EXECUTION COPY
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (this "AGREEMENT"), dated as of June 14,
2006, by and among ZBB ENERGY CORPORATION, a Wisconsin corporation, (the
"COMPANY"), and each of the purchasers set forth on the signature pages hereto
(the "BUYERS").
WHEREAS, the Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the rules and regulations as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "SECURITIES ACT");
WHEREAS, the Buyers desire to purchase and the Company desires to
issue and sell, upon the terms and conditions set forth in this Agreement
US$2,226,667 aggregate principal amount 8% Senior Secured Notes due July 14,
2008 (the "NOTES"), in the form attached hereto as EXHIBIT "A" and common stock
purchase warrants, in the form attached hereto as EXHIBIT "B" (the "WARRANTS")
to purchase shares of the Company's common stock, par value $0.01 per share (the
"COMMON STOCK") for an aggregate purchase price of US$1,670,000;
WHEREAS, each Buyer wishes to purchase, upon the terms and conditions
stated in this Agreement, such principal amount of Notes and number of Warrants
as is set forth immediately below its name on the signature pages hereto;
WHEREAS, contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, in the form attached hereto as EXHIBIT "C" (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder and applicable state securities laws;
WHEREAS, contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Security Agreement,
in the form attached hereto as EXHIBIT "D" (the "SECURITY AGREEMENT") pursuant
to which the Company has agreed to grant a senior security interest in all of
the assets of the Company to secure the obligations of the Company to the
Buyers;
WHEREAS, contemporaneous with the execution and delivery of this
Agreement, each of the Subsidiaries (as defined herein) is executing and
delivering a Guaranty Agreement, in the form attached hereto as EXHIBIT "E" (the
"GUARANTY"), guaranteeing the obligations of the Company to the Buyers;
WHEREAS, contemporaneous with the execution and delivery of this
Agreement, each of the Subsidiaries and the Buyers are executing and delivering
a Security Agreement, in the form attached hereto as EXHIBIT "F" (the
"SUBSIDIARY SECURITY AGREEMENT"), pursuant to which each Subsidiary has agreed
to grant a senior security interest in all of the assets of such Subsidiary to
secure the obligations of such Subsidiary to the Buyers;
WHEREAS, contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Pledge and Escrow
Agreement, in the form attached hereto as EXHIBIT "G" (the "PLEDGE AGREEMENT")
pursuant to which the Company has agreed to pledge all of the equity of each
Subsidiary; and
WHEREAS, contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an agreement, (the
"REAL PROPERTY SECURITY AGREEMENT") pursuant to which the Company has granted a
non-senior security interest and mortgage in its real property located at N93
X00000 Xxxxxxxxx Xxx, Xxxxxxxxx Xxxxx, Xxxxxxxxx, reasonably satisfactory to the
Buyers, and which is otherwise recordable with the proper government office in
the State of Wisconsin.
NOW THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. AUTHORIZATION AND PURCHASE AND SALE OF NOTES AND WARRANTS.
a. AUTHORIZATION OF NOTES. The Company has authorized the issue
and sale of the Notes.
b. PURCHASE OF NOTES AND WARRANTS. Subject to the terms and
conditions of this Agreement, on the Closing Date (as defined below), the
Company shall issue and sell to each Buyer and each Buyer severally agrees to
purchase from the Company such principal amount of Notes and Warrants to
purchase such number of shares of Common Stock as is set forth immediately below
such Buyer's name on the signature pages hereto.
c. FORM OF PAYMENT. On the Closing Date, (i) each Buyer shall pay
the purchase price for the Notes and the Warrants to be issued and sold to it at
the Closing (as defined below) (the "PURCHASE PRICE") by wire transfer of
immediately available funds to the Company, in accordance with the Company's
written wiring instructions, against delivery of the Notes in the principal
amount equal to the Purchase Price and the number of Warrants as is set forth
immediately below such Buyer's name on the signature pages hereto, and (ii) the
Company shall deliver such Notes and Warrants duly executed on behalf of the
Company, to such Buyer, against delivery of such Purchase Price.
d. CLOSING DATE. Subject to the satisfaction (or written waiver)
of the conditions thereto set forth in Sections 5 and 6 below, the date and time
of the issuance and sale of the Notes and the Warrants pursuant to Section 1(b)
of this Agreement (the "CLOSING DATE") shall be simultaneous with the execution
and delivery of this Agreement by the parties, or such other mutually agreed
upon time. The closing of the transactions contemplated by Section 1(b) of this
Agreement (the "CLOSING") shall occur on the Closing Date at such location as
may be agreed to by the parties.
2. REPRESENTATIONS AND WARRANTIES OF EACH BUYER. Each Buyer severally
(and not jointly) represents and warrants to the Company solely as to such Buyer
that:
a. INVESTMENT PURPOSE. As of the date hereof and the Closing Date
the Buyer is purchasing the Notes and the Warrants and the shares of Common
Stock issuable
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upon exercise thereof (the "WARRANT SHARES" and, collectively with the Notes and
Warrants, the "SECURITIES") for its own account and not with a present view
towards the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the Securities Act; provided,
however, that by making the representations herein, the Buyer does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities Act.
b. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D under the
Securities Act (an "ACCREDITED INVESTOR").
c. RELIANCE ON EXEMPTIONS. The Buyer understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. INFORMATION. The Buyer and its advisors, if any, have had the
opportunity to ask questions of management of the Company and have been
furnished with all information relating to the business, finances and operations
of the Company and information relating to the offer and sale of the Securities
which have been requested by the Buyer or its advisors. Neither such inquiries
nor any other due diligence investigation conducted by the Buyer or any of its
advisors or representatives shall modify, amend or affect the Buyer's right to
rely on the Company's representations and warranties contained in Section 3
below. The Buyer understands that its investment in the Securities involves a
significant degree of risk. The Buyer further represents to the Company that the
Buyer's decision to enter into this Agreement has been based solely on the
independent evaluation of the Buyer and its representatives.
e. GOVERNMENTAL REVIEW. The Buyer 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.
f. TRANSFER OR RE-SALE. The Buyer understands that except as
provided in the Registration Rights Agreement, the sale or re-sale of the
Securities has not been and is not being registered under the Securities Act or
any applicable state securities laws, and the Securities may not be transferred
unless (i) the Securities are sold pursuant to an effective registration
statement under the Securities Act, (ii) the Buyer shall have delivered to the
Company an opinion of counsel that shall be in form, substance and scope
customary for opinions of counsel in comparable transactions to the effect that
the Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from such registration, which opinion shall be reasonably
acceptable to the Company, (iii) the Securities are sold or transferred to an
"affiliate" (as defined in Rule 144 promulgated under the Securities Act (or a
successor rule) ("RULE 144")) of the Buyer who agrees to sell or otherwise
transfer the Securities only in accordance with this Section 2(f) and who is an
Accredited Investor, (iv) the Securities are sold
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pursuant to Rule 144, or (v) the Securities are sold pursuant to Regulation S
under the Securities Act (or a successor rule) ("REGULATION S"). Notwithstanding
the foregoing or anything else contained herein to the contrary, the Securities
may be pledged as collateral in connection with a bona fide margin account or
other lending arrangement.
g. LEGENDS. The Buyer understands that the Notes and the Warrants
shall bear a restrictive legend in the form as set forth on Exhibit "A" and
Exhibit "B", respectively. The Buyer understands that, until such time as the
resale of the Warrant Shares have been registered under the Securities Act as
contemplated by the Registration Rights Agreement or otherwise may be sold
pursuant to Rule 144 or Regulation S without any restriction as to the number of
securities as of a particular date that can then be immediately sold, the
Warrant Shares may bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the certificates
evidencing such Securities):
"Neither the offer nor sale of the securities represented by this
certificate has been registered under the Securities Act of 1933, as
amended, (the "Act"). The securities may not be sold, transferred or
assigned in the absence of an effective registration statement for the
securities under the Act, or an opinion of counsel, in form, substance
and scope customary for opinions of counsel in comparable
transactions, that registration is not required under the Act or
unless sold pursuant to Rule 144 or Regulation S under the Act."
h. RESIDENCY. The Buyer is a resident of the jurisdiction set
forth immediately below such Buyer's name on the signature pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
in the DISCLOSURE SCHEDULE annexed hereto, the Company represents and warrants
to each Buyer that:
a. ORGANIZATION AND QUALIFICATION.
(i) The Company and each of its Subsidiaries is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated or
organized, with full power and authority (corporate and other) to own, lease,
use and operate its properties and to carry on its business as and where now
owned, leased, used, operated and conducted. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership or use of property or
the nature of the business conducted by it makes such qualification necessary
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect.
(ii) "MATERIAL ADVERSE EFFECT" means any material adverse
effect on the business, operations, assets, financial condition or prospects of
the Company and the Subsidiaries individually and taken as a whole, or on the
transactions contemplated hereby or by the agreements or instruments to be
entered into in connection herewith.
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b. SUBSIDIARIES. The DISCLOSURE SCHEDULE contains a complete and
correct list of the Subsidiaries, showing as to each Subsidiary, the correct
name thereof, the jurisdiction of its organization, and the percentage of shares
of each class of capital stock or similar equity interests outstanding owned by
the Company. "SUBSIDIARY" means any "significant subsidiary" or "subsidiary" (as
such terms are defined in the SEC's Rule 1-02 of Regulation S-X) of the Company.
All of the outstanding shares of capital stock or similar equity interests of
each Subsidiary shown in the DISCLOSURE SCHEDULE as being owned by the Company
have been validly issued, fully paid and nonassessable and are owned by the
Company free and clear of any lien, claim, mortgage, charge, restriction,
pledge, security interest, option, lease or sublease, claim, right of any third
party, easement, encroachment or encumbrance or any other right or adverse
interest ("LIENS").
c. AUTHORIZATION; ENFORCEMENT.
(i) The Company has all requisite corporate power and
authority to enter into and perform this Agreement, the Registration Rights
Agreement, the Notes, the Warrants, the Pledge Agreement, the Real Property
Security Agreement and the Security Agreement and to consummate the transactions
contemplated hereby and thereby and to issue the Securities, in accordance with
the terms hereof and thereof. The execution and delivery of this Agreement, the
Registration Rights Agreement, the Notes, the Warrants, the Pledge Agreement,
the Real Property Security Agreement and the Security Agreement by the Company
and the consummation by it of the transactions contemplated hereby and thereby
(including without limitation, the issuance of the Notes and the Warrants and
the issuance and reservation for issuance of the Warrant Shares issuable upon
exercise thereof) have been duly authorized by the Company's Board of Directors
and no further consent or authorization of the Company, its Board of Directors,
or its shareholders is required. This Agreement has been duly executed and
delivered by the Company by its authorized representative, and such authorized
representative is the true and official representative with authority to sign
this Agreement and the other documents executed in connection herewith and bind
the Company accordingly. This Agreement constitutes, and upon execution and
delivery by the Company of the Registration Rights Agreement, the Notes, the
Warrants, the Pledge Agreement, the Real Property Security Agreement and the
Security Agreement each of such instruments will constitute, a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.
(ii) Each Subsidiary has all requisite corporate power and
authority to enter into and perform the Guaranty and the Subsidiary Security
Agreement to which it is a party, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of the Guaranty and
each Subsidiary Security Agreement by each Subsidiary and the consummation by
such Subsidiary of the transactions contemplated thereby have been duly
authorized by such Subsidiary's Board of Directors and no further consent or
authorization of such Subsidiary, its Board of Directors, or its shareholders is
required. This Agreement has been duly executed and delivered by each Subsidiary
by its authorized representative, and such authorized representative is the true
and official representative with authority to sign this Agreement and the other
documents executed in connection herewith and bind the Subsidiary accordingly.
