PURCHASE AGREEMENT
THIS
PURCHASE AGREEMENT (“Agreement”) is made as of the 1st day of February, 2007 by
and among Precision Optics Corporation, Inc., a Massachusetts corporation (the
“Company”), and the Investors set forth on the signature pages affixed hereto
(each an “Investor” and collectively the “Investors”).
Recitals
A. The
Company and the Investors are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation D”), as promulgated by the U.S.
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
as amended; and
B. The
Investors wish to purchase from the Company, and the Company wishes to sell
and
issue to the Investors, upon the terms and conditions stated in this Agreement,
(i) an aggregate of 10,000,000 shares of the Company’s Common Stock, par value
$0.01 per share (together with any securities into which such shares may be
reclassified the “Common Stock”), at purchase price of $0.25 per share, and (ii)
warrants to purchase an aggregate of 10,000,000 shares of Common Stock (subject
to adjustment) at an exercise price of $0.32 per share (subject to adjustment)
in the form attached hereto as Exhibit A (the “Warrants”); and
C. Contemporaneous
with the sale of the Common Stock and Warrants, the parties hereto will execute
and deliver a Registration Rights Agreement, in the form attached hereto as
Exhibit B (the “Registration Rights Agreement”), pursuant to which the Company
will agree to provide certain registration rights under the Securities Act
of
1933, as amended, and the rules and regulations promulgated thereunder, and
applicable state securities laws.
In
consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties hereto agree as follows:
1. Definitions.
In
addition to those terms defined above and elsewhere in this Agreement, for
the
purposes of this Agreement, the following terms shall have the meanings set
forth below:
“Affiliate”
means,
with respect to any Person, any other Person which directly or indirectly
through one or more intermediaries Controls, is controlled by, or is under
common control with, such Person.
“Business
Day”
means
a
day, other than a Saturday or Sunday, on which banks in New York City are open
for the general transaction of business.
“Company’s
Knowledge”
means
the actual knowledge of the executive officers (as defined in Rule 405 under
the
0000 Xxx) of the Company, after due inquiry.
“Confidential
Information”
means
trade secrets, confidential information and know-how (including but not limited
to ideas, formulae, compositions, processes, procedures and techniques, research
and development information, computer program code, performance specifications,
support documentation, drawings, specifications, designs, business and marketing
plans, and customer and supplier lists and related information).
“Control”
(including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
“Effective
Date”
means
the date on which the initial Registration Statement is declared effective
by
the SEC.
“Effectiveness
Deadline”
means
the date on which the initial Registration Statement is required to be declared
effective by the SEC under the terms of the Registration Rights
Agreement.
“Intellectual
Property”
means
all of the following: (i) patents, patent applications, patent disclosures
and
inventions (whether or not patentable and whether or not reduced to practice);
(ii) trademarks, service marks, trade dress, trade names, corporate names,
logos, slogans and Internet domain names, together with all goodwill associated
with each of the foregoing; (iii) copyrights and copyrightable works; (iv)
registrations, applications and renewals for any of the foregoing; and (v)
proprietary computer software (including but not limited to data, data bases
and
documentation).
“Material
Adverse Effect”
means
a
material adverse effect on (i) the assets, liabilities, results of operations,
condition (financial or otherwise), business, or prospects of the Company and
its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform
its obligations under the Transaction Documents.
“Person”
means
an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority or any
other
form of entity not specifically listed herein.
“Purchase
Price”
means
Two Million Five Hundred Thousand Dollars ($2,500,000).
“Registration
Statement”
has
the
meaning set forth in the Registration Rights Agreement.
“SEC
Filings”
has
the
meaning set forth in Section 4.6.
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“Securities”
means
the Shares, the Warrants and the Warrant Shares.
“Shares”
means
the shares of Common Stock being purchased by the Investors
hereunder.
“Subsidiary”
of
any
Person means another Person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if
there
are no such voting interests, 50% or more of the equity interests of which)
is
owned directly or indirectly by such first Person.
“Transaction
Documents”
means
this Agreement, the Warrants and the Registration Rights Agreement.
“Warrant
Shares”
means
the shares of Common Stock issuable upon the exercise of the
Warrants.
“1933
Act”
means
the Securities Act of 1933, as amended, or any successor statute, and the rules
and regulations promulgated thereunder.
“1934
Act”
means
the Securities Exchange Act of 1934, as amended, or any successor statute,
and
the rules and regulations promulgated thereunder.
2. Purchase
and Sale of the Shares and Warrants.
Subject
to the terms and conditions of this Agreement, on the Closing Date, each of
the
Investors shall severally, and not jointly, purchase, and the Company shall
sell
and issue to the Investors, the Shares and Warrants in the respective amounts
set forth opposite the Investors’ names on the signature pages attached hereto
in exchange for the Purchase Price as specified in Section 3 below.
3. Closing.
Upon
confirmation that the other conditions to closing specified herein have been
satisfied or duly waived by the Investors, the Company shall deliver to
Xxxxxxxxxx Xxxxxxx PC, in trust, a certificate or certificates, registered
in
such name or names as the Investors may designate, representing the Shares
and
Warrants, with instructions that such certificates are to be held for release
to
the Investors only upon payment in full of the Purchase Price to the Company
by
all the Investors. Upon such receipt by Xxxxxxxxxx Xxxxxxx PC of the
certificates, each Investor shall promptly, but no more than one Business Day
thereafter, cause a wire transfer in same day funds to be sent to the account
of
the Company as instructed in writing by the Company, in an amount representing
such Investor’s pro rata portion of the Purchase Price as set forth on the
signature pages to this Agreement. On the date (the “Closing Date”) the Company
receives the Purchase Price, the certificates evidencing the Shares and Warrants
shall be released to the Investors (the “Closing”). The Closing of the purchase
and sale of the Shares and Warrants shall take place at the offices of
Xxxxxxxxxx Xxxxxxx PC, 1251 Avenue of the Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000, or at such other location and on such other date as the Company
and
the Investors shall mutually agree.
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4. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Investors that, except as set
forth in the schedules delivered herewith (collectively, the “Disclosure
Schedules”):
4.1 Organization,
Good Standing and Qualification.
Each of
the Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry
on
its business as now conducted and to own its properties. Each of the Company
and
its Subsidiaries is duly qualified to do business as a foreign corporation
and
is in good standing in each jurisdiction in which the conduct of its business
or
its ownership or leasing of property makes such qualification or leasing
necessary unless the failure to so qualify has not had and could not reasonably
be expected to have a Material Adverse Effect. The Company’s Subsidiaries are
listed on Schedule
4.1
hereto.
