Exhibit 10.1
PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 24
day of June, 2009, by and between Ophthalmic Imaging Systems
(the “ Company ”), a corporation
organized under the laws of the State of California, with its
principal offices at 221 Lathrop Way, Suite I, Sacramento, CA 95815
and the purchaser whose name and address is set forth on the
signature page hereof (the “ Purchaser
”).
IN CONSIDERATION of the mutual
covenants contained in this Agreement, the Company and the
Purchaser agree as follows:
SECTION
1. Authorization of Sale of the
Shares and Warrants . Subject to the terms and conditions of
this Agreement, the Company has authorized the issuance and sale of
up to 13,214,317 shares of common stock, no par value (the “
Common Stock ”), of the Company, and warrants
to purchase up to 4,404,772 shares of Common Stock, in one or more
transactions that are exempt from the registration requirements of
the Securities Act of 1933, as amended (the “
Securities Act ”), provided by Section 4(2)
thereof and Rule 506 of Regulation D thereunder.
SECTION
2. Agreement to Sell and Purchase the
Shares and the Warrants.
2.1
Closing . At the Closing (as defined in Section 3.1),
the Company will, subject to the terms of this Agreement, issue and
sell to the Purchaser, and the Purchaser will buy from the Company,
upon the terms and conditions hereinafter set forth:
(a) 9,633,228
shares of Common Stock (the “ 1 st
Installment Shares ”) for a purchase price per share equal to
$0.41522 resulting in an aggregate purchase price of $3,999,908.90
(the “ 1 st Installment ”),
which reflects a pre-money valuation of the Company of $7,200,000
as of the Closing Date, taking into account all outstanding shares
of the Company and assuming the conversion or exercise of all
outstanding notes and warrants (calculating their conversion at the
maximum number of underlying shares), options, convertible
securities or loans, which in any event, can only be exercised on a
price per share lower than $0.41522 (such calculation shall be
referred as the “ Fully Diluted Basis ”);
at the Closing, the 1 st Installment Shares shall
represent 36.35% of the Company’s issued and outstanding
shares on a Fully Diluted Basis; and
(b) a
warrant to purchase up to 3,211,076 shares of Common Stock (i.e.,
33% of the 1 st Installment Shares) (the “ 1
st Installment Warrant Shares ”) exercisable at $1.00 per share for a
period of three years commencing upon the Closing Date (the “
1 st Installment Warrant ”), which warrant shall be substantially
in the form set forth in Exhibit A-1
hereto.
2.2
Deferred Closing . At the Deferred Closing (as defined in
Section 3.2), the Company will, subject to the terms of this
Agreement, issue and sell to the Purchaser, and the Purchaser will
buy from the Company, upon the terms and conditions hereinafter set
forth:
(a) 3,581,089
shares of Common Stock (the “ 2 nd
Installment Shares ” and, together with 1 st
Installment Shares, the “ Shares ”) for a
purchase price per share equal to $0.55848 (subject to adjustment
for reverse and forward stock splits and similar transactions)
resulting in an aggregate purchase price of $1,999,966.50 (the
“ 2 nd Installment ”), which
reflects
a pre-money valuation of the Company
of $10,800,000 as of the Deferred Closing Date, on a Fully Diluted
Basis; and
(b) a
warrant to purchase up to 1,193,696 shares of Common Stock (i.e.,
33% of the 2 nd Installment Shares) (the “ 2
nd Installment Warrant Shares ” and, together with the 2 nd
Installment Warrant Shares, the “ Warrant
Shares ”) exercisable at $1.00 per share, for a
period of three years from the Closing Date (the “ 2
nd Installment Warrant ” and, together with the 1 st
Installment Warrant, the “ Warrants ”,and
the Shares, the Warrants and the Warrant Shares shall be
collectively referred to as, the “ Securities
”), which warrant shall be substantially in the form set
forth in Exhibit A-2 hereto.
(c) If
at the time of the Deferred Closing Date, the Company’s Board
of Directors determines in good faith that the Company’s
financial situation requires the Company to raise additional funds
in a capital raising transaction (in addition to 2 nd
Installment), the Purchaser (in its capacity as a shareholder in
the Company) hereby agrees not to object to such capital raising
transaction and will agree to waive its participation right (as set
forth in Section 8.14 below) in connection therewith;
provided , that such capital raising transaction is with
Persons who are shareholders of MediVision Medical Imaging Ltd.,
the parent entity of the Company (“ MediVision
”), on the date hereof, in an aggregate amount not to exceed
$1,500,000, at a price per share not less than $0.55848 (subject to
adjustment for reverse and forward stock splits and similar
transactions), and without the provision of any special rights to
such investors. For avoidance of doubt, nothing herein shall be
deemed as an obligation of any Purchaser Director (as defined
below) to vote in any manner at any meeting of the Company’s
Board of Directors (the “ Board ”)
concerning this matter and each such director shall serve his
duties in accordance with applicable law.
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SECTION 3.
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Delivery of the Shares at the Closing and at the
Deferred Closing.