Upon execution and delivery by a Subsidiary of the Guaranty and the Subsidiary
Security Agreement, each of such instruments will constitute, a legal, valid
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and binding obligation of such Subsidiary enforceable against such Subsidiary in
accordance with its terms.
d. ISSUANCE OF SHARES. The Warrant Shares are duly authorized and
reserved for issuance and, upon exercise of the Warrants in accordance with
their respective terms and payment of the consideration set forth in the
Warrants, will be validly issued, fully paid and non-assessable, and free from
all taxes and Liens with respect to the issue thereof and shall not be subject
to preemptive rights or other similar rights of shareholders of the Company and
will not impose personal liability upon the holder thereof.
e. NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Pledge Agreement, the Real
Property Security Agreement, the Security Agreement, the Notes and the Warrants
by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
reservation for issuance of the Warrant Shares), and the execution, delivery and
performance of the Guaranty and the Subsidiary Security Agreement by each
Subsidiary and the consummation by each Subsidiary of the transactions
contemplated thereby, will not (i) conflict with or result in a violation of any
provision of the articles of incorporation, as amended, (the "ARTICLES OF
INCORPORATION") of the Company or any of its Subsidiaries or the by-laws, as
amended, (the "BY-LAWS") of the Company or any of its Subsidiaries, or (ii)
violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement or instrument to which
the Company or any of its Subsidiaries is a party or is otherwise bound or is a
beneficiary, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal, state and foreign securities laws and
regulations and regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect). Neither
the Company nor any of its Subsidiaries is in violation of its Articles of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party or by which any property or assets of the Company or any of its
Subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its Subsidiaries, if any, are not being conducted in
violation of any law, ordinance or regulation of any governmental entity
material to the business of the Company and its Subsidiaries. Except as
specifically contemplated by this Agreement and as required under the Securities
Act and any applicable state and Australian securities laws, neither the Company
nor any Subsidiary is required to obtain any consent, authorization or order of,
or make any filing or registration with, any court, governmental agency,
regulatory agency, self regulatory organization or stock market or any third
party, in order for (i) the Company to execute, deliver
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or perform any of its obligations under this Agreement, the Registration Rights
Agreement, the Security Agreement, the Pledge Agreement, the Real Property
Security Agreement, the Notes or the Warrants in accordance with the terms
hereof or thereof or to issue and sell the Notes and the Warrants in accordance
with the terms hereof and to issue the Warrant Shares upon exercise of the
Warrants, or (ii) any Subsidiary to execute, deliver or perform the Guaranty or
the Subsidiary Security Agreement in accordance with the terms thereof. All
consents, authorizations, orders, filings and registrations which either the
Company or any Subsidiary is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof.
f. FINANCIAL STATEMENTS. The financial statements contained in
the Company's 2005 Annual Report as filed with the Australian Stock Exchange
("ASX") on September 30, 2005 (the "FINANCIAL STATEMENTS") have been prepared in
accordance with the Australian Accounting Standards, consistently applied,
("AAS") during the periods involved (except (i) as may be otherwise indicated in
such financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in the
Financial Statements, the Company has no liabilities, contingent or otherwise,
of the type customarily reflected on financial statements and the notes thereto,
other than (i) liabilities incurred in the ordinary course of business
subsequent to June 30, 2005 and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under AAS to be
reflected in such Financial Statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
g. ABSENCE OF CERTAIN CHANGES. Since June 30, 2005, there has
been no material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company or any of its Subsidiaries.
h. 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 any executive officer of the Company or any of its Subsidiaries,
threatened against or affecting the Company or any of its Subsidiaries, or their
officers or directors in their capacity as such, that could have a Material
Adverse Effect. No executive officer of the Company or any of its Subsidiaries
has knowledge of any facts or circumstances which might give rise to any of the
foregoing.
i. PATENTS, COPYRIGHTS, TRADEMARKS.
(i) The Company and each of its Subsidiaries owns or
possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
("INTELLECTUAL PROPERTY") necessary to enable it to conduct its business as now
operated (and, to the Company's knowledge, as presently contemplated to be
operated in the future); there is no claim or action by any Person pertaining
to, or proceeding
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pending, or to the knowledge of any executive officer of the Company or any of
its Subsidiaries threatened, which challenges the right of the Company or of a
Subsidiary with respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and, to the knowledge of any executive
officer of the Company or any of its Subsidiaries, as presently contemplated to
be operated in the future); to the knowledge of any executive officer of the
Company or any of its Subsidiaries, neither the Company's nor its Subsidiaries'
current and intended products, services and processes infringe on any
Intellectual Property or other rights held by any Person; and no executive
officer of the Company or any of its Subsidiaries has knowledge of any facts or
circumstances which might give rise to any of the foregoing.
(ii) Except as set forth in the DISCLOSURE SCHEDULE, neither
the Company nor any of its Subsidiaries owns or possesses any Copyrights,
Patents, Trademarks, Copyright Licenses, Patent Licenses or Trademark Licenses,
each as defined herein.
(iii) "COPYRIGHTS" shall mean (i) copyrights, whether
registered or unregistered, held pursuant to the laws of the United States, any
State thereof or any other country; (ii) registrations, applications and
recordings in the United States Copyright Office or in any similar office or
agency of the United States, any State thereof or any other country; (iii) any
continuations, renewals or extensions thereof; (iv) any registrations to be
issued in any pending applications; (v) prior versions of works covered by
copyright and all works based upon, derived from or incorporating such works;
(vi) income, royalties, damages, claims and payments now and hereafter due
and/or payable with respect to copyrights, including, without limitation,
damages, claims and recoveries for past, present or future infringement; (vii)
rights to xxx for past, present and future infringements of any copyright;
(viii) any rights in any material which is copyrightable or which is protected
by common law, United States copyright laws or similar laws, or any law of any
State, and (ix) any other rights corresponding to any of the foregoing rights
throughout the world.
(iv) "COPYRIGHT LICENSE" shall mean any agreement, written
or oral, granting any right in or to any Copyright or Copyright registration,
including, without limitation, licenses for the exclusive right to use a
copyright owned by a third party.
(v) "PATENTS" shall mean (i) letters patent of the United
States or any other country, all registrations and recordings thereof and all
applications for letters patent of the United States or any other country,
including, without limitation, registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof or any other country; (ii) reissues,
divisions, continuations, renewals, continuations in part or extensions thereof;
(iii) xxxxx patents, divisionals and patents of addition; (iv) patents to issue
in any such applications; (v) income, royalties, damages, claims and payments
now and hereafter due and/or payable with respect to patents, including, without
limitation, damages, claims and recoveries for past, present or future
infringement; and (vi) rights to xxx for past, present and future infringements
of any patent.
(vi) "PATENT LICENSE" shall mean any agreement, whether
written or oral, granting any right with respect to any Patent.
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(vii) "TRADEMARKS" shall mean (i) trademarks, tradenames,
corporate names, company names, business names, trade styles, service marks,
logos, other source or business identifiers, prints and labels on which any of
the foregoing have appeared or appear, designs and general intangibles of like
nature, registrations and recordings thereof and any applications in connection
therewith, including, without limitation, registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country
(collectively, the "MARKS"); (ii) any reissues, extensions or renewals thereof,
(iii) income, royalties, damages, claims and payments now and hereafter due
and/or payable with respect to the Marks, including, without limitation,
damages, claims and recoveries for past, present or future infringement and (v)
rights to xxx for past, present and future infringements of the Marks.
(viii) "TRADEMARK LICENSE" shall mean any agreement, written
or oral, granting any right in and to any Trademark or Trademark registration.
j. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
k. TAX STATUS. The Company and each of its Subsidiaries has made
or filed all federal, state and foreign income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its Financial Statements provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its Financial Statements
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and none of the executive officers of the Company
or any of its Subsidiaries know of any basis for any such claim. Neither the
Company nor any of its Subsidiaries has executed a waiver with respect to the
statute of limitations relating to the assessment or collection of any foreign,
federal, state or local tax. None of the Company's tax returns is presently
being audited by any taxing authority.
l. CERTAIN TRANSACTIONS. Except for arm's length transactions
pursuant to which the Company or any of its Subsidiaries makes payments in the
ordinary course of business upon terms no less favorable than the Company or any
of its Subsidiaries could obtain from third parties, none of the officers,
directors, or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for 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 any
executive officer of the Company or any of its
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Subsidiaries, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
m. PERMITS; COMPLIANCE. The Company and each of its Subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "COMPANY PERMITS"), and there is
no action pending or, to the knowledge of any executive officer of the Company
or any of its Subsidiaries, threatened regarding suspension or cancellation of
any of the Company Permits. Neither the Company nor any of its Subsidiaries is
in conflict with, or in default or violation of, any of the Company Permits,
except for any such conflicts, defaults or violations which, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. Since June 30, 2005, neither the Company nor any of its Subsidiaries has
received any notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations would
not have a Material Adverse Effect.
n. ENVIRONMENTAL MATTERS. There are, with respect to the Company
or any of its Subsidiaries, no past or present violations of Environmental Laws
(as defined below), releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental liability or any
liability under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 or similar federal, state, local or foreign laws and
neither the Company nor any of its Subsidiaries has received any notice with
respect to any of the foregoing, nor is any action pending or, to the knowledge
of any executive officer of the Company or any of its Subsidiaries, threatened
in connection with any of the foregoing. The term "ENVIRONMENTAL LAWS" means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants contaminants, or toxic or hazardous
substances or wastes (collectively, "HAZARDOUS MATERIALS") into the environment,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as
well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder. Other
than those that are or were stored, used or disposed of in compliance with
applicable law, no Hazardous Materials are contained on or about any real
property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company's
or any of its Subsidiaries' business. There are no underground storage tanks on
or under any real property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable law.
o. TITLE TO PROPERTY. The Company and its Subsidiaries have good
and marketable title in fee simple to all real property and good and marketable
title to all
10
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all Liens and defects
except such as would not have a Material Adverse Effect. Any real property and
facilities held under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as would not
have a Material Adverse Effect.
p. INSURANCE. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks, including casualty and liability insurance, and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged, which such policies are
set forth on the DISCLOSURE SCHEDULE. No executive officer of the Company or any
of its Subsidiaries has any reason to believe that the Company and its
Subsidiaries will not be able to renew their existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue such businesses at a cost that would not have a
Material Adverse Effect.
q. INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, 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. The Company has adopted and
implemented written procedures of internal control over financial reporting as
required by Section 404 of the Xxxxxxxx-Xxxxx Act and the rules and regulations
thereunder.
r. FOREIGN CORRUPT PRACTICES; FOREIGN ASSETS CONTROL REGULATIONS.
Neither the Company, nor any of its Subsidiaries, nor any current director or
officer, nor, to the knowledge of any executive officer of the Company or any of
its Subsidiaries, any past director, past officer, agent, employee or other
Person acting on behalf of the Company or any Subsidiary has, in the course of
his actions for, or on behalf of, the Company or any of its Subsidiaries, (i)
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee. Neither the
sale of the Securities by the Company hereunder nor its use of the proceeds
thereof will violate the trading with the Enemy Act, as amended, or any foreign
assets control regulations of the United States Treasury Department (31 CFR
Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating therefrom. Neither the Company nor any Subsidiary nor any
director or senior officer of the Company or any Subsidiary is a Person named on
the U.S. Treasury Department's Office of Foreign Assets Control ("OFAC") list,
nor is a Person prohibited under the OFAC programs.
11
s. SOLVENCY. The Company and each Subsidiary (after giving effect
to the transactions contemplated by this Agreement) is solvent (i.e., its assets
have a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured). The
Company and each Subsidiary (after giving effect to the transactions
contemplated by this Agreement) has the ability to pay its debts from time to
time incurred in connection therewith as such debts mature.
t. NO INVESTMENT COMPANY. The Company is not, and upon the
issuance and sale of the Securities as contemplated by this Agreement will not
be an "investment company" as defined under the Investment Company Act of 1940
(an "INVESTMENT COMPANY"). The Company is not controlled by an Investment
Company.
u. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF SECURITIES. The
Company acknowledges and agrees that the Buyers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any statement made by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to such Buyer's purchase of the Securities. The Company further represents to
each Buyer that the Company's decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives.
v. 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 in any security or solicited any offers to
buy any security under circumstances that would require registration under the
Securities Act of the issuance of the Securities to the Buyers. The issuance of
the Securities to the Buyers will not be integrated with any other issuance of
the Company's securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its securities.
w. NO BROKERS. The Company has taken no action which would give
rise to any claim by any Person for brokerage commissions, transaction fees or
similar payments relating to this Agreement or the transactions contemplated
hereby.
x. GENERAL SOLICITATION. Neither the Company nor any other Person
or entity authorized by the Company to act on its behalf has engaged in a
general solicitation or general advertising (within the meaning of Regulation D
of the Securities Act) of investors with respect to offers or sales of the Notes
or the Warrants.
y. DISCLOSURE. All information relating to or concerning the
Company or any of its Subsidiaries set forth in this Agreement and provided to
the Buyers in connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading. No
event or circumstance has occurred or exists with respect to the Company or any
12
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.
