally, and the availability of equitable
remedies.
(b) The execution and delivery of this Agreement by Buyer does not,
and the consummation of the transactions contemplated hereby will not,
constitute a breach or violation of the charter or bylaws of Buyer, or a default
under any of the terms, conditions or provisions of (or an act or omission that
would give rise to any right of termination, cancellation or acceleration under)
any material note, bond, mortgage, lease, indenture, agreement or obligation to
which Buyer is a party, pursuant to which any of them otherwise receive
benefits, or by which any of their properties may be bound.
5.3. Securities Laws.
(a) The Buyer is purchasing the Series A Preferred Stock for
investment purposes and not with a view to the sale or distribution, by public
or private sale or other disposition, and the Buyer has no present intention of
selling, granting any participation in or otherwise distributing or disposing of
any of the Series A Preferred Stock.
(b) Investment Representations. The Buyer has been offered the
opportunity to ask questions of, and receive answers from the Company's
management, and the Buyer has been given full and complete access to all
available information and data relating to the business and assets of the
Company and has obtained such additional information about the Company as the
Buyer has deemed necessary in order to evaluate the opportunities, both
financial and otherwise, with respect to the Company and, except as set forth
herein, has not relied on any representation, warranty or other statement
concerning the Company and its evaluation of the decision to consummate the
transactions contemplated herein. In its judgment, the Buyer is sufficiently
familiar with the Company to enable the Buyer to proceed with the transactions
contemplated hereby.
(c) The Buyer is an "accredited investor," as such term is defined
in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
(d) The Buyer is a sophisticated investor familiar with the type of
risks inherent in the acquisition of securities such as the shares of the
Company and the Buyer's financial position is such that the Buyer can afford to
12
retain its shares of Company Series A Preferred Stock for an indefinite period
of time without realizing any direct or indirect cash return on its investment.
6. CONDUCT OF BUSINESS OF THE COMPANY PENDING CLOSING.
The Company covenants and agrees that between the date hereof and
the Closing Date:
6.1. Business in the Ordinary Course. Except as set forth in the SEC
Documents, the business of the Company shall be conducted only in the ordinary
course, and consistent with past practice. Without limiting the generality of
the foregoing, and except as set forth in the SEC Documents or as otherwise
approved by Buyer:
(a) Except for the transaction contemplated hereby, the Company
shall not enter into any contract, agreement or other arrangement which would
constitute a Material Contract, except for contracts to sell or supply goods or
services to customers in the ordinary course of business at prices and on terms
substantially consistent with the prior operating practices of the Company;
(b) except for sales of personal property in the ordinary course of
its business, the Company shall not sell, assign, transfer, mortgage, convey,
encumber or otherwise dispose of, or cause the sale, assignment, transfer,
mortgage, conveyance, encumbrance or other disposition of any of the assets or
properties of the Company or any interest therein;
(c) the Company shall not acquire any material assets, except
expenditures made in the ordinary course of business as reasonably necessary to
enable the Company to conduct its normal business operations and to maintain its
normal inventory of goods and materials, at prices and on terms substantially
consistent with current market conditions and prior operating practices;
(d) the books, records and accounts of the Company shall be
maintained in the usual, regular and ordinary course of business on a basis
consistent with prior practices and in accordance with GAAP;
(e) the Company shall use its best efforts to preserve its business
organization, to preserve the good will of its suppliers, customers and others
having business relations with the Company, and to retain the services of key
employees and agents of the Company;
(f) except as it may terminate in accordance with the terms of this
Agreement, the Company shall keep in full force and effect, and not cause a
default of any of its obligations under, each of their contracts and
commitments;
(g) the Company shall duly comply in all material respects with all
laws applicable to it and to the conduct of its business;
(h) the Company shall not create, incur or assume any liability or
indebtedness, except in the ordinary course of business consistent with past
practices;
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(i) other than as contemplated in this Agreement, the Company shall
not apply any of its assets to the direct or indirect payment, discharge,
satisfaction or reduction of any amount payable directly or indirectly to or for
the benefit of any shareholder or any Related Party; and
(j) the Company shall not take or omit to take any action which
would render any of the representations or warranties untrue or misleading, or
which would be a breach of any of the covenants.
