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Exhibit 10.48
WARRANT EXERCISE SUBSCRIPTION AGREEMENT
This
SUBSCRIPTION AGREEMENT ("
Subscription Agreement ")
is made and entered into as of May 16, 2008 by and between
Neonode Inc. ,
a Delaware corporation ("
Company "),
and the subscribers whose names and addresses are set forth on the
signature page hereto (each a "
Subscriber ").
Background :
The Company has issued (i) 5,376,453 warrants, each exercisable to
purchase one share of common stock, par value $.01 per share, of
the Company (“
Common Stock ”),
exercisable at a price of $2.8313 expiring August 10, 2012 (the
“
$2.83 Warrants ”),
issued pursuant to the Warrant Agreement, dated August 10, 2007
(the “
$2.83 Warrant Agreement ”),
(ii) 206,000 warrants, each exercisable to purchase Common Stock,
exercisable at a price per share of $16.65, expiring July 6, 2010
(the “
$16.65 Warrants ”),
(iii) 11,000 warrants, each exercisable to purchase Common Stock,
exercisable at a price per share of $7.50, expiring June 26, 2008
(the “
$7.50 Warrants ”),
(iv) 11,000 warrants, each exercisable to purchase Common Stock,
exercisable at a price per share of $8.75, expiring June 26, 2008
(the “
$8.75 Warrants ”),
(v) 1,432,445
warrants,
each exercisable to purchase Common Stock, exercisable at a price
per share of $3.92, expiring September 26, 2012 (the “
$3.92 Warrants ”),
(vi) 213,077 warrants, each exercisable to purchase Common Stock,
exercisable at a price per share of approximately $3.92, expiring
on dates through September 26, 2012 (the “
Additional Warrants ”),
and (vii) 10,000 warrants, each exercisable to purchase Common
Stock, exercisable at a price per share of $10.00, expiring June
26, 2008 (the “
$10.00 Warrants ”,
and collectively with the $2.83 Warrants, the $16.65 Warrants, the
$7.50 warrants, the $3.92 Warrants, the Additional Warrants and the
$8.75 Warrants the “
Exercise Warrants ”).
In order to induce exercise of the Exercise Warrants, the Company
is offering (the “
Warrant Offering ”)
to
holders of Exercise Warrants (the “
Warrantholders ”)
for a period expiring at 3:30 p.m. on May 19, 2008
to
reduce the exercise price per Exercise Warrant to $[__]
1
(payable
in cash or by surrender of Company debt only) per share of Common
Stock and to issue two new warrants to purchase Common Stock in the
form attached hereto as
Exhibit A (the
“
New Warrants ”)
for each Exercise Warrant exercised. Holders of the $2.83 Warrants
are requested to amend the Warrant Agreement to eliminate a
requirement for a 30 day period for a temporary reduction in
exercise price and to waive certain notice provisions contained
therein to enable the Company to carry out the Warrant Offering.
The New Warrants will be exercisable for a term of five (5) years
at an exercise price of $
[ ]
2 .
The aggregate reduced exercise price is hereafter referred to as
the “
Subscription Price ”.
The shares of Common Stock issuable upon exercise of the Exercise
Warrants are hereafter referred to as the “
New Shares ”.
1 The
price shall be the closing sale price per share of the Common Stock
on the date hereof (“
Market Value ”)
plus $.01. The closing sale price per share of the Common Stock on
May 13, 2008 was $1.37 per share
2 The
exercise price of the new warrant shall be 115% of Market
Value.
The
New Shares and New Warrants are sometimes referred to herein
as the “
Securities .”
The
Company has also entered into a financial advisory agreement
(the “
Financial Advisory Agreement ”)
with Empire Asset Management Company (“
Empire ”)
in connection with the transactions contemplated in this
Subscription Agreement. Under the Financial Advisory Agreement,
Empire Asset Management Company will receive cash fees equal to 10%
of the gross proceeds from the Warrant offering, plus warrants (the
“
Empire Warrants ”)
in substantially the form of the New Warrants to purchase a number
of shares of Common Stock equal to 10% of the aggregate number of
New Shares and New Warrants issued in the Warrant Offering at an
exercise price equal to the Market Value plus $.01 and the New
Warrant Price, respectively, and a non-accountable expense
allowance of $35,000.