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(a) The
completion of the purchase and sale of the 1 st
Installment Shares (the “ Closing ”)
shall occur at the offices of Troutman Sanders LLP, 405 Lexington
Avenue, New York, New York 10174 as soon as practicable and as
agreed to by the parties hereto, within three business days
following the execution of this Agreement, or on such later date or
at such different location as the parties shall agree in writing,
but not prior to the date that the conditions for Closing set forth
in Sections 3.1(b) and 3.1(c) below have been satisfied or waived
by the appropriate party (the “ Closing
Date
”).
(b) The
Company’s obligation to complete the purchase and sale of the
1 st Installment Shares and deliver such stock
certificate to the Purchaser at the Closing shall be subject to the
following conditions, any one or more of which may be waived by the
Company:
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(i)
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receipt by the Company of the 1 st
Installment; and
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(ii) each
of the representations and warranties of the Purchaser made herein
shall be true and correct in all respects as of the date of this
Agreement and as of the Closing Date as though made at that
time.
(c) The
Purchaser’s obligation to accept delivery of the 1
st Installment Shares, such stock certificate and the 1
st Installment Warrant, and to pay the 1 st
Installment at the
Closing shall be subject to the
following conditions, any one or more of which may be waived by the
Purchaser:
(i) the
delivery to the Purchaser by counsel to the Company of a legal
opinion dated as of the Closing Date in the form set forth in
Exhibit B ;
(ii) each
of the representations and warranties of the Company set forth
herein are true and correct in all respects as of the date of this
Agreement and as of such Closing Date as though made at that time
and that the Company shall have complied in all respects with all
the agreements and satisfied in all respects all the conditions
herein on its part to be performed or satisfied on or prior to such
Closing Date, and the Purchaser shall have received a certificate
executed by the chief executive officer and chief financial officer
of the Company, dated as of the Closing Date, to the foregoing
effect, in the form set forth in Exhibit C-1
;
(iii) the
execution by the Company of a written agreement (copy of each shall
be delivered to the Purchaser at the Closing) with each of the
Company’s lenders, United Mizrachi Bank (“ United
Bank ”) and The Tail Wind Fund Ltd. (“
Tail Wind ”) which agreement is binding on the
parties thereto, and pursuant to which each of United Bank and Tail
Wind agree to forgo any principal payments payable by the Company
(or any of its subsidiaries) under any United Bank or Tail Wind
indebtedness outstanding on the Closing Date until January 1, 2011,
and in the case of United Bank, the United Bank consents to and
approves the MediVision Assets Transaction (as defined below) and
the transaction contemplated thereunder. Notwithstanding the
foregoing, if the Company makes a principal payment to United Bank
in 2010 in amount higher than the Company’s Earnings
Before Interest, Taxes and Amortization (“
EBITDA ”) for the year ended December 31, 2010,
then within three business days after the filing with the SEC
(as defined below) of the Company’s audited financial
statements for the year ended December 31, 2010, the Company will
issue shares of Common Stock to the Purchaser free of charge and
without payment of any consideration by the Purchaser, in an amount
equal to the amount of principal payments made to United Bank minus
EBITDA divided by 0.41522 (the “ Additional
Shares ”); the provisions of Section 7.1 shall apply,
mutatis mutandis , to the Additional Shares, and the Company
shall take all required actions set forth in Section 7.1 in order
to register the Additional Shares;
(iv) the
execution by the Company and MediVision of a written agreement (a
copy of which shall be delivered to the Purchaser at the Closing)
(the “ Assets Purchase Agreement ”),
which agreement is binding on the Company and the parties thereto,
for the purchase of certain assets of MediVision in a manner and
under terms reasonably satisfactory to the Purchaser (the “
MediVision Assets Transaction ”);
(v) the
deposit by MediVision of 3,793,452 shares of Common Stock,
currently owned by MediVision, in escrow with Stephen L. Davis,
Esq. and the execution of the escrow agreement by all parties
thereto (copy of which shall be delivered to the Purchaser at the
Closing), pursuant to the terms of Section 8.7(b)
herein;
(vi) the
execution by MediVision and the receipt by the Purchaser at the
Closing of a copy of a binding and irrevocable proxy, substantially
in the form set forth in Exhibit D , appointing Gil
Allon as its true and lawful attorney-in-fact and proxy with
respect to all shares of Common Stock owned by MediVision (i.e,
9,380,843 shares) to vote FOR the Stockholder Approvals (as defined
below) at the Company’s 2010 Annual Meeting of
Shareholders; provided that
MediVision may transfer up to 2,000,000 shares of Common Stock free
and clear of this irrevocable proxy; and
(vii) the execution
by Agfa Gevaert N.V., Delta Trading and Services (1986) Ltd, Gil
Allon, Noam Allon, Ariel Shenhar and Yuval Shenhar (collectively,
the “ Principal MV Shareholders ,” and
together with MediVision, the “ MediVision/Principal MV
Shareholders Group ” ) and the receipt by the
Purchaser at the Closing of copies of binding and irrevocable
proxies, substantially in the form of set forth in Exhibit
E , appointing Noam Allon as their true and lawful
attorney-in-fact and proxy with respect to all shares of MediVision
owned by such entities or persons to vote FOR the MediVision Assets
Transaction and any other matters for which MediVision’s
shareholders are asked to grant their vote or consent in connection
with the consummation of the MediVision Assets
Transaction.