6.2. No Material Changes. Except as contemplated in this Agreement,
the Company shall not materially alter its organization, capitalization, or
financial structure, practices or operations. Without limiting the generality of
the foregoing:
(a) no change shall be made in the articles of incorporation and
bylaws of the Company;
(b) no change shall be made in the authorized or issued capital
stock of the Company;
(c) the Company shall not issue or grant any right or option to
purchase or otherwise acquire any of its capital stock or other securities;
(d) no dividend or other distribution or payment shall be declared
or made with respect to any of the capital stock of the Company; and
(e) no change shall be made affecting the banking arrangements of
the Company.
6.3. Notification. Each party to this Agreement shall promptly
notify the other parties in writing of the occurrence, or threatened occurrence,
of any event that would constitute a breach or violation of this Agreement by
any party or that would cause any representation or warranty made by the
notifying party in this Agreement to be false or misleading in any respect. The
Company will promptly notify the Buyer of any event that could have a material
adverse effect on the business, assets, financial condition or prospects of the
Company. The Company shall have the right to update the Schedules to this
Agreement immediately prior to Closing; provided, if such update discloses any
breach of a representation, warranty, covenant or obligation of the Company, the
Buyer shall have the right to then exercise its available rights and remedies
hereunder.
7. CONDITIONS TO OBLIGATIONS OF ALL PARTIES.
The obligation of Buyer and the Company to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, on
or before the Closing, of each of the following conditions; any or all of which
may be waived in whole or in part by the joint agreement of Buyer and the
Company:
7.1. Absence of Actions. No action or proceeding shall have been
brought or threatened before any court or administrative agency to prevent the
14
consummation or to seek damages in a material amount by reason of the
transactions contemplated hereby, and no governmental authority shall have
asserted that the within transactions (or any other pending transaction
involving Buyer or the Company when considered in light of the effect of the
within transactions) shall constitute a violation of law or give rise to
material liability on the part of the Company or the Buyer.
7.2. Consents. The parties shall have received from any suppliers,
lessors, lenders, lien holders or governmental authorities, bodies or agencies
having jurisdiction over the transactions contemplated by this Agreement, or any
part hereof, such consents, authorizations and approvals as are necessary for
the consummation hereof.
8. CONDITIONS TO OBLIGATIONS OF THE BUYER.
All obligations of the Buyer to consummate the transactions
contemplated by this Agreement are subject to the fulfillment and satisfaction
of each and every of the following conditions on or prior to the Closing, any or
all of which may be waived in whole or in part by Buyer:
8.1. Representations and Warranties. The representations and
warranties contained in Section 4 of this Agreement and in any certificate,
instrument, schedule, agreement or other writing delivered by or on behalf of
the Company in connection with the transactions contemplated by this Agreement
shall be true, correct and complete in all material respects (except for
representations and warranties which are by their terms qualified by
materiality, which shall be true, correct and complete in all respects) as of
the date when made and shall be deemed to be made again at and as of the Closing
Date and shall be true, correct and complete at and as of such time in all
material respects (except for representations and warranties which are by their
terms qualified by materiality, which shall be true, correct and complete in all
respects).
8.2. Compliance with Agreements and Conditions. The Company shall
have performed and complied with all material agreements and conditions required
by this Agreement to be performed or complied with by it prior to or on the
Closing Date.
8.3. Absence of Material Adverse Changes. No material adverse change
in the business, assets, financial condition, or prospects of the Company shall
have occurred, no substantial part of the assets of the Company not
substantially covered by insurance shall have been destroyed due to fire or
other casualty, and no event shall have occurred which has had or will have a
material adverse effect on the business, assets, financial condition or
prospects of the Company.
