SECURITIES PURCHASE AGREEMENT
EXECUTION
COPY
This
Securities Purchase Agreement (this “Agreement”)
is
dated as of March 9, 2007 among Lighting Science Group Corporation, a Delaware
corporation (the “Company”),
and
the purchasers identified on the signature pages hereto (each, a “Purchaser”
and
collectively, the “Purchasers”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”),
the
Company desires to issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, desires to purchase from the Company, certain
securities of the Company as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of
which
are hereby acknowledged, the Company and each of the Purchasers, severally
and
not jointly, agree as follows:
ARTICLE
I
DEFINITIONS
1.1
Definitions.
In
addition to the terms defined elsewhere in this Agreement, the following
terms
have the meanings indicated:
“Additional
Warrants”
means,
collectively, the Common Stock warrants issued upon exercise of the Warrant
B,
in the form of Exhibit
A-3.
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as
such
terms are used in and construed under Rule 144 under the Securities Act.
With
respect to a Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as such Purchaser
will
be deemed to be an Affiliate of such Purchaser.
“Business
Day”
means
any day other than Saturday, Sunday or other day on which the Federal Reserve
Bank of New York is closed.
“Change
of Control”
means
the occurrence of any of the following in one or a series of related
transactions: (i) an acquisition after the date hereof by an individual or
legal
entity or “group” (as described in Rule 13d-5(b)(1) under the Exchange Act) of
more than one-third of the voting rights or equity interests in the Company;
(ii) a replacement of more than one-third of the members of the Company's
board
of directors that is not approved by those individuals who are members of
the
board of directors on the date hereof (or other directors previously approved
by
such individuals); (iii) a merger or consolidation of the Company or any
significant Subsidiary or a sale of more than one-third of the assets of
the
Company in one or a series of related transactions, unless following such
transaction or series of transactions, the holders of the Company's securities
prior to the first such transaction continue to hold at least two-thirds
of the
voting rights and equity interests in the surviving entity or acquirer of
such
assets; (iv) a recapitalization, reorganization or other transaction involving
the Company or any significant Subsidiary that constitutes or results in
a
transfer of more than one-half of the voting rights or equity interests in
the
Company; (v) consummation of a “Rule 13e-3 transaction” as defined in Rule 13e-3
under the Exchange Act with respect to the Company, or (vi) the execution
by the
Company or its controlling stockholders of an agreement providing for or
reasonably likely to result in any of the foregoing events.
“Closing”
means
the closing of the purchase and sale of the Shares and Warrants pursuant
to
Section 2.1.
“Closing
Date”
means
the date of the Closing.
“Closing
Price”
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 an Eligible
Market
or any other national securities exchange, the closing price per share of
the
Common Stock for such date (or the nearest preceding date) on the primary
Eligible Market or exchange on which the Common Stock is then listed or quoted;
(b) if prices for the Common Stock are then quoted on the OTC Bulletin
Board, the closing bid price per share of the Common Stock for such date
(or the
nearest preceding date) so quoted; (c) if prices for the Common Stock are
then reported in the “Pink Sheets” published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its functions
of
reporting prices), the most recent closing bid price per share of the Common
Stock so reported; or (d) in all other cases, the fair market value of a
share of Common Stock as determined by an independent appraiser selected
in good
faith by Purchasers holding a majority of the Securities.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $0.001 per share.
"Common
Stock Equivalents"
means,
collectively, Options and Convertible Securities.
“Company
Counsel”
means
Xxxxxx and Xxxxx, LLP, counsel to the Company.
"Convertible
Securities"
means
any stock or securities (other than Options) convertible into or exercisable
or
exchangeable for Common Stock.
“Effective
Date”
means
the date that the Registration Statement is first declared effective by the
Commission.
“Eligible
Market”
means
any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ
Global Select Market, NASDAQ Global Market, the NASDAQ Capital Market or
the OTC
Bulletin Board.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Excluded
Stock” means
any
of the following:
(i) shares
of
capital stock of the Company issued or issuable upon conversion or exercise
of
any currently outstanding securities set forth in Schedule
3.1(f)
(provided that such exercise of conversion occurs in accordance with the
terms
thereof, without amendment or modification, and that the applicable exercise
or
conversion price or ratio is described in such schedule) or any Excluded
Stock
issued in accordance with this Agreement;
(ii) shares
or
options or warrants for Common Stock granted to officers, directors and
employees of, and consultants to, the Company pursuant to stock option or
purchase plans or other compensatory agreements approved by the Board of
Directors;
(iii) shares
of
Common Stock or Preferred Stock issued in connection with any pro rata stock
split, stock dividend (including PIK Dividend Shares) or recapitalization
by the
Company;
(iv) shares
of
capital stock, or options or warrants to purchase capital stock, issued in
connection with a strategic commercial agreement or commercial relationship
as
determined by the Company, the primary purpose of which is not to raise capital;
(v) shares
of
capital stock, or options or warrants to purchase capital stock, issued in
accordance with the letter dated March 7, 2007, provided by the Company to
Iroquois Master Fund, Ltd; provided, that such financing is completed within
30
days following the date hereof;
(vi) shares
of
capital stock, or options or warrants to purchase capital stock, issued pursuant
to the acquisition of another corporation or entity by the Company by
consolidation, merger, purchase of all or substantially all of the assets,
or
other reorganization in which the Company acquires, in a single transaction
or
series of related transactions, all or substantially all of the assets of
such
other corporation or entity or fifty percent (50%) or more of the voting
power
of such other corporation or entity or fifty percent (50%) or more of the
equity
ownership of such other corporation or entity, in each case the primary purpose
of which is not to raise capital; and
(vii) shares
of
capital stock issued in a bona-fide underwritten public securities offering
with
a nationally recognized underwriter with net proceeds of at least $20 Million;
(viii) securities
issuable upon conversion or exercise of the securities set forth in paragraphs
(i) - (vii) above.
“Filing
Date”
means
the 45th
day
following the Closing Date with respect to the initial Registration Statement
required to be filed hereunder, and, with respect to any additional Registration
Statements that may be required pursuant to Section
6.1(f),
the
10th day following the date on which the Company first knows, or reasonably
should have known, that such additional Registration Statement is required
under
such Section.
“Lien”
means
any lien, charge, claim, security interest, encumbrance, right of first refusal
or other restriction.
“Losses”
means
any and all losses, claims, damages, liabilities, settlement costs and expenses,
including, without limitation, costs of preparation and reasonable attorneys’
fees.
“Options”
means
any rights, warrants or options to subscribe for or purchase Common Stock
or
Convertible Securities (including all Warrants and Additional Warrants that
can
be issued under the Transaction Documents).
“Person”
means
any individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or any court
or
other federal, state, local or other governmental authority or other entity
of
any kind.
“Per
Unit Purchase Price”
means
$0.30.
“PIK
Dividend Shares”
means
the shares of Common Stock issued and issuable in payment of dividends on
the
Preferred Stock, and upon any stock split, stock dividend, recapitalization
or
similar event with respect to such shares of Common Stock and any other
securities issued in exchange of or replacement of such shares of Common
Stock;
“Post-Effective
Amendment” means
a
post-effective amendment to the Registration Statement.
“Post-Effective
Amendment Filing Deadline”
means
the 10th
Trading
Day after the Registration Statement ceases to be effective pursuant to
applicable securities laws due to the passage of time or the occurrence of
an
event requiring the Company to file a Post-Effective Amendment.
“Preferred
Stock”
means
the 6% convertible preferred stock of the Company, par value $0.001 per
share.
“Proceeding”
means an
action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.
“Prospectus”
means
the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted
from a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration Statement,
and
all other amendments and supplements to the Prospectus including post effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Purchaser
Counsel”
has the
meaning set forth in Section
6.2(a).
“Registrable
Securities”
means
any Common Stock (including Underlying Shares) issued or issuable pursuant
to
the Transaction Documents, together with any securities issued or issuable
upon
any stock split, dividend or other distribution, recapitalization or similar
event with respect to the foregoing.
“Registration
Statement”
means
each registration statement required to be filed under Article VI, including
(in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to
be
incorporated by reference in such registration statement.
“Required
Effectiveness Date”
means
(i) with respect to the initial Registration Statement required to be filed
hereunder, the 120th
day
following the Closing Date and (ii) with respect to any additional Registration
Statements that may be required pursuant to Section
6.1(f),
the
30th day following the date on which the Company first knows, or reasonably
should have known, that such additional Registration Statement is required
under
such Section.
“Restricted
Person” means,
as
of Closing, each of the executive officers of the Company and each of the
members of the Company’s board of directors.
“Rule
144,” “Rule
415,”
and
“Rule
424”
means
Rule 144, Rule 415 and Rule 424, respectively, promulgated by the Commission
pursuant to the Securities Act, as such Rules may be amended from time to
time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
“Securities”
means
the Shares, the Warrant A, the Warrant B, the Additional Warrant and the
Underlying Shares.
“Shares”
means
the shares of Common Stock, which are being issued and sold to the Purchasers
at
the Closing.
“Subsidiary”
means
any Person in which the Company, directly or indirectly, owns capital stock
or
holds an equity or similar interest.
“Trading
Day”
means
(a) any day on which the Common Stock is listed or quoted and traded on its
primary Trading Market, or (b) if the Common Stock is not then listed or
quoted
and traded on its primary Trading Market, then a day on which trading occurs
on
an Eligible Market (or any successor thereto), or (c) if trading ceases to
occur
on an Eligible Market (or any successor thereto), any Business Day.
“Trading
Market”
means
the OTC Bulletin Board or any other Eligible Market, or any national securities
exchange, market or trading or quotation facility on which the Common Stock
is
then listed or quoted.