(viii) the
receipt by the Purchaser from the Company of a copy of resolutions
adopted by the Board approving the execution of the Transaction
Documents, the consummation of the transactions contemplated
therein, the appointment of Uri Geiger and Moshe Arkin to the Board
as of the Closing and the delivery of a director indemnification
agreement to each of them.
(ix) the
delivery to the Purchaser of a duly executed secretary certificate,
dated as of the Closing Date, in the form of Exhibit
F-1 .
(a) The
completion of the purchase and sale of the 2 nd
Installment Shares (the “ Deferred Closing
”) shall occur at the offices of Troutman Sanders LLP, 405
Lexington Avenue, New York, New York 10174 as soon as practicable
and as agreed to by the parties hereto, within 14 days from the
Company’s filing with the United States Securities and
Exchange Commission (the “ SEC ”) of its
Form 10-Q for the fiscal quarter ended March 31, 2010 (the “
Q1 Financial Statements ”), or on such later
date or at such different location as the parties shall agree in
writing, but not prior to the date that the conditions for Deferred
Closing set forth in Sections 3.2(b) and 3.2(c) below have been
satisfied or waived by the appropriate party (the “
Deferred Closing Date ”).
(b) The
Company’s obligation to complete the purchase and sale of the
2 nd Installment Shares and the 2 nd
Installment Warrant, and deliver the stock certificate and the 2
nd Installment Warrant to the Purchaser at the Deferred
Closing shall be subject to the following conditions, any one or
more of which may be waived by the Company:
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(i)
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receipt by the Company of the 2 nd
Installment; and
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(ii) each
of the representations and warranties of the Purchaser made herein
shall be true and correct in all material respects (except for
those representations and warranties that are qualified by Material
Adverse Effect, which shall be true and correct in all respects) as
of the Deferred Closing Date as though made at that time (except
for representations and warranties that speak as of a specific
date, which shall be true and correct as of such specific
date.
(c) The
Purchaser’s obligation to accept delivery of the 2
nd Installment Shares, the stock certificate and the 2
nd Installment Warrant, and to pay the 2 nd
Installment at the Deferred Closing, shall be subject to the
completion of the Closing in all respects, and to the following
conditions, any one or more of which may be waived by the
Purchaser:
(i) The
Company shall have generated, for the period from January 1, 2009
to March 31, 2010, consolidated aggregate revenues (calculated in
accordance with “generally accepted accounting
principles” as shall be defined in the Q1 Financial
Statements) of at least $2,000,000 from the sale of EMR Products
(as defined below), of which at least $1,000,000 is generated (as
shall be evidenced in writing to the Purchaser prior to the
Deferred Closing Date) from sales of the Company (excluding sales
by Abraxas Medical Solutions Ltd., a subsidiary of the Company
(“ Abraxas Medical ”)) to the
ophthalmology segment (the “ Milestone
”). If the Milestone shall not be achieved in full, the
Purchaser shall not be obligated to invest any portion of the 2
nd Installment; provided , that the Purchaser
shall be entitled at its sole discretion to invest all or any
portion of the 2 nd Installment on the terms set forth
herein. For the purpose of this Section 3.2, “ EMR
Product ” shall mean all software, installation
training, service and maintenance of the Electronic Medical Records
and Practice Management;
(ii) the
delivery to the Purchaser by counsel to the Company of a legal
opinion dated as of the Deferred Closing Date in the form set forth
in Exhibit B ; and
(iii) each of
the representations and warranties of the Company set forth herein
shall be true and correct in all material respects (except for
those representations and warranties that are qualified by Material
Adverse Effect, which shall be true and correct in all respects) as
of the Deferred Closing Date as though made at that time (except
for representations and warranties that speak as of a specific
date, which shall be true and correct as of such specific date) and
that the Company has complied in all respects with all the
agreements and satisfied in all respects all the conditions herein
on its part to be performed or satisfied on or prior to such
Deferred Closing Date, and the Purchaser shall have received a
certificate executed by the chief executive officer and chief
financial officer of the Company, dated as of the Deferred Closing
Date, to the foregoing effect in the form set forth in
Exhibit C-2 .
(iv) the
delivery to the Purchaser of a duly executed secretary certificate,
dated as of the Deferred Closing Date, in the form of Exhibit
F-2 .