Holders
of Exercise Warrants who do not wish to exercise Exercise
Warrants pursuant to this Subscription Agreement (
the
“
Transfer Holders ”)
may
transfer the Exercise Warrants to an accredited investor(s) (each,
a “
Transferee ”)
who will simultaneously exercise such Exercise Warrants for cash or
surrender of Company debt, in exchange for delivery to the Transfer
Holders of one New Warrant issuable upon exercise per Exercise
Warrant transferred, as provided in the Warrant Transfer Agreement
(the “
Transfer Agreement ”)
in the form attached hereto as
Exhibit B .
Accordingly, Transferees who exercise Exercise Warrants acquired
pursuant to a Transfer Agreement shall be required to execute this
Subscription Agreement and shall receive one New Share upon
exercise thereof and one New Warrant, with one additional New
Warrant delivered to the Transfer Holder of the exercised Exercise
Warrant.
The
Company has outstanding $3,250,000 principal amount of 8%
convertible notes (the “
8% Notes ”).
The 8% Notes plus accrued interest are convertible at the option of
the holders exercised prior to November 10, 2007, into Common Stock
and warrants. Simultaneously with the issuance of the 8% Notes, the
Company also agreed to sell up to $750,000 of additional 8% Notes
to Ellis International at its option, expiring June 30, 2008. The
Company has agreed with holders of the 8% Notes (the
“
Warrant Extension Agreement ”) to
issue to them warrants, substantially similar to the New Warrants
(the “
Extension Warrants ”),
to purchase an aggregate of 1,252,998 shares of Common Stock, in
exchange for an extension of the maturity date of the 8% Notes to
December 31, 2008, and has also agreed to extend the Ellis option
to December 31, 2008. The foregoing is a condition to the Closing
hereunder.
This
Subscription Agreement, the New Warrants, the Financial
Advisory Agreement and the Transfer Agreement are referred to
herein as the “
Transaction Documents .”
In
connection with this subscription, each Subscriber and the
Company agree as follows:
1.
Subscription
; Closing .
1.1.
Purchase of New Shares and New Warrants; Transfer of Exercise
Warrants.
The
undersigned Subscriber (which includes both Warrantholders and
Transferees of New Warrants) hereby irrevocably agrees, represents
and warrants with, to and for the benefit of the Company, that such
Subscriber is executing this Subscription Agreement in connection
with the exercise by the Subscriber of the number of Exercised
Warrants set forth on the signature page hereof. Each Subscriber
shall receive one New Share and two New Warrants for each Exercise
Warrant exercised by the Subscriber; provided that Subscribers who
are Transferees shall deliver one New Warrant to the Applicable
Transfer Holder for each Exercise Warrant in accordance with the
applicable Transfer Agreement. Subject to the terms and conditions
of this Subscription Agreement, upon execution and delivery hereof
by the Subscriber, the Subscriber hereby agrees to purchase the
Securities pursuant to the terms of this Subscription Agreement,
and against concurrent delivery to the Company of the Exercise
Warrants exercised and the Subscription Price for such
Securities.
1.2.
Offering .
This offering of the Securities (the “
Offering ”)
is being made to a limited group of Warrantholders and Transferees,
all of whom shall represent to the Company pursuant to this
Subscription Agreement that they are "accredited investors," as
that term is defined in Regulation D promulgated under the
Securities Act of 1933, as amended (the "
Securities Act ")
or who have otherwise been qualified as investors by the Company.
All of the Securities offered hereby are being sold by the Company.
The Company is offering the Securities for the consideration set
forth herein. The Company may sell less than all of the Securities
offered hereby, and shall be entitled to accept subscriptions and
receive the Subscription Price for each subscription prior to the
entire Offering being subscribed for. The Offering is being made on
a “best efforts” no minimum basis, and accordingly the
risk to Subscribers may be greater is only a small amount of
Securities are sold hereunder.
1.3.
Escrow .
Each Subscriber subscribing for cash shall deliver to Signature
Bank, a New York State chartered bank and having an office at 261
Madison Avenue, New York, New York 10016 (the “
Escrow Agent ”),
via wire transfer or a certified check, immediately available funds
equal to its Subscription Price, which proceeds shall remain in
escrow until the Closing (as defined below) occurs
hereunder.
1.4.
Closing .