8.4. Board Approval. The Company's Board of Directors shall have
taken the action required by them pursuant to this Agreement, including an
amendment to the Company's articles of incorporation to adopt the rights and
preferences of the Series A Preferred Stock, authorize issuance of the Series A
Preferred Stock and Common Stock to be issued upon conversion of the Series A
Preferred Stock and the reservation of the shares of Common Stock to be issued
upon conversion of the Series A Preferred Stock.
15
8.5. Other Agreements. The Company shall have executed and delivered
to the Buyer a Registration Rights Agreement, Escrow Agreement and Irrevocably
Transfer Agent Instructions, all in a form acceptable to the Buyer.
8.6. Other Documents. The Company shall have delivered to the Buyer
such other documents and instruments as the Buyer deems reasonably necessary or
desirable to consummate the transactions contemplated hereby.
8.7. The Buyer(s) shall have received an opinion of counsel from
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP in a form satisfactory to the Buyer.
8.8. The Company shall have provided to the Buyer(s) a certificate
of good standing from the secretary of state from the state in which the company
is incorporated.
8.9. The Company shall have provided to the Investor an
acknowledgement, to the satisfaction of the Investor, from ________________ as
to its ability to provide all consents required in order to file a registration
statement in connection with this transaction.
All documents delivered to the Buyer shall be in form and
substance reasonably satisfactory to the Buyer.
9. CONDITIONS TO OBLIGATIONS OF THE COMPANY.
All of the obligations of the Company to consummate the transactions
contemplated by this Agreement are subject to the fulfillment and satisfaction
of each and every of the following conditions on or prior to the Closing, any or
all of which may be waived in whole or in part by the Company:
9.1. Representations and Warranties. The representations and
warranties contained in Section 5 of this Agreement and in any certificate,
instrument, schedule, agreement or other writing delivered by or on behalf of
Buyer in connection with the transactions contemplated by this Agreement shall
be true and correct in all material respects (except for representations and
warranties which are by their terms qualified by materiality, which shall be
true, correct and complete in all respects) when made and shall be deemed to be
made again at and as of the Closing Date and shall be true at and as of such
time in all material respects (except for representations and warranties which
are by their terms qualified by materiality, which shall be true, correct and
complete in all respects).
9.2. Compliance with Agreements and Conditions. Buyer shall have
performed and complied with all material agreements and conditions required by
this Agreement to be performed or complied with by Buyer prior to or on the
Closing Date.
10. INDEMNITY.
10.1. Indemnification by the Company. The Company (hereinafter
collectively called the "Company Indemnitor") shall defend, indemnify and hold
harmless the Buyer, its direct and indirect parent corporations, subsidiaries
and affiliates, their officers, members, directors, employees, attorneys and
agents (hereinafter collectively called "Buyer Indemnitees") against and in
16
respect of any and all loss, damage, liability, fine, penalty, cost and expense,
including reasonable attorneys' fees and amounts paid in settlement
(collectively, "Buyer Losses"), suffered or incurred by any Buyer Indemnitee by
reason of, or arising out of:
(a) any misrepresentation, breach of warranty or breach or
nonfulfillment of any covenant, obligation or agreement of the Company contained
in this Agreement or in any certificate, schedule, instrument or document
delivered to Buyer by or on behalf of the Company pursuant to the provisions of
this Agreement (without regard to materiality thresholds contained therein); and
(b) any liabilities of the Company of any nature whatsoever
(including tax liability, penalties and interest), whether accrued, absolute,
contingent or otherwise, (i) existing as of the date of the 2004 Company Balance
Sheet, and required to be shown therein in accordance with GAAP, to the extent
not reflected or reserved against in full in the 2004 Company Balance Sheet; or
(ii) arising or occurring between March 31, 2004 and the Closing Date, except
for liabilities arising in the ordinary course of business, none of which shall
have a material adverse effect on the Company.