“Transaction
Documents”
means
this Agreement, the Warrant A, the Warrant B, the Additional Warrant, the
Lock-Up Letters, the Transfer Agent Instructions and any other documents
or
agreements executed in connection with the transactions contemplated
hereunder.
"Transfer
Agent Instructions"
means
the Irrevocable Transfer Agent Instructions, in the form of Exhibit
D,
executed by the Company and delivered to and acknowledged in writing by the
Company's transfer agent.
“Underlying
Shares”
means
the shares of Common Stock issuable (i) upon exercise of the Warrants and
(ii)
upon exercise of the Additional Warrants issued upon exercise of the Warrant
B.
“Unit”
means
(i) one Share, (ii) a Warrant A to acquire 0.75 shares of Common Stock, (ii)
a
Warrant B to acquire one share of Common Stock, and (iii) an Additional Warrant
to acquire 0.75 shares of Common Stock upon the exercise of a Warrant
B.
“Warrant
A”
means
each Common Stock purchase warrant in the form of Exhibit
A-1.
“Warrant
B”
means
each Common Stock purchase warrant in the form of Exhibit
A-2.
“Warrants”
means,
collectively, each of the Warrant A and Warrant B.
ARTICLE
II
PURCHASE
AND SALE
2.1
Subject
to the terms and conditions set forth in this Agreement, at the Closing the
Company shall issue and sell to each Purchaser, and each Purchaser shall,
severally and not jointly, purchase from the Company, the Shares, the Warrant
A
and the Warrant B for the purchase price set forth on Schedule
A
hereto
under the heading “Purchase Price”. The Closing shall take place at the offices
of Malhotra & Associates LLP immediately following the execution hereof, or
at such other location or time as the parties may agree.
2.2
Closing
Deliveries.
(a)
At
the
Closing, the Company shall deliver or cause to be delivered to each Purchaser
the following:
(i)
one
or
more stock certificates, free and clear of all restrictive and other legends
(except as expressly provided in Section 4.1(b) hereof), evidencing such
number
of Shares equal to the number of Units indicated on Schedule
A
hereto
under the heading “Units”, registered in the name of such
Purchaser;
(ii)
a
Warrant
A, registered in the name of such Purchaser, pursuant to which such Purchaser
shall have the right to acquire such number of Underlying Shares indicated
on
Schedule
A
hereto
under the heading “Warrant Shares”.
(iii)
a
Warrant
B, registered in the name of such Purchaser, pursuant to which such Purchaser
shall have the right to acquire (i) such number of Underlying Shares indicated
on Schedule
A
hereto
under the heading “Warrant B Shares”, and (ii) an Additional Warrant, pursuant
to which such Purchaser shall have the right to acquire such number of
Underlying Shares indicated on Schedule
A
hereto
under the heading “Additional Warrant Shares”, each on the terms set forth
therein;
(iv)
a
lock up
letter executed by each Restricted Person in the form of Exhibit
E
(the
“Lock-Up
Letter”);
(v)
a
legal
opinion of Company Counsel, in the form of Exhibit
B,
executed by such counsel and delivered to the Purchasers;
(vi)
duly
executed Transfer Agent Instructions; and
(vii)
a
certificate from a duly authorized officer certifying on behalf of the Company
that each of the conditions set forth in Section 5.1 has been
satisfied;
(b)
At
the
Closing, each Purchaser shall deliver or cause to be delivered an amount
equal
to the Per Unit Purchase Price multiplied by the number of Units purchased,
in
United States dollars and in immediately available funds, by wire transfer
to
the Company’s account at:
Bank
of
Texas
0000
Xxxxx Xxxxxx
Xxxxxx,
Xxxxx 00000
Routing
#: 000000000
A/C
#:
8091185481
The
total
purchase price payable by each Purchaser shall be set forth on Schedule
A
hereto
under the heading “Purchase Price.”
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1
Representations
and Warranties of the Company.
The
Company hereby represents and warrants to each of the Purchasers as
follows:
(a)
Subsidiaries.
The
Company has no direct or indirect Subsidiaries other than those listed in
Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the Company owns,
directly or indirectly, all of the capital stock or comparable equity interests
of each Subsidiary free and clear of any Lien and all the issued and outstanding
shares of capital stock or comparable equity interest of each Subsidiary
are
validly issued and are fully paid, non-assessable and free of preemptive
and
similar rights.
(b)
Organization
and Qualification.
Each of
the Company and the Subsidiaries is an entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
or
organization (as applicable), with the requisite power and authority to own
and
use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any
of the
provisions of its respective certificate or articles of incorporation, bylaws
or
other organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing
as a
foreign corporation or other entity in each jurisdiction in which the nature
of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing,
as
the case may be, could not, individually or in the aggregate, (i) adversely
affect the legality, validity or enforceability of any Transaction Document,
(ii) have or result in a material adverse effect on the results of operations,
assets, prospects, business or condition (financial or otherwise) of the
Company
and the Subsidiaries, taken as a whole on a consolidated basis, or (iii)
adversely impair the Company's ability to perform fully on a timely basis
its
obligations under any of the Transaction Documents (any of (i), (ii) or (iii),
a
“Material
Adverse Effect”).
(c)
Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and
to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents by the Company
and
the consummation by it of the transactions contemplated hereby and thereby
have
been duly authorized by all necessary action on the part of the Company and
no
further consent or action is required by the Company, its Board of Directors
or
its stockholders. Each of the Transaction Documents has been (or upon delivery
will be) duly executed by the Company and, assuming the due authorization,
execution and delivery by the other parties thereto, is, or when delivered
in
accordance with the terms hereof, will constitute, the valid and binding
obligation of the Company enforceable against the Company in accordance with
its
terms. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its certificate or articles of incorporation, bylaws or other
organizational or charter documents.
(d)
No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby
and
thereby do not and will not (i) conflict with or violate any provision of
the
Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would become
a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of,
any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company
or
any Subsidiary is a party or by which any property or asset of the Company
or
any Subsidiary is bound or affected, or (iii) result in a violation of any
law,
rule, regulation, order, judgment, injunction, decree or other restriction
of
any court or governmental authority to which the Company or a Subsidiary
is
subject (including federal and state securities laws and regulations and
the
rules and regulations of any self-regulatory organization to which the Company
or its securities are subject), or by which any property or asset of the
Company
or a Subsidiary is bound or affected.
(e)
Issuance
of the Securities.
The
Securities (including the Underlying Shares) are duly authorized and, when
issued and paid for in accordance with the Transaction Documents, will be
duly
and validly issued, fully paid and nonassessable, free and clear of all Liens
and shall not be subject to preemptive rights or similar rights of stockholders.
The Company has reserved from its duly authorized capital stock the maximum
number of shares of Common Stock currently issuable upon exercise of the
Warrants.
(f)
Capitalization.
The
number of shares and type of all authorized, issued and outstanding capital
stock, options and other securities of the Company (whether or not presently
convertible into or exercisable or exchangeable for shares of capital stock
of
the Company), as of February 28, 2007, is set forth in Schedule 3.1(f). All
outstanding shares of capital stock are duly authorized, validly issued,
fully
paid and nonassessable and have been issued in compliance with all applicable
securities laws. No securities of the Company are entitled to preemptive
or
similar rights, and no Person has any right of first refusal, preemptive
right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as disclosed in Schedule
3.1(f), there are no outstanding options, warrants, script rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exercisable or exchangeable for,
or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which
the
Company or any Subsidiary is or may become bound to issue additional shares
of
Common Stock, or securities or rights convertible or exchangeable into shares
of
Common Stock. Except as disclosed in Schedule 3.1(f), there are no anti-dilution
or price adjustment provisions contained in any security issued by the Company
(or in any agreement providing rights to security holders). The issue and
sale
of the Securities (including the Underlying Shares) will not obligate the
Company to issue shares of Common Stock or other securities to any Person
(other
than the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities. To the knowledge of the Company, except as specifically
disclosed in Schedule 3.1(f), no Person or group of related Persons beneficially
owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or has
the
right to acquire, by agreement with or by obligation binding upon the Company,
beneficial ownership of in excess of 5% of the outstanding Common Stock,
ignoring for such purposes any limitation on the number of shares of Common
Stock that may be owned at any single time.
(g)
SEC
Reports; Financial Statements; Press Releases.
The
Company has filed all reports required to be filed by it under 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 (together with any materials
filed by the Company under the Exchange Act, whether or not required) being
collectively referred to herein as the “SEC
Reports”
and,
together with this Agreement and the Schedules to this Agreement, the
“Disclosure
Materials”)
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.
The
Company has delivered to each Purchaser true, correct and complete SEC Reports
filed by the Company within the 10 days preceding the date hereof. 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 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 the 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 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. All material agreements to which the Company or any Subsidiary
is a
party or to which the property or assets of the Company or any Subsidiary
are
subject are included as part of or specifically identified in the SEC Reports.
Each press release disseminated during the 12 months preceding the date of
this
Agreement did not at the time of release contain any untrue statement of
a
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading..
(h)
Material
Changes.
Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in the SEC Reports, (i) there has
been
no event, occurrence or development that, individually or in the aggregate,
has
had or that is reasonably likely to result in a Material Adverse Effect,
(ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course
of
business consistent with past practice and (B) liabilities not required to
be
reflected in the Company’s financial statements pursuant to GAAP or required to
be disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting or the identity of its auditors, except
as
disclosed in its SEC Reports, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares
of
its capital stock, and (v) the Company has not issued any equity securities
to
any officer, director or Affiliate, except pursuant to existing Company
stock-based plans.
(i)
Absence
of Litigation.