4.2 Authorization.
The
Company has full power and authority and has taken all requisite action on
the
part of the Company, its officers, directors and stockholders necessary for
(i)
the authorization, execution and delivery of the Transaction Documents, (ii)
the
authorization of the performance of all obligations of the Company hereunder
or
thereunder, and (iii) the authorization, issuance (or reservation for issuance)
and delivery of the Securities.
The
Transaction Documents constitute the legal, valid and binding obligations of
the
Company, enforceable against the Company in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and
similar laws of general applicability, relating to or affecting creditors’
rights generally.
4.3 Capitalization.
The
issued and outstanding shares of Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, were not issued in violation of
or
subject to any preemptive rights or other rights to subscribe for or purchase
securities, and conform in all material respects to the description thereof
contained in the Company’s filings with the SEC. Except as set forth in the
Company’s SEC Filings and except for options and other awards that may be
granted under the Company’s Amended and Restated 1997 Incentive Plan or the
Company's 2006 Equity Incentive Plan, the Company does not have outstanding
any
options to purchase, or any preemptive rights or other rights to subscribe
for
or to purchase, any securities or obligations convertible into, or any contracts
or commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations. Except as contemplated
by this Agreement, neither the Company nor any of its Subsidiaries is currently
in negotiations for the issuance of any equity securities of any kind. Except
as
described on Schedule
4.3
and
except for the Registration Rights Agreement, there are no voting agreements,
buy-sell agreements, option or right of first purchase agreements or other
agreements of any kind among the Company and any of the securityholders of
the
Company relating to the securities of the Company held by them. Except as
described on Schedule
4.3
and
except as provided in the Registration Rights Agreement, no Person has the
right
to require the Company to register any securities of the Company under the
1933
Act, whether on a demand basis or in connection with the registration of
securities of the Company for its own account or for the account of any other
Person.
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Except
as
described on Schedule
4.3,
the
issuance and sale of the Securities hereunder will not obligate the Company
to
issue shares of Common Stock or other securities to any other Person (other
than
the Investors) and will not result in the adjustment of the exercise,
conversion, exchange or reset price of any outstanding security.
Except
as
described on Schedule
4.3,
the
Company does not have outstanding stockholder purchase rights or “poison pill”
or any similar arrangement in effect giving any Person the right to purchase
any
equity interest in the Company upon the occurrence of certain
events.
4.4 Valid
Issuance.
The
Shares have been duly and validly authorized and, when issued and paid for
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable, and shall be free and clear of all encumbrances and restrictions
(other than those created by the Investors), except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities
laws.
The Warrants have been duly and validly authorized. Upon the due exercise of
the
Warrants, the Warrant Shares will be validly issued, fully paid and
non-assessable free and clear of all encumbrances and restrictions, except
for
restrictions on transfer set forth in the Transaction Documents or imposed
by
applicable securities laws and except for those created by the Investors. The
Company has reserved a sufficient number of shares of Common Stock for issuance
upon the exercise of the Warrants, free and clear of all encumbrances and
restrictions, except for restrictions on transfer set forth in the Transaction
Documents or imposed by applicable securities laws and except for those created
by the Investors.
4.5 Consents.
The
execution, delivery and performance by the Company of the Transaction Documents
and the offer, issuance and sale of the Securities require no consent of, action
by or in respect of, or filing with, any Person, governmental body, agency,
or
official other than filings that have been made pursuant to applicable state
securities laws and post-sale filings pursuant to applicable state and federal
securities laws which the Company undertakes to file within the applicable
time
periods. Subject to the accuracy of the representations and warranties of each
Investor set forth in Section 5 hereof, the Company has taken all action
necessary to exempt (i) the issuance and sale of the Securities, (ii) the
issuance of the Warrant Shares upon due exercise of the Warrants, and (iii)
the
other transactions contemplated by the Transaction Documents from the provisions
of any stockholder rights plan or other “poison pill” arrangement, any
anti-takeover, business combination or control share law or statute binding
on
the Company or to which the Company or any of its assets and properties may
be
subject and any provision of the Company’s Articles of Organization or Bylaws
that is or could reasonably be expected to become applicable to the Investors
as
a result of the transactions contemplated hereby, including without limitation,
the issuance of the Securities and the ownership, disposition or voting of
the
Securities by the Investors or the exercise of any right granted to the
Investors pursuant to this Agreement or the other Transaction
Documents.
4.6 Delivery
of SEC Filings; Business.
The
Company has made available to the Investors through the XXXXX system, true
and
complete copies of the Company’s most recent Annual Report on Form 10-KSB for
the fiscal year ended June 30, 2006 (the “10-KSB”), and all other reports filed
by the Company pursuant to the 1934 Act since the filing of the 10-KSB and
prior
to the date hereof (collectively, the “SEC Filings”). The SEC Filings are the
only filings required of the Company pursuant to the 1934 Act for such period.
The Company and its Subsidiaries are engaged in all material respects only
in
the business described in the SEC Filings and the SEC Filings contain a complete
and accurate description in all material respects of the business of the Company
and its Subsidiaries, taken as a whole.
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4.7 Use
of
Proceeds.
The net
proceeds of the sale of the Shares and the Warrants hereunder shall be used
by
the Company for working capital and general corporate purposes.
4.8 No
Material Adverse Change.
Since
June 30, 2006, except as identified and described in the SEC Filings or as
described on Schedule
4.8,
there
has not been:
(i) any
change in the consolidated assets, liabilities, financial condition or operating
results of the Company from that reflected in the financial statements included
in the Company’s Quarterly Report on Form 10-QSB for the quarter ended September
30, 2006, except for changes in the ordinary course of business which have
not
had and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate;
(ii) any
declaration or payment of any dividend, or any authorization or payment of
any
distribution, on any of the capital stock of the Company, or any redemption
or
repurchase of any securities of the Company;
(iii) any
material damage, destruction or loss, whether or not covered by insurance to
any
assets or properties of the Company or its Subsidiaries;
(iv) any
waiver, not in the ordinary course of business, by the Company or any Subsidiary
of a material right or of a material debt owed to it;
(v) any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or a Subsidiary, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results or business of the Company and its Subsidiaries
taken as a whole (as such business is presently conducted and as it is proposed
to be conducted);
(vi) any
change or amendment to the Company's Articles of Organization or Bylaws, or
material change to any material contract or arrangement by which the Company
or
any Subsidiary is bound or to which any of their respective assets or properties
is subject;
(vii) any
material labor difficulties or labor union organizing activities with respect
to
employees of the Company or any Subsidiary;
(viii) any
material transaction entered into by the Company or a Subsidiary other than
in
the ordinary course of business;
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(ix) the
loss
of the services of any key employee, or material change in the composition
or
duties of the senior management of the Company or any Subsidiary;
(x) the
loss
or threatened loss of any customer which has had or could reasonably be expected
to have a Material Adverse Effect; or
(xi) any
other
event or condition of any character that has had or could reasonably be expected
to have a Material Adverse Effect.