(c) Indemnification by Buyer. The Buyer (hereinafter called the
"Buyer Indemnitor") shall defend, indemnify and hold harmless the Company, its
direct and indirect parent corporations, subsidiaries and affiliates, their
officers, members, directors, employees, attorneys and agents (hereinafter
called "Company Indemnitee") against and in respect of any and all loss, damage,
liability, cost and expense, including reasonable attorneys' fees and amounts
paid in settlement (collectively, "Company Losses"), suffered or incurred by
Company Indemnitee by reason of or arising out of any misrepresentation, breach
of warranty or breach or non-fulfillment of any material covenant, obligation or
agreement of Buyer contained in this Agreement or in any other certificate,
schedule, instrument or document delivered to the Company by or on behalf of
Buyer pursuant to the provisions of this Agreement (without regard to
materiality thresholds contained therein).
10.2. Defense of Claims.
(a) Each party seeking indemnification hereunder (an "Indemnitee"):
(i) shall provide the other party or parties (the "Indemnitor") written notice
of any claim or action by a third party for which an Indemnitor may be liable
under the terms of this Agreement, within ten (10) days after such claim or
action arises and is known to Indemnitee, and (ii) shall give the Indemnitor a
reasonable opportunity to participate in any proceedings and to settle or defend
any such claim or action. The expenses of all proceedings, contests or lawsuits
with respect to such claims or actions shall be borne by the Indemnitor. If the
Indemnitor wishes to assume the defense of such claim or action, the Indemnitor
shall give written notice to the Indemnitee within ten (10) days after notice
from the Indemnitee of such claim or action, and the Indemnitor shall thereafter
assume the defense of any such claim or liability, through counsel reasonably
satisfactory to the Indemnitee, provided that Indemnitee may participate in such
defense at their own expense, and the Indemnitor shall, in any event, have the
right to control the defense of the claim or action. The failure of an
Indemnitee to give any notice required by this Section shall not affect any of
such party's rights under this Section or otherwise, except and to the extent
that such failure is actually prejudicial to the rights or obligations of the
Indemnitor.
17
(b) If the Indemnitor shall not assume the defense of, or if after
so assuming it shall fail to defend, any such claim or action, the Indemnitee
may defend against any such claim or action in such manner as they may deem
appropriate and the Indemnitees may settle such claim or litigation on such
terms as they may deem appropriate but subject to the Indemnitor's approval,
such approval not to be unreasonably withheld; provided, however, that any such
settlement shall be deemed approved by the Indemnitor if the Indemnitor fails to
object thereto, by written notice to the Indemnitee, within fifteen (15) days
after the Indemnitor's receipt of a written summary of such settlement. The
Indemnitor shall promptly reimburse the Indemnitee for the amount of all
expenses, legal and otherwise, incurred by the Indemnitee in connection with the
defense and settlement of such claim or action.
(c) If a non-appealable judgment is rendered against any Indemnitee
in any action covered by the indemnification hereunder, or any lien attaches to
any of the assets of any of the Indemnitee, the Indemnitor shall immediately
upon such entry or attachment pay such judgment in full or discharge such lien
unless, at the expense and direction of the Indemnitor, an appeal is taken under
which the execution of the judgment or satisfaction of the lien is stayed. If
and when a final judgment is rendered in any such action, the Indemnitor shall
forthwith pay such judgment or discharge such lien before any Indemnitee is
compelled to do so.
10.3. Waiver. The failure of any Indemnitee to give any notice or to
take any action hereunder shall not be deemed a waiver of any of the rights of
such Indemnitee hereunder, except to the extent that Indemnitor is actually
prejudiced by such failure.
11. TERMINATION.
11.1. Termination. This Agreement may be terminated at any time on
or prior to the Closing:
(a) By mutual consent of Buyer and the Company; or
(b) At the election of Buyer if: (i) a Company has breached or
failed to perform or comply with any of its representations, warranties,
covenants or obligations under this Agreement; or (ii) any of the conditions
precedent set forth in Section 7 or 8 is not satisfied as and when required by
this Agreement; or (iii) the Closing has not been consummated by within five (5)
business days from the date hereof; or
(c) At the election of the Company if: (i) Buyer has breached or
failed to perform or comply with any of its representations, warranties,
covenants or obligations under this Agreement; or (ii) any of the conditions
precedent set forth in Section 7 or 9 is not satisfied as and when required by
this Agreement; or (iii) the Closing has not been consummated by within five (5)
business days from the date hereof.