4. INFORMATION.
a. FINANCIAL INFORMATION. For so long as any of the Notes are
outstanding, the Company shall send the following reports to each holder of the
Notes the following:
(i) At any time that the Company has a class of securities
registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT") or is filing reports with the SEC as required
under Section 15(d) of the Exchange Act, then within three (3) days after the
filing with the SEC, a copy of its Annual Report on Form 10-K, its Quarterly
Reports on Form 10-Q and any Current Reports on Form 8-K, provided, however, if
any such document is available on the SEC's XXXXX Filing System then the Company
need not deliver a hard copy of such document;
(ii) At any time that the Company does not have a class of
securities registered under Section 12(b) or 12(g) of the Exchange Act and is
not required to file reports with the SEC as required under Section 15(d) of the
Exchange Act ("NON-REPORTING COMPANY"), then (A) within ninety (90) days after
the end of each of the Company's fiscal years a consolidated audited balance
sheet for such fiscal year and the immediately preceding fiscal year, a
consolidated income statement for such fiscal year and the immediately preceding
two fiscal years, a consolidated cash flow statement for such fiscal year and
the immediately preceding two fiscals year and a consolidated shareholders'
equity statement for such fiscal year and the immediately preceding two fiscals
year, (B) within forty-five (45) days after the end of each of the Company's
fiscal quarters (other than a fiscal quarter which is also the end of the
Company's fiscal year) a consolidated unaudited balance sheet for such fiscal
quarter, a consolidated income statement for such fiscal quarter and a
consolidated cash flow statement for such fiscal quarter, in each case all in
accordance with AAS, or generally accepted accounting principles, and each
certified by the Chief Executive Officer and Chief Financial Officer as fairly
presenting, in all material respects, the financial condition of the companies
being reported on and their results of operations, subject to, in the case of
unaudited financial statements, changes resulting from normal audit adjustments.
(iii) promptly upon their becoming available, one copy of
(A) each report, notice or proxy statement sent by the Company or any Subsidiary
to securities holders generally, and (B) each registration statement, and each
prospectus and all amendments thereto filed by the Company or any Subsidiary
with the SEC, provided, however, if any such document is available on the SEC's
XXXXX Filing System then the Company need not deliver a hard copy of such
document; and
(iv) within fifteen (15) days after the end of each month,
copies of a consolidated balance sheet and consolidated income statement of the
Company and its Subsidiaries as at the end of such month, each certified by the
Chief Executive Officer and Chief Financial Officer as fairly presenting, in all
material respects, the financial condition of the
13
companies being reported on and their results of operations, subject to changes
resulting from normal audit adjustments and a report detailing the aging of all
accounts receivable and accounts payable of the Company and each Subsidiary.
b. NOTICE OF DEFAULT OR EVENT OF DEFAULT. Promptly, and in any
event within three (3) business days after the Company becomes aware of the
existence of any Default or Event of Default or that any Person has given any
notice or taken any action with respect to a claimed default hereunder or that
any Person has given notice or taken any action with respect to a claimed
default of the type referred to in Section 9(f), the Company shall deliver to
each holder of the Notes a written notice specifying the nature and period of
existence thereof and what action the Company is taking or proposes to take with
respect thereto. "PERSON" shall mean any individual, corporation, limited
liability company, partnership, association, trust or other entity or
organization.
c. NOTICES FROM GOVERNMENTAL AUTHORITIES. Promptly, and in any
event within three (3) business days of receipt thereof, the Company shall
deliver to each holder of the Notes copies of any notice to the Company or any
Subsidiary from any Federal, State, local or foreign governmental authority
alleging a violation of any order, ruling, statute or other law or regulation
that could reasonably be expected to have a Material Adverse Effect; and
d. REQUESTED INFORMATION. With reasonable promptness, the Company
shall deliver to each holder of the Notes such other data and information
relating to the business, operations, affairs, financial condition, assets or
properties of the Company or any of its Subsidiaries or relating to the ability
of the Company to perform its obligations hereunder and under the Notes as from
time to time may be reasonably requested by any such holder of Notes.
e. INSPECTION. The Company will permit the representatives of
each holder of Notes, at the expense of the Company, to visit and inspect any of
the offices or properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make copies
and extracts therefrom, and to discuss their respective affairs, finances, and
accounts with their respective officers and independent public accountants (and
by this provision the Company authorizes said accountants to discuss the
affairs, finances and accounts of the Company and its Subsidiaries), all at such
times and as often as may be requested. Furthermore, that the holders of a
majority of the then-outstanding principal amount of Notes may authorize audits
of the Company and its Subsidiaries every three (3) months commencing September
14, 2006 and the Company shall reimburse or pay directly audit fees of $800 per
day, per auditor, plus out of pocket expenses. The audit will include, but not
be limited to, the review of accounts receivables documentation, cash receipts
and disbursements, accounts payable inventory contracts, and other purchase
order documentation. The Company shall provide all documents and information
deemed necessary or appropriate by the auditor.
f. OFFICERS' CERTIFICATE. Each set of financial statements
delivered to, or made available under the SEC's XXXXX Filing System to, a holder
of Notes pursuant to Section 7(a) shall be accompanied by a certificate of the
Chief Executive Officer and Chief Financial Officer of the Company setting
forth:
14
(i) That the Company was in compliance with the requirements
of the covenants contained in Sections 7 and 8 herein during the monthly,
quarterly or annual period covered by the statements then being furnished; and
(ii) A statement that such officer has reviewed the relevant
terms hereof and has made, or caused to be made, under his or her supervision, a
review of the transactions and conditions of the Company and its Subsidiaries
from the beginning of the monthly, quarterly or annual period covered by the
statements then being furnished to the date of the certificate and that such
review shall not have disclosed the existence during such period of any
condition or event that constitutes an Event of Default or, if any such
condition or event existed or exists specifying the nature and period of
existence thereof and what action the Company shall have taken or proposes to
take with respect thereto.
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to issue and sell the Notes and the Warrants to a Buyer at
the Closing is subject to the satisfaction, at or before the Closing Date of
each of the following conditions thereto, provided that these conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion:
a. The applicable Buyer shall have executed this Agreement, the
Registration Rights Agreement, the Security Agreement, the Pledge Agreement, the
Real Property Security Agreement and the Subsidiary Security Agreement and
delivered the same to the Company.
b. The applicable Buyer shall have delivered the Purchase Price
in accordance with Section 1(c) above.
c. The representations and warranties of the applicable Buyer
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and the applicable Buyer shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the applicable Buyer at or prior to the Closing
Date.
d. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
6. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation
of each Buyer hereunder to purchase the Notes and the Warrants at the Closing is
subject to the satisfaction, at or before the Closing Date of each of the
following conditions, provided that these conditions are for such Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:
15
a. The Company shall have executed this Agreement, the
Registration Rights Agreement, the Pledge Agreement, the Real Property Security
Agreement and the Security Agreement and delivered the same to such Buyer.
b. Each Subsidiary shall have executed the Guaranty and the
Subsidiary Security Agreement and delivered the same to such Buyer.
c. The Company shall have delivered to such Buyer duly executed
Notes (in such denominations as such Buyer shall request) and Warrants in
accordance with Section 1(b) above.
d. The representations and warranties of the Company shall be
true and correct in all material respects (provided, however, that such
qualification shall only apply to representations or warranties not otherwise
qualified by materiality) as of the date when made and as of the Closing Date as
though made at such time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. Such Buyer shall have received a
certificate or certificates, executed by the Chief Executive Officer and Chief
Financial Officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by such Buyer
including, but not limited to certificates with respect to the Company's and
each Subsidiary's Articles of Incorporation, By-laws and Board of Directors'
resolutions relating to the transactions contemplated hereby.
e. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
f. No event shall have occurred which could reasonably be
expected to have a Material Adverse Effect.
g. The Buyer shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance acceptable
to such Buyer.
h. The Company's Chief Executive Officer shall deliver a validity
guaranty in form and substance acceptable to the Collateral Agent.
i. [intentionally omitted]
j. [intentionally omitted]
k. The Company and the Subsidiaries shall deliver, or cause to be
delivered, at the Closing (i) an insurance certificate naming each Buyer as a
loss payee on each of the Company's and each Subsidiary's casualty insurance
policies (the "CASUALTY POLICIES"), (ii) an insurance certificate naming each
Buyer as an additional insured on each of the
16
Company's and each Subsidiary's liability insurance policies (the "LIABILITY
POLICIES"), each of the foregoing in an amount of coverage not less than the
aggregate amount of the then-outstanding Notes issued under this Agreement.
l. The Buyers shall have received an executed payoff letter from
Park Bank - Capitol (the "LENDER"), in form and substance satisfactory to the
Buyers, relating to the payment of the Company's indebtedness to the Lender, and
the release of the Lender's liens on all of the Company's and any Subsidiaries'
assets.
m. Contemporaneous with the Closing, the Company shall sell to
each other Buyer and each other Buyer shall purchase the Notes and Warrants to
be purchased by it at the Closing.
7. AFFIRMATIVE COVENANTS. The Company covenants that so long as any of
the Notes are outstanding, unless holders of a majority of the then-outstanding
principal amount of the Notes consents in writing otherwise:
a. COMPLIANCE WITH LAW. The Company will, and will cause each
Subsidiary to, comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
b. INSURANCE. The Company will, and will cause each Subsidiary
to, maintain, with financially sound and reputable insurers, insurance,
including, without limitation, the Casualty Policies and the Liability Policies,
with respect to their respective properties and businesses against such
casualties and contingencies, of such types, on such terms and in such amounts
(including deductibles, co-insurance and self-insurance, if adequate reserves
are maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
c. MAINTENANCE OF PROPERTIES. The Company will, and will cause
each Subsidiary to, maintain and keep, or cause to be maintained and kept, their
respective properties in good repair, working order and condition (other than
ordinary wear and tear), so that the business carried on in connection therewith
may be properly conducted at all times.
d. PAYMENT OF TAXES AND CLAIMS. The Company will, and will cause
each Subsidiary to, file all income tax or similar tax returns required to be
filed in any jurisdiction and to pay and discharge all taxes shown to be due and
payable on such returns and all other taxes, assessments, governmental charges,
or levies imposed on them or any of their properties, assets, income or
franchises, to the extent such taxes and assessments have become due and payable
and before they have become delinquent and all claims for which sums have become
due and payable that have or might become a Lien on properties or assets of the
17
Company or any Subsidiary, provided that neither the Company nor any Subsidiary
need pay any such tax or assessment or claims if the amount, applicability or
validity thereof is contested by the Company or such Subsidiary on a timely
basis in good faith and in appropriate proceedings, and the Company or a
Subsidiary has established adequate reserves therefor in accordance with United
States generally accepted accounting principles, consistently applied, (or if
the Company is a Non-Reporting Company, in accordance with AAS, or generally
accepted accounting principles, consistently applied) on the books of the
Company or such Subsidiary .
e. CORPORATE EXISTENCE, ETC. The Company will at all times
preserve and keep in full force and effect its corporate existence. The Company
will at all times preserve and keep in full force and effect the corporate
existence of each Subsidiary and all rights and franchises of the Company and
its Subsidiaries.
f. USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Notes and the Warrants as set forth in the DISCLOSURE SCHEDULE. The
Company shall not, directly or indirectly, use the proceeds from the sale of the
Notes and the Warrants for any loan to or investment, directly or indirectly, in
any other corporation, partnership, enterprise or other Person (except in
connection with the Subsidiaries).
g. AUTHORIZATION AND RESERVATION OF SHARES. The Company shall at
all times have authorized, and reserved for the purpose of issuance, a
sufficient number of shares of Common Stock to provide for the full exercise of
the outstanding Warrants and issuance of the Warrant Shares in connection
therewith (based on the Exercise Price of the Warrants in effect from time to
time) and as otherwise required by the Warrants. Except in the case of
combinations of Common Stock (by any reverse stock split, recapitalization,
reorganization, reclassification or otherwise), the Company shall not reduce the
number of shares of Common Stock reserved for issuance upon exercise of the
Warrants without the consent of each Buyer.