4.9 SEC
Filings.
At the
time of filing thereof, the SEC Filings complied as to form in all material
respects with the requirements of the 1934 Act and did 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.
4.10 No
Conflict, Breach, Violation or Default.
The
execution, delivery and performance of the Transaction Documents by the Company
and the issuance and sale of the Securities will not conflict with or result
in
a breach or violation of any of the terms and provisions of, or constitute
a
default under (i) the Company’s Articles of Organization or the Company’s
Bylaws, both as in effect on the date hereof (true and complete copies of which
have been made available to the Investors through the XXXXX system), or (ii)(a)
any statute, rule, regulation or order of any governmental agency or body or
any
court, domestic or foreign, having jurisdiction over the Company, any Subsidiary
or any of their respective assets or properties, or (b) any agreement or
instrument to which the Company or any Subsidiary is a party or by which the
Company or a Subsidiary is bound or to which any of their respective assets
or
properties is subject except, in the case of clause (ii) only, such breaches,
violations or defaults that individually or in the aggregate would not cause
a
Material Adverse Effect.
4.11 Tax
Matters.
The
Company and each Subsidiary has timely prepared and filed all tax returns
required to have been filed by the Company or such Subsidiary with all
appropriate governmental agencies and timely paid all taxes shown thereon or
otherwise owed by it (after giving effect to applicable extensions). The
charges, accruals and reserves on the books of the Company in respect of taxes
for all fiscal periods are adequate in all material respects, and there are
no
material unpaid assessments against the Company or any Subsidiary nor, to the
Company’s Knowledge, any basis for the assessment of any additional taxes,
penalties or interest for any fiscal period or audits by any federal, state
or
local taxing authority except for any assessment which is not material to the
Company and its Subsidiaries, taken as a whole. All taxes and other assessments
and levies that the Company or any Subsidiary is required to withhold or to
collect for payment have been duly withheld and collected and paid to the proper
governmental entity or third party when due. There are no tax liens or claims
pending or, to the Company’s Knowledge, threatened against the Company or any
Subsidiary or any of their respective assets or property. Except as described
on
Schedule
4.11,
there
are no outstanding tax sharing agreements or other such arrangements between
the
Company and any Subsidiary or other corporation or entity.
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4.12 Title
to Properties.
Except
as disclosed in the SEC Filings, the Company and each Subsidiary has good and
marketable title to all real properties and all other properties and assets
owned by it, in each case free from liens, encumbrances and defects that would
materially affect the value thereof or materially interfere with the use made
or
currently planned to be made thereof by them; and except as disclosed in the
SEC
Filings, the Company and each Subsidiary holds any leased real or personal
property under valid and enforceable leases with no exceptions that would
materially interfere with the use made or currently planned to be made thereof
by them.
4.13 Certificates,
Authorizations and Permits.
The
Company and each Subsidiary possess adequate certificates, authorizations or
permits issued by appropriate governmental agencies or bodies necessary to
conduct the business now operated by it, except where the failure to possess
such certificates, authorizations or permits has not had and could not
reasonably be expected to have a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any notice of proceedings relating
to
the revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or such Subsidiary, could
reasonably be expected to have a Material Adverse Effect, individually or in
the
aggregate.
4.14 Labor
Matters.
(a) Except
as
set forth on Schedule
4.14,
the
Company is not a party to or bound by any collective bargaining agreements
or
other agreements with labor organizations. The Company has not violated in
any
material respect any laws, regulations, orders or contract terms, affecting
the
collective bargaining rights of employees, labor organizations or any laws,
regulations or orders affecting employment discrimination, equal opportunity
employment, or employees’ health, safety, welfare, wages and hours.
(b) (i)
There
are no labor disputes existing, or to the Company's Knowledge, threatened,
involving strikes, slow-downs, work stoppages, job actions, disputes, lockouts
or any other disruptions of or by the Company's employees, (ii) there are no
unfair labor practices or petitions for election pending or, to the Company's
Knowledge, threatened before the National Labor Relations Board or any other
federal, state or local labor commission relating to the Company's employees,
(iii) no demand for recognition or certification heretofore made by any labor
organization or group of employees is pending with respect to the Company and
(iv) to the Company's Knowledge, the Company enjoys good labor and employee
relations with its employees and labor organizations.
(c) The
Company is, and at all times has been, in compliance in all material respects
with all applicable laws respecting employment (including laws relating to
classification of employees and independent contractors) and employment
practices, terms and conditions of employment, wages and hours, and immigration
and naturalization. There are no claims pending against the Company before
the
Equal Employment Opportunity Commission or any other administrative body or
in
any court asserting any violation of Title VII of the Civil Rights Act of 1964,
the Age Discrimination Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other
federal, state or local Law, statute or ordinance barring discrimination in
employment.
-8-
(d) Except
as
disclosed in the SEC Filings or as described on Schedule
4.14,
the
Company is not a party to, or bound by, any employment or other contract or
agreement that contains any severance, termination pay or change of control
liability or obligation, including, without limitation, any “excess parachute
payment,” as defined in Section 2806(b) of the Internal Revenue
Code.
(e) Except
as
specified in Schedule
4.14,
each of
the Company's employees is a Person who is either a United States citizen or
a
permanent resident entitled to work in the United States. To the Company's
Knowledge, the Company has no liability for the improper classification by
the
Company of such employees as independent contractors or leased employees prior
to the Closing.
4.15 Intellectual
Property.
(a) All
Intellectual Property of the Company and its Subsidiaries is currently in
compliance with all legal requirements (including timely filings, proofs and
payments of fees) and is valid and enforceable. No Intellectual Property of
the
Company or its Subsidiaries which is necessary for the conduct of Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted has been or is now involved in any
cancellation, dispute or litigation, and, to the Company’s Knowledge, no such
action is threatened. No patent of the Company or its Subsidiaries has been
or
is now involved in any interference, reissue, re-examination or opposition
proceeding.