The closing (“
Closing ”)
of the purchase and sale of the Securities hereunder shall take
place on or about May 19, 2008 (the “
Closing Date ”)
at the offices of Hahn & Hessen LLP, counsel for the Company
(“
Counsel ”),
in New York, NY; provided that the Note Extension Agreement shall
be executed and effective as of Closing. At the
Closing:
(a)
The Subscriber shall deliver the Exercise Warrants to be exercised
(or an appropriate Affidavit of Loss);
(b)
The Escrow Agent shall deliver the Subscription Price to the
Company or as otherwise directed by the Company (and Subscribers
subscribing by surrender of Company debt shall deliver evidence of
such debt (or an affidavit of loss and indemnity) to
Counsel);
(c)
The Company shall deliver the New Warrants to the Subscribers;
and
(d)
The Company shall cause its transfer agent to deliver the New
Shares to the Subscriber.
2.
Representations and Warranties of the Subscriber
.
The
Subscriber hereby represents and warrants to the Company as of
the date hereof:
2.1.
Place of Business .
The
principal place of business address set forth below is such
Subscriber's true and correct principal place of business and is
the only jurisdiction in which an offer to sell the Securities was
made to such Subscriber and such Subscriber has no present
intention of moving its principal place of business to or of
becoming a resident of any other state or
jurisdiction.
2.2.
Sale or Transfer of the Securities; Unregistered
Securities.
The
Subscriber understands that the Securities have not been registered
under the Securities Act, or under the laws of any other
jurisdiction. The Subscriber understands and agrees that transfer
or sale of the Securities may be restricted or prohibited unless
they are subsequently registered under the Securities Act and,
where required, under the laws of other jurisdictions or an
exemption from registration is available. The Subscriber will not
offer, sell, transfer or assign its Securities or any interest
therein in contravention of this Subscription Agreement, the
Securities Act or any state or federal law. The Subscriber
understands and acknowledges that, because of the substantial
restrictions on the transferability of the Securities, it may not
be possible for the Subscriber to liquidate the Subscriber's
investment in the Company readily, even in the case of an
emergency. Subscriber acknowledges that the Offering has not been
registered with the Securities and Exchange Commission (the
“
Commission ”)
because
the Company is relying on an exemption from registration under
Section 4(2) of the Securities Act and Regulation D promulgated
thereunder.
2.3.
Representation of Accredited Investor Status (if a U.S.
person) .
If the Subscriber is a U.S. person (as
defined in Regulation S of the Commission), (i) such Subscriber, if
it is a corporation, a partnership, a limited liability company, a
trust or other business entity, has not been organized for the
purpose of purchasing the Securities and (ii)
Subscriber represents that at the time of the sale of the
Securities to Subscriber, Subscriber (or,
if Subscriber is a corporation, limited liability company or trust,
each of its equity owners)
qualifies as an "accredited investor" (as
defined under Rule 501 of Regulation D promulgated under the
Securities Act) using the following qualification factors (check
all appropriate items)
:
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$1,000,000 Net Worth Test:
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I,
Subscriber, am a natural person and my individual net worth,
or joint net worth with my spouse (if any),
inclusive of
home, furnishings and automobiles, at the time of this purchase is
in excess of $1,000,000.
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$200,000 Individual/$300,000 Joint Annual Income
Test:
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I,
Subscriber, am a natural person and my individual annual gross
income (exclusive of my spouse’s income) has been in
excess of $200,000 in each of the two most recent tax years,
and I reasonably expect individual annual gross income
(exclusive of my spouse’s income) to be in excess of
$200,000 for the current tax year; or I am a natural person
and my joint annual gross income (including my spouse’s
annual gross income) has been in excess of $300,000 in each of
the two most recent tax years, and I reasonably expect our
joint annual gross incomes to be in excess of $300,000 for the
current tax year.
(“Income” under
this test is defined as adjusted gross income for federal income
tax purposes
plus (i)
deductions for long-term capital gains under the Internal Revenue
Code; (ii) deductions for depletion under section 611 et seq. of
the Code; (iii) any exclusion for interest received on tax-exempt
securities; and (iv) any losses of a Company allocated to the
individual limited partners of the Company as reported on Form
1040).