3.3 At
each of the Closing and the Deferred Closing, the Purchaser shall
deliver, in immediately available funds, the full amount of the
purchase price for the Shares being purchased hereunder by wire
transfer to an account designated by the Company, and the Company
shall deliver to the Purchaser one or more stock certificates and
Warrants registered in the name of the Purchaser, or in such
nominee name(s) as designated by the Purchaser in writing,
representing the number of Shares and the number of the Warrant
Shares set forth in Section 2 above and bearing an appropriate
legend referring to the fact that the Shares and the Warrants were
sold in reliance upon the exemption from registration under the
Securities Act provided by Section 4(2) thereof and
Rule 506 of Regulation D promulgated thereunder. The name(s)
in which the stock certificates are to be registered are set forth
in the Stock Certificate Questionnaire attached hereto as part of
Appendix I .
SECTION 4.
Representations, Warranties and Covenants of the Company .
The Company hereby represents and warrants to, and covenants with,
the Purchaser as follows:
4.1
Organization and Qualification . The Company is a
corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation with
corporate power and authority to own or lease its properties and
conduct its business in all material respects as described in the
SEC Reports (as defined below) and the Company is qualified to do
business as a foreign corporation in each jurisdiction in which
qualification is required, except where failure to so qualify would
not have a Material Adverse Effect (as defined herein). The
Company’s subsidiaries (each a “
Subsidiary ” and collectively the “
Subsidiaries ”) are listed on Exhibit
G to this Agreement
and are the only subsidiaries, direct or indirect, of the Company.
Each Subsidiary is a direct or indirect wholly owned subsidiary of
the Company (except as otherwise set forth in Exhibit G). Each
Subsidiary is duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, with corporate
power and authority to own or lease its properties and conduct its
business, and is qualified to do business as a foreign corporation
in each jurisdiction in which qualification is required, except
where failure to so qualify would not have a Material Adverse
Effect.
4.2
Reporting Company; Registration Statement . The Company is
not an “ineligible issuer” (as defined in Rule 405
promulgated under the Securities Act) and is eligible to register
the Shares and the Warrant Shares for resale by the Purchaser on a
registration statement under the Securities Act.
4.3
Authorized Capital Stock . The Company has the authorized
and the issued and outstanding capitalization as set forth on
Schedule 4.3(i) ; all of the issued and outstanding
securities of the Company have been duly authorized and validly
issued, are fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and were not
issued in violation of or subject to any preemptive rights or other
rights to subscribe for or purchase securities, and conform in all
material respects to the description thereof contained in the SEC
Reports. Except as set forth on Schedule 4.3(ii) ,
the Company does not have outstanding any options to purchase, or
any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any
contracts or commitments to issue or sell, shares of its capital
stock or any such options, rights, convertible securities or
obligations. With respect to each of the Subsidiaries (i) all
the issued and outstanding shares of such Subsidiary’s
capital stock is owned and held by the Company, and have been duly
authorized and validly issued, are fully paid and nonassessable,
have been issued in compliance with all federal and state
securities laws, and were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase
securities, and (ii) there are no outstanding options to
purchase, or any preemptive rights or other rights to subscribe for
or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of such
Subsidiary’s capital stock or any such options, rights,
convertible securities or obligations.
4.4
Issuance, Sale and Delivery of the Shares . The Shares and
the Warrants issuable on each of the Closing Date and the Deferred
Closing Date, as the case may be, have been duly authorized and,
when issued, delivered and paid for in the manner set forth in this
Agreement, will be validly issued, fully paid and nonassessable,
and will conform in all material respects to the description of the
Common Stock set forth in the Company’s Form 8-A filed with
the Commission on May 13, 1993 (the “ Form 8-A
”). No preemptive rights or other rights to subscribe for or
purchase any shares of Common Stock of the Company exist with
respect to the
issuance and sale of the Shares and
Warrant Shares by the Company pursuant to this Agreement. The
Warrant Shares have been duly authorized and, upon exercise in
accordance with the applicable Warrants, the Warrant Shares will be
validly issued, fully paid and nonassessable, and will conform in
all material respects to the description of the Common Stock set
forth in the Form 8-A. No stockholder of the Company has any right
(which has not been waived or has not expired by reason of lapse of
time following notification of the Company’s intention to
file the Registration Statement (as hereinafter defined)) to
require the Company to register the sale of any capital stock owned
by such stockholder under the Registration Statement (other than
rights granted to the Tail Wind Fund, Ltd. and Solomon Strategic
Holdings, Inc.).