(b) All
of
the licenses and sublicenses and consent, royalty or other agreements concerning
Intellectual Property which are necessary for the conduct of the Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted to which the Company or any Subsidiary is
a
party or by which any of their assets are bound (other than generally
commercially available, non-custom, off-the-shelf software application programs
having a retail acquisition price of less than $10,000 per license)
(collectively, “License Agreements”) are valid and binding obligations of the
Company or its Subsidiaries that are parties thereto and, to the Company’s
Knowledge, the other parties thereto, enforceable in accordance with their
terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors’ rights generally, and
there exists no event or condition which will result in a material violation
or
breach of or constitute (with or without due notice or lapse of time or both)
a
default by the Company or any of its Subsidiaries under any such License
Agreement.
(c) The
Company and its Subsidiaries own or have the valid right to use all of the
Intellectual Property that is necessary for the conduct of the Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted and for the ownership, maintenance and
operation of the Company’s and its Subsidiaries’ properties and assets, free and
clear of all liens, encumbrances, adverse claims or obligations to license
all
such owned Intellectual Property and Confidential Information, other than
licenses entered into in the ordinary course of the Company’s and its
Subsidiaries’ businesses. The Company and its Subsidiaries have a valid and
enforceable right to use all third party Intellectual Property and Confidential
Information used or held for use in the respective businesses of the Company
and
its Subsidiaries.
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(d) To
the
Company’s Knowledge, the conduct of the Company’s and its Subsidiaries’
businesses as currently conducted does not infringe or otherwise impair or
conflict with (collectively, “Infringe”) any Intellectual Property rights of any
third party or any confidentiality obligation owed to a third party, and, to
the
Company’s Knowledge, the Intellectual Property and Confidential Information of
the Company and its Subsidiaries which are necessary for the conduct of
Company’s and each of its Subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted are not being Infringed
by
any third party. There is no litigation or order pending or outstanding or,
to
the Company’s Knowledge, threatened or imminent, that seeks to limit or
challenge or that concerns the ownership, use, validity or enforceability of
any
Intellectual Property or Confidential Information of the Company and its
Subsidiaries and the Company’s and its Subsidiaries’ use of any Intellectual
Property or Confidential Information owned by a third party, and, to the
Company’s Knowledge, there is no valid basis for the same.
(e) The
consummation of the transactions contemplated hereby and by the other
Transaction Documents will not result in the alteration, loss, impairment of
or
restriction on the Company’s or any of its Subsidiaries’ ownership or right to
use any of the Intellectual Property or Confidential Information which is
necessary for the conduct of Company’s and each of its Subsidiaries’ respective
businesses as currently conducted or as currently proposed to be
conducted.
(f) The
Company and its Subsidiaries have taken reasonable steps to protect the
Company’s and its Subsidiaries’ rights in their Intellectual Property and
Confidential Information. Except under confidentiality obligations, there has
been no material disclosure of any of the Company’s or its Subsidiaries’
Confidential Information to any third party.
4.16 Environmental
Matters.
Neither
the Company nor any Subsidiary is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic
or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment
or
human exposure to hazardous or toxic substances (collectively, “Environmental
Laws”), owns or operates any real property contaminated with any substance that
is subject to any Environmental Laws, is liable for any off-site disposal or
contamination pursuant to any Environmental Laws, or is subject to any claim
relating to any Environmental Laws, which violation, contamination, liability
or
claim has had or could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate; and there is no pending or, to the Company’s
Knowledge, threatened investigation that might lead to such a
claim.
4.17 Litigation.
Except
as described on Schedule
4.17,
there
are no pending legal actions, suits or proceedings against or affecting the
Company, its Subsidiaries or any of its or their properties, which legal
actions, suits or proceedings, individually or in the aggregate, might
reasonably be expected to have a Material Adverse Effect; and to the Company’s
Knowledge, no such actions, suits or proceedings are threatened or
contemplated.
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4.18 Financial
Statements.
The
financial statements included in each SEC Filing present fairly, in all material
respects, the consolidated financial position of the Company as of the dates
shown and its consolidated results of operations and cash flows for the periods
shown, and such financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a consistent
basis (“GAAP”) (except as may be disclosed therein or in the notes thereto, and,
in the case of quarterly financial statements, as permitted by Form 10-QSB
under
the 1934 Act); provided, however, that the unaudited financial statements are
subject to normal year-end audit adjustments (which are not expected to be
material) and do not contain all footnotes required under generally accepted
accounting principles. As of their respective dates, such financial statements
complied as to form in all material respects with the published rules and
regulations of the Commission with respect thereto. Except as set forth in
the
financial statements of the Company included in the SEC Filings filed prior
to
the date hereof or as described on Schedule
4.18,
neither
the Company nor any of its Subsidiaries has incurred any liabilities, contingent
or otherwise, except those incurred in the ordinary course of business,
consistent (as to amount and nature) with past practices since the date of
such
financial statements, none of which, individually or in the aggregate, have
had
or could reasonably be expected to have a Material Adverse Effect.
4.19 Insurance
Coverage.
The
Company and each Subsidiary maintains in full force and effect insurance
coverage that is customary for comparably situated companies for the business
being conducted and properties owned or leased by the Company and each
Subsidiary, and the Company reasonably believes such insurance coverage to
be
adequate against all liabilities, claims and risks against which it is customary
for comparably situated companies to insure.
4.20 Brokers
and Finders.
No
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company, other than as described in Schedule
4.20.
4.21 No
Directed Selling Efforts or General Solicitation.
Neither
the Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation
D) in
connection with the offer or sale of any of the Securities.
4.22 No
Integrated Offering.
Neither
the Company nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any Company
security or solicited any offers to buy any security, under circumstances that
would adversely affect reliance by the Company on Section 4(2) for the exemption
from registration for the transactions contemplated hereby or would require
registration of the Securities under the 1933 Act.
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4.23 Private
Placement.
The
offer and sale of the Securities to the Investors as contemplated hereby is
exempt from the registration requirements of the 1933 Act.
4.24 Questionable
Payments.
Neither
the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of
their respective current or former directors, officers, employees, agents or
other Persons acting on behalf of the Company or any Subsidiary, has on behalf
of the Company or any Subsidiary or in connection with their respective
businesses: (a) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (b)
made any direct or indirect unlawful payments to any governmental officials
or
employees from corporate funds; (c) established or maintained any unlawful
or
unrecorded fund of corporate monies or other assets; (d) made any false or
fictitious entries on the books and records of the Company or any Subsidiary;
or
(e) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature.
4.25 Transactions
with Affiliates.