There
is no action, suit, claim, proceeding, inquiry or investigation before or
by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting
the
Company or any of its Subsidiaries that is reasonably likely to, individually
or
in the aggregate, have a Material Adverse Effect. Schedule 3.1(i) contains
a
complete list and summary description of any pending or, to the knowledge
of the
Company, threatened proceeding against or affecting the Company or any of
its
Subsidiaries, without regard to whether it could, individually or in the
aggregate, have a Material Adverse Effect.
(j)
Compliance.
Neither
the Company nor any Subsidiary (i) is in default under or in violation of
(and,
to the knowledge of the Company, no event has occurred that has not been
waived
that, with notice or lapse of time or both, would result in a default by
the
Company or any Subsidiary under), nor has the Company or any Subsidiary received
written notice of a claim that it is in default under or that it is in violation
of, any indenture, loan or credit agreement or any other agreement or instrument
to which it is a party or by which it or any of its properties is bound (whether
or not such default or violation has been waived), (ii) is in violation of
any
order of any court, arbitrator or governmental body, or (iii) is or has been
in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws relating
to taxes, environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each case
as
could not, individually or in the aggregate, have or result in a Material
Adverse Effect.
(k)
Title
to Assets.
The
Company and the Subsidiaries have good and marketable title in fee simple
to all
real property owned by them that is material to the business of the Company
and
the Subsidiaries and good and marketable title in all personal property owned
by
them that is material to the business of the Company and the Subsidiaries,
in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the
use
made and proposed to be made of such property by the Company and the
Subsidiaries. Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable
leases of which the Company and the Subsidiaries are in compliance.
(l)
Certain
Fees.
Except
for the fees described in Schedule 3.1(l), all of which are payable to
registered broker-dealers, no brokerage or finder’s fees or commissions are or
will be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect
to
the transactions contemplated by this Agreement, and the Company has not
taken
any action that would cause any Purchaser to be liable for any such fees
or
commissions.
(m)
Private
Placement.
Neither
the Company nor any Person acting on the Company’s behalf has sold or offered to
sell or solicited any offer to buy the Securities by means of any form of
general solicitation or advertising. Neither the Company nor any of its
Affiliates nor any Person acting on the Company's behalf has, directly or
indirectly, at any time within the past six months, made any offer or sale
of
any security or solicitation of any offer to buy any security under
circumstances that would (i) eliminate the availability of the exemption
from
registration under Regulation D under the Securities Act in connection with
the
offer and sale of the Securities as contemplated hereby or (ii) cause the
offering of the Securities pursuant to the Transaction Documents to be
integrated with prior offerings by the Company for purposes of any applicable
law, regulation or stockholder approval provisions, including, without
limitation, under the rules and regulations of any Trading Market. Assuming
the
accuracy of the Purchasers representations and warranties set forth in Section
3.2, no registration under the Securities Act is required for the offer and
sale
of the Securities by the Company to the Purchasers as contemplated hereby.
The
Company is not, and is not an Affiliate of, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended. The Company is
not a
United States real property holding corporation within the meaning of the
Foreign Investment in Real Property Tax Act of 1980.
(n)
Listing
and Maintenance Requirements.
The
Company has not, in the two years preceding the date hereof, received notice
(written or oral) from any Trading Market on which the Common Stock is or
has
been listed or quoted to the effect that the Company is not in compliance
with
the listing or maintenance requirements of such Trading Market. The Company
is,
and has no reason to believe that it will not in the foreseeable future continue
to be, in compliance with all such listing and maintenance
requirements.
(o)
Registration
Rights.
Except
as described in Schedule 3.1(o), the Company has not granted or agreed to
grant
to any Person any rights (including “piggy-back” registration rights) to have
any securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied.
(p)
Application
of Takeover Protections.
There
is no control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or other similar anti-takeover
provision under the Company’s charter documents or the laws of its state of
incorporation that is or could become applicable to any of the Purchasers
as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including, without
limitation, as a result of the Company's issuance of the Securities and the
Purchasers' ownership of the Securities.
(q)
Disclosure.
The
Company confirms that neither it nor any other Person acting on its behalf
has
provided any of the Purchasers or their agents or counsel with any information
that constitutes or might constitute material, nonpublic information (other
than
the existence of the transactions contemplated by this Agreement, which shall
be
disclosed in the press release issued pursuant to Section 4.6). The Company
understands and confirms that each of the Purchasers will rely on the foregoing
representations in effecting transactions in securities of the Company. To
our
knowledge, all disclosure materials provided to the Purchasers regarding
the
Company, its business and the transactions contemplated hereby, including
the
Schedules to this Agreement, furnished by or on behalf of the Company are
true
and correct and do not contain any untrue statement of a material fact or
omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.
The
Company acknowledges and agrees that (i) no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2 or (ii) any
statement, commitment or promise to the Company or, to its knowledge, any
of its
representatives which is or was an inducement to the Company to enter into
this
Agreement or otherwise.
(r)
Acknowledgment
Regarding Purchasers' Purchase of Securities.
The
Company acknowledges and agrees that each of the Purchasers is acting solely
in
the capacity of an arm's length purchaser with respect to this Agreement
and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or
in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and
the
transactions contemplated hereby is merely incidental to the Purchasers'
purchase of the Securities. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby by
the
Company and its representatives.
(s)
Patents
and Trademarks.
The
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or material
for
use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have could have a Material Adverse Effect
(collectively, the "Intellectual
Property Rights").
Neither the Company nor any Subsidiary has received a written notice that
the
Intellectual Property Rights used by the Company or any Subsidiary violates
or
infringes upon the rights of any Person. To the knowledge of the Company,
all
such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property
Rights.
(t)
Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries
are
engaged. Neither the Company nor any Subsidiary has any reason to believe
that
it will not be able to renew its existing insurance coverage as and when
such
coverage expires or to obtain similar coverage from similar insurers as may
be
necessary to continue its business without a significant increase in
cost.
(u)
Regulatory
Permits.
The
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described
in the
SEC Reports, except where the failure to possess such permits could not,
individually or in the aggregate, have or result in a Material Adverse Effect
(“Material
Permits”),
and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(v)
Transactions
With Affiliates and Employees.
Except
as set forth in SEC Reports filed at least ten days prior to the date hereof,
none of the officers or directors of the Company and, to the knowledge of
the
Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or
other
arrangement providing for the furnishing of services to or by, providing
for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of
the
Company, any entity in which any officer, director, or any such employee
has a
substantial interest or is an officer, director, trustee or
partner.
(w)
Form
SB-2 Eligibility.
The
Company is eligible to register the resale of its Common Stock for resale
by the
Purchasers under Form SB-2 promulgated under the Securities Act.
(x)
Solvency.
Based
on the financial condition of the Company as of the Closing Date, (i) the
Company’s fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature; (ii)
the
Company’s assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to
be
conducted including its capital needs taking into account the particular
capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash
flow
of the Company, together with the proceeds the Company would receive, were
it to
liquidate all of its assets, after taking into account all anticipated uses
of
the cash, would be sufficient to pay all amounts on or in respect of its
debt
when such amounts are required to be paid. The Company does not intend to
incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its
debt).
(y)
Internal
Accounting Controls.
The
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(z)
Xxxxxxxx-Xxxxx
Act.
The
Company is in compliance with applicable requirements of the Xxxxxxxx-Xxxxx
Act
of 2002 and applicable rules and regulations promulgated by the Commission
thereunder in effect as of the date of this Agreement, except where such
noncompliance could not be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect.
3.2
Representations
and Warranties of the Purchasers.
Each
Purchaser hereby, as to itself only and for no other Purchaser, represents
and
warrants to the Company as follows:
(a)
Organization;
Authority.
Such
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with the requisite
corporate or partnership power and authority to enter into and to consummate
the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The purchase by such Purchaser
of
the Shares and the Warrants hereunder has been duly authorized by all necessary
action on the part of such Purchaser. This Agreement has been duly executed
and
delivered by such Purchaser and constitutes the valid and binding obligation
of
such Purchaser, enforceable against it in accordance with its
terms.
(b)
No
Conflicts.
The
execution and delivery of the Transaction Documents by the Purchaser and
the
consummation by such Purchaser of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or violate any provision of
such
Purchaser’s certificate or articles of incorporation, bylaws or other
organizational or charter documents; (ii) conflict with, or constitute a
default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration
or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument or other understanding to which
such
Purchaser is a party or by which any property or asset of such Purchaser
is
bound or affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which such Purchaser is subject.
(c)
Purchaser
Status.
At the
time such Purchaser was offered the Shares and the Warrants, it was, and
at the
date hereof it is, an “accredited investor” as defined in Rule 501(a) under the
Securities Act.
(d)
Experience
of such Purchaser.
Such
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters
so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such
investment.
3.3
Schedules.
For
purposes of the Transaction Documents, disclosure of information in the
Schedules, regardless of section references or headings, shall automatically
constitute disclosure where such disclosure is applicable or may be
necessary.
ARTICLE
IV
OTHER
AGREEMENTS OF THE PARTIES
4.1
Transfer
Restrictions.
(a)
Securities
may only be disposed of pursuant to an effective registration statement under
the Securities Act or pursuant to an available exemption from the registration
requirements of the Securities Act, and in compliance with any applicable
state
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or to the Company or pursuant
to
Rule 144, except as otherwise set forth herein, the Company may require the
transferor to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act. Notwithstanding the foregoing, the
Company hereby consents to and agrees to register on the books of the Company
and with its transfer agent, without any such legal opinion, any transfer
of
Securities by a Purchaser to an Affiliate of such Purchaser, provided that
the
transferee certifies to the Company that it is an “accredited investor” as
defined in Rule 501(a) under the Securities Act.