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Bank or Investment Company Test:
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Subscriber
is a bank as defined in section 3(a)(2) of the Securities Act,
or any savings and loan association or other institution as
defined in section 3(a)(5)(A) of the Securities Act, whether
acting in its individual or fiduciary capacity; or is a broker
or dealer registered pursuant to section 15 of the Securities
Exchange Act of 1934; or is an insurance company as defined in
section 2(13) of the Securities Act; or is any investment
company registered under the Investment Corporation Act of
1940, or a business development company as defined in section
2(a)(48) of that Act; or is a Small Business Investment
Corporation licensed by the U.S. Small Business Administration
under section 301(c) or (d) of the Small Business Investment
Act of 1958; is a plan established and maintained by a state,
its political subdivision, or any agency or instrumentality of
a state or its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of
$5,000,000; or is an employee benefit plan within the meaning
of the employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in
section 3(21) of such Act, which is either a bank, savings and
loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in
excess of $5,000,000, or, if a self-directed plan, with
investment decisions made solely by persons that are
accredited investors.
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Private Business Development Corporation
Test:
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Subscriber
is a private business development company as defined in
section 202(a)(22) of the Investment Advisors Act of
1940.
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IRC Section 501c(3) Organization Test:
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Subscriber
is an organization described in Section 501c(3) of the
Internal Revenue Code, corporation, Massachusetts or similar
business trust, or Company, not formed for the specific
purpose of acquiring the securities being offered, with total
assets in excess of $5,000,000.
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Direct Relationship to Issuer Test:
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Subscriber
is a director, executive officer, partner or manager of the
Company of the securities being offered or sold, or any
director, executive officer or manager of a partner or partner
of that issuer.
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$5,000,000 Noninvestment Trust Test:
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Subscriber
is a trust with total assets in excess of $5,000,000 not
formed for the specific purpose of acquiring the securities
being offered, whose purchase is directed by a
“sophisticated person” as described in section
230.506(b)(2)(ii).
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Equity Entity Comprised of Accredited Investors
Test:
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Subscriber
is any equity entity in which all of the equity owners are
accredited investors as defined above. Subscriber has had one
of the persons responsible for overseeing and/or managing one
or more of Subscriber’s financial accounts complete the
attestation in Section 2 hereof in order to verify the
information in this Section 2:
Yes
_________
No
_________
2.4.
Non U.S. Purchasers
. If the Subscriber is not a U.S. person (each, a
“
Non-U.S. Purchaser
”), (i) such Non-U.S. Purchaser is not a U.S. person; (ii)
such Non-U.S. Purchaser was outside the United States at the time
the offer to sell the Securities was made and at the time the buy
order for the Securities was originated; (iii) such Non-U.S.
Purchaser will not offer or sell the Securities, or any securities
of the Company received in respect thereof, to a U.S. person or for
the account or benefit of a U.S. person (other than a distributor),
for a period of one year commencing on the
Closing.
2.5.
Investment Experience and Ability to Bear Risk
.
Subscriber is knowledgeable and experienced with respect to the
financial and business activities contemplated by the Company and
is capable of evaluating the risks and merits of investing in the
Securities and, in making a decision to proceed with this
investment, has not relied upon any representations, warranties or
agreements, other than those set forth in this Subscription
Agreement and can bear the economic risk of an investment in the
Company for an indefinite period of time, and can afford to suffer
the complete loss thereof.
2.6.
Own Advice .
In connection with the Subscriber’s investment in the
Company, the Subscriber has carefully considered and has, to the
extent the Subscriber believes such discussion necessary, discussed
with the Subscriber’s professional legal, tax and financial
advisers (the “
Investment Advisors ”)
the suitability of an investment in the Securities for the
Subscriber’s particular tax and financial situation and the
Subscriber has determined that the Securities are a suitable
investment for the Subscriber.
2.7.
Risks .
The Subscriber represents and warrants that the Subscriber is aware
(i) that the Securities involve a substantial degree of risk
of loss of the Subscriber’s entire investment and that there
is no assurance of any income from the Subscriber’s
investment; and (ii) that any federal or State income tax
benefits which may be available to the Subscriber, if any, may be
lost through the adoption of new laws or regulations, to changes to
existing laws and regulations and to changes in the interpretation
of existing laws and regulations. The Subscriber further represents
that the Subscriber is relying solely on the Subscriber’s own
conclusions or the advice of the Subscriber’s Investment
Advisors with respect to tax aspects of any investment in the
Securities. The Subscriber further represents that it has read and
reviewed the SEC Documents (as defined below) and Company
Disclosure Letter, including without limitation the risk factors
set forth therein.