4.5
Due Execution, Delivery and Performance of the Agreements; No
Conflicts; No Consents . The Company has the requisite
corporate power and authority to enter into this Agreement, the
Voting Agreement and the Warrants (collectively, the “
Transaction Documents ”) and to consummate the
transactions contemplated hereby and thereby. The Transaction
Documents have been duly authorized and when delivered in
accordance with the terms of this Agreement, will be duly executed
and delivered by the Company, and will constitute legal, valid and
binding agreements of the Company, enforceable against the Company
in accordance with their respective terms, except as enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
relating to or affecting the enforcement of creditors’ rights
and the application of equitable principles relating to the
availability of remedies, and except as rights to indemnity or
contribution, including but not limited to, indemnification
provisions set forth in Sections 7.4 and 8.7 below, this
Agreement may be limited by federal or state securities law or the
public policy underlying such laws. The execution and performance
of the Transaction Documents by the Company and the consummation of
the transactions herein and therein contemplated (including the
issuance of the Shares, the Warrants and the Warrant Shares) will
not: (i) violate any provision of the articles of incorporation or
bylaws of the Company or the organizational documents of any
Subsidiary; (ii) result in the creation of any lien, charge,
security interest or encumbrance upon any assets of the Company or
any Subsidiary pursuant to the terms or provisions of, or will not
conflict with, result in the breach or violation of, or constitute,
either by itself or upon notice or the passage of time or both, a
default under any agreement, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which
any of the Company or any Subsidiary is a party or by which any of
the Company or any Subsidiary or their respective properties may be
bound; or (iii) result in a violation of any statute or any
authorization, judgment, decree, order, rule or regulation of any
court or any regulatory body, administrative agency or other
governmental agency or body applicable to the Company or any
Subsidiary or any of their respective properties, except in the
case of (ii) and (iii), such as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect. No consent, approval, authorization or other order
of any court, regulatory body, administrative agency or other
governmental agency or body is required for the execution and
delivery of the Transaction Documents or the consummation of the
transactions contemplated herein or therein, except for compliance
with the Blue Sky laws and federal securities laws applicable to
the offering of the Securities. For the purposes of this Agreement,
the term “ Material Adverse Effect ”
shall mean a material adverse effect on the condition (financial or
otherwise), properties, business, prospects or results of
operations of the Company and/or its Subsidiaries, individually or
taken as a whole.
4.6
Accountants . Perry-Smith LLP, who has expressed its opinion
with respect to the consolidated financial statements contained in
the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008, which will be incorporated by
reference into the Registration Statement and the Prospectus (as
defined herein) that forms a part thereof, are registered
independent public accountants as required by the Securities Act
and the rules and regulations promulgated thereunder (the “
1933 Act Rules and Regulations ”) and by the
rules of the Public Accounting Oversight Board.
4.7
Contracts . The material contracts to which the Company is a
party that are filed with, or incorporated by reference to, the
Company’s Annual Report on Form 10-K or and Exchange Act
report filed by the Company with the Commission after December 31,
2008 have been duly and validly authorized, executed and delivered
by the Company and constitute the legal, valid and binding
agreements of the Company, enforceable by and against the Company
in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to enforcement of
creditors’ rights generally, and general equitable principles
relating to the availability of remedies, and except as rights to
indemnity or contribution may be limited by federal or state
securities laws and the public policy underlying such
laws.
4.8
No Actions . Except as disclosed in the SEC Reports, there
are no legal or governmental actions, suits or proceedings pending
or, to the Company’s knowledge, threatened against the
Company or any Subsidiary before or by any court, regulatory body
or administrative agency or any other governmental agency or body,
domestic, or foreign, which actions, suits or proceedings,
individually or in the aggregate, might reasonably be expected to
have a Material Adverse Effect; and no labor disturbance by the
employees of the Company exists or is imminent, that might
reasonably be expected to have a Material Adverse Effect. Neither
the Company nor any Subsidiary is a party to or subject to the
provisions of any injunction, judgment, decree or order of any
court, regulatory body, administrative agency or other governmental
agency or body that might have a Material Adverse
Effect.
4.9
Properties . Except as disclosed in the SEC Reports, the
Company and each Subsidiary have good and marketable title to all
the properties and assets described as owned by it in the
consolidated financial statements included in the SEC Reports, free
and clear of all liens, mortgages, pledges, or encumbrances of any
kind except (i) those, if any, reflected in such consolidated
financial statements, or (ii) those that are not material in
amount and do not adversely affect the use made and proposed to be
made of such property by the Company or its Subsidiaries. Except as
disclosed in the SEC Reports, the Company and each Subsidiary holds
its leased properties under valid and binding leases. The Company
and any Subsidiary owns or leases all such properties as are
necessary to their respective operations as described in the SEC
Reports.
4.10
No Material Adverse Change . Since December 31, 2008:
(i) the Company and its Subsidiaries have not incurred any
material liabilities or obligations, indirect, or contingent, or
entered into any material agreement or other transaction that is
not in the ordinary course of business or that could reasonably be
expected to result in a material reduction in the future earnings
of the Company; (ii) the Company and its Subsidiaries have not
sustained any material loss or interference with their businesses
or properties from fire, flood, windstorm, accident or other
calamity not covered by insurance; (iii) the Company and its
Subsidiaries have
not paid or declared any dividends
or other distributions with respect to their capital stock and none
of the Company or any Subsidiary is in default in the payment of
principal or interest on any outstanding debt obligations;
(iv) there has not been any change in the capital stock of the
Company or its Subsidiaries other than the sale of the Shares
hereunder and shares or options issued pursuant to employee equity
incentive plans or purchase plans approved by the Company’s
Board of Directors, or indebtedness material to the Company or its
Subsidiaries (other than in the ordinary course of business and any
required scheduled payments); and (v) there has not occurred
any event that has caused or could reasonably be expected to cause
a Material Adverse Effect.