(b)
The
Purchasers agree to the imprinting, so long as is required by this Section
4.1(b),
of the
following legend on any certificate evidencing Securities:
[NEITHER]
THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE
FOREGOING, THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
Certificates
evidencing Securities shall not be required to contain such legend or any
other
legend (i) while a Registration Statement covering the resale of such Securities
is effective under the Securities Act, (ii) following any sale of such
Securities pursuant to Rule 144, (iii) if such Securities are eligible for
sale
under Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The Company shall
cause
its counsel to issue the letter included in the Transfer Agent Instructions
to
the Company's transfer agent on the Effective Date.
Following the Effective Date or at such earlier time as a legend is no longer
required for certain Securities, the Company will cause its transfer agent,
no
later than three Trading Days following the delivery by a Purchaser to the
Company or the Company’s transfer agent of a legended certificate representing
such Securities, to deliver or cause to be delivered to such Purchaser a
certificate representing such Securities that is free from all restrictive
and
other legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.
(c)
The
Company acknowledges and agrees that a Purchaser may from time to time pledge
or
grant a security interest in some or all of the Securities in connection
with a
bona fide margin agreement or other loan or financing arrangement secured
by the
Securities and, if required under the terms of such agreement, loan or
arrangement, such Purchaser may transfer pledged or secured Securities to
the
pledgees or secured parties that are accredited investors. Such a pledge
or
transfer would not be subject to approval of the Company and no legal opinion
of
the pledgee, secured party or pledgor shall be required in connection therewith.
Further, no notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably
request
in connection with a pledge or transfer of the Securities, including the
preparation and filing of any required prospectus supplement under Rule
424(b)(3) of the Securities Act or other applicable provision of the Securities
Act to appropriately amend the list of Selling Stockholders
thereunder.
4.2
Furnishing
of Information.
As long
as any Purchaser owns Securities, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. Upon the request of any Purchaser, the Company
shall deliver to such Purchaser a written certification of a duly authorized
officer as to whether it has complied with the preceding sentence. As long
as
any Purchaser owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Purchasers and
make
publicly available in accordance with paragraph (c) of Rule 144 such information
as is required for the Purchasers to sell the Securities under Rule 144.
The
Company further covenants that it will take such further action as any holder
of
Securities may reasonably request to satisfy the provisions of Rule 144
applicable to the issuer of securities relating to transactions for the sale
of
securities pursuant to Rule 144.
4.3
Integration.
The
Company shall not, and shall use its commercially reasonable efforts to ensure
that no Affiliate of the Company shall, sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale
of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.
4.4
Reservation
and Listing of Securities.
(a)
The
Company shall maintain a reserve from its duly authorized shares of Common
Stock
for issuance pursuant to the Transaction Documents in such amount as may
be
required to fulfill its obligations in full under the Transaction Documents.
In
the event that at any time the then authorized shares of Common Stock are
insufficient for the Company to satisfy its obligations in full under the
Transaction Documents, the Company shall promptly take such actions as may
be
required to increase the number of authorized shares. The Company shall in
the
time and manner required by its Trading Market take any steps necessary to
cause
such shares of Common Stock to be approved for listing on its Trading Market
as
soon as possible.
(b)
In
the
case of a breach by the Company of Section
4.4(a),
in
addition to the other remedies available to the Purchasers, the Purchasers
shall
have the right to require the Company to either: (i) use its commercially
reasonable efforts to obtain the required stockholder approval necessary
to
permit the issuance of such shares of Common Stock as soon as is possible,
but
in any event not later than the 60th day after such notice, or (ii) within
five Trading Days after delivery of a written notice, pay cash to such
Purchaser, as liquidated damages and not as a penalty, in an amount equal
to the
number of shares of Common Stock not issuable by the Company times 115% of
the
average Closing Price over the five Trading Days immediately prior to the
date
of such notice or, if greater, the five Trading Days immediately prior to
the
date of payment (the “Cash
Amount”).
If
the exercising or Purchaser elects the first option under the preceding sentence
and the Company fails to obtain the required stockholder approval on or prior
to
the 60th day after such notice, then within three Trading Days after such
60th
day, the Company shall pay the Cash Amount to such Purchaser, as liquidated
damages and not as penalty.
4.5
Subsequent
Placements.
(a)
From
the
date hereof until the Effective Date, the Company will not, directly or
indirectly, offer, sell, grant any option to purchase, or otherwise dispose
of
(or announce any offer, sale, grant or any option to purchase or other
disposition of) any of its or the Subsidiaries’ equity or equity equivalent
securities, including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for Common
Stock
or Common Stock Equivalents (any such offer, sale, grant, disposition or
announcement being referred to as a “Subsequent
Placement”).
(b)
From
the
Effective Date until 30 Trading Days after the Effective Date (the “Blockout
Period”),
the
Company will not, directly or indirectly, effect any Subsequent Placement
except
as set forth in Section 4.5(e).
(c)
The
Blockout Period set forth in Section 4.5(b) above shall be extended for the
number of Trading Days during such period in which (i) trading in the Common
Stock is suspended by any Trading Market, (ii) the Registration Statement
is not
effective, or (iii) the prospectus included in the Registration Statement
may
not be used by the Purchasers for the resale of Registrable Securities
thereunder.
(d)
From
the
end of the Blockout Period until the one year anniversary thereof, the Company
will not, directly or indirectly, effect any Subsequent Placement unless
the
Company shall have first complied with this Section 4.5(d).
(i)
The
Company shall deliver to each Purchaser a written notice (the "Offer")
of any
proposed or intended issuance or sale or exchange of the securities being
offered (the “Offered
Securities”)
in a
Subsequent Placement, which Offer shall (w) identify and describe the Offered
Securities, (x) describe the price and other terms upon which they are to
be
issued, sold or exchanged, and the number or amount of the Offered Securities
to
be issued, sold or exchanged, (y) identify the Persons or entities to which
or
with which the Offered Securities are to be offered, issued, sold or exchanged
and (z) offer to issue and sell to or exchange with each Purchaser (A) a
pro
rata portion of the Offered Securities based on such Purchaser’s pro rata
portion of the aggregate purchase price paid by the Purchasers for all of
the
Shares purchased hereunder (the "Basic
Amount"),
and
(B) with respect to each Purchaser that elects to purchase its Basic Amount,
any
additional portion of the Offered Securities attributable to the Basic Amounts
of other Purchasers as such Purchaser shall indicate it will purchase or
acquire
should the other Purchasers subscribe for less than their Basic Amounts (the
“Undersubscription
Amount”).
(ii)
To
accept
an Offer, in whole or in part, a Purchaser must deliver a written notice
to the
Company prior to the end of the ten (10) Trading Day period of the Offer,
setting forth the portion of the Purchaser's Basic Amount that such Purchaser
elects to purchase and, if such Purchaser shall elect to purchase all of
its
Basic Amount, the Undersubscription Amount, if any, that such Purchaser elects
to purchase (in either case, the "Notice
of Acceptance").
If
the Basic Amounts subscribed for by all Purchasers are less than the total
of
all of the Basic Amounts, then each Purchaser who has set forth an
Undersubcription Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has subscribed for; provided,
however,
that if
the Undersubscription Amounts subscribed for exceed the difference between
the
total of all the Basic Amounts and the Basic Amounts subscribed for (the
“Available
Undersubscription Amount”),
each
Purchaser who has subscribed for any Undersubscription Amount shall be entitled
to purchase on that portion of the Available Undersubscription Amount as
the
Basic Amount of such Purchaser bears to the total Basic Amounts of all
Purchasers that have subscribed for Undersubscription Amounts, subject to
rounding by the Board of Directors to the extent its deems reasonably
necessary.
(iii)
The
Company shall have five (5) Trading Days from the expiration of the period
set
forth in Section 4.5(d)(ii) above to issue, sell or exchange all or any part
of
such Offered Securities as to which a Notice of Acceptance has not been given
by
the Purchasers (the "Refused
Securities"),
but
only to the offerees described in the Offer and only upon terms and conditions
(including, without limitation, unit prices and interest rates) that are
not
more favorable to the acquiring Person or Persons or less favorable to the
Company than those set forth in the Offer.
(iv)
In
the
event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section
4.5(d)(iii) above), then each Purchaser may, at its sole option and in its
sole
discretion, reduce the number or amount of the Offered Securities specified
in
its Notice of Acceptance to an amount that shall be not less than the number
or
amount of the Offered Securities that the Purchaser elected to purchase pursuant
to Section 4.5(d)(ii) above multiplied by a fraction, (i) the numerator of
which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Purchasers pursuant to Section 4.5(c)(ii) above prior to such
reduction) and (ii) the denominator of which shall be the original amount
of the
Offered Securities. In the event that any Purchaser so elects to reduce the
number or amount of Offered Securities specified in its Notice of Acceptance,
the Company may not issue, sell or exchange more than the reduced number
or
amount of the Offered Securities unless and until such securities have again
been offered to the Purchasers in accordance with Section 4.5(d)(i)
above.
(v)
Upon
the
closing of the issuance, sale or exchange of all or less than all of the
Refused
Securities, the Purchasers shall acquire from the Company, and the Company
shall
issue to the Purchasers, the number or amount of Offered Securities specified
in
the Notices of Acceptance, as reduced pursuant to Section 4.5(d)(iv) above
if
the Purchasers have so elected, upon the terms and conditions specified in
the
Offer. The purchase by the Purchasers of any Offered Securities is subject
in
all cases to the preparation, execution and delivery by the Company and the
Purchasers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Purchasers and their
respective counsel. Notwithstanding anything to the contrary contained in
this
Agreement, if the Company does not consummate the closing of the issuance,
sale
or exchange of all or less than all of the Refused Securities within seven
(7)
Trading Days of the expiration of the period set forth in Section
4.5(d)(ii),
the
Company shall issue to the Purchasers the number or amount of Offered Securities
specified in the Notices of Acceptance, as reduced pursuant to Section
4.5(d)(iv)
above if
the Purchasers have so elected, upon the terms and conditions specified in
the
Offer.