2.8.
Inquiries .
The Subscriber and its Investment Advisors have been given access
to, and prior to the execution of this Subscription Agreement, have
been provided with an opportunity to ask questions of, and receive
answers from, the Company officers concerning the Company and the
terms and conditions of the Offering and the Securities, and to
obtain any other information which the Subscriber and the
Subscriber’s Investment Advisors required with respect to the
Company and an investment in the Company in order to evaluate such
investment and verify the accuracy of all information furnished to
the Subscriber and its Investment Advisors regarding the Company.
All such questions, if asked, were answered satisfactorily and all
information or documents provided were found to be satisfactory.
Neither the Subscriber nor its Investment Advisors have been
furnished any offering literature on which they have relied on
other this Subscription Agreement and the Subscriber and its
Investment Advisors have relied only on this Subscription
Agreement. At no time was the Subscriber presented with or
solicited by any leaflet, public promotion meeting, newspaper or
magazine article, radio or television advertisement or any other
form of general advertising or general solicitation.
2.9.
Authority .
The Subscriber is authorized and has full right and power to
subscribe for the Securities and to perform the Subscriber’s
obligations pursuant to the provisions of this Subscription
Agreement; the person signing this Subscription Agreement and any
other instrument executed and delivered herewith on behalf of such
Subscriber has been duly authorized by such entity and has full
power and authority to do so. If the Subscriber is a corporation,
partnership, unincorporated association or other entity, the person
signing this agreement has the legal capacity to authorize, deliver
and be bound by this Subscription Agreement and to take all actions
required pursuant hereto and further certifies that all necessary
approvals of directors, stockholders or otherwise have been given
and obtained; and if the Subscriber is an individual, it is of the
full age of majority in the jurisdiction in which the Subscriber is
resident and is legally competent to execute, deliver and be bound
by this Subscription Agreement and take all action pursuant
hereto.
2.10.
No Default .
The execution and delivery of this Subscription Agreement and the
consummation of the transactions contemplated hereby and thereby
will not conflict with, or result in any violation of or default
pursuant to, any provision of any governing instrument applicable
to the Subscriber, or any agreement or other instrument to which
the Subscriber is a party or by which the Subscriber or any of the
Subscriber’s properties are bound or any permit, franchise,
judgment, decree, statute, rule or regulation applicable to the
Subscriber or any of the Subscriber’s business or
properties.
2.11.
ERISA .
If the Subscriber is an employee benefit plan subject to ERISA,
then such Subscriber acknowledges that such Subscriber has been
informed of and understands the operations and business of the
Company, and represents that such Subscriber’s investment in
the Company (i) is permissible under the documents and instruments
governing such plan; (ii) satisfies the diversification
requirements of ERISA; (iii) is prudent considering all the facts
and circumstances, including the fact that there is no trading
market for the Securities; and (iv) is not a “prohibited
transaction” within the meaning of Section 406 of
ERISA.
2.12.
Purchase Entirely For Own Account .
This Subscription Agreement is made with the Subscriber in reliance
upon the Subscriber’s representations to the Company, which
by the Subscriber’s execution of this Subscription Agreement,
the Subscriber hereby confirms, that the Securities issuable to the
Subscriber will be acquired for investment for the
Subscriber’s own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and
that the Subscriber has no present intention of selling, granting
any participation in, or otherwise distributing the same. The
Subscriber represents and warrants that the Subscriber has no
contract, understanding, agreement or arrangement with any person
to sell or transfer or pledge to such person or anyone else any of
the Securities for which the Subscriber hereby subscribes (in whole
or in part) or any interest therein; and the Subscriber represents
and warrants that the Subscriber has no present plans to enter into
any such contract, undertaking, agreement or
arrangement.
2.13.
Certain Legal Issues .
The Subscriber represents and warrants that the funds representing
the Subscription Price which will be advanced by the Subscriber
hereunder will not represent proceeds of crime and the Subscriber
acknowledges that the Company may in the future be required by law
to disclose the Subscriber’s name and other information
relating to this Subscription Agreement and the Subscriber’s
subscription hereunder, on a confidential basis, and to the best of
the Subscriber’s knowledge (i) none of the subscription funds
to be provided by the Subscriber (a) have been or will be derived
from or related to any activity that is deemed criminal under the
laws of the United States of America, or any other jurisdiction, or
(b) are being tendered on behalf of a person or entity who has not
been identified to the Subscriber, and (ii) it shall promptly
notify the Company if the Subscriber discovers that any of such
representations ceases to be true, and to provide the Company with
appropriate information in connection therewith.