4.11
Intellectual Property . Except as disclosed in the SEC
Reports, (i) the Company and each Subsidiary owns or has
obtained valid and enforceable licenses or options for the
inventions, patent applications, patents, trademarks (both
registered and unregistered), trade names, copyrights and trade
secrets necessary for the conduct of its respective business as
described in the SEC Reports (collectively, the “
Intellectual Property ”); and
(ii) (a) there are no third parties who have any
ownership rights to any Intellectual Property that is owned by, or
has been licensed to, the Company or each Subsidiary for the
products described in the SEC Reports that would preclude the
Company or any Subsidiary from conducting its business as currently
conducted and have a Material Adverse Effect, except for the
ownership rights of the owners of the Intellectual Property
licensed or optioned by the Company or any Subsidiary; (b) to
the Company’s knowledge, there are currently no sales of any
products that would constitute an infringement by third parties of
any Intellectual Property owned, licensed or optioned by the
Company or any Subsidiary, which infringement would have a Material
Adverse Effect; (c) there is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or
claim by others challenging the rights of the Company or any
Subsidiary in or to any Intellectual Property owned, licensed or
optioned by the Company or any Subsidiary, other than claims which
could not reasonably be expected to have a Material Adverse Effect;
(d) there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others challenging
the validity or scope of any Intellectual Property owned, licensed
or optioned by the Company or any Subsidiary, other than
non-material actions, suits, proceedings and claims; and
(e) there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others that the
Company or any of any Subsidiaries infringes or otherwise violates
any patent, trademark, copyright, trade secret or other proprietary
right of others, other than non-material actions, suits,
proceedings and claims.
4.12
Compliance . None of the Company nor its Subsidiaries has
been advised, nor do any of them have any reason to believe, that
it is not conducting business in compliance with all applicable
laws, rules and regulations of the jurisdictions in which it is
conducting business, including, without limitation, all applicable
local, state and federal environmental laws and regulations, except
where failure to be so in compliance would not have a Material
Adverse Effect.
4.13
Taxes . The Company and each Subsidiary has filed on a
timely basis (giving effect to extensions) all federal, state and
foreign income and franchise tax returns and has paid or accrued
all taxes that shown as due thereon, and the Company has no
knowledge of a tax deficiency that has been or might be asserted or
threatened against it that could have a Material Adverse Effect.
All tax liabilities accrued through the date hereof have been
adequately provided for on the books of the Company.
4.14
Transfer Taxes . On the Closing Date, all stock transfer or
other taxes (other than income taxes) that are required to be paid
in connection with the sale and transfer of the Shares to be sold
to the Purchaser hereunder will have been, fully paid or provided
for by the Company and all laws imposing such taxes will have been
fully complied with.
4.15
Investment Company . The Company is not an “investment
company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for
an investment company, within the meaning of the Investment Company
Act of 1940, as amended, and the rules and regulations of the
Commission promulgated thereunder.
4.16
Insurance . The Company maintains insurance underwritten by
insurers of recognized financial responsibility, of the types and
in the amounts that the Company reasonably believes is adequate for
its business, including, but not limited to, insurance covering all
real and personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, with such deductibles as are customary
for companies in the same or similar business, all of which
insurance is in full force and effect.
4.17
Additional Information . In the past 12 calendar months, the
Company has filed all documents required to be filed by it prior to
the date hereof with the Commission pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended
(the “ Exchange Act ”) (all of the
foregoing filed prior to the Closing Date and all exhibits included
therein and financial statements, notes and schedules thereto and
documents incorporated by reference therein being hereinafter
referred to as the “ SEC Reports ”). The
Company has made available to the Purchaser or its representatives
true, correct and complete copies of the SEC Reports not available
on the SEC’s EDGAR system, if any. As of their respective
filing dates, the SEC Reports complied in all material respects
with the requirements of the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder (the “
1934 Act Rules and Regulations ” and, together
with the 1933 Act Rule and Regulations, the “
Rules and Regulations ”) applicable to the SEC
Reports, and none of the SEC Reports, at the time they were filed
with the Commission, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
4.18
Price of Common Stock . The Company has not taken, and will
not take, directly or indirectly, any action designed to cause or
result in, or that has constituted or that might reasonably be
expected to constitute, the stabilization or manipulation of the
price of the shares of the Common Stock to facilitate the sale or
resale of the Securities.
4.19
Use of Proceeds . The Company shall use the proceeds from
the sale of the Securities pursuant to the Company’s budget
and a strategic work plan in the form attached on Schedule
4.19 .
4.20
Non-Public Information . The Company has not disclosed to
the Purchaser information that would constitute material non-public
information as of the Closing Date other than the existence of the
transaction contemplated hereby.