11.2. Manner and Effect of Termination. Written notice of any
termination ("Termination Notice") pursuant to this Section 11 shall be given by
the party electing termination of this Agreement ("Terminating Party") to the
other party or parties (collectively, the "Terminated Party"), and such notice
shall state the reason for termination. The party or parties receiving
Termination Notice shall have a period of ten (10) days after receipt of
Termination Notice to cure the matters giving rise to such termination to the
reasonable satisfaction of the Terminating Party. If the matters giving rise to
18
termination are not cured as required hereby, this Agreement shall be terminated
effective as of the close of business on the tenth (10th) day following the
Terminated Party's receipt of Termination Notice. Upon termination of this
Agreement prior to the consummation of the First Closing and in accordance with
the terms hereof, this Agreement shall become void and of no effect, and none of
the parties shall have any liability to the others, except that nothing
contained herein shall relieve any party from: (a) its obligations under
Sections 2.3 and 2.4; or (b) liability for its intentional breach of any
representation, warranty or covenant contained herein, or its intentional
failure to comply with the terms and conditions of this Agreement or to perform
its obligations hereunder.
12. MISCELLANEOUS.
12.1. Notices.
(a) All notices, requests, demands, or other communications required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given upon receipt if delivered in person, or upon the expiration of two (2)
days after the date sent, if sent by federal express (or similar overnight
courier service) to the parties at the following addresses:
If to Buyer: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxx Xxxxxxxx, Esq.
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Company: SmarTire Systems Inc.
Richmond Corporate Centre
Xxxxx 000-00000 Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
Attention: Xxxxxx X. Xxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Xxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
19
(b) Notices may also be given in any other manner permitted by
law, effective upon actual receipt. Any party may change the address to which
notices, requests, demands or other communications to such party shall be
delivered or mailed by giving notice thereof to the other parties hereto in the
manner provided herein.
12.2. Survival. The representations, warranties, agreements and
indemnifications of the parties contained in this Agreement or in any writing
delivered pursuant to the provisions of this Agreement shall survive any
investigation heretofore or hereafter made by the parties and the consummation
of the transactions contemplated herein and shall continue in full force and
effect after the Closing.
12.3. Counterparts; Interpretation. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original, and
all of which shall constitute one and the same instrument. This Agreement
supersedes all prior discussions and agreements between the parties with respect
to the subject matter hereof, and this Agreement contains the sole and entire
agreement among the parties with respect to the matters covered hereby. All
Schedules hereto shall be deemed a part of this Agreement. This Agreement shall
not be altered or amended except by an instrument in writing signed by or on
behalf of all of the parties hereto. No ambiguity in any provision hereof shall
be construed against a party by reason of the fact it was drafted by such party
or its counsel. For purposes of this Agreement: "herein", "hereby", "hereunder",
"herewith", "hereafter" and "hereinafter" refer to this Agreement in its
entirety, and not to any particular subsection or paragraph. References to
"including" means including without limiting the generality of any description
preceding such term. Nothing expressed or implied in this Agreement is intended,
or shall be construed, to confer upon or give any person other than the parties
hereto any rights or remedies under or by reason of this Agreement.
12.4. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New Jersey without
regard to the principles of conflict of laws. The parties further agree that any
action between them shall be heard exclusively in Xxxxxx County, New Jersey, and
expressly consent to the jurisdiction and venue of the Superior Court of New
Jersey, sitting in Xxxxxx County, New Jersey and the United States District
Court of New Jersey, sitting in Newark, New Jersey, for the adjudication of any
civil action asserted pursuant to this paragraph. Each party hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of any such action in the forum selected
hereby.