Except
as disclosed in the SEC Filings or as disclosed on Schedule
4.25,
none of
the officers or directors of the Company and, to the Company’s Knowledge, none
of the employees of the Company is presently a party to any transaction with
the
Company or any Subsidiary (other than as holders of stock options and/or
warrants, and 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 Company’s Knowledge, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
4.26 Internal
Controls.
The
Company is
in
material compliance with the provisions of the Xxxxxxxx-Xxxxx Act of 2002
currently applicable to the Company. 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 GAAP 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. The Company has established disclosure controls
and
procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including the Subsidiaries, is
made known to the certifying officers by others within those entities,
particularly during the period in which the Company’s most recently filed
periodic report under the 1934 Act, as the case may be, is being prepared.
The
Company's certifying officers have evaluated the effectiveness of the Company's
controls and procedures as of the end of the period covered by the most recently
filed periodic report under the 1934 Act (such date, the "Evaluation Date").
The
Company presented in its most recently filed periodic report under the 1934
Act
the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since November 14, 2006, there have been no significant changes
in the Company's internal controls (as such term is defined in Item 308 of
Regulation S-K) or, to the Company's Knowledge, in other factors that could
significantly affect the Company's internal controls. The Company maintains
and
will continue to maintain a standard system of accounting established and
administered in accordance with GAAP and the applicable requirements of the
1934
Act.
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4.27 Disclosures.
Neither
the Company nor any Person acting on its behalf has provided the Investors
or
their agents or counsel with any information that constitutes as of the Closing
Date, material non-public information, other than the terms of the transactions
contemplated hereby. The written materials delivered to the Investors in
connection with the transactions contemplated by the Transaction Documents
do
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein, in light
of
the circumstances under which they were made, not misleading.
5. Representations
and Warranties of the Investors.
Each of
the Investors hereby severally, and not jointly, represents and warrants to
the
Company that:
5.1 Organization
and Existence.
If the
Investor is not an individual, such Investor is a validly existing corporation,
limited partnership or limited liability company and has all requisite
corporate, partnership or limited liability company power and authority to
invest in the Securities pursuant to this Agreement.
5.2 Authorization.
The
execution, delivery and performance by such Investor of the Transaction
Documents to which such Investor is a party have been duly authorized and will
each constitute the valid and legally binding obligation of such Investor,
enforceable against such Investor in accordance with their respective terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability, relating to or affecting
creditors’ rights generally.
5.3 Purchase
Entirely for Own Account.
The
Securities to be received by such Investor hereunder will be acquired for such
Investor’s own account, not as nominee or agent, and not with a view to the
resale or distribution of any part thereof in violation of the 1933 Act, and
such Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same in violation of the 1933 Act
without
prejudice, however, to such Investor’s right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws.
Nothing
contained herein shall be deemed a representation or warranty by such Investor
to hold the Securities for any period of time. Such
Investor
is not a broker-dealer registered with the SEC under the 1934 Act or an entity
engaged in a business that would require it to be so registered.
5.4 Investment
Experience.
Such
Investor acknowledges that it can bear the economic risk and complete loss
of
its investment in the Securities and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment contemplated hereby.
5.5 Disclosure
of Information.
Such
Investor has had an opportunity to receive all information related to the
Company requested by it and to ask questions of and receive answers from the
Company regarding the Company, its business and the terms and conditions of
the
offering of the Securities. Such Investor acknowledges receipt of copies of
the
SEC Filings. Neither such inquiries nor any other due diligence investigation
conducted by such Investor shall modify, limit or otherwise affect such
Investor’s right to rely on the Company’s representations and warranties
contained in this Agreement.
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5.6 Restricted
Securities.
Such
Investor understands that the Securities are characterized as “restricted
securities” under the U.S. federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and
that under such laws and applicable regulations such securities may be resold
without registration under the 1933 Act only in certain limited
circumstances.
5.7 Legends.
It is
understood that, except as provided below, certificates evidencing the
Securities may bear the following or any similar legend:
(a) “The
securities represented hereby have not been registered under the Securities
Act
of 1933, as amended (the ‘Act’) and may not be transferred unless (i) such
securities have been registered for sale pursuant to the Act, (ii) such
securities may be sold pursuant to Rule 144(k), or (iii) the Company has
received an opinion of counsel reasonably satisfactory to it that such transfer
may lawfully be made without registration under the Securities Act of 1933
or
qualification under applicable state securities laws.”
(b) If
required by the authorities of any state in connection with the issuance of
sale
of the Securities, the legend required by such state authority.
5.8 Accredited
Investor.
Such
Investor is an accredited investor as defined in Rule 501(a) of Regulation
D, as
amended, under the 0000 Xxx.
5.9 No
General Solicitation.
Such
Investor did not learn of the investment in the Securities as a result of any
general solicitation or general advertising.
5.10 Brokers
and Finders.
No
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of such Investor.
5.11 Prohibited
Transactions.
During
the last thirty (30) days prior to the date hereof, neither such Investor nor
any Affiliate of such Investor which (x) had knowledge of the transactions
contemplated hereby, (y) has or shares discretion relating to such Investor’s
investments or trading or information concerning such Investor’s investments,
including in respect of the Securities, or (z) is subject to such Investor’s
review or input concerning such Affiliate’s investments or trading
(collectively, “Trading Affiliates”) has, directly or indirectly, effected or
agreed to effect any short sale, whether or not against the box, established
any
“put equivalent position” (as defined in Rule 16a-1(h) under the 0000 Xxx) with
respect to the Common Stock, granted any other right (including, without
limitation, any put or call option) with respect to the Common Stock or with
respect to any security that includes, relates to or derived any significant
part of its value from the Common Stock or otherwise sought to hedge its
position in the Securities (each, a “Prohibited Transaction”). Prior to the
earliest to occur of (i) the termination of this Agreement, (ii) the Effective
Date or (iii) the Effectiveness Deadline, such Investor shall not, and shall
cause its Trading Affiliates not to, engage, directly or indirectly, in a
Prohibited Transaction. Such Investor acknowledges that the representations,
warranties and covenants contained in this Section 5.11 are being made for
the
benefit of the Investors as well as the Company and that each of the other
Investors shall have an independent right to assert any claims against such
Investor arising out of any breach or violation of the provisions of this
Section 5.11.
-14-
5.12 Reliance
on Exemptions.
Such
Investor understands that the Securities are being offered and sold to it in
reliance upon specific exemptions from the registration requirements of the
1933
Act, the rules and regulations promulgated thereunder and state securities
laws
and that the Company is relying upon the truth and accuracy of, and the
Investor’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order
to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the Securities.
5.13 Investment
Decision.
