Exhibit 4.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of March
10, 2008 by and between Easy Energy, Inc., a Nevada corporation (the "Company")
and Tailor Made Capital, Ltd. (the "Purchaser"). Capitalized terms used in this
Agreement and not otherwise defined shall have the meanings ascribed to them in
Article 1.
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall have the right to issue and sell
to the Purchaser from time to time as provided herein, and the Purchaser shall
be obligated to purchase from the Company up to $1,000,000 worth of shares of
Common Stock on a private placement basis pursuant to an exemption from
registration under Section 4(2) of the Security Act of 1933; and
WHEREAS, the Purchaser shall be entitled to resell shares of Common Stock
acquired hereunder pursuant to a resale registration statement established by
the Company pursuant to the terms of the Registration Rights Agreement between
the Company and the Purchaser which shall be declared effective by the
Commission prior to the delivery of the first Draw Down Notice.
NOW, THEREFORE, in consideration of the foregoing premises, and the
promises and covenants herein contained, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties, intending to be
legally bound, hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section 3.1(j).
"Affiliate" means any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a Person as such terms are used in and construed under Rule 144 under the
Securities Act. With respect to the Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as the Purchaser will be deemed to be an Affiliate of the Purchaser.
"Business Day" means any day except Saturday, Sunday, any day which shall
be a federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.
"Commission" means the Securities and Exchange Commission.
"Commencement Date" shall mean the Trading Day immediately following the
date on which the applicable Draw Down Notice is delivered to the Purchaser.
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"Commitment Amount" shall have the meaning assigned to such term in Section
2.1 hereof.
"Commitment Period" shall mean the period of 24 consecutive months
commencing immediately after the Effective Date but in no event later than the
36 month anniversary of the date hereof.
"Common Stock" means the common stock of the Company, $0.0001 par value per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed into.
"Common Stock Equivalents" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
"Company Counsel" means___________________________________________or any
other counsel that the Company shall designate upon providing reasonable notice
to Purchaser of such designation.
"Disclosure Schedules" means the Disclosure Schedules of the Company
delivered concurrently herewith.
"Draw Down" shall have the meaning assigned to such term in Section 6.1(a)
hereof.
"Draw Down Notice" shall have the meaning assigned to such term in Section
6.1(c) hereof.
"Draw Down Pricing Period" shall mean a period of 10 consecutive Trading
Days including and immediately preceding the date on which the applicable Draw
Down Notice is delivered to the Purchaser.
"Draw Down Shares" shall mean the shares of Common Stock issuable pursuant
to a Draw Down.
"DTC" shall have the meaning assigned to such term in Section 6.1(g).
"DWAC" shall have the meaning assigned to such term in Section 6.1(g).
"Effective Date" means the date that the initial Registration Statement filed by
the Company pursuant to the Registration Rights Agreement is first declared
effective by the Commission.
"Equity Conditions" shall mean, during the period in question, (i) all
liquidated damages and other amounts owing to the Purchaser pursuant to the
Transaction Documents have been paid, (ii) there is an effective Registration
Statement pursuant to which the Purchaser is permitted to utilize the prospectus
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thereunder to resell all of the Draw Down Shares (issued and to be issued
pursuant to the applicable Draw Down), the Shares and the Warrant Shares (and
the Company believes, in good faith, that such effectiveness will continue
uninterrupted for the foreseeable future), (iii) the Common Stock is trading on
the Trading Market and all of the shares issuable pursuant to the Transaction