(vi)
Any
Offered Securities not acquired by the Purchasers or other persons in accordance
with Section 4.5(d)(iii) above may not be issued, sold or exchanged until
they
are again offered to the Purchasers under the procedures specified in this
Agreement.
(vii)
Notwithstanding
anything to the contrary in this Section 4.5 and unless otherwise agreed
to by
the Purchasers, the Company shall either confirm in writing to the Purchasers
that the transaction with respect to the Subsequent Placement has been abandoned
or shall publicly disclose its intention to issue the Offered Securities,
in
either case in such a manner such that the Purchasers will not be in possession
of material non-public information, by the 10th
Trading
Day following delivery of the Offer notice. If by the 10th
Trading
Day following the Offer notice no public disclosure regarding a transaction
with
respect to the Offered Securities has been made, and no notice regarding
the
abandonment of such transaction has been received by the Purchasers, such
transaction shall be deemed to have been abandoned and the Purchasers shall
not
be deemed to be in possession of any material non-public information with
respect to the Company. Should the Company decide to pursue such transaction
with respect to the Offered Securities, the Company shall provide each Purchaser
with another Offer notice and each Purchaser will again have the right of
participation set forth in this Section 4.5. The Company shall not be permitted
to deliver more than four such Offer notices to the Purchasers in any 12
month
period.
(e)
The
restrictions contained in paragraphs (a), (b) and (d) of this Section 4.5
shall
not apply to Excluded Stock.
4.6
Securities
Laws Disclosure; Publicity.
The
Company shall, on or before 8:30 a.m., New York City time on March 12, 2007,
issue a press release acceptable to the Purchasers disclosing all material
terms
of the transactions contemplated hereby. Prior to the second Business Day
after
the Closing Date, the Company shall file a Current Report on Form 8-K with
the
Commission (the “8-K
Filing”) describing
the terms of the transactions contemplated by the Transaction Documents and
including as exhibits to such Current Report on Form 8-K this Agreement and
the
form of Warrant, in the form required by the Exchange Act. Thereafter, the
Company shall timely file any filings and notices required by the Commission
or
applicable law with respect to the transactions contemplated hereby and provide
copies thereof to the Purchasers promptly after filing. Except
with respect to the 8-K Filing and the press release referenced above (a
copy of
which will be provided to the Purchasers for their review as early as
practicable prior to its filing), the
Company
shall, at least two Trading Days prior to the filing or dissemination of
any
disclosure required by this paragraph that does not contain any material
non-public information, provide a copy thereof to the Purchasers for their
review. The Company and the Purchasers shall consult with each other in issuing
any press releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or Trading Market
with respect to the transactions contemplated hereby, and neither party shall
issue any such press release or otherwise make any such public statement,
filing
or other communication without the prior consent of the other, except if
such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement, filing
or
other communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except to the
extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or Trading Market regulations, in which case
the
Company shall provide the Purchasers with prior notice of such disclosure.
The
Company shall not, and shall cause each of its Subsidiaries and its and each
of
their respective officers, directors, employees and agents not to, provide
any
Purchaser with any material nonpublic information regarding the Company or
any
of its Subsidiaries from and after the filing of the 8-K Filing without the
express written consent of such Purchaser. In the event of a breach of the
foregoing covenant by the Company, any of its Subsidiaries, or any of its
or
their respective officers, directors, employees and agents, in addition to
any
other remedy provided herein or in the Transaction Documents, a Purchaser
shall
have the right to make a public disclosure, in the form of a press release,
public advertisement or otherwise, of such material nonpublic information
without the prior approval by the Company, its Subsidiaries, or any of its
or
their respective officers, directors, employees or agents. No Purchaser shall
have any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents for any
such
disclosure. Subject to the foregoing, neither the Company nor any Purchaser
shall issue any press releases or any other public statements with respect
to
the transactions contemplated hereby; provided, however, that the Company
shall
be entitled, without the prior approval of any Purchaser, to make any press
release or other public disclosure with respect to such transactions (i)
in
substantial conformity with the 8-K Filing and contemporaneously therewith
and
(ii) as is required by applicable law and regulations (provided that in the
case
of clause (i) each Purchaser shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its
release).
4.7
Use
of
Proceeds.
Except
as set forth on Schedule
4.7,
the
Company shall use the net proceeds from the sale of the Securities hereunder
for
working capital purposes and other general corporate purposes, but not (i)
for
the satisfaction of any portion of the Company’s debt (other than payment of
trade payables and accrued expenses in the ordinary course of the Company’s
business and consistent with past practice), (ii) to redeem any Company equity
or equity-equivalent securities, or (iii) to settle any outstanding litigation.
4.8
Reimbursement.
If any
Purchaser or any of its Affiliates or any officer, director, partner,
controlling Person, employee or agent of a Purchaser or any of its Affiliates
(a
“Related
Person”)
becomes involved in any capacity in any Proceeding brought by or against
any
Person in connection with or as a result of the transactions contemplated
by the
Transaction Documents, the Company will indemnify and hold harmless such
Purchaser or Related Person for its reasonable legal and other expenses
(including the costs of any investigation, preparation and travel) and for
any
Losses incurred in connection therewith, as such expenses or Losses are
incurred, excluding only Losses that result directly from such Purchaser’s or
Related Person’s gross negligence or willful misconduct. In addition, the
Company shall indemnify and hold harmless each Purchaser and Related Person
from
and against any and all Losses, as incurred, arising out of or relating to
any
breach by the Company of any of the representations, warranties or covenants
made by the Company in this Agreement or any other Transaction Document,
or any
allegation by a third party that, if true, would constitute such a breach.
The
conduct of any Proceedings for which indemnification is available under this
paragraph shall be governed by Section 6.4(c) below. The indemnification
obligations of the Company under this paragraph shall be in addition to any
liability that the Company may otherwise have and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Purchasers and any such Related Persons. If the Company
breaches its obligations under any Transaction Document, then, in addition
to
any other liabilities the Company may have under any Transaction Document
or
applicable law, the Company shall pay or reimburse the Purchasers on demand
for
all costs of collection and enforcement (including reasonable attorneys fees
and
expenses). Without limiting the generality of the foregoing, the Company
specifically agrees to reimburse the Purchasers on demand for all costs of
enforcing the indemnification obligations in this paragraph. To the extent
that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. Except as otherwise set forth herein, the mechanics and procedures with
respect to the rights and obligations under this Section 4.8 shall be the
same
as those set forth in Section 6.4(c) below.
4.9
Acknowledgment
of Dilution.
The
Company acknowledges that the issuance of the Securities (including the
Underlying Shares) will result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions.
The
Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Securities
(including the Underlying Shares) pursuant to the Transaction Documents,
are
unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim that the Company may have against any Purchaser. Anything in
this
Agreement or elsewhere herein to the contrary notwithstanding, it is understood
and agreed by the Company (i) that none of the Purchasers have been asked
to
agree, nor has any Purchaser agreed, to desist from purchasing or selling,
long
and/or short, securities of the Company, or “derivative” securities based on
securities issued by the Company or to hold the Securities for any specified
term; (ii) that future open market or other transactions by any Purchaser,
including short sales, and specifically including, without limitation, short
sales or “derivative” transactions, before or after the closing of this or
future private placement transactions, may negatively impact the market price
of
the Company’s publicly traded securities; (iii) that any Purchaser, and counter
parties in “derivative” transactions to which any such Purchaser is a party,
directly or indirectly, presently may have a “short” position in the Common
Stock; and (iv) that each Purchaser shall not be deemed to have any affiliation
with or control over any arm’s length counter party in any “derivative”
transaction.
ARTICLE
V
CONDITIONS
5.1
Conditions
Precedent to the Obligations of the Purchasers.
The
obligation of each Purchaser to acquire Securities at the Closing is subject
to
the satisfaction or waiver by such Purchaser, at or before the Closing, of
each
of the following conditions:
(a)
Representations
and Warranties.
The
representations and warranties of the Company contained herein shall be true
and
correct in all material respects as of the date when made and as of the Closing
as though made on and as of such date;
(b)
Performance.
The
Company and each other Purchaser shall have performed, satisfied and complied
in
all material respects with all covenants, agreements and conditions required
by
the Transaction Documents to be performed, satisfied or complied with by
it at
or prior to the Closing;
(c)
No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction
shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any
of
the transactions contemplated by the Transaction Documents;
(d)
Adverse
Changes.
Since
the date of execution of this Agreement, no event or series of events shall
have
occurred that reasonably would be expected to have or result in a Material
Adverse Effect; and
(e)
No
Suspensions of Trading in Common Stock; Listing.
Trading
in the Common Stock shall not have been suspended by the Commission or any
Trading Market (except for any suspensions of trading of not more than one
Trading Day solely to permit dissemination of material information regarding
the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for trading
on
an Eligible Market;
5.2
Conditions
Precedent to the Obligations of the Company.
The
obligation of the Company to sell Securities at the Closing is subject to
the
satisfaction or waiver by the Company, at or before the Closing, of each
of the
following conditions:
(a)
Representations
and Warranties.
The
representations and warranties of the Purchasers contained herein shall be
true
and correct in all material respects as of the date when made and as of the
Closing Date as though made on and as of such date;
(b)
Performance.
The
Purchasers shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Purchasers at
or
prior to the Closing; and
(c)
No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction
shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any
of
the transactions contemplated by the Transaction Documents.