4.21
Use of Purchaser Name . Except as otherwise required by
applicable law or regulation, the Company shall not use the
Purchaser’s name or the name of any of its affiliates in any
advertisement, announcement, press release or other similar public
communication unless it
has received the prior written
consent of the Purchaser for the specific use contemplated which
consent shall not be unreasonably withheld.
4.22
Related Party Transactions . No transaction has occurred
between or among the Company, on the one hand, and its affiliates,
officers or directors on the other hand, that is required to have
been described under applicable securities laws in its SEC Reports
and is not so described in such reports.
4.23
Off-Balance Sheet Arrangements . There is no transaction,
arrangement or other relationship between the Company and an
unconsolidated or other off-balance sheet entity that is required
to be disclosed by the Company in its SEC Reports and is not so
disclosed or that otherwise would be reasonably likely to have a
Material Adverse Effect. There are no such transactions,
arrangements or other relationships with the Company that may
create contingencies or liabilities that are not otherwise
disclosed by the Company in its SEC Reports.
4.24
Governmental Permits, Etc . The Company and each Subsidiary
has all franchises, licenses, certificates and other authorizations
from such federal, state or local government or governmental
agency, department or body that are currently necessary for the
operation of the business of the Company as described in the SEC
Reports, except where the failure to posses currently such
franchises, licenses, certificates and other authorizations is not
reasonably expected to have a Material Adverse Effect. Neither the
Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such permit that,
if the subject of an unfavorable decision, ruling or finding, could
reasonably be expected to have a Material Adverse
Effect.
4.25
Financial Statements . The consolidated financial statements
of the Company and the related notes and schedules thereto included
in the SEC Reports fairly present the financial position, results
of operations, stockholders’ equity and cash flows of the
Company and its consolidated Subsidiaries at the dates and for the
periods specified therein. Such financial statements and the
related notes and schedules thereto have been prepared in
accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as
otherwise noted therein) and all adjustments necessary for a fair
presentation of results for such periods have been made;
provided , however , that the unaudited financial
statements are subject to normal year-end audit adjustments (which
are not expected to be material) and do not contain all footnotes
required under generally accepted accounting principles.
4.26
Internal Accounting Controls . The Company maintains a
system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in
accordance with management’s general or specific
authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain
accountability for assets; (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 existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The
Company has disclosure controls and procedures (as defined in
Rules 13a-14 and 15d-14 under the Exchange Act) that are
designed to ensure that material information relating to the
Company is made known to the Company’s principal executive
officer and the Company’s principal financial officer or
persons performing similar functions. The Company is otherwise in
compliance in all material respects
with all applicable provisions of
the Sarbanes-Oxley Act of 2002, as amended and the rules and
regulations promulgated thereunder.
4.27
Foreign Corrupt Practices . Neither the Company, nor any
Subsidiary, nor, to the knowledge of the Company, any director,
officer, agent, employee or other Person acting on behalf of the
Company or any Subsidiary has, in the course of its actions for, or
on behalf of, the Company: (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 unlawful
bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.
4.28
Employee Relations . Neither the Company nor any Subsidiary
is a party to any collective bargaining agreement or employs any
member of a union. The Company and each Subsidiary believe that
their relations with their employees are good. The Company is not
engaged in any unfair labor practice except for matters which would
not, individually or in the aggregate, have a Material Adverse
Effect, (i) there is (A) no unfair labor practice
complaint pending or, to the Company’s knowledge, threatened
against the Company before the National Labor Relations Board, and
no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending or threatened,
(B) no strike, labor dispute, slowdown or stoppage pending or,
to the Company’s knowledge, threatened against the Company
and (C) no union representation dispute currently existing
concerning the employees of the Company, and (ii) to the
Company’s knowledge, (A) no union organizing activities
are currently taking place concerning the employees of the Company
and (B) there has been no violation of any federal, state,
local or foreign law relating to discrimination in the hiring,
promotion or pay of employees or any applicable wage or hour laws.
No executive officer of the Company (as defined in
Rule 501(f) promulgated under the Securities Act) has
notified the Company that such officer intends to leave the Company
or otherwise terminate such officer’s employment with the
Company. No executive officer of the Company is, or is now expected
to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other agreement or any
restrictive covenant, and the continued employment of each such
executive officer does not subject the Company or any Subsidiary to
any liability with respect to any of the foregoing
matters.
4.29
ERISA . The Company is in compliance in all material
respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder (herein called
“ ERISA ”); no “reportable event”
(as defined in ERISA) has occurred with respect to any
“pension plan” (as defined in ERISA) for which the
Company would have any liability; the Company has not incurred and
does not expect to incur liability under: (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any
“pension plan”; or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the “
Code ”); and each “Pension Plan”
for which the Company would have liability that is intended to be
qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which would cause the loss
of such qualification.