h. PATENTS. The Company shall, and cause its Subsidiaries to, use
its and their best efforts, respectively, to complete, prosecute, and defend all
patent applications, including, those listed on the DISCLOSURE SCHEDULE with
respect to Section 3(i) of this Agreement and any other patent applications.
i. DOCUMENT ROOM. The Company shall on behalf of itself and each
of the Subsidiaries, establish not later than thirty (30) days after the Closing
Date and maintain continuously thereafter until all of the Obligations (as
defined in the Security Agreement) have been indefeasibly paid in full, a secure
document control room ("DOCUMENT CONTROL ROOM") designated as such at the
Company's central offices located at N93 X00000 Xxxxxxxx Xxx, Xxxxxxxxx Xxxxx,
Xxxxxxxxx, which shall contain all complete, genuine and accurate current, as of
the Closing Date, and future:
(i) design sheets, testing and operating procedures and
manuals, and all other documentation specifying the method of manufacture of the
Company's and the Subsidiaries' products, including, without limitation,
procedures for manufacturing all parts of battery stack, list of drawings,
vendor information and pictures of the such manufacturing process;
18
(ii) design sheets, testing and operating procedures and
manuals, and all other documentation specifying the method of assembly of the
Company's and the Subsidiaries' products, including, without limitation,
procedures for assembling modules and shipping containers, list of drawings,
vendor information and pictures of the such assembly process;
(iii) designs and drawings, whether hard copy or computer
files, of the Company's and the Subsidiaries' products, including the battery,
module and shipping containers, list of such designs and drawings, vendor
information and specifications for all components of the foregoing;
(iv) lists and descriptions of raw materials used in the
manufacture of the Company's and the Subsidiaries' products, including trade
name, complete technical specification, vendor name(s) and contact;
(v) lists and detail descriptions of all formulations used
in the manufacture of the Company's and the Subsidiaries' products, including
Electrolyte, Electrode material and Battery frame material;
(vi) licenses and agreements (including joint ventures,
manufacturing, development and marketing agreements) which any of the Company or
any of the Subsidiaries is a party;
(vii) contracts with consultants, employee agreements with
respect to inventions and intellectual property which any of the Company or any
of the Subsidiaries is a party;
(viii) any of the Company's or any of the Subsidiaries'
products customer lists, price lists, market studies, and business plans;
(ix) hard copy and computer files containing any of the
Company's or any of the Subsidiaries' operating manuals for use of manufacturing
equipment, including, without limitation, vendor information, designs and
drawings of such equipment, and maintenance records;
(x) any of the Company's or any of the Subsidiaries'
internal and independent technical reports, including results of technical
specification measurements;
(xi) all software, including object and source code, and
related manuals, both hard copy and electronic formats, used in the design,
manufacturing, monitoring and marketing of the Company's or any of the
Subsidiaries' products;
(xii) all manuals, procedures and codes, whether in hard
copy of electronic format, for the testing of batteries, including, Individual
Stacks, Modules and Shipping Containers, and all data, results and conclusions
of all prior testing
19
(xiii) software, including object and source code, and
related manuals, both hard copy and electronic formats, used in the design,
manufacturing, monitoring and marketing of the Company's or any of the
Subsidiaries' products;
(xiv) all documentation, whether in hard copy or electronic
format, concerning the Company's and each Subsidiaries' research and
development, including, without limitation, all information and documentation
which the Company or any Subsidiary has protected as trade secrets, all
documentation with respect to previous and future research and development
projects and reports, and all documentation with respect to testing methods used
in such research and development efforts (such as including bromine diffusion,
resistivity, surface area).
(xv) all documentation, whether in hard copy or electronic
format, concerning the Company's and each Subsidiaries' quality control methods,
procedures and specifications used with respect to research and development,
manufacturing, assembly, shipping, maintenance and service.
(xvi) patents and applications, trademarks and tradenames
and applications, copyrights and applications and correspondence with applicable
government agencies and intellectual property counsel by or with the Company or
any of the Subsidiaries;
(xvii) the Company's or any of the Subsidiaries'
distribution methods and processes;
(xviii) the Company's or any of the Subsidiaries' security
codes, passwords and other access devices with respect to the foregoing;
(xix) all written vendor or supplier, contracts, and written
summaries of any such oral contracts, to which any of the Company or any of the
Subsidiaries is a party;
(xx) all written customer contracts, and written summaries
of any such oral contracts, to which any of the Company or any of the
Subsidiaries is a party;
(xxi) hard copy and computer files containing all of the
Company's and all of the Subsidiaries' financial information, including, without
limitation, bills of materials, vendor phone and contact info, back-up of data
files, Peachtree Manufacturing software and asset schedules; and
(xxii) any and all amendments, changes and additions to the
foregoing as they may arise, which such amendments, changes and additions shall
be included in the Document Control Room not later than every sixty (60) days
commencing on the ninetieth (90th) day after the Closing Date.
The foregoing items under (i) through (xxii), inclusive is collectively referred
to as the "DOCUMENT CONTROL ROOM ITEMS." The Company shall make the foregoing,
and all of the Company's and Subsidiaries Collateral, as defined in the Security
Agreement and each Subsidiary Security Agreement, available to the Collateral
Agent for inspection during normal
20
business hours. The Collateral Agent and the Company shall execute a
confidentiality agreement reasonable satisfactory to both parties. Upon an Event
of Default, the Collateral Agent may terminate the confidentiality agreement and
take exclusive possession of the Document Control Room and/or the contents
therein.
j. APPLICATION TO ASX. The Company shall (i) within thirty (30)
days of the Closing Date, apply to the ASX for a waiver permitting the Company
to issue the shares of common stock upon conversion of the Notes in accordance
with Section 18 of this Agreement (the "ASX APPROVAL"), and (ii) use its
commercially reasonable efforts to obtain the ASX Approval.
k. COLLATERAL ASSIGNMENTS OF MATERIAL EQUIPMENT LEASES. The
Company shall, and cause its Subsidiaries to, within sixty (60) days of the
Closing Date, (i) execute and deliver collateral assignments reasonably
acceptable to the Collateral Agent of each of the Company's and each
Subsidiary's respective equipment leases, which are material to the businesses
of the Company and the Subsidiaries respectively, as mutually agreed in good
faith by the Company and the Collateral Agent, and (ii) to deliver lessors'
consents reasonably acceptable to the Collateral Agent to such collateral
assignments.
8. NEGATIVE COVENANTS. The Company covenants that so long as any of
the Notes are outstanding, unless holders of a majority of the then-outstanding
principal amount of the Notes consents in writing otherwise:
a. LIENS. The Company will not, and will not permit any
Subsidiary to, and cause such Subsidiary not to, permit to exist, create, assume
or incur, directly or indirectly, any Lien on its properties or assets, whether
now owned or hereafter acquired, except:
(i) Liens existing on property or assets of the Company or
any Subsidiary as of the date of this Agreement that are described in the
DISCLOSURE SCHEDULE;
(ii) Liens for taxes, assessments or governmental charges
not then due and delinquent;
(iii) encumbrances in the nature of leases, subleases,
zoning restrictions, easements, rights of way, minor survey exceptions and other
rights and restrictions of record on the use of real property and defects in
title arising or incurred in the ordinary course of business, which,
individually and in the aggregate, do not materially impair the use or value of
the property or assets subject thereto or which relate only to assets that in
the aggregate are not material;
(iv) Liens incidental to the conduct of business or the
ownership of properties and assets (including landlords', lessors', carriers',
warehousemen's, mechanics', materialmen's and other similar liens) and Liens to
secure the performance of bids, tenders, leases or trade contracts, or to secure
statutory obligations (including obligations under workers compensation,
unemployment insurance and other social security legislation), surety or appeal
bonds or other Liens of like general nature incurred in the ordinary course of
business and not in connection with the borrowing of money; or
21
(v) any attachment or judgment Lien, unless the judgment it
secures has not, within sixty (60) days after the entry thereof, been discharged
or execution thereof stayed pending appeal, or has not been discharged within
sixty (60) days after the expiration of any such stay.
b. MERGERS, CONSOLIDATIONS, ETC. The Company will not, and will
not permit any Subsidiary to, and cause such Subsidiary not to, consolidate with
or merge with any other Person or convey, transfer, sell or lease all or
substantially all of its assets in a single transaction or series of
transactions to any Person.
c. SALE OF ASSETS. The Company will not, and will not permit any
Subsidiary to, and cause such Subsidiary not to, sell, lease, transfer or
otherwise dispose of, including by way of merger (collectively a "DISPOSITION"),
any assets, including capital stock of any Subsidiary, in one or a series of
transactions, to any Person, other than Dispositions in the ordinary course of
business.
d. NATURE OF BUSINESS. The Company will not, and will not permit
any Subsidiary to, and cause such Subsidiary not to, engage in any business if,
as a result, the general nature of the business in which the Company and its
Subsidiaries, taken as a whole, would then be engaged would be substantially
changed from the general nature of the business in which the Company and its
Subsidiaries, taken as a whole, are engaged on the date of this Agreement.
e. TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not permit any Subsidiary to, and cause such Subsidiary not to, enter into
directly or indirectly any transaction or material group of related transactions
(including without limitation the purchase, lease, sale or exchange of
properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Subsidiary), except upon fair and reasonable
terms no less favorable to the Company or such Subsidiary than would be
obtainable in a comparable arm's-length transaction with a Person not an
Affiliate.
f. RESTRICTION ON DISTRIBUTIONS AND STOCK REPURCHASES. The
Company will not, and will not permit any Subsidiary to, and cause such
Subsidiary not to, redeem, repurchase or otherwise acquire (whether for cash or
in exchange for property or other securities or otherwise) in any one
transaction or series of related transactions any shares of capital stock of the
Company or any Subsidiary or any warrants, rights or options to purchase or
acquire any such shares. The Company will not and will not permit any Subsidiary
to make any distribution or dividend of cash or other property with respect to
its capital stock.
g. INVESTMENTS. The Company will not, and will not permit any
Subsidiary to, and cause such Subsidiary not to, make any loan or advance to any
Person or entity, or purchase or otherwise acquire any capital stock, assets,
obligations, or other securities of, make any capital contribution to, or
otherwise invest in or acquire any interest in any Person or entity, except
direct obligations of the United States or any agency thereof, bonds, and
certificates of deposit in commercial or savings banks of recognized standing.
22
h. ADDITIONAL SUBSIDIARY CAPITAL. The Company shall not permit
any of the Subsidiaries to issue to third parties any of its capital stock or
options, warrants or other similar rights to acquire its capital stock.