ARTICLE
VI
REGISTRATION
RIGHTS
6.1
Shelf
Registration
(a)
As
promptly as possible, and in any event on or prior to the Filing Date, the
Company shall prepare and file with the Commission a “Shelf” Registration
Statement covering the resale of all Registrable Securities for an offering
to
be made on a continuous basis pursuant to Rule 415. The Registration Statement
shall be on Form S-3 (except if the Company is not then eligible to register
for
resale the Registrable Securities on Form S-3, in which case such registration
shall be on Form SB-2) and shall contain (except if otherwise directed by
the
Purchasers) the “Plan of Distribution” attached hereto as Exhibit
C.
(b)
The
Company shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective by the Commission as promptly as possible
after the filing thereof, but in any event prior to the Required Effectiveness
Date, and shall use its commercially reasonable efforts to keep the Registration
Statement continuously effective under the Securities Act until the earlier
of
(i) the second anniversary of the Effective Date, (ii) the date when all
Registrable Securities covered by such Registration Statement have been sold
publicly, or (iii) the date on which the Registrable Securities are eligible
for
sale without registration pursuant to subparagraph (k) of Rule 144 (the
“Effectiveness
Period”).
The
Company shall notify each Purchaser in writing promptly (and in any event
within
one Business Day) after receiving notification from the Commission that the
Registration Statement has been declared effective.
(c)
As
promptly as possible, and in any event no later than the Post-Effective
Amendment Filing Deadline, the Company shall prepare and file with the
Commission a Post-Effective Amendment. The Company shall use its commercially
reasonable efforts to cause the Post-Effective Amendment to be declared
effective by the Commission as promptly as possible after the filing thereof,
but in any event prior to the 15th
Trading
Day following the Post-Effective Amendment Filing Deadline. The Company shall
notify each Purchaser in writing promptly (and in any event within one Business
Day) after receiving notification from the Commission that the Post-Effective
Amendment has been declared effective.
(d)
If:
(i)
any Registration Statement is not filed on or prior to the Filing Date or
a
Post-Effective Amendment is not filed on or prior to the Post-Effective
Amendment Filing Deadline (if the Company files such Registration Statement
or
amendment without affording the Purchasers the opportunity to review and
comment
on the same as required by Section 6.2(a) hereof, the Company shall not be
deemed to have satisfied this clause (i)), or (ii) the Company fails to file
with the Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act, within five Trading Days after the
date
that the Company is notified (orally or in writing, whichever is earlier)
by the
Commission that a Registration Statement will not be “reviewed,” or will not be
subject to further review, or (iii) the Company fails to respond to any comments
made by the Commission within 10 Trading Days after the receipt of such
comments, or (iv) a Registration Statement filed hereunder is not declared
effective by the Commission by the Required Effectiveness Date or a
Post-Effective Amendment is not declared effective on or prior to the
15th
Trading
Day following the Post-Effective Amendment Filing Deadline, or (v) except
as
provided in Section 6.1(g), after a Registration Statement is filed with
and
declared effective by the Commission, such Registration Statement ceases
to be
effective as to all Registrable Securities to which it is required to relate
at
any time prior to the expiration of the Effectiveness Period without being
succeeded within 10 Trading Days by an amendment to such Registration Statement
or by a subsequent Registration Statement filed with and declared effective
by
the Commission, or (vi) except as provided in Section 6.1(g), an amendment
to a
Registration Statement is not filed by the Company with the Commission within
ten Trading Days after the Commission’s having notified the Company that such
amendment is required in order for such Registration Statement to be declared
effective, or (vii) the Common Stock is not listed or quoted, or is suspended
from trading on its Trading Market for a period of three Trading Days (which
need not be consecutive Trading Days), or (viii) the exercise rights of the
Purchasers pursuant to the Warrants are suspended for any reason (any such
failure or breach being referred to as an “Event,”
and
for purposes of clause (i), (iv) or (viii) the date on which such Event occurs,
or for purposes of clause (ii) the date on which such five Trading Day period
is
exceeded, or for purposes of clauses (iii), (v) or (vi) the date which such
ten
Trading Day-period is exceeded, or for purposes of clause (vii) the date
on
which such three Trading Day period is exceeded, being referred to as
“Event
Date”),
then:
(x) on each such Event Date the Company shall pay to each Purchaser an amount
in
cash, as partial liquidated damages and not as a penalty, equal to 1% of
the
aggregate purchase price paid by such Purchaser pursuant to this Agreement;
and
(y) on each monthly anniversary of each such Event Date thereof (if the
applicable Event shall not have been cured by such date) until the applicable
Event is cured, the Company shall pay to each Purchaser an amount in cash,
as
partial liquidated damages and not as a penalty, equal to 1% of the aggregate
purchase price paid by such Purchaser pursuant to the Purchase Agreement;
provided, however the maximum aggregate amount that may be assessed under
this
Section 6.1(d) for all Events shall not exceed 10% of the aggregate purchase
price paid by such Purchaser pursuant to this Agreement. Such payments shall
be
in partial compensation to the Purchasers and shall not constitute the
Purchaser’s exclusive remedy for such events. If the Company fails to pay any
liquidated damages pursuant to this Section in full within seven days after
the
date payable, the Company will pay interest thereon at a rate of 18% per
annum
(or such lesser maximum amount that is permitted to be paid by applicable
law)
to the Purchaser, accruing daily from the date such liquidated damages are
due
until such amounts, plus all such interest thereon, are paid in full.
Notwithstanding anything herein to the contrary, to the extent that the
registration of any or all of the Registrable Securities by the Company on
a
registration statement is prohibited (the “Non-Registered Shares”) as a result
of rules, regulations, positions or releases issued or actions taken by the
Commission pursuant to its authority with respect to Rule 415 and the Company
has registered at such time the maximum number of Registrable Securities
permissible upon consultation with the Commission, then the liquidated damages
described in this Section 6.1(d) shall not be applicable to such Non-Registered
Shares.
(e)
The
Company shall not, prior to the Effective Date of the Registration Statement,
prepare and file with the Commission a registration statement relating to
an
offering for its own account or the account of others (other than as
contemplated in the Transaction Documents) under the Securities Act of any
of
its equity securities.
(f)
If
the
Company issues to the Purchasers any Common Stock pursuant to the Transaction
Documents that is not included in the initial Registration Statement, then
the
Company shall file an additional Registration Statement covering such number
of
shares of Common Stock on or prior to the Filing Date and shall use its
commercially reasonable efforts to cause such additional Registration Statement
to become effective by the Commission.
(g)
Suspension
Period.
Notwithstanding anything in this Agreement to the contrary, after 60 consecutive
Trading Days of continuous effectiveness of the initial Registration Statement
filed and declared effective pursuant to this Agreement, the Company may,
by
written notice to the Purchasers, suspend sales under a Registration Statement
after the Effective Date thereof and/or require that the Purchasers immediately
cease the sale of shares of Common Stock pursuant thereto and/or defer the
filing of any subsequent Registration Statement if the Company is engaged
in a
material merger, acquisition or sale and the Board of Directors determines
in
good faith, by appropriate resolutions, that, as a result of such activity,
(A)
it would be materially detrimental to the Company (other than as relating
solely
to the price of the Common Stock) to file a Registration Statement at such
time
and (B) it is in the best interests of the Company to defer proceeding with
such
registration at such time. Upon receipt of such notice, each Purchaser shall
immediately discontinue any sales of Registrable Securities pursuant to such
registration until such Purchaser has received copies of a supplemented or
amended Prospectus or until such Purchaser is advised in writing by the Company
that the then-current Prospectus may be used and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in such Prospectus. In no event, however, shall this right be
exercised to suspend sales beyond the period during which (in the good faith
determination of the Company’s Board of Directors) the failure to require such
suspension would be materially detrimental to the Company. The Company’s rights
under this Section 6.1(g) may not be exercised more than (2) times or 30
days in
the aggregate in any twelve month period; provided, further, that no such
suspension shall be permitted for more than twenty (20) consecutive days,
arising out of the same set of facts, circumstances or transactions. Immediately
after the end of any suspension period under this Section 6.1(g), the Company
shall take all necessary actions (including filing any required supplemental
prospectus) to restore the effectiveness of the applicable Registration
Statement and the ability of the Purchasers to publicly resell their Registrable
Securities pursuant to such effective Registration Statement.
6.2
Registration
Procedures.
In
connection with the Company's registration obligations hereunder, the Company
shall:
(a)
Not
less
than three Trading Days prior to the filing of a Registration Statement or
any
related Prospectus or any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein
by
reference), the Company shall (i) furnish to each Purchaser and any counsel
designated by any Purchaser (each, a “Purchaser
Counsel”,
and
Iroquois Master Fund Ltd. has initially designated Malhotra & Associates LLP
“LP
Counsel”)
copies
of all such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to
the
review of each Purchaser and Purchaser Counsel upon their request and on
a
confidential basis strictly in accordance with Regulation FD promulgated
pursuant to the Exchange Act, and (ii) cause its officers and directors,
counsel
and independent certified public accountants to respond to such inquiries
as
shall be necessary, in the reasonable opinion of respective counsel, to conduct
a reasonable investigation within the meaning of the Securities Act. The
Company
shall not file a Registration Statement or any such Prospectus or any amendments
or supplements thereto to which Purchasers holding a majority of the Registrable
Securities shall reasonably object.