The
Subscriber represents and warrants that the current structure
of this transaction and all transactions and activities
contemplated hereunder is not a plan or scheme to evade the
registration provisions of the Securities Act.
The
Subscriber acknowledges that:
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(i)
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no
securities commission or similar regulatory authority has
reviewed or passed on the merits of the Securities;
and
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(ii)
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There
is no government or other insurance covering the Securities;
and
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(iii)
|
there
are risks associated with the purchase of the Securities;
and
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(iv)
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there
are restrictions on the Subscriber’s ability to resell
the Securities and it is the responsibility of the
Subscriber to find out what those restrictions are and
to comply with them before selling the Securities;
and
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(v)
|
the
Company has advised the Subscriber that the Company is relying
on an exemption from the requirements to provide the
Subscriber with a prospectus and to sell securities
through a person or company registered to sell
securities under applicable securities laws and, as a
consequence of acquiring the Securities pursuant to this
exemption, certain protections, rights and remedies
provided by applicable securities laws, including
statutory rights of rescission or damages, will not be
available to the Subscriber.
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The
Subscriber represents and warrants that neither the Company,
nor any of their respective directors, officers, employees or
representatives, have made any representations (oral or
written) to the Subscriber regarding the future value of the
Securities.
The
Subscriber acknowledges that (i) the Company may complete
secured or unsecured debt financings or equity financings in
the future in order to develop the Company’s business
and to fund its ongoing development, (ii) there is no
assurance that such financings will be available and, if
available, on reasonable terms, (iii) any such future
financings may have a dilutive effect on current security
holders, including the Subscriber, and (iv) if such future
financings are not available, the Company may be unable to
fund its ongoing development and the lack of capital resources
may result in the failure of its business.
The
Subscriber will not, directly or indirectly, except in
compliance with (that is, only to the extent required to
comply with) the Securities Act and such other securities or
“Blue Sky” laws as may be applicable, (i) offer,
sell, pledge, transfer or otherwise dispose of (or solicit any
offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Securities, (ii) engage in any short sale which
results in a disposition of any of the Securities by
Subscriber, or (iii) hedge the economic risk of the
Subscriber’s investment in the Securities.
2.14.
The
Subscriber hereby covenants with the Company not to make any
sale of the Registrable Shares (as defined below) under the
Registration Statement without effectively causing the
prospectus delivery requirement under the Securities Act to be
satisfied, and the Subscriber acknowledges and agrees that
such Registrable Shares are not transferable on the books of
the Company pursuant to a sale under a Registration Statement
unless the certificate submitted to the transfer agent
evidencing the Registrable Shares is accompanied by a separate
Subscriber’s certificate of subsequent sale in
reasonable form, executed by an officer of, or other
authorized person designated by, the Subscriber, to the effect
that (A) the Registrable Shares have been sold in accordance
with the Registration Statement, the Securities Act and any
applicable state securities or Blue Sky laws and (B) if
applicable, the requirement of delivering a current prospectus
has been satisfied. The Subscriber acknowledges that there may
occasionally be times when the Company must suspend the use of
the prospectus forming a part of the Registration Statement (a
“
Suspension ”)
until such time as an amendment to the Registration Statement has
been filed by the Company and declared effective by the Commission,
or such time as such prospectus has been supplemented, or until
such time as the Company has filed an appropriate report with the
Commission pursuant to the Exchange Act. The Subscriber hereby
covenants that it will not sell any Registrable Shares pursuant to
said prospectus during the period commencing at the time at which
it receives written notice of the Suspension of the use of said
prospectus (without providing any other material information other
than at the written request of the Subscriber) and ending at the
time the Company gives the Subscriber written notice that the
Subscriber may thereafter effect sales pursuant to said prospectus.