9. EVENTS OF DEFAULT. An "Event of Default" shall exist if any of the
following conditions or events shall occur and be continuing:
a. the Company defaults in the payment of any principal on any
Note when the same becomes due and payable, whether at maturity or otherwise; or
b. the Company defaults in the payment of any interest on any
Note for more than five (5) business days after the same becomes due and
payable; or
c. the Company defaults in the performance of or compliance with
any term contained in or Sections 8(a) through 8(h), and such default has not
been cured for ten (10) business days after the earlier of (i) an executive
officer of the Company or any Subsidiary obtaining actual knowledge of such
default and (ii) the Collateral Agent delivering written notice to the Company
of such default; or
d. the Company defaults in the performance of or compliance with
any term, agreement or covenant contained herein (other than those referred to
in paragraphs (a), (b) and (c) of this Section 9) and such default is not
remedied within ten (10) business days after the earlier of (i) an executive
officer of the Company or any Subsidiary obtaining actual knowledge of such
default and (ii) the Collateral Agent delivering written notice to the Company
of such default; or
e. any representation or warranty made by or on behalf of the
Company or any Subsidiary or by any officer of the Company or a Subsidiary in
this Agreement, the Security Agreement, any Subsidiary Security Agreement, any
Guaranty, the Real Property Security Agreement, the Pledge Agreement or in any
writing furnished in connection with the transactions contemplated hereby or
thereby proves to have been false or incorrect in any material respect on the
date as of which made, and such condition has not been cured for ten (10)
business days after the earlier of (i) an executive officer of the Company or
any Subsidiary obtaining actual knowledge of such condition and (ii) the
Collateral Agent delivering written notice to the Company of such condition; or
f. (i) the Company or any Subsidiary is in default (as principal
or as guarantor or other surety) in the payment of any principal of or premium
or make-whole amount or interest on any indebtedness that is outstanding beyond
any period of grace provided with respect thereto, or (ii) the Company or any
Subsidiary is in default in the performance of or compliance with any term of
any evidence of any indebtedness that is outstanding or of any mortgage,
indenture or other agreement relating thereto or any other condition exists, and
as a consequence of such default or condition such indebtedness has become, or
has been declared (or one or more Persons are entitled to declare such
indebtedness to be), due and payable before its stated maturity or before its
regularly scheduled dates of payment, or (iii) as a consequence of the
occurrence or continuation of any event or condition (other than the passage of
time or the right of the holder of indebtedness to convert such indebtedness
into equity interests), (A) the
23
Company or any Subsidiary has become obligated to purchase or repay indebtedness
before its regular maturity or before its regularly scheduled dates of payment,
or (B) one or more Persons have the right to require the Company or any
Subsidiary so to purchase or repay such indebtedness; provided, that any of the
foregoing, if curable, has not been cured within ten (10) business day after the
earlier of (i) an executive officer of the Company or any Subsidiary obtaining
actual knowledge of such default and (ii) the Collateral Agent delivering
written notice to the Company of such default; or
g. the Company or any Subsidiary (i) is generally not paying, or
admits in writing its inability to pay, its debts as they become due, (ii)
files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii) makes
an assignment for the benefit of its creditors, (iv) consents to the appointment
of a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or
h. a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any Subsidiary, a
custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, or constituting
an order for relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company or any Subsidiary, or any such petition
shall be filed against the Company or any Subsidiary and such petition shall not
be dismissed within sixty (60) days; or
i. a final judgment or judgments for the payment of money are
rendered against one or more of the Company and its Subsidiaries, which
judgments are not, within sixty (60) days after entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within sixty (60)
days after the expiration of such stay; or
j. any Subsidiary defaults in the performance of or compliance
with any term contained in any Guaranty or the Subsidiary Security Agreement or
any Guaranty or the Subsidiary Security Agreement ceases to be in full force and
effect as a result of acts taken by the Company or any Subsidiary, or is
declared to be null and void in whole or in material part by a court or other
governmental or regulatory authority having jurisdiction or the validity or
enforceability thereof shall be contested by any of the Company or any
Subsidiary or any of them renounces any of the same or denies that it has any or
further liability thereunder; provided, that any of the foregoing, if curable,
has not been cured within ten (10) business day after the earlier of (i) an
executive officer of the Company or any Subsidiary obtaining actual knowledge of
such default and (ii) the Collateral Agent delivering written notice to the
Company of such default;
k. the Company defaults in the performance of or compliance with
any term contained in the Pledge Agreement or the Pledge Agreement ceases to be
in full force and effect as a result of acts taken by the Company or any
Subsidiary, or is declared to be null
24
and void in whole or in material part by a court or other governmental or
regulatory authority having jurisdiction or the validity or enforceability
thereof shall be contested by any of the Company or any Subsidiary or any of
them renounces any of the same or denies that it has any or further liability
thereunder; provided, that any of the foregoing, if curable, has not been cured
within ten (10) business day after the earlier of (i) an executive officer of
the Company or any Subsidiary obtaining actual knowledge of such default and
(ii) the Collateral Agent delivering written notice to the Company of such
default; or
l. the Company defaults in the performance of or compliance with
any term contained in the Real Property Security Agreement or the Real Property
Security Agreement ceases to be in full force and effect as a result of acts
taken by the Company or any Subsidiary, or is declared to be null and void in
whole or in material part by a court or other governmental or regulatory
authority having jurisdiction or the validity or enforceability thereof shall be
contested by any of the Company or any Subsidiary or any of them renounces any
of the same or denies that it has any or further liability thereunder; provided,
that any of the foregoing, if curable, has not been cured within ten (10)
business day after the earlier of (i) an executive officer of the Company or any
Subsidiary obtaining actual knowledge of such default and (ii) the Collateral
Agent delivering written notice to the Company of such default.
10. REMEDIES ON DEFAULT, ETC.
a. ACCELERATION.
(i) If an Event of Default with respect to the Company
described in paragraph (g) or (h) of Section 9 (other than an Event of Default
described in clause (i) of paragraph (g) or described in clause (vi) of
paragraph (g) by virtue of the fact that such clause encompasses clause (i) of
paragraph (g)) has occurred, all the Notes then outstanding shall automatically
become immediately due and payable.
(ii) If any other Event of Default has occurred and is
continuing, holders of a majority or more in principal amount of the Notes at
the time outstanding may at any time at its or their option, by notice or
notices to the Company, declare all the Notes then outstanding to be immediately
due and payable.
(iii) If any Event of Default described in paragraph (a) or
(b) of Section 9 has occurred and is continuing, any holder or holders of Notes
at the time outstanding affected by such Event of Default may at any time, at
its or their option, by notice or notices to the Company, declare all the Notes
held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 10(a), whether
automatically or by declaration (a "DEFAULT"), such Notes will forthwith mature
and the entire unpaid principal amount of such Notes, plus all accrued and
unpaid interest thereon shall all be immediately due and payable, in each and
every case without presentment, demand, protest or further notice, all of which
are hereby waived.
b. OTHER REMEDIES. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared
25
immediately due and payable under Section 10(a), the holder of any Note at the
time outstanding may proceed to protect and enforce the rights of such holder by
an action at law, suit in equity or other appropriate proceeding, whether for
the specific performance of any agreement contained herein or in any Note, or
for an injunction against a violation of any of the terms hereof or thereof, or
in aid of the exercise of any power granted hereby or thereby or by law or
otherwise.
c. RESCISSION. At any time after any Notes have been declared due
and payable pursuant to clause (i) or (ii) of Section 10(a), the holders of a
majority in principal amount of the Notes then outstanding, by written notice to
the Company, may rescind and annul any such declaration and its consequences if
(i) the Company has paid all overdue interest on the Notes and all principal of
any Notes that are due and payable and are unpaid other than by reason of such
declaration, (ii) all Events of Default and Defaults, other than non-payment of
amounts that have become due solely by reason of such declaration, have been
cured or have been waived pursuant to Section 14, and (iii) no judgment or
decree has been entered for the payment of any monies due pursuant hereto or to
the Notes. No rescission and annulment under this Section 10(c) will extend to
or affect any subsequent Event of Default or Default or impair any right
consequent thereon.
d. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No course
of dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies. No right, power or remedy conferred by
this Agreement or by any Note upon any holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of the Company under Section 17, the Company will pay to the holder
of each Note on demand such further amount as shall be sufficient to cover all
costs and expenses of such holder incurred in any enforcement or collection
under this Section 10, including, without limitation, reasonable attorneys'
fees, expenses and disbursements.
e. DEFAULT INTEREST. During any period a Default or an Event of
Default has occurred and is continuing, any amount of principal on the Notes
then outstanding shall bear interest (the "DEFAULT INTEREST"), and the Company
shall pay to the holder thereof in cash as liquidated damages and not as a
penalty, at the rate equal to (i) two percent (2%) for the first thirty (30)
days, or fraction thereof, after such Default or Event of Default has occurred
and (ii) thereafter three and one-half percent (3.5%) for each thirty (30) day
period, or fraction thereof, until the earlier of (A) the Notes, including
accrued but unpaid interest thereon, are paid in full and (B) such Default or
Event of Default, if curable under the terms of this Agreement, has been cured.
Such Default Interest shall be paid to the holders of such Notes by the fifth
(5th) day of the month following the month in which it has accrued or, if not so
paid, shall be added to the principal amount of such holder's Notes, in which
event interest shall accrue thereon in accordance with the terms of the Notes.
11. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
a. REGISTRATION OF NOTES. The Company shall keep at its principal
executive office a register for the registration and registration of transfers
of Notes. The name and address of each holder of one or more Notes, each
transfer thereof and the name and address
26
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary.
b. TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any Note at
the principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or his attorney duly authorized in writing and
accompanied by the address for notices of each transferee of such Note or part
thereof), the Company shall execute and deliver, at the Company's expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) in exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be substantially in
the form of Exhibit "A." Each such new Note shall be dated and bear interest
from the date to which interest shall have been paid on the surrendered Note or
dated the date of the surrendered Note if no interest shall have been paid
thereon. Notes shall not be transferred in denominations of less than $50,000,
provided that if necessary to enable the registration of transfer by a holder of
its entire holding of Notes, one Note may be in a denomination of less than
$50,000.
c. REPLACEMENT OF NOTES. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be notice from such
holder of such ownership and such loss, theft, destruction or mutilation), and
(i) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note is, or
is a nominee for, (A) a Buyer, or (B) other Person with a minimum net worth of
at least the then-outstanding principal amount of the Notes so lost, stolen,
destroyed or mutilated, then such Buyer's or other Person's own unsecured
agreement of indemnity shall be deemed to be satisfactory), or
(ii) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
12. PAYMENT ON NOTES.
a. PLACE OF PAYMENT. Subject to Section 12(b), payments of
principal and interest becoming due and payable on the Notes shall be made in
U.S. Dollars at the principal office of the Company. The Company may at any
time, by notice to each holder of a Note, change the place of payment of the
Notes so long as such place of payment shall be
27
either the principal office of the Company in such jurisdiction or the principal
office of a bank or trust company in such jurisdiction.
b. HOME OFFICE PAYMENT. So long as a Buyer or its nominee shall
be the holder of any Note, and notwithstanding anything contained in Section
12(a) or in such Note to the contrary, the Company will pay all sums becoming
due on such Note for principal and interest in U.S. Dollars and by the method
and at the address specified for such purpose below such Buyer's name on the
signature page hereto, or by such other method or at such other address as such
Buyer shall have from time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such Note or the making of any
notation thereon, except that upon written request of the Company made
concurrently with or reasonably promptly after payment or prepayment in full of
any Note, such Buyer shall surrender such Note for cancellation, reasonably
promptly after any such request, to the Company at its principal executive
office or at the place of payment most recently designated by the Company
pursuant to Section 12(a).
c. ALLOCATION OF PREPAYMENT. In the case of each partial
prepayment of the Notes, the principal amount of the Notes to be prepaid shall
be allocated among all of the Notes at the time outstanding in proportion, as
nearly as practicable, to the respective unpaid principal amounts thereof not
theretofore called for prepayment.
d. MAKE-WHOLE AMOUNT. If (i) the Company, at its option, prepays
at any time all, or from time to time any part of, the Notes, or (ii) the
principal amount of the Notes become due and payable prior to the Maturity Date,
by acceleration or otherwise, then the Company shall pay, in addition to any
other amounts due and owing to the holders of such Notes, the Make-Whole Amount
determined for the prepayment date with respect to such principal amount so
prepaid. Contemporaneous with any such payment, the Company will give each
holder of Notes (i) written notice which shall specify (A) the aggregate
principal amount of the Notes being prepaid, (B) the principal amount of each
Note held by such holder being prepaid, (C) the accrued but unpaid interest
through the prepayment date, including Default Interest, if any, being paid with
respect to such principal amount being prepaid, and (ii) a certificate of the
Chief Financial Officer as to the estimated Make-Whole Amount due in connection
with such prepayment, setting forth the details of such computation. The term
"MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount equal to the
non-discounted interest that would have accrued from the date of such prepayment
to the Maturity Date.
13. INDEMNIFICATION.
a. SURVIVAL. All representations, warranties and covenants in
this Agreement and the DISCLOSURE SCHEDULE will survive the Closing. The right
to indemnification, payment of Damages (as defined below) or other remedy based
on such representations, warranties and covenants will not be affected by any
investigation conducted with respect to, or any knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty or covenant.
The waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of
28
or compliance with any covenant, shall not affect the right to indemnification,
payment of Damages, or other remedy based on such representations, warranties
and covenants.
b. INDEMNIFICATION. The Company will indemnify and hold harmless
the Buyers and the Collateral Agent, each of their officers, partners, managers,
and all Persons who control (as such term is defined under the Securities Act or
the Exchange Act) such Buyer or the Collateral Agent (each an "INDEMNIFIED
PARTY" and collectively the "INDEMNIFIED PARTIES"), and will pay to the
Indemnified Parties the amount of, any loss, liability, claim, damage, expense,
including costs of investigation and defense and reasonable attorneys' fees,
(collectively, "DAMAGES") arising, directly or indirectly, from or in connection
with (i) any breach of any representation or warranty made by the Company in
this Agreement or the DISCLOSURE SCHEDULE, the Notes, the Warrants, the
Registration Rights Agreement, the Pledge Agreement, the Real Property Security
Agreement or the Security Agreement, (ii) any breach by the Company of any
covenant or obligation of the Company in this Agreement, the Notes, the
Warrants, the Registration Rights Agreement, the Pledge Agreement, the Real
Property Security Agreement or the Security Agreement, or (iii) any breach of
any representation or warranty made by any Subsidiary in any Guaranty or any
Subsidiary Security Agreement, or (iv) any breach of by any Subsidiary of any
covenant or obligation of such Subsidiary under any Guaranty or any Subsidiary
Security Agreement.
c. TIME LIMITATIONS. The Company shall have no liability (for
indemnification or otherwise) with respect to any breach of any representation
or warranty, unless on or before the date three (3) years from the Closing Date,
an Indemnified Party notifies the Company of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by such
Indemnified Party.
d. PROCEDURE FOR INDEMNIFICATION. If a claim is to be made
against the Company under Section 13(b), the Indemnified Party shall give notice
to the Company of such claim. In the event that the Company objects in writing
to any claim for Damages, the Indemnified Party and the Company shall attempt in
good faith to resolve the dispute. The remedies provided in this Section 13 will
not be exclusive of or limit any other remedies that may be available to the
Buyers. When determining Damages under this Section 13, all materiality
qualifiers will be disregarded.
14. AMENDMENT AND WAIVER.
a. REQUIREMENTS. This Agreement, the Notes, the Security
Agreement, any Guaranty, the Subsidiary Security Agreement, the Pledge Agreement
and the Real Property Security Agreement may be amended, and the observance of
any term hereof or thereof may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
holders of a majority of the then-outstanding principal amount of the Notes.
b. SOLICITATION OF HOLDERS OF NOTES. The Company will provide
each holder of the Notes (irrespective of the amount of Notes then owned by it)
with sufficient information, sufficiently far in advance of the date a decision
is required, to enable such holder to make an informed and considered decision
with respect to any proposed amendment, waiver or
29
consent in respect of any of the provisions hereof or of the Notes. The Company
will deliver executed or true and correct copies of each amendment, waiver or
consent effected pursuant to the provisions of this Section 14 to each holder of
outstanding Notes promptly following the date on which it is executed and
delivered by, or receives the consent or approval of, the requisite holders of
Notes.
c. BINDING EFFECT, ETC. Any amendment or waiver consented to as
provided in this Section 14 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" or "the Agreement" and
references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
d. NOTES HELD BY COMPANY. Solely for the purpose of determining
whether the holders of the requisite percentage of the aggregate principal
amount of Notes then outstanding approved or consented to any amendment, waiver
or consent to be given under this Agreement or the Notes, or have directed the
taking of any action provided herein or in the Notes to be taken upon the
direction of the holders of a specified percentage of the aggregate principal
amount of Notes then outstanding, Notes directly or indirectly owned by the
Company or any of its Affiliates shall be deemed not to be outstanding.
15. EXPENSES.
a. CURRENT EXPENSES. The Company shall reimburse, or pay
directly, at the Closing up to $30,000 in the aggregate, of which $10,000 is
acknowledged as previously paid, (i) counsels' fees of one firm designated by
ABS SOS-PLUS PARTNERS, LTD. (the "LEAD BUYER") incurred in connection with the
negotiation, preparation, and closing of this Agreement and the other agreements
to be executed in connection herewith (the "DOCUMENTS"), (ii) such counsels'
reasonable out of pocket expenses and (iii) other out-of-pocket expenses
incurred by the Lead Buyer or the Collateral Agent incurred in connection with
the negotiation of the terms of the transactions contemplated herein and due
diligence of the Company, its Subsidiaries and their respective management. When
requested by the Lead Buyer the Company shall pay these fees directly, otherwise
the Company must make immediate payment for reimbursement to the Lead Buyer for
such fees and expenses immediately upon written notice by the Lead Buyer or the
submission of an invoice by the Lead Buyer. If the Company fails to reimburse
the Lead Buyer in full within three (3) business days of the written notice or
submission of invoice by the Lead Buyer, the Company shall pay interest on the
total amount of fees to be reimbursed at a rate of eighteen percent (18%) per
annum. Unless otherwise provided in this Agreement, each party shall bear its
own expenses in performing this Agreement.
b. EXPENSES IN DISPUTE. In the event of any dispute regarding the
subject matter hereunder, the non-prevailing party in any dispute shall be
required to fully
30
reimburse the prevailing party in any dispute for all of its documented
attorneys' fees, costs and expenses incurred in connection with such dispute,
the outcome of which shall have been determined by a court of competent
jurisdiction.
c. EXPENSES FOR AMENDMENTS. If the Lead Buyer shall employ
counsel for advice or other representation or shall incur legal or other costs
and expenses in connection with any amendment or modification of this Agreement
or any of the other Documents, then, and in any such event, the counsel fees
arising from such services and all expenses, costs, charges and other fees of
such counsel incurred in connection with or related to any of the events or
actions described above shall be payable by the Company.
16. [INTENTIONALLY OMITTED]
17. GOVERNING LAW; JURY TRIAL.
a. GOVERNING LAW. The validity and interpretation of this
Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York. Each of the parties hereto and their assigns
hereby consents to the exclusive jurisdiction and venue of the Courts of the
State of New York, located in the City and County of New York and the United
States District Court, Southern District, for the State of New York with respect
to any matter relating to this Agreement and performance of the parties'
obligations hereunder, the documents and instruments executed and delivered
concurrently herewith or pursuant hereto and performance of the parties'
obligations thereunder and each of the parties hereto hereby consents to the
personal jurisdiction of such courts and shall subject itself to such personal
jurisdiction. Any action, suit or proceeding relating to such matters shall be
commenced, pursued, defended and resolved only in such courts and any
appropriate appellate court having jurisdiction to hear an appeal from any
judgment entered in such courts. The parties irrevocably waive the defense of an
inconvenient forum to the maintenance of such suit or proceeding. Service of
process in any action, suit or proceeding relating to such matters may be made
and served within or outside the State of New York by registered or certified
mail to the parties and their representatives at their respective addresses
specified in Section 18 hereof, provided that a reasonable time, not less than
thirty (30) days, is allowed for response. Service of process may also be made
in such other manner as may be permissible under the applicable court rules.
b. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL
ENCOMPASSING OF ANY DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO
THE SUBJECT MATER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT FOR EACH PARTY TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY
HAS RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY
WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH
PARTY FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVES ITS
RIGHTS TO A JURY TRIAL FOLLOWING SUCH CONSULTATION. THIS WAIVER IS IRREVOCABLE,
MEANING THAT, NOTWITHSTANDING ANYTHING HEREIN TO
31
THE CONTRARY, IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS AND SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
18. CONVERSION RIGHTS.
a. GENERAL.
(i) CONVERSION EVENTS. Each holder of a Note shall have the
right from time to time, at any time while a Default or an Event of Default has
occurred as is continuing and subject to (A) the ASX granting the ASX Approval
or (B) such conversion or conversions not causing a delisting of the Company
from the ASX, to convert all or any part of the outstanding and unpaid principal
amount and accrued but unpaid interest of the holder's Note into fully paid and
non-assessable common stock, par value $0.01 per share, of the Company (the
"COMMON STOCK"), or any shares of capital stock or other securities of the
Company into which such Common Stock shall hereafter be changed or reclassified
at the Conversion Price (as defined herein).
(ii) CONVERSION AMOUNT. The number of shares of Common Stock
to be issued upon each conversion of the holder's Note shall be equal to (i) the
Conversion Amount (as defined below) divided by (ii) the applicable Conversion
Price then in effect on the date specified in the notice of conversion, in the
form accompanying this Agreement (the "NOTICE OF CONVERSION"), delivered to the
Company by the holder in accordance with Section 18(d) below; provided that the
Notice of Conversion is submitted by facsimile (or by other means resulting in,
or reasonably expected to result in, notice) to the Company before 6:00 p.m.,
New York, New York time on such conversion date (the "CONVERSION DATE"). The
term "CONVERSION AMOUNT" means, with respect to any conversion of the holder's
Note, the sum of (1) the principal amount of the holder's Note to be converted
in such conversion plus (2) accrued and unpaid interest, if any, on such
principal amount at the interest rates provided in the holder's Note to the
Conversion Date plus (3) Default Interest, if any.
(iii) CONVERSION LIMIT. In no event, at any time that the
Company has any class of its securities registered under Section 12(b) or
Section 12(g) of the Exchange Act, shall the holder be entitled to convert any
portion of the holder's Note in excess of that portion of the holder's Note upon
conversion of which the sum of (i) the number of shares of Common Stock
beneficially owned by the holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Notes or the unexercised or unconverted portion of
any other security of the Company (including, without limitation, the warrants
issued by the Company pursuant to this Agreement) subject to a limitation on
conversion or exercise analogous to the limitations contained herein) and (ii)
the number of shares of Common Stock issuable upon the conversion of the portion
of the holder's Note with respect to which the determination of this proviso is
being made, would result in beneficial ownership by the holder and its
affiliates of more than 4.99% of the outstanding shares of Common Stock. For
purposes of this Agreement, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act, and Regulations 13D-G
thereunder, except as otherwise provided in clause (i) above. The holder
32
may waive the provisions of this Section 18(a)(iii) as to itself (and solely as
to itself) (i) upon not less than 61 days' prior notice to the Company, and the
provisions of this Section 18(a)(iii) shall continue to apply until such 61st
day (or such later date as may be specified in such notice of waiver) or (ii)
upon the occurrence of any event under Section 18(f)(i). No conversion in
violation of this Section 18(a)(iii), but otherwise in accordance here, shall
affect the status of the Common Stock issued upon such conversion as validly
issued, fully-paid and nonassessable.
b. DEFINITIONS. The capitalized terms below as used in this
Section 18 shall have the following definitions.
(i) BLOOMBERG. The term "BLOOMBERG" shall mean Bloomberg,
L.P. (or any successor to its function of reporting stock prices).
(ii) CONVERSION PRICE. The "CONVERSION PRICE" shall be
US$0.15, subject to adjustment as provided herein.
(iii) MARKET PRICE. The term "MARKET PRICE" means, as of any
date, (i) the average of the last reported sale prices for the shares of Common
Stock on a national securities exchange which is the principal trading market
for the Common Stock for the five (5) Trading Days immediately preceding such
date as reported by Bloomberg, or (ii) if no national securities exchange is the
principal trading market for the shares of Common Stock, the average of the last
reported sale prices on the principal trading market for the Common Stock during
the same period as reported by Bloomberg, or (iii) if market value cannot be
calculated as of such date on any of the foregoing bases, the Market Price shall
be the fair market value as reasonably determined in good faith by (x) the Board
of Directors of the Company or, (y) at the option of a majority-in-interest of
the holders of the outstanding Notes, by an independent investment bank of
nationally recognized standing in the valuation of businesses similar to the
business of the Company. The manner of determining the Market Price of the
Common Stock set forth in the foregoing definition shall apply with respect to
any other security in respect of which a determination as to market value must
be made hereunder.
(iv) TRADING DAY. The term "TRADING DAY" shall mean any day
on which the Common Stock is traded for any period on the principal securities
exchange or other securities market on which the Common Stock is then being
traded.
c. AUTHORIZED SHARES. The Company covenants that during the
period the conversion right exists, the Company will reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of Common Stock upon the full conversion of
the holder's Note and the other Notes issued pursuant to this Agreement (the
"RESERVED AMOUNT"). If the Company shall issue any securities or make any change
to its capital structure which would change the number of shares of Common Stock
into which the Notes shall be convertible at the then current Conversion Price,
the Company shall at the same time make proper provision so that thereafter
there shall be a sufficient number of shares of Common Stock authorized and
reserved, free from preemptive rights, for conversion of the outstanding Notes.
The Company (i) acknowledges that it has irrevocably instructed its transfer
agent to issue certificates for the Common Stock issuable upon conversion of the
holder's Note, and (ii) agrees that its issuance of the holder's Note shall
33
constitute full authority to its officers and agents who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock in accordance with the terms and
conditions of the holder's Note.
d. METHOD OF CONVERSION.