Such
Investor understands that nothing in the Agreement or any other materials
presented to such Investor in connection with the purchase and sale of the
Securities constitutes legal, tax or investment advice. Such Investor has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of the
Securities.
5.14 Risk
of Loss.
Such
Investor understands that its investment in the Securities involves a
significant degree of risk, including a risk of total loss of such Investor’s
investment, and such Investor has full cognizance of and understands all of
the
risk factors related to such Investor’s purchase of the Securities, including,
but not limited to, those set forth under or incorporated by reference under
the
caption “Factors That May Affect Future Results and Market Price of Stock” in
the SEC Filings. Such Investor understands that the market price of the Common
Stock has been volatile and that no representation is being made as to the
future value of the Common Stock.
5.15 No
Government Review.
Such
Investor understands that no United States federal or state agency or any other
government or governmental agency has passed upon or made any recommendation
or
endorsement of the Securities.
5.16 Residency.
Such
Investor's principal executive office, if an entity, or residence, if an
individual, is in the jurisdiction set forth immediately below such Investor’s
name on the signature pages hereto.
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6.
Conditions
to Closing.
6.1 Conditions
to the Investors’ Obligations.
The
obligation of each Investor to purchase the Shares and the Warrants at the
Closing is subject to the fulfillment to such Investor’s satisfaction, on or
prior to the Closing Date, of the following conditions, any of which may be
waived by such Investor (as to itself only):
(a) The
representations and warranties made by the Company in Section 4 hereof qualified
as to materiality shall be true and correct at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly
speaks as of an earlier date, in which case such representation or warranty
shall be true and correct as of such earlier date, and, the representations
and
warranties made by the Company in Section 4 hereof not qualified as to
materiality shall be true and correct in all material respects at all times
prior to and on the Closing Date, except to the extent any such representation
or warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct in all material respects
as
of such earlier date. The Company shall have performed in all material respects
all obligations and covenants herein required to be performed by it on or prior
to the Closing Date.
(b) The
Company shall have obtained any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation of the
purchase and sale of the Securities and the consummation of the other
transactions contemplated by the Transaction Documents, all of which shall
be in
full force and effect.
(c) The
Company shall have executed and delivered the Registration Rights
Agreement.
(d) No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order
of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in
the
other Transaction Documents.
(e) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Chief Executive Officer or its Chief Financial Officer, dated as of the
Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a), (b), (d) and (h) of this Section 6.1.
(f) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Clerk, dated as of the Closing Date, certifying the resolutions adopted
by
the Board of Directors of the Company approving the transactions contemplated
by
this Agreement and the other Transaction Documents and the issuance of the
Securities, certifying the current versions of the Articles of Organization
and
Bylaws of the Company and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of
the
Company.
(g) The
Investors shall have received an opinion from Ropes & Xxxx LLP, the
Company's counsel, dated as of the Closing Date, in form and substance
reasonably acceptable to the Investors and addressing such legal matters as
the
Investors may reasonably request.
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(h) No
stop
order or suspension of trading shall have been imposed by the SEC or any other
governmental or regulatory body with respect to public trading in the Common
Stock.
6.2 Conditions
to Obligations of the Company.
The
Company's obligation to sell and issue the Shares and the Warrants at the
Closing is subject to the fulfillment to the satisfaction of the Company on
or
prior to the Closing Date of the following conditions, any of which may be
waived by the Company:
(a) The
representations and warranties made by the Investors in Section 5 hereof, other
than the representations and warranties contained in Sections 5.3, 5.4, 5.5,
5.6, 5.7, 5.8 and 5.9 (the “Investment Representations”), shall be true and
correct in all material respects when made, and shall be true and correct in
all
material respects on the Closing Date with the same force and effect as if
they
had been made on and as of said date. The Investment Representations shall
be
true and correct in all respects when made, and shall be true and correct in
all
respects on the Closing Date with the same force and effect as if they had
been
made on and as of said date. The Investors shall have performed in all material
respects all obligations and covenants herein required to be performed by them
on or prior to the Closing Date.
(b) The
Investors shall have executed and delivered the Registration Rights
Agreement.
(c) The
Investors shall have delivered the Purchase Price to the Company.
6.3 Termination
of Obligations to Effect Closing; Effects.
(a) The
obligations of the Company, on the one hand, and the Investors, on the other
hand, to effect the Closing shall terminate as follows:
(i) Upon
the
mutual written consent of the Company and the Investors;
(ii) By
the
Company if any of the conditions set forth in Section 6.2 shall have become
incapable of fulfillment, and shall not have been waived by the
Company;
(iii) By
an
Investor (with respect to itself only) if any of the conditions set forth in
Section 6.1 shall have become incapable of fulfillment, and shall not have
been
waived by the Investor; or
-17-
(iv) By
either
the Company or any Investor (with respect to itself only) if the Closing has
not
occurred on or prior to February 1, 2007;
provided,
however, that, except in the case of clause (i) above, the party seeking to
terminate its obligation to effect the Closing shall not then be in breach
of
any of its representations, warranties, covenants or agreements contained in
this Agreement or the other Transaction Documents if such breach has resulted
in
the circumstances giving rise to such party’s seeking to terminate its
obligation to effect the Closing.
(b) In
the
event of termination by the Company or any Investor of its obligations to effect
the Closing pursuant to this Section 6.3, written notice thereof shall forthwith
be given to the other Investors and the other Investors shall have the right
to
terminate their obligations to effect the Closing upon written notice to the
Company and the other Investors. Nothing in this Section 6.3 shall be deemed
to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or the other Transaction Documents or to impair
the right of any party to compel specific performance by any other party of
its
obligations under this Agreement or the other Transaction
Documents.
7. Covenants
and Agreements of the Company.
7.1 Reservation
of Common Stock.
The
Company shall at all times reserve and keep available out of its authorized
but
unissued shares of Common Stock, solely for the purpose of providing for the
exercise of the Warrants, such number of shares of Common Stock as shall from
time to time equal the number of shares sufficient to permit the exercise of
the
Warrants issued pursuant to this Agreement in accordance with their respective
terms.
7.2 Reports.
The
Company will furnish to the Investors such information relating to the Company
and its Subsidiaries as from time to time may reasonably be requested by the
Investors; provided, however, that the Company shall not disclose material
nonpublic information to the Investors, or to advisors to or representatives
of
the Investors, unless prior to disclosure of such information the Company
identifies such information as being material nonpublic information and provides
the Investors, such advisors and representatives with the opportunity to accept
or refuse to accept such material nonpublic information for review and any
Investor wishing to obtain such information enters into an appropriate
confidentiality agreement with the Company with respect thereto.