(b)
(i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to each Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period and prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all of
the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented
or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably possible, and in any event within ten days, to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as reasonably possible provide the Purchasers true
and
complete copies of all correspondence from and to the Commission relating
to the
Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Purchasers thereof set forth in the Registration Statement
as
so amended or in such Prospectus as so supplemented
(c)
Notify
the Purchasers of Registrable Securities to be sold and Purchaser Counsel
as
promptly as reasonably possible, and (if requested by any such Person) confirm
such notice in writing no later than one Trading Day thereafter, of any of
the
following events: (i) the Commission notifies the Company whether there will
be
a “review” of any Registration Statement; (ii) the Commission comments in
writing on any Registration Statement (in which case the Company shall deliver
to each Purchaser a copy of such comments and of all written responses thereto);
(iii) any Registration Statement or any post-effective amendment is declared
effective; (iv) the Commission or any other Federal or state governmental
authority requests any amendment or supplement to any Registration Statement
or
Prospectus or requests additional information related thereto; (v) the
Commission issues any stop order suspending the effectiveness of any
Registration Statement or initiates any Proceedings for that purpose; (vi)
the
Company receives notice of any suspension of the qualification or exemption
from
qualification of any Registrable Securities for sale in any jurisdiction,
or the
initiation or threat of any Proceeding for such purpose; or (vii) the financial
statements included in any Registration Statement become ineligible for
inclusion therein or any statement made in any Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein
by
reference is untrue in any material respect or any revision to a Registration
Statement, Prospectus or other document is required so that it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in
the light of the circumstances under which they were made, not
misleading.
(d)
Use
its
commercially reasonable efforts to avoid the issuance of or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of any Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, as soon as possible.
(e)
Furnish
to each Purchaser and Purchaser Counsel, without charge, at least one conformed
copy of each Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed
to be
incorporated therein by reference, and all exhibits to the extent requested
by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(f)
Promptly
deliver to each Purchaser and Purchaser Counsel, without charge, as many
copies
of the Prospectus or Prospectuses (including each form of prospectus) and
each
amendment or supplement thereto as such Persons may reasonably request. The
Company hereby consents to the use of such Prospectus and each amendment
or
supplement thereto by each of the selling Purchasers in connection with the
offering and sale of the Registrable Securities covered by such Prospectus
and
any amendment or supplement thereto.
(g)
(i) In
the time and manner required by each Trading Market, prepare and file with
such
Trading Market an additional shares listing application covering all of the
Registrable Securities; (ii) take all steps necessary to cause such Registrable
Securities to be approved for listing on each Trading Market as soon as possible
thereafter; (iii) provide to the Purchasers evidence of such listing; and
(iv)
maintain the listing of such Registrable Securities on each such Trading
Market
or another Eligible Market.
(h)
Prior
to
any public offering of Registrable Securities, use its reasonable commercially
reasonable efforts to register or qualify or cooperate with the selling
Purchasers and each applicable Purchaser Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States
as
any Purchaser requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness
Period
and to do any and all other acts or things necessary or advisable to enable
the
disposition in such jurisdictions of the Registrable Securities covered by
a
Registration Statement.
(i)
Cooperate
with the Purchasers to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee
pursuant to a Registration Statement, which certificates shall be free, to
the
extent permitted by this Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in
such
names as any such Purchasers may request.
(j)
Upon
the
occurrence of any event described in Section 6.2(c)(vii), as promptly as
reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to
the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(k)
Cooperate
with any due diligence investigation undertaken by the Purchasers in connection
with the sale of Registrable Securities, including, without limitation, by
making available any documents and information; provided that the Company
will
not deliver or make available to any Purchaser material, nonpublic information
unless such Purchaser specifically requests in advance to receive material,
nonpublic information in writing.
(l)
If
Holders of a majority of the Registrable Securities being offered pursuant
to a
Registration Statement select underwriters for the offering, the Company
shall
enter into and perform its obligations under an underwriting agreement, in
usual
and customary form, including, without limitation, by providing customary
legal
opinions, comfort letters and indemnification and contribution
obligations.
(m)
Comply
with all applicable rules and regulations of the Commission.
6.3
Registration
Expenses.
The
Company shall pay (or reimburse the Purchasers for) all fees and expenses
incident to the performance of or compliance with this Agreement by the Company,
including without limitation (a) all registration and filing fees and expenses,
including without limitation those related to filings with the Commission,
any
Trading Market and in connection with applicable state securities or Blue
Sky
laws, (b) printing expenses (including without limitation expenses of printing
certificates for Registrable Securities and of printing prospectuses requested
by the Purchasers), (c) messenger, telephone and delivery expenses, (d) fees
and
disbursements of counsel for the Company, (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, and (f) all listing fees to
be paid
by the Company to the Trading Market.
6.4
Indemnification
(a)
Indemnification
by the Company.
The
Company shall, notwithstanding any termination of this Agreement, indemnify
and
hold harmless each Purchaser, the officers, directors, partners, members,
agents, brokers (including brokers who offer and sell Registrable Securities
as
principal as a result of a pledge or any failure to perform under a margin
call
of Common Stock), investment advisors and employees of each of them, each
Person
who controls any such Purchaser (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers, directors,
partners, members, agents and employees of each such controlling Person,
to the
fullest extent permitted by applicable law, from and against any and all
Losses,
as incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or
form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, except to the extent, but only to the
extent, that (i) such untrue statements, alleged untrue statements, omissions
or
alleged omissions are based solely upon information regarding such Purchaser
furnished in writing to the Company by such Purchaser expressly for use therein,
or to the extent that such information relates to such Purchaser or such
Purchaser's proposed method of distribution of Registrable Securities and
was
reviewed and expressly approved in writing by such Purchaser expressly for
use
in the Registration Statement, such Prospectus or such form of Prospectus
or in
any amendment or supplement thereto or (ii) in the case of an occurrence
of an
event of the type specified in Section 6.2(c)(v)-(vii), the use by such
Purchaser of an outdated or defective Prospectus after the Company has notified
such Purchaser in writing that the Prospectus is outdated or defective and
prior
to the receipt by such Purchaser of the Advice contemplated in Section 6.5.
The
Company shall notify the Purchasers promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with
the
transactions contemplated by this Agreement.
(b)
Indemnification
by Purchasers.
Each
Purchaser shall, severally and not jointly, indemnify and hold harmless the
Company, its directors, officers, agents and employees, each Person who controls
the Company (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, agents or employees
of
such controlling Persons, to the fullest extent permitted by applicable law,
from and against all Losses (as determined by a court of competent jurisdiction
in a final judgment not subject to appeal or review) arising solely out of
any
untrue statement of a material fact contained in the Registration Statement,
any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of any omission of a material fact required
to be
stated therein or necessary to make the statements therein (in the case of
any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading to the extent, but
only
to the extent, that such untrue statement or omission is contained in any
information so furnished in writing by such Purchaser to the Company
specifically for inclusion in such Registration Statement or such Prospectus
or
to the extent that (i) such untrue statements or omissions are based solely
upon
information regarding such Purchaser furnished in writing to the Company
by such
Purchaser expressly for use therein, or to the extent that such information
relates to such Purchaser or such Purchaser's proposed method of distribution
of
Registrable Securities and was reviewed and expressly approved in writing
by
such Purchaser expressly for use in the Registration Statement, such Prospectus
or such form of Prospectus or in any amendment or supplement thereto or (ii)
in
the case of an occurrence of an event of the type specified in Section
6.2(c)(v)-(vii),
the use
by such Purchaser of an outdated or defective Prospectus after the Company
has
notified such Purchaser in writing that the Prospectus is outdated or defective
and prior to the receipt by such Purchaser of the Advice contemplated in
Section
6.5.
In no
event shall the liability of any selling Purchaser hereunder be greater in
amount than the dollar amount of the net proceeds received by such Purchaser
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c)
Conduct
of Indemnification Proceedings.
If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an “Indemnified
Party”),
such
Indemnified Party shall promptly notify the Person from whom indemnity is
sought
(the “Indemnifying
Party”)
in
writing, and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party
and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such
notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall
be
finally determined by a court of competent jurisdiction (which determination
is
not subject to appeal or further review) that such failure shall have
proximately and materially adversely prejudiced the Indemnifying
Party.
An
Indemnified Party shall have the right to employ separate counsel in any
such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees
and
expenses; or (ii) the Indemnifying Party shall have failed promptly to assume
the defense of such Proceeding and to employ counsel reasonably satisfactory
to
such Indemnified Party in any such Proceeding; or (iii) the named parties
to any
such Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that a conflict of interest is likely to exist if the
same
counsel were to represent such Indemnified Party and the Indemnifying Party
(in
which case, if such Indemnified Party notifies the Indemnifying Party in
writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Indemnifying Party).
The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent
of the
Indemnified Party, effect any settlement of any pending Proceeding in respect
of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All
fees
and expenses of the Indemnified Party (including reasonable fees and expenses
to
the extent incurred in connection with investigating or preparing to defend
such
Proceeding in a manner not inconsistent with this Section) shall be paid
to the
Indemnified Party, as incurred, within ten Trading Days of written notice
thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent
it is
finally judicially determined that such Indemnified Party is not entitled
to
indemnification hereunder).
(d)
Contribution.
If a
claim for indemnification under Section
6.4(a)
or
(b)
is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party
as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as
well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference
to,
among other things, whether any action in question, including any untrue
or
alleged untrue statement of a material fact or omission or alleged omission
of a
material fact, has been taken or made by, or relates to information supplied
by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a
result
of any Losses shall be deemed to include, subject to the limitations set
forth
in Section
6.4(c),
any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been
indemnified for such fees or expenses if the indemnification provided for
in
this Section was available to such party in accordance with its
terms.
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section
6.4(d)
were
determined by pro rata allocation or by any other method of allocation that
does
not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
6.4(d), no Purchaser shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the proceeds actually received by
such
Purchaser from the sale of the Registrable Securities subject to the Proceeding
exceeds the amount of any damages that such Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.
6.5
Dispositions.