(i) MECHANICS OF CONVERSION. Subject to Section 18(a), the
holder's Note may be converted by the holder in whole or in part, by (i)
submitting to the Company a Notice of Conversion (by facsimile or other
reasonable means of communication dispatched on the Conversion Date prior to
6:00 p.m., New York, New York time) and (ii) subject to Section 18(d)(ii),
surrendering the holder's Note at the principal office of the Company.
(ii) SURRENDER OF NOTE UPON CONVERSION. Notwithstanding
anything to the contrary set forth herein, upon conversion of the holder's Note
in accordance with the terms hereof, the holder shall not be required to
physically surrender the holder's Note to the Company unless the entire unpaid
principal amount of the holder's Note is so converted. The holder and the
Company shall maintain records showing the principal amount so converted and the
dates of such conversions or shall use such other method, reasonably
satisfactory to the holder and the Company, so as not to require physical
surrender of the holder's Note upon each such conversion. In the event of any
dispute or discrepancy, such records of the Company shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any portion of the holder's Note is converted as aforesaid, the holder may
not transfer the holder's Note unless the holder first physically surrenders the
holder's Note to the Company, whereupon the Company will forthwith issue and
deliver upon the order of the holder a new Note of like tenor, registered as the
holder (upon payment by the holder of any applicable transfer taxes) may
request, representing in the aggregate the remaining unpaid principal amount of
the holder's Note. The holder and any assignee, by acceptance of the holder's
Note, acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of the holder's Note, the unpaid and
unconverted principal amount of the holder's Note represented by the holder's
Note may be less than the amount stated on the face hereof.
(iii) DELIVERY OF COMMON STOCK UPON CONVERSION. Upon receipt
by the Company from the holder of a facsimile transmission (or other reasonable
means of communication) of a Notice of Conversion meeting the requirements for
conversion as provided in this Section 18(d), the Company shall issue and
deliver or cause to be issued and delivered to or upon the order of the holder
certificates for the Common Stock issuable upon such conversion within two (2)
business days after such receipt (and, solely in the case of conversion of the
entire unpaid principal amount hereof, surrender of the holder's Note) (such
third business day being hereinafter referred to as the "DEADLINE") in
accordance with the terms hereof and the Purchase Agreement.
(iv) OBLIGATION OF COMPANY TO DELIVER COMMON STOCK. Upon
delivery by the holder to the Company of a Notice of Conversion, the holder
shall be deemed to be the holder of record of the Common Stock issuable upon
such conversion, the outstanding principal amount and the amount of accrued and
unpaid interest on the holder's Note shall be reduced to reflect such
conversion, and, unless the Company defaults on its obligations
34
under this Section 18, all rights with respect to the portion of the holder's
Note being so converted shall forthwith terminate except the right to receive
the Common Stock or other securities, cash or other assets, as herein provided,
on such conversion. If the holder shall have given a Notice of Conversion as
provided herein, the Company's obligation to issue and deliver the certificates
for Common Stock shall be absolute and unconditional, irrespective of the
absence of any action by the holder to enforce the same, any waiver or consent
with respect to any provision thereof, the recovery of any judgment against any
Person or any action to enforce the same, any failure or delay in the
enforcement of any other obligation of the Company to the holder of record, or
any setoff, counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the holder of any obligation to the Company, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the holder in connection with such conversion. The
Conversion Date specified in the Notice of Conversion shall be the Conversion
Date so long as the Notice of Conversion is received by the Company before 6:00
p.m., New York, New York time, on such date.
(v) DELIVERY OF COMMON STOCK BY ELECTRONIC TRANSFER. In lieu
of delivering physical certificates representing the Common Stock issuable upon
conversion, provided the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program,
upon request of the holder and its compliance with the provisions contained in
Section 18(a) and in this Section 18(d), the Company shall use its best efforts
to cause its transfer agent to electronically transmit the Common Stock issuable
upon conversion to the holder by crediting the account of holder's Prime Broker
with DTC through its Deposit Withdrawal Agent Commission system.
e. CONCERNING THE SHARES.
(i) LEGEND. The shares of Common Stock issuable upon
conversion of the holder's Note may not be sold or transferred unless (A) such
shares are sold pursuant to an effective registration statement under the
Securities Act, or (B) the Company or its transfer agent shall have been
furnished with an opinion of counsel (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions) to the
effect that the shares to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration or (C) such shares are sold or
transferred pursuant to Rule 144 under the Securities Act (or a successor rule)
("RULE 144") or (D) such shares are sold or transferred outside the United
States in accordance with Rule 904 of Regulation S under the Securities Act, or
(E) such shares are transferred to an "affiliate" (as defined in Rule 144) of
the Company who agrees to sell or otherwise transfer the shares only in
accordance with this Section 18(e). Except as otherwise provided in this
Agreement (and subject to the removal provisions set forth below), until such
time as the shares of Common Stock issuable upon conversion of the holder's Note
have been registered under the Act as contemplated by the Registration Rights
Agreement, otherwise may be sold pursuant to Rule 144 without any restriction as
to the number of securities as of a particular date that can then be immediately
sold, each certificate for shares of Common Stock issuable upon conversion of
the holder's Note that has not been so included in an effective registration
statement or that has not been sold pursuant to an effective registration
statement or an exemption that permits removal of the legend, shall bear a
legend substantially in the following form, as appropriate:
35
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT"). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES THAT SUCH SECURITIES
MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE
CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF
REGULATION S UNDER THE U.S. SECURITIES ACT, (C) WITHIN THE UNITED STATES
AFTER REGISTRATION OR IN ACCORDANCE WITH THE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE
144 THEREUNDER, IF APPLICABLE, AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS, OR (D) WITHIN THE UNITED STATES IN A TRANSACTION THAT DOES
NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE
STATE SECURITIES LAWS AND THE HOLDER HAS PRIOR TO SUCH SALE FURNISHED TO
THE CORPORATION AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION.
(ii) REMOVAL OF LEGEND. The legend set forth above shall be
removed and the Company shall issue to the holder a new certificate therefor
free of any transfer legend if (A) the Company or its transfer agent shall have
received an opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public sale
or transfer of such Common Stock may be made without registration under the Act
and the shares are so sold or transferred, (B) such holder provides the Company
or its transfer agent with reasonable assurances that the Common Stock issuable
upon conversion of the holder's Note (to the extent such securities are deemed
to have been acquired on the same date) can be sold pursuant to Rule 144 or (C)
in the case of the Common Stock issuable upon conversion of the holder's Note,
such security is registered for sale by the holder under an effective
registration statement filed under the Act or otherwise may be sold pursuant to
Rule 144 without any restriction as to the number of securities as of a
particular date that can then be immediately sold. The Company shall cause its
counsel to issue a legal opinion to the Company's transfer agent promptly after
the effective date of any registration statement under the Act registering the
resale of the Common Stock issuable upon conversion of the Notes if required by
the Company's transfer agent to effect the removal of the legend hereunder.
Nothing in the holder's Note shall (x) limit the Company's obligation under the
Registration Rights Agreement or (y) affect in any way the holder's obligations
to comply with applicable prospectus delivery requirements upon the resale of
the securities referred to herein.
(iii) AUSTRALIAN STOCK EXCHANGE. Notwithstanding the
foregoing under this Section 18(e), subject to the ASX granting the ASX
Approval, the Company (A) represents and warrants to each Buyer that the shares
of Common Stock issuable upon conversion of the Notes pursuant to this Section
18 are freely transferable by each of the Buyers and their respective registered
assigns of the Notes on the ASX pursuant to the rules and regulations of the
ASX, Australian law and United States federal and state law, without, subject to
market conditions, volume limitation or price discount, and (B) covenants to
each of the Buyers and their respective registered assigns of the Notes that the
shares of Common Stock
36
when issued upon conversion of the Notes pursuant to this Section 18 will be
freely transferable by such Buyers and their respective registered assigns on
the ASX pursuant to the rules and regulations of the ASX, Australian law and
United States federal and state law, without, subject to market conditions,
volume limitation or price discount, and subject to changes in rules and
regulations of the ASX, Australian law and United States federal and state law
after the date hereof.
f. EFFECT OF CERTAIN EVENTS.
(i) ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, at any
time when any of the Notes are issued and outstanding, there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization, or
other similar event, as a result of which shares of Common Stock of the Company
shall be changed into the same or a different number of shares of another class
or classes of stock or securities of the Company or another entity, or in case
of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then each holder of a Note shall thereafter have the right to receive
upon conversion of the holder's Note, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such stock, securities or
assets which the holder would have been entitled to receive in such transaction
had the holder's Note been converted in full immediately prior to such
transaction (without regard to any limitations on conversion set forth herein),
and in any such case appropriate provisions shall be made with respect to the
rights and interests of the holder of the holder's Note to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the Conversion Price and of the number of shares issuable upon conversion of the
Note) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities or assets thereafter deliverable upon the conversion
hereof. The Company shall not effect any transaction described in this Section
18(f)(i) unless (a) it first gives, to the extent practicable, thirty (30) days
prior written notice (but in any event at least fifteen (15) days prior written
notice) of the record date of the special meeting of stockholders to approve, or
if there is no such record date, the consummation of, such merger,
consolidation, exchange of shares, recapitalization, reorganization or other
similar event or sale of assets (during which time the holder shall be entitled
to convert the holder's Note notwithstanding Section 18(a)(iii)) and (b) the
resulting successor or acquiring entity (if not the Company) assumes by written
instrument the obligations of this Section 18(f)(i). The above provisions shall
similarly apply to successive consolidations, mergers, sales, transfers or share
exchanges.
(ii) ADJUSTMENT DUE TO DISTRIBUTION. If, at any time when
any Notes are issued and outstanding, the Company shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the Company's shareholders
in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a "DISTRIBUTION"), then each holder of a Note shall be
entitled, upon any conversion of the holder's Note after the date of record for
determining shareholders entitled to such Distribution, to receive the amount of
such assets which would have been payable to the holder with respect to the
shares of Common Stock issuable upon such conversion had such holder been the
holder of such shares of Common Stock on the record date for the determination
37
of shareholders entitled to such Distribution and the Note shall be deemed
repaid by the amount of the fair value of the Distribution.
(iii) ADJUSTMENT DUE TO DILUTIVE ISSUANCE. If, at any time
when any Notes are issued and outstanding, the Company issues or sells, or in
accordance with this Section 18(f) is deemed to have issued or sold, any shares
of Common Stock for no consideration or for a consideration per share (before
deduction of reasonable expenses or commissions or underwriting discounts or
allowances in connection therewith) less than the Conversion Price in effect on
the date of such issuance (or deemed issuance) of such shares of Common Stock (a
"DILUTIVE ISSUANCE"), then immediately upon the Dilutive Issuance, the
Conversion Price will be reduced to the lower of (i) the amount of the
consideration per share received by the Company in such Dilutive Issuance and
(ii) the price determined by multiplying the Conversion Price in effect
immediately prior to the Dilutive Issuance by a fraction, (A) the numerator of
which is an amount equal to the sum of (x) the number of shares of Common Stock
actually outstanding immediately prior to the Dilutive Issuance, plus (y) the
quotient of the aggregate consideration, calculated as set forth in Section
18(f)(iv) hereof, received by the Company upon such Dilutive Issuance divided by
the Conversion Price in effect immediately prior to the Dilutive Issuance, and
(B) the denominator of which is the Common Stock Deemed Outstanding (as defined
below) immediately after the Dilutive Issuance; provided that only one
adjustment will be made for each Dilutive Issuance. The term "COMMON STOCK
DEEMED OUTSTANDING" shall mean the number of shares of Common Stock actually
outstanding (not including shares of Common Stock held in the treasury of the
Company), plus (i) pursuant to Section 18(f)(iv)(1) hereof, the maximum total
number of shares of Common Stock issuable upon the exercise of Options, as of
the date of such issuance or grant of such Options, if any, and (ii) pursuant to
Section 18(f)(iv)(2) hereof, the maximum total number of shares of Common Stock
issuable upon conversion or exchange of Convertible Securities, as of the date
of issuance of such Convertible Securities, if any. No adjustment to the
Conversion Price shall have the effect of increasing the Conversion Price above
the Conversion Price in effect immediately prior to such adjustment.