7.3 No
Conflicting Agreements.
The
Company will not take any action, enter into any agreement or make any
commitment that would conflict or interfere in any material respect with the
Company’s obligations to the Investors under the Transaction
Documents.
7.4 Insurance.
The
Company shall not materially reduce the insurance coverages described in Section
4.19.
7.5 Compliance
with Laws.
The
Company will comply in all material respects with all applicable laws, rules,
regulations, orders and decrees of all governmental authorities.
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7.6 Listing
of Underlying Shares and Related Matters.
If the
Company applies to have its Common Stock or other securities traded on any
stock
exchange or market, it shall include in such application the Shares and the
Warrant Shares. If so listed, the Company will use commercially reasonable
efforts to continue the listing and trading of its Common Stock on such exchange
or market and, in accordance, therewith, will use commercially reasonable
efforts to comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of such exchange or market, as
applicable.
7.7 Termination
of Covenants.
The
provisions of Sections 7.2 through 7.5 shall terminate and be of no further
force and effect on the date on which the Company’s obligations under the
Registration Rights Agreement to register or maintain the effectiveness of
any
registration covering the Registrable Securities (as such term is defined in
the
Registration Rights Agreement) shall terminate.
7.8 Removal
of Legends.
Upon
the earlier of (i) registration for resale pursuant to the Registration Rights
Agreement or (ii) Rule 144(k) becoming available the Company shall (A) deliver
to the transfer agent for the Common Stock (the “Transfer Agent”) irrevocable
instructions that the Transfer Agent shall reissue a certificate representing
shares of Common Stock without legends upon receipt by such Transfer Agent
of
the legended certificate(s) for such shares, together with either (1) a
customary representation by the Investor that Rule 144(k) applies to the shares
of Common Stock represented thereby or (2) a statement by the Investor that
such
Investor has sold the shares of Common Stock represented thereby in accordance
with the Plan of Distribution contained in the Registration Statement, and
(B)
cause its counsel to deliver to the Transfer Agent one or more blanket opinions
to the effect that the removal of such legends in such circumstances may be
effected under the 1933 Act. From and after the earlier of such dates, upon
an
Investor’s written request accompanied by the required representation or
statement referred to in the preceding sentence, the Company shall promptly
cause certificates evidencing the Investor’s Securities to be replaced with
certificates which do not bear such restrictive legends, and Warrant Shares
subsequently issued upon due exercise of the Warrants shall not bear such
restrictive legends provided the provisions of either clause (i) or clause
(ii)
above, as applicable, are satisfied with respect to such Warrant Shares. When
the Company is required to cause unlegended certificates to replace previously
issued legended certificates, if unlegended certificates are not delivered
to an
Investor within five (5) Business Days of submission by that Investor of
legended certificate(s) to the Transfer Agent as provided above (or to the
Company, in the case of the Warrants), the Company shall be liable to the
Investor for liquidated damages in an amount equal to 1.0% of the aggregate
purchase price of the Securities evidenced by such certificate(s) for each
thirty (30) day period (or portion thereof) beyond such five (5) Business Day
that the unlegended certificates have not been so delivered.
8. Survival
and Indemnification.
8.1 Survival.
The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing of the transactions contemplated by this
Agreement.
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8.2 Indemnification.
To the
extent permitted by law, the Company shall indemnify and hold harmless each
Investor and its Affiliates and their respective directors, officers, employees
and agents from and against any and all losses, claims, damages, liabilities
and
expenses (including without limitation reasonable attorney fees and
disbursements and other expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement thereof) (collectively, “Losses”) to which such
Person may become subject as a result of any breach of representation, warranty,
covenant or agreement made by or to be performed on the part of the Company
under the Transaction Documents, and will reimburse any such Person for all
such
amounts as they are incurred by such Person.
8.3 Conduct
of Indemnification Proceedings.
Promptly
after receipt by any Person (the “Indemnified
Person”) of notice of any demand, claim or circumstances which would or might
give rise to a claim or the commencement of any action, proceeding or
investigation in respect of which indemnity may be sought pursuant to Section
8.2, such Indemnified Person shall promptly notify the Company in writing and
the Company shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Person, and shall assume
the
payment of all reasonable fees and expenses; provided,
however, that
the
failure of any Indemnified Person so to notify the Company shall not relieve
the
Company of its obligations hereunder except to the extent that the Company
is
materially prejudiced by such failure to notify. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the
fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless: (i) the Company and the Indemnified Person shall have mutually agreed
to
the retention of such counsel; or (ii) in the reasonable judgment of counsel
to
such Indemnified Person representation of both parties by the same counsel
would
be inappropriate due to actual or potential differing interests between them.
The Company shall not be liable for any settlement of any proceeding effected
without its written consent, which consent shall not be unreasonably withheld,
but if settled with such consent, or if there be a final judgment for the
plaintiff, the Company shall indemnify and hold harmless such Indemnified Person
from and against any loss or liability (to the extent stated above) by reason
of
such settlement or judgment. Without the prior written consent of the
Indemnified Person, which consent shall not be unreasonably withheld, the
Company shall not effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability arising out of such proceeding.
9. Miscellaneous.
9.1 Successors
and Assigns.
This
Agreement may not be assigned by a party hereto without the prior written
consent of the Company or the Investors, as applicable, provided, however,
that
an Investor may assign its rights and delegate its duties hereunder in whole
or
in part to an Affiliate or to a third party acquiring some or all of its
Securities in a private transaction without the prior written consent of the
Company or the other Investors provided, that no such assignment or obligation
shall affect the obligations of such Investor hereunder. The provisions of
this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
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9.2 Counterparts;
Faxes.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. This Agreement may also be executed and transmitted via facsimile
or
by .pdf (portable document format) via electronic mail, each of which shall
be
deemed an original.
9.3 Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
9.4 Notices.
Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by telex or telecopier, then such notice
shall be deemed given upon receipt of confirmation of complete transmittal,
(iii) if given by mail, then such notice shall be deemed given upon the earlier
of (A) receipt of such notice by the recipient or (B) three days after such
notice is deposited in first class mail, postage prepaid, and (iv) if given
by
an internationally recognized overnight air courier, then such notice shall
be
deemed given one Business Day after delivery to such carrier. All notices shall
be addressed to the party to be notified at the address as follows, or at such
other address as such party may designate by ten days’ advance written notice to
the other party:
If
to the
Company:
Precision
Optics Corporation, Inc.