4.30
Environmental Matters . There has been no storage, disposal,
generation, manufacture, transportation, handling or treatment of
toxic wastes, hazardous wastes or hazardous substances by the
Company or to its knowledge, any Subsidiary (or, to the knowledge
of the Company, any of their predecessors in interest) at, upon or
from any of the property now or previously owned or leased by the
Company or any Subsidiary in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or
that would require remedial action under any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit;
there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind into such
property or into the environment surrounding such property of any
toxic wastes, medical wastes, solid wastes, hazardous wastes or
hazardous substances due to or caused by the Company or any
Subsidiary or with respect to which the Company or any Subsidiary
have knowledge; the terms “hazardous wastes,”
“toxic wastes,” “hazardous substances,” and
“medical wastes” shall have the meanings specified in
any applicable local, state, federal and foreign laws or
regulations with respect to environmental protection.
4.31
Integration; Other Issuances of Shares . Neither the Company
nor its subsidiaries or any affiliates, nor any person acting on
its or their behalf, has issued any shares of Common Stock or
shares of any series of preferred stock or other securities or
instruments convertible into, exchangeable for or otherwise
entitling the holder thereof to acquire shares of Common Stock
which would be integrated with the sale of the Securities to the
Purchaser for purposes of the Securities Act or of any applicable
stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are
listed or designated, nor will the Company or its subsidiaries or
affiliates take any action or steps that would require registration
of any of the Securities under the Securities Act or cause the
offering of the Securities to be integrated with other offerings.
Assuming the accuracy of the representations and warranties of the
Purchaser, the offer and sale of the Securities by the Company to
the Purchaser pursuant to this Agreement will be exempt from the
registration requirements of the Securities Act.
4.32
Money Laundering Laws . The operations of the Company and
its Subsidiaries are and have been conducted at all times in
compliance with applicable financial recordkeeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act
of 1970, as amended, the money laundering statutes of all
jurisdictions, the rules and regulations thereunder and any related
or similar rules, regulations or guidelines, issued, administered
or enforced by any governmental agency (collectively, the “
Money Laundering Laws ”) and no action, suit or
proceeding by or before any court or governmental agency, authority
or body or any arbitrator involving the Company or any of its
Subsidiaries with respect to the Money Laundering Laws is pending
or, to the knowledge of the Company, threatened, except, in each
case, as would not reasonably be expected to have a Material
Adverse Effect.
4.33
Foreign Assets Controls . Neither the Company nor any of its
Subsidiaries nor, to the knowledge of the Company, any director,
officer, agent, employee or affiliate of the Company or any of its
subsidiaries is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“ OFAC ”); and the
Company will not directly or indirectly use the proceeds of the
offering, or lend, contribute or otherwise make available such
proceeds to any subsidiary, joint venture partner or other person
or entity, for the purpose of financing the activities of any
person currently subject to any U.S. sanctions administered by
OFAC.
4.34
Shareholders Rights Plan . No claim will be made or enforced
by the Company that the Purchaser is an “Acquiring
Person” under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that
any Purchaser could be deemed to trigger the provisions of any such
plan or arrangement, by virtue of receiving the
Securities.
4.35
No General Solicitation; Offering Materials . Neither the
Company nor, to the Company’s knowledge, any person acting on
behalf of the Company, has engaged in any form of general
solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the
Securities. Each of the Company, its directors and officers has not
distributed and will not distribute prior to the Closing Date or
the Deferred Closing Dates any offering material, including any
“free writing prospectus” (as defined in Rule 405
promulgated under the Securities Act), in connection with the
offering and sale of the Shares other than the SEC Reports or any
amendment or supplement thereto.
SECTION 5.
Representations, Warranties and Covenants of the Purchaser .
The Purchaser represents and warrants to, and covenants with, the
Company that:
5.1
Investment Experience . The Purchaser can bear the economic
risk and complete loss of its investment in the Securities and is
knowledgeable, sophisticated and experienced in financial and
business maters, in making, and is qualified to make, decisions
with respect to investments representing an investment decision
like that involved in the purchase of the Securities.
5.2
Investment Intent . The Purchaser is acquiring the
Securities in the ordinary course of its business and for its own
account for investment only not with a view to distribution (within
the meaning of Section 2(11) of the Securities Act) (this
representation and warranty not limiting the Purchaser’s
right to sell pursuant to the Registration Statement or in
compliance with the Securities Act and the Rules and Regulations,
or, other than with respect to any claims arising out of a breach
of this representation and warranty, the Purchaser’s right to
indemnification under Section 7.4). Prior to the Closing, the
Purchaser was not an affiliate of the Company. Neither the
Purchaser nor any of its affiliates is a registered broker dealer
or an entity engaged in the business of being a broker dealer. The
Purchaser does not have any agreement or understanding, directly or
indirectly, with any person to distribute the
Securities.
5.3
Shareholder Questionnaire . The Purchaser has completed or
caused to be completed the Registration Statement Questionnaire
attached hereto as part of Appendix I , for use in
preparation of the Initial Registration Statement (as defined
below), and the answers thereto are true and correct as of the date
hereof and will be true and correct as of the effective date of the
Registration Statement and the Purchaser will notify the Company
immediately of any material change in any such information provided
in the Registration Statement Questionnaire until such time
as