The Subscriber shall not be prohibited from selling Registrable
Shares under the Registration Statement as a result of Suspensions
on more than two occasions of not more than thirty (30) days each
in any 12-month period, unless, in the good faith judgment of the
Company’s Board of Directors following the written advice of
counsel, the sale of Registrable Shares under the Registration
Statement in reliance on this paragraph would be reasonably likely
to cause a violation of the Securities Act or the Exchange Act;
provided that the Company shall remain liable for liquidated
damages pursuant to Section 7.7 hereof with respect to any
Suspensions exceeding the aforementioned two permitted 30-day
Suspensions in any 12-month period.
2.15.
If
the Subscriber is exercising $2.83 Warrants, the Subscriber
hereby agrees (i) to amend the definition of
"Purchase Price" set forth in the $2.83 Warrant Agreement to
delete the phrase "for a period of not less than 30 days
on not less than 30 days' prior written notice to the
Registered Holders", so that such definition shall
read in its entirety: " 'Purchase Price' shall mean, subject
to modification and adjustment as provided in Section 8,
$2.8313 and further subject to the Company's right, in its
sole discretion, to decrease the Purchase Price on notice to
the Registered Holders .
"
and (ii) that such amendment be effective immediately
prior to the reduction of the Purchase Price (as newly defined
in the $2.83 Warrant Agreement) pursuant to the Warrant
Offering.
3.
Representations and Warranties of the Company
.
3.1.
Corporate Organization; Authority; Due Authorization
.
(a)
The
Company (A) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of the
State of Delaware, (B) has the corporate power and authority
to own or lease its properties as and in the places where its
business is now conducted and to carry on its business as now
conducted, and (C) is duly qualified as a foreign corporation
authorized to do business in every jurisdiction where the
failure to so qualify, individually or in the aggregate, would
have a material adverse effect on the operations, assets,
liabilities, financial condition or business of the Company
taken as a whole (a “
Material Adverse Effect ”).
(b)
The
Company (A) has the requisite corporate power and authority to
execute, deliver and perform its obligations under this
Subscription Agreement, the Financial Advisory Agreement and
to issue and perform its obligations under the New Warrants
and Empire Warrants (except that the Company is barred from
taking actions that may trigger adjustments under Section 4 of
each of the New Warrants, Empire Warrants and Extension
Warrants) and to incur the obligations herein and therein and
(B) has been authorized by all necessary corporate action to
execute, deliver and perform the Transaction Documents and to
consummate the transactions contemplated hereby and thereby
(the “
Contemplated Transaction
s ”).
The Transaction Documents will be on the Closing Date valid and
binding obligations of the Company enforceable in accordance with
their terms except as limited by applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting
the enforcement of creditors’ rights and the availability of
equitable remedies (regardless of whether such enforceability is
considered in a proceeding at law or equity).
3.2.
Capitalization .
The authorized capital stock of the Company consists of seventy
five million (75,000,000) shares of common stock, $.01 par value,
of which as of May 13, 2008, 25,919,162 shares of Common Stock are
outstanding. All outstanding shares of capital stock of the Company
were issued in compliance with all applicable federal and State
securities laws, and the issuance of such shares was duly
authorized by all necessary corporate action on the part of the
Company. Except as contemplated by this Subscription Agreement or
as set forth in the SEC Documents, there are (A) no outstanding
subscriptions, warrants, options, conversion privileges or other
rights or agreements obligating the Company to purchase or
otherwise acquire or issue any shares of capital stock of the
Company (or shares reserved for such purpose), (B) no preemptive
rights contained in the Company’s Certificate of
Incorporation, as amended (the “
Certificate of Incorporation ”),
the By-laws of the Company or contracts to which the Company is a
party or rights of first refusal with respect to the issuance of
additional shares of capital stock of the Company, including
without limitation the Securities and (C) no commitments or
understandings (oral or written) of the Company to issue any
shares, warrants, options or other rights to acquire any equity
securities of the Company other than with respect to existing
antidilution rights of existing investors (certain of which
antidilution rights will be triggered by the sale of Securities
hereunder). To the Company’s knowledge, except as set forth
in the SEC Documents, none of the shares of common stock are
subject to any stockholders’ agreement, voting trust
agreement or similar arrangement or understanding. Except as set
forth in the SEC Documents, the Company has no outstanding bonds,
debentures, Common Stock or other obligations the holders of which
have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the
stockholders of the Company on any matter.
3.3.
Due Execution, Delivery and Performance of the Transaction
Documents .
The Company has all requisite corporate power and authority to
enter into ea
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