00
Xxxx
Xxxxxxxx
Xxxxxxx,
Xxxxxxxxxxxxx 00000-0000
Attention:
Xxxxxxx X. Xxxxxx, President, Chief Executive Officer and
Treasurer
Fax:
(000) 000-0000
With
a
copy to:
Ropes
& Xxxx LLP
Xxx
Xxxxxxxxxxxxx Xxxxx
Xxxxxx,
XX 00000
Attention:
Xxxxxxx X’Xxxxx
Fax:
(000) 000-0000
If
to the
Investors:
to
the
addresses set forth on the signature pages hereto.
-21-
9.5 Expenses.
The
parties hereto shall pay their own costs and expenses in connection herewith,
except that the Company shall pay the reasonable fees and expenses of Xxxxxxxxxx
Xxxxxxx PC not to exceed $35,000; it being understood that Xxxxxxxxxx Xxxxxxx
PC
has only rendered legal advice to the Special Situations Funds participating
in
this transaction and not to the Company or any other Investor in connection
with
the transactions contemplated hereby, and that each of the Company and each
Investor has relied for such matters on the advice of its own respective
counsel. Such expenses shall be paid not later than the Closing. The Company
shall reimburse the Investors upon demand for all reasonable out-of-pocket
expenses incurred by the Investors, including without limitation reimbursement
of attorneys’ fees and disbursements, in connection with any amendment,
modification or waiver of this Agreement or the other Transaction Documents.
In
the event that legal proceedings are commenced by any party to this Agreement
against another party to this Agreement in connection with this Agreement or
the
other Transaction Documents, the party or parties which do not prevail in such
proceedings shall severally, but not jointly, pay their pro rata share of the
reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses
incurred by the prevailing party in such proceedings.
9.6 Amendments
and Waivers.
Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Investors. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any Securities purchased under
this Agreement at the time outstanding, each future holder of all such
Securities, and the Company.
9.7 Publicity.
Except
as set forth below, no public release or announcement concerning the
transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or
announcement by the Investors) or the Investors (in the case of a release or
announcement by the Company) (which consents shall not be unreasonably
withheld), except as such release or announcement may be required by law or
the
applicable rules or regulations of any securities exchange or securities market,
in which case the Company or the Investors, as the case may be, shall allow
the
Investors or the Company, as applicable, to the extent reasonably practicable
in
the circumstances, reasonable time to comment on such release or announcement
in
advance of such issuance. By 8:30 a.m. (New York City time) on the trading
day
immediately following the Closing Date, the Company shall issue a press release
disclosing the consummation of the transactions contemplated by this Agreement.
No later than the fourth trading day following the Closing Date, the Company
will file a Current Report on Form 8-K attaching the press release described
in
the foregoing sentence as well as copies of the Transaction
Documents.
9.8 Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law
which
renders any provision hereof prohibited or unenforceable in any
respect.
-22-
9.9 Entire
Agreement.
This
Agreement, including the Exhibits and the Disclosure Schedules, and the other
Transaction Documents constitute the entire agreement among the parties hereof
with respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter hereof and thereof.
9.10 Further
Assurances.
The
parties shall execute and deliver all such further instruments and documents
and
take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.
9.11 Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in New York County
and the United States District Court for the Southern District of New York
for
the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Agreement and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served
on
each party hereto anywhere in the world by the same methods as are specified
for
the giving of notices under this Agreement. Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that
any
such suit, action or proceeding brought in any such court has been brought
in an
inconvenient forum. EACH
OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.
9.12 Independent
Nature of Investors' Obligations and Rights.
The
obligations of each Investor under any Transaction Document are several and
not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by
such
Investor independently of any other Investor. Nothing contained herein or in
any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents.
Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor 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 Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
[signature
page follows]
-23-
IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
authorized officers to execute this Agreement as of the date first above
written.
| The Company: | PRECISION OPTICS CORPORATION, INC. | |
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxxx | |
|
Name:
Xxxxxxx X. Xxxxxx
Title:
President, Chief Executive Officer and
Treasurer
|
||
-24-
| The Investors: | SPECIAL SITUATIONS FUND III QP, L.P. | |
| |
|
|
| By: | /s/ Xxxxx X. Greenhouse | |
|
Name:
Xxxxx X. Greenhouse
Title:
General Partner
|
||
Aggregate
Purchase Price: $1,000,000
Number
of
Shares: 4,000,000
Number
of
Warrants: 4,000,000
|
Address
for Notice:
|
000
Xxxxxxx Xxxxxx
Xxxxx
0000
Xxx
Xxxx, XX 00000
|
|
|
with
a copy to:
Xxxxxxxxxx
Xxxxxxx PC
00
Xxxxxxxxxx Xxxxxx
Xxxxxxxx,
XX 00000
Attn:
Xxxx X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
|
| SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P. | ||
| |
|
|
| By: | /s/ Xxxxx X. Greenhouse | |
|
Name:
Xxxxx X. Greenhouse
Title:
General Partner
|
||
|
Aggregate
Purchase Price: $1,000,000
Number
of Shares: 4,000,000
Number
of Warrants: 4,000,000
|
||
|
000
Xxxxxxx Xxxxxx
Xxxxx
0000
Xxx
Xxxx, XX 00000
with
a copy to:
Xxxxxxxxxx
Xxxxxxx PC
00
Xxxxxxxxxx Xxxxxx
Xxxxxxxx,
XX 00000
Attn:
Xxxx X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
|
||
-25-
| LAPLACE GROUP LLC | ||
| |
|
|
| By: | /s/ Xxxxxx Xxxxxxx | |
|
Name:
Xxxxxx Xxxxxxx
Title:
Managing Member
|
||
|
Aggregate
Purchase Price: $100,000
Number
of Shares: 400,000
Number
of Warrants: 400,000
|
||
|
0000
Xxxxxxx Xxxx
Xxxxxxxxx
Xxxxxxx, Xxxx 00000-0000
|
||
| /s/ Xxxx Xxxxxx | ||
|
Xxxx
Xxxxxx
|
||
|
Aggregate
Purchase Price: $250,000
Number
of Shares: 1,000,000
Number
of Warrants: 1,000,000
|
||
|
000
Xxxxx Xxxxxx
Xxxxx
000
Xxxxxxx,
XX 00000
|
||
| /s/ Xxxxxx Xxxxxxxx | ||
|
Xxxxxx
Xxxxxxxx
|
||
|
Aggregate
Purchase Price: $150,000
Number
of Shares: 600,000
Number
of Warrants: 600,000
|
||
|
000
Xxxx 00xx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
|
||
-26-