Each
Purchaser agrees that it will comply with the prospectus delivery requirements
of the Securities Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement. Each Purchaser
further agrees that, upon receipt of a notice from the Company of the occurrence
of any event of the kind described in Sections
6.2(c)(v),
(vi)
or
(vii),
such
Purchaser will discontinue disposition of such Registrable Securities under
the
Registration Statement until such Purchaser's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated
by
Section
6.2(j),
or
until it is advised in writing (the “Advice”)
by the
Company that the use of the applicable Prospectus may be resumed, and, in
either
case, has received copies of any additional or supplemental filings that
are
incorporated or deemed to be incorporated by reference in such Prospectus
or
Registration Statement. The Company may provide appropriate stop orders and
stop
transfer instructions to enforce the provisions of this paragraph.
6.6
No
Piggyback on Registrations.
Neither
the Company nor any of its security holders (other than the Purchasers in
such
capacity pursuant hereto) may include securities of the Company in the
Registration Statement other than the Registrable Securities, and the Company
shall not after the date hereof enter into any agreement providing any such
right to any of its security holders.
6.7
Piggy-Back
Registrations.
If at
any time during the Effectiveness Period there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under
the
Securities Act of any of its equity securities, other than on Form S-4 or
Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Purchaser written notice of such determination and if,
within
fifteen days after receipt of such notice, any such Purchaser shall so request
in writing, the Company shall include in such registration statement all
or any
part of such Registrable Securities such Purchaser requests to be
registered.
ARTICLE
VII
MISCELLANEOUS
7.1
Termination.
This
Agreement may be terminated by the Company or any Purchaser, by written notice
to the other parties, if the Closing has not been consummated by the third
Trading Day following the date of this Agreement; provided that no such
termination will affect the right of any party to xxx for any breach by the
other party (or parties).
7.2
Fees
and Expenses.
At the
Closing, the Company shall pay to Iroquois Master Fund Ltd. an aggregate
of
$30,000 for their legal fees and expenses incurred in connection with the
preparation and negotiation of this Agreement, of which amount $20,000 has
been
previously paid by the Company. In lieu of the foregoing remaining payment,
Iroquois Master Fund Ltd. may retain such amount at the Closing. Except as
expressly set forth in the Transaction Documents to the contrary, each party
shall pay the fees and expenses of its advisers, counsel, accountants and
other
experts, if any, and all other expenses incurred by such party incident to
the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all transfer agent fees, stamp taxes and other taxes
and
duties levied in connection with the issuance of the Securities.
7.3
Entire
Agreement.
The
Transaction Documents, together with the Exhibits and Schedules thereto,
contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules. At or after the Closing, and
without further consideration, the Company will execute and deliver to the
Purchasers such further documents as may be reasonably requested in order
to
give practical effect to the intention of the parties under the Transaction
Documents.
7.4
Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this Section
prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading
Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number specified in this Section on a day
that is
not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
Day, (c) the Trading Day following the date of deposit with a nationally
recognized overnight courier service, or (d) upon actual receipt by the party
to
whom such notice is required to be given. The addresses and facsimile numbers
for such notices and communications are those set forth on the signature
pages
hereof, or such other address or facsimile number as may be designated in
writing hereafter, in the same manner, by any such Person.
7.5
Amendments;
Waivers.
No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and Purchasers
holding a majority of the Shares or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement
shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof,
nor
shall any delay or omission of either party to exercise any right hereunder
in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to
a
matter that relates exclusively to the rights of Purchasers under Article
VI
and that
does not directly or indirectly affect the rights of other Purchasers may
be
given by Purchasers holding at least a majority of the Registrable Securities
to
which such waiver or consent relates.
7.6
Construction.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
7.7
Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Purchasers. Any Purchaser may assign its rights under this
Agreement to any Person to whom such Purchaser assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with
respect
to the transferred Securities, by the provisions hereof that apply to the
“Purchasers.” Notwithstanding anything to the contrary herein, Securities may be
assigned to any Person in connection with a bona fide margin account or other
loan or financing arrangement secured by such Securities.
7.8
No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except that each Related
Person is an intended third party beneficiary of Section 4.8 and each
Indemnified Party is an intended third party beneficiary of Section 6.4 and
(in
each case) may enforce the provisions of such Sections directly against the
parties with obligations thereunder.
7.9
Governing
Law; Venue; Waiver Of Jury Trial.
ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANY AND PURCHASERS HEREBY
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS
SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION
OF
ANY DISPUTE BROUGHT BY THE COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION
HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN
(INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS),
AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION
OR
PROCEEDING BROUGHT BY THE COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS
NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT,
ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL
SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT,
ACTION
OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL
OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS
IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE
SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND PURCHASERS HEREBY WAIVE ALL
RIGHTS TO A TRIAL BY JURY.
7.10
Survival.
The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery and/or exercise of the Securities, as
applicable.
7.11
Execution.
This
Agreement may be executed in two or more counterparts, all of which when
taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered
to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation
of the
party executing (or on whose behalf such signature is executed) with the
same
force and effect as if such facsimile signature page were an original
thereof.
7.12
Severability.
If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that
is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
7.13
Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever any Purchaser
exercises a right, election, demand or option under a Transaction Document
and
the Company does not timely perform its related obligations within the periods
therein provided, then such Purchaser may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to its future
actions and rights.
7.14
Replacement
of Securities.
If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction
and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement
Securities.
7.15
Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages each of the Purchasers and the Company
will
be entitled to specific performance under the Transaction Documents. The
parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of
any such obligation the defense that a remedy at law would be
adequate.
7.16
Payment
Set Aside.
To the
extent that the Company makes a payment or payments to any Purchaser hereunder
or pursuant to the Warrants or any Purchaser enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the proceeds of
such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company
by a trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation
or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
7.17
Usury.
To the
extent it may lawfully do so, the Company hereby agrees not to insist upon
or
plead or in any manner whatsoever claim, and will resist any and all efforts
to
be compelled to take the benefit or advantage of, usury laws wherever enacted,
now or at any time hereafter in force, in connection with any claim, action
or
proceeding that may be brought by any Purchaser in order to enforce any right
or
remedy under any Transaction Document. Notwithstanding any provision to the
contrary contained in any Transaction Document, it is expressly agreed and
provided that the total liability of the Company under the Transaction Documents
for payments in the nature of interest shall not exceed the maximum lawful
rate
authorized under applicable law (the “Maximum
Rate”),
and,
without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in
the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the
maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate of interest applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law. If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any Purchaser with
respect to indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance of any
such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser’s election.
7.18
Adjustments
in Share Numbers and Prices.
In the
event of any stock split, subdivision, dividend or distribution payable in
shares of Common Stock (or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly shares of
Common
Stock), combination or other similar recapitalization or event occurring
after
the date hereof, each reference in any Transaction Document to a number of
shares or a price per share shall be amended to appropriately account for
such
event.
7.19
Independent
Nature of Purchasers' Obligations and Rights.
The
obligations of each Purchaser under any Transaction Document are several
and not
joint with the obligations of any other Purchaser, and no Purchaser shall
be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser
to
purchase Securities pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Company or of the Subsidiary which may have
been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have
any
liability to any other Purchaser (or any other Person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a
group
with respect to such obligations or the transactions contemplated by the
Transaction Document. The Company hereby confirms that it understands that
the
Purchasers are not acting as a “group” as that term is used in Section 13(d) of
the Exchange Act. Each Purchaser acknowledges that no other Purchaser has
acted
as agent for such Purchaser in connection with making its investment hereunder
and that no other Purchaser will be acting as agent of such Purchaser in
connection with monitoring its investment hereunder. Each Purchaser shall
be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser
to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser represents that it has been represented by its own separate legal
counsel in its review and negotiations of this Agreement and the Transaction
Documents and each party represents and confirms that Malhotra & Associates
LLP represents only Iroquois Master Fund Ltd. in connection with this Agreement
and the other Transaction Documents.
[SIGNATURE
PAGES TO FOLLOW]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
Lighting
Science Group Corporation
By: __________________________
Name:
Title:
Address
for Notice:
Lighting
Science Group Corporation
0000
XxXxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx,
Xxxxx 00000
Facsimile
No.: 000.000.0000
Attn:
Xx.
Xxx Xxxx, Chairman & CEO
With
a
copy to:
Xxxxxx
and Xxxxx, LLP
000
Xxxx
Xxxxxx
0000
Xxxx
xx Xxxxxxx Xxxxx
Xxxxxx,
Xxxxx 00000
Facsimile
No.: 000.000.0000
Telephone
No.: 000.000.0000
Attn:
Xxxx. X. Xxxxxx, Esq.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES FOR PURCHASERS FOLLOW]
IROQUOIS
MASTER FUND LTD.
By: __________________________
Name:
Title:
Address
for Notice:
Iroquois
Master Fund Ltd.
000
Xxxxxxxxx Xxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Facsimile
No.: (000) 000-0000
Telephone
No.: (000) 000-0000
Attn:
Xxxxxx Xxxxxxxxx
With
a
copy to:
Malhotra
& Associates LLP
00
Xxxx
Xxxxx, 0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Facsimile
No.: (000) 000-0000
Telephone
No.: (000) 000-0000
Attn:
Xxxx Xxxxxxxx, Esq.
_______________________________________
(Name
of
Purchaser)
By: __________________________
Name:
Title:
Address
for Notice:
___________________
___________________
___________________
Facsimile
No.: ___________________
Telephone
No.: ___________________
Attn:
___________________
Exhibits:
A-1
Form
of
Warrant A
A-2 Form
of
Warrant B
A-3 Form
of
Additional Warrant
B
Form of
Opinion of Company Counsel
C
Plan of
Distribution
D
Form of
Transfer Agent Instructions
E
Lock-Up
Letter
Schedule
A
|
Purchasers
|
Units
|
Warrant
A Shares
|
Warrant
B Shares
|
Additional
Warrant Shares
|
Purchase
Price
|
|
Iroquois
Master Fund, Ltd.
|
|||||