12.5. Successors and Assigns; Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, legal representatives, and successors; provided,
however, that the Company may not assign this Agreement or any rights hereunder,
in whole or in part.
20
12.6. Partial Invalidity and Severability. All rights and
restrictions contained herein may be exercised and shall be applicable and
binding only to the extent that they do not violate any applicable laws and are
intended to be limited to the extent necessary to render this Agreement legal,
valid and enforceable. If any terms of this Agreement not essential to the
commercial purpose of this Agreement shall be held to be illegal, invalid or
unenforceable by a court of competent jurisdiction, it is the intention of the
parties that the remaining terms hereof shall constitute their agreement with
respect to the subject matter hereof and all such remaining terms shall remain
in full force and effect. To the extent legally permissible, any illegal,
invalid or unenforceable provision of this Agreement shall be replaced by a
valid provision which will implement the commercial purpose of the illegal,
invalid or unenforceable provision.
12.7. Waiver. Any term or condition of this Agreement may be waived
at any time by the party which is entitled to the benefit thereof, but only if
such waiver is evidenced by a writing signed by such party. No failure on the
part of a party hereto to exercise, and no delay in exercising, any right, power
or remedy created hereunder, shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or remedy by any such party
preclude any other future exercise thereof or the exercise of any other right,
power or remedy. No waiver by any party hereto to any breach of or default in
any term or condition of this Agreement shall constitute a waiver of or assent
to any succeeding breach of or default in the same or any other term or
condition hereof.
12.8. Headings. The headings as to contents of particular paragraphs
of this Agreement are inserted for convenience only and shall not be construed
as a part of this Agreement or as a limitation on the scope of any terms or
provisions of this Agreement.
12.9. Expenses.
12.9.1. Structuring Fees. Except as otherwise expressly provided
herein, all legal and other costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the Buyer or
the Company as each party incurs such expenses except that the Company shall pay
to Yorkville Advisors Management, LLC a structuring fee of Ten Thousand Dollars
($10,000) directly from the gross proceeds of the Closing
12.9.2. Commitment Fees. The Company shall pay to the Buyer a
commitment fee of ten percent (10%) of the Purchase Price. The commitment fee
shall be deemed fully earned on the date hereof, and the payment shall be offset
against the Purchase Price.
12.10. Finder's Fees. The Buyer represents to the Company that no
broker, agent, finder or other party has been retained by it in connection with
the transactions contemplated hereby and that no other fee or commission has
been agreed by the Buyer to be paid for or on account of the transactions
contemplated hereby. The Company represents to the Buyer that no broker, agent,
finder or other party has been retained by the Company in connection with the
transactions contemplated hereby and that no other fee or commission has been
agreed by the Company to be paid for or on account of the transactions
contemplated hereby.
21
12.11. Gender. Where the context requires, the use of the singular
form herein shall include the plural, the use of the plural shall include the
singular, and the use of any gender shall include any and all genders.
12.12. Currency. All foreign currency amounts required to be
converted to U.S. Dollars for purposes of this Agreement shall be converted in
accordance with GAAP.
12.13. Acceptance by Fax. This Agreement shall be accepted,
effective and binding, for all purposes, when the parties shall have signed and
transmitted to each other, by telecopier or otherwise, copies of the signature
pages hereto.
12.14. Attorneys Fees. If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any provision of this
Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees, court costs and all expenses (including, without limitation,
all such fees, costs and expenses incident to appellate, bankruptcy,
post-judgment and alternative dispute resolution proceedings), incurred in that
action or proceeding, in addition to any other relief to which such party may be
entitled.
12.15. NO JURY TRIAL. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT AND ANY DOCUMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS AGREEMENT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Investment Agreement or
caused this Investment Agreement to be duly executed by their duly authorized
officers as of the day and year first above written.
COMPANY:
SMARTIRE SYSTEMS INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
BUYER
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Xxxx Xxxxxx
--------------------------
Name: Xxxx Xxxxxx
Title: Portfolio Manager
23