(iv) EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Conversion Price, the following will be
applicable:
1. ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock ("CONVERTIBLE
SECURITIES") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "OPTIONS") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Conversion Price on the date of issuance or grant of such
Options, then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Options will, as of the date of the issuance or grant
of such Options, be deemed to be outstanding and to have been issued and sold by
the Company for such price per share. For purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon the exercise of
such Options" is determined by dividing (i) the total amount, if any, received
or receivable by the Company as consideration for the issuance or granting of
all such Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise
38
of all such Options, plus, in the case of Convertible Securities issuable upon
the exercise of such Options, the minimum aggregate amount of additional
consideration payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Options (assuming full conversion of Convertible Securities, if
applicable). No further adjustment to the Conversion Price will be made upon the
actual issuance of such Common Stock upon the exercise of such Options or upon
the conversion or exchange of Convertible Securities issuable upon exercise of
such Options.
2. ISSUANCE OF CONVERTIBLE SECURITIES. If the Company
in any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the Conversion Price on the date
of issuance, then the maximum total number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities will, as of
the date of the issuance of such Convertible Securities, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For the purposes of the preceding sentence, the "price per share for
which Common Stock is issuable upon such conversion or exchange" is determined
by dividing (i) the total amount, if any, received or receivable by the Company
as consideration for the issuance or sale of all such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment to the
Conversion Price will be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
3. CHANGE IN OPTION PRICE OR CONVERSION RATE. If there
is a change at any time in (i) the amount of additional consideration payable to
the Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Conversion Price in effect at the time of such change will be readjusted to the
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.
4. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the
Company at any time subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) the shares of
Common Stock acquirable hereunder into a greater number of shares, then, after
such date of record for effecting such subdivision, the Conversion Price in
effect immediately prior to such subdivision will be proportionately reduced. If
the Company at any time combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a smaller number of shares, then, after the date of
record for effecting such combination, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased.
39
5. TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. If, in any case, the total number of shares of Common
Stock issuable upon exercise of any Option or upon conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to convert or exchange such Convertible Securities shall have expired
or terminated, the Conversion Price then in effect will be readjusted to the
Conversion Price which would have been in effect at the time of such expiration
or termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination (other than in
respect of the actual number of shares of Common Stock issued upon exercise or
conversion thereof), never been issued.
6. CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of the holder's Note will be
the amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair value
of such consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the Company.
7. EXCEPTIONS TO ADJUSTMENT OF CONVERSION PRICE. No
adjustment to the Conversion Price will be made (A) upon the issuance of shares
of Common Stock or options or warrants to purchase Common Stock to employees of
the Company pursuant to any stock or option plan duly adopted by the Board of
Directors of the Company on or before June 14, 2006, or (B) the issuance of
shares of Common Stock upon exercise of any of the Warrants.
(v) NOTICE OF ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price as a result of the events
described in this Section 18(f), the Company, at its expense, shall promptly
compute such adjustment or readjustment and prepare and furnish to each holder
of Notes a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based. The
Company shall, upon the written request at any time of any holder of Notes,
furnish to such holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon conversion of such holder's
Note.
g. STATUS AS SHAREHOLDER.
40
(i) DEEMED OWNER; RESCISSION. Upon submission of a Notice of
Conversion by a holder of a Note, (i) the shares covered thereby (other than the
shares, if any, which cannot be issued because their issuance would exceed such
holder's allocated portion of the Reserved Amount) shall be deemed converted
into shares of Common Stock and (ii) the holder's rights as a holder of such
converted portion of the holder's Note shall cease and terminate, excepting only
the right to receive certificates for such shares of Common Stock and to any
remedies provided herein or otherwise available at law or in equity to such
holder because of a failure by the Company to comply with the terms of the
holder's Note. Notwithstanding the foregoing, if a holder has not received
certificates for all shares of Common Stock prior to the third (3rd) business
day after the Deadline with respect to a conversion of any portion of the
holder's Note for any reason, then the holder may elect at such holder's option
to regain the rights of a holder of the holder's Note with respect to such
attempted converted portions of the holder's Note and the Company shall, as soon
as practicable, return such attempted converted Note to the holder or, if the
Note has not been surrendered, adjust its records to reflect that such portion
of the holder's Note has not been converted. In all cases, the holder shall
retain all of its rights and remedies for the Company's failure to convert the
holder's Note.
(ii) COMPENSATION FOR BUY-IN ON FAILURE TO TIMELY DELIVER
CERTIFICATES UPON CONVERSION. In addition to any other rights available to the
holder, if the Company fails for any reason to deliver to the holder of a Note
such certificate or certificates pursuant to this Section 18 by the third (3rd)
business day after the Deadline, and if after such third business day after the
Deadline the holder is required by its brokerage firm to purchase (in an open
market transaction or otherwise) Common Stock to deliver in satisfaction of a
sale by such holder of Common Stock which the holder anticipated receiving upon
such conversion (a "BUY-IN"), then the Company shall (i) pay in cash to the
holder (in addition to any remedies available to or elected by the holder) the
amount by which (x) the holder's total purchase price (including brokerage
commissions, if any) for the Common Stock so purchased exceeds (y) the product
of (1) the aggregate number of shares of Common Stock that such holder
anticipated receiving from the conversion at issue multiplied by (2) the actual
sale price of the Common Stock at the time of the sale (including brokerage
commissions, if any) giving rise to such purchase obligation and (ii) at the
option of the holder, either reissue Notes in principal amount equal to the
principal amount of the attempted conversion or deliver to the holder the number
of shares of Common Stock that would have been issued had the Company timely
complied with its delivery requirements under this Section 18. The holder shall
provide the Company written notice indicating the amounts payable to the holder
in respect of the Buy-In.
19. MISCELLANEOUS.
a. HEADINGS. The headings of this Agreement are for convenience
of reference only and shall not form part of, or affect the interpretation of,
this Agreement.
b. SEVERABILITY. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform to such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
41
c. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
d. NOTICES. Any notices required or permitted to be given under
the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
ZBB Energy Corporation
X00 X00000 Xxxxxxxxx Xxx
Xxxxxxxxx Xxxxx, XX 00000
Attn: Xxxxxx Xxxxx, Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with copies to:
Xxxxxxx Xxxx LLP
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000 - 0150
Attn: Xxxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.
with copies to:
Xxxxxx Xxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Each party shall provide notice to all of the other parties of any
change in address.
e. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor
42
any Buyer shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other. Notwithstanding the foregoing,
any Buyer may assign its rights hereunder to any Person that purchases any of
the Securities in a private transaction from such Buyer or to any of its
Affiliates without the consent of the Company.
f. THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
g. FURTHER ASSURANCES. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
h. NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
i. REMEDIES. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that the
Buyers shall be entitled, in addition to all other available remedies at law or
in equity, to an injunction or injunctions restraining, preventing or curing any
breach of this Agreement and to enforce specifically the terms and provisions
hereof, without the necessity of showing economic loss and without any bond or
other security being required.
j. NONLIABILITY OF THE BUYERS. The relationship between the
Company and the Buyers is, and shall at all times remain, solely that of the
Company with a purchaser of its securities. The Buyers neither undertake nor
assume any responsibility or duty to the Company to review, inspect, supervise,
pass judgment upon, or inform the Company of any matter in connection with any
phase of the Company's business, operations, or condition, financial or
otherwise. The Company shall rely entirely upon its own judgment with respect to
such matters, and any review, inspection, supervision, exercise of judgment, or
information supplied to the Company by the Buyers, or any representative or
agent of the Buyers, in connection with any such matter is for the protection of
the Buyers, and neither the Company nor any third party is entitled to rely
thereon.
k. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company covenants
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, or plead, or in any manner whatsoever claim, and shall resist any and all
efforts to be compelled to take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit or forgive the
Company from paying all or any portion of the principal of or interest on the
Notes as contemplated herein and therein, wherever enacted, now or at any time
hereafter in force, or which may effect the covenants or the performance of this
Agreement; and
43
(to the extent that it may lawfully do so) the Company hereby expressly waives
all benefit or advantage of any such law and covenants that it shall not hinder,
delay or impede the execution of power herein granted to the holders of the
Notes, but shall suffer and permit the execution of every such power as though
no such law had been enacted. All agreements between the Company and holders of
the Notes, whether now existing or hereafter arising and whether written or
oral, are hereby limited so that in no contingency, whether by reason or demand
or acceleration of the final maturity date of the Notes or prepayment or
otherwise, shall the interest contracted for (or any original issue discount
that would be determined to be interest), charged, received, paid or agreed to
be paid to holders exceed the maximum amount permissible under the laws of the
State of New York (hereinafter the "APPLICABLE LAW"). If, from any circumstances
whatsoever, interest (or any original issue discount that would be determined to
be interest) would otherwise be payable to any holder of the Notes in excess of
the maximum amount permissible under Applicable Law, the interest payable to
such holder shall be reduced to the maximum amount permissible under Applicable
Law, and if from any circumstances such holder shall ever receive anything
deemed interest by the Applicable Law in excess of the maximum amount
permissible under the Applicable Law, an amount equal to the excessive interest
shall be applied to the reduction of the principal hereof and not to the payment
of interest, or if such excessive amount of interest exceeds the unpaid
principal balance of principal hereof, such excess shall be refunded to the
Company as applicable. All interest paid or agreed to be paid to the holders of
the Notes shall, to the extent permitted by Applicable Law, be amortized,
prorated, allocated and spread throughout full period (including any renewal or
extension) until payment in full of the principal so that the interest hereon
for such full period shall not exceed the maximum amount permissible under the
Applicable Law.
l. OBLIGATIONS SEVERAL NOT JOINT. The obligations of each Buyer
under this Agreement are several and not joint with the obligations of any other
Buyer, and no Buyer shall be responsible in any way for the performance of the
obligations of any other Buyer under this Agreement. Nothing contained herein,
and no action taken by any Buyer pursuant hereto, shall be deemed to constitute
the Buyers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Buyers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by this Agreement. Each Buyer shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose. Each Buyer has
been represented by, or has had the opportunity to be represented by, its own
separate legal counsel in its review and negotiation of this Agreement, the
Notes, the Warrants, the Registration Rights Agreement, the Pledge Agreement,
the Real Property Security Agreement, the Security Agreement, each Guaranty, the
Subsidiary Security Agreement and any other documents contemplated by any of the
foregoing.
m. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
44
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45
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
COMPANY:
ZBB ENERGY CORPORATION
By:
------------------------------------
Xxxxxx Xxxxx
Chief Executive Officer
[signature page continues on next page]
46
BUYERS:
ABS SOS-PLUS PARTNERS, LTD.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
JURISDICTION: Cayman Islands
ADDRESS: Xxxxx Xxxxx Xxxxx 0
Xxxxxx Xxxx West
Nassau, Bahamas CB-11267
Attention: Tamischa Xxxxxxxxx
Facsimile: 000-000-0000
Telephone: 000-000-0000
With copies of notices to:
ADDRESS: CTI Capital Management
0000 Xxxxxxxx-Xxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Attn: Kara Irish
Facsimile: 000-000-0000
Telephone: 000-000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Purchase Price: $835,000
Principal Amount of Notes: Equal to Buyer's Purchase Price
multiplied by 1 1/3 $1,113,333
Number of Warrants: Equal to Principal Amount of Note divided
by $0.15 7,422,220
[signature page continues on next page]
47
BUYERS (CONTINUED):
BUSHIDO CAPITAL MASTER FUND L.P.
By: Bushido Capital Partners, Ltd.
By:
------------------------------------
Xxxxx Xxxxxx
President
JURISDICTION: Cayman Islands
ADDRESS: 000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Purchase Price: $417,500
Principal Amount of Notes: Equal to Buyer's Purchase Price
multiplied by 1 1/3 $556,667
Number of Warrants: Equal to Principal Amount of Note
divided by $0.15 3,711,110
[signature page continues on next page]
48
BUYERS (CONTINUED):
XXXXXX DIVERSIFIED STRATEGY MASTER FUND
BY: BUSHIDO CAPITAL PARTNERS, LTD.
By:
------------------------------------
Xxxxx Xxxxxx
President
JURISDICTION: _________________
ADDRESS: 000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Purchase Price: $417,500
Principal Amount of Notes: Equal to Buyer's Purchase
Price multiplied by 1 1/3 $556,666
Number of Warrants: Equal to Principal Amount of
Note divided by $0.15 3,711,110
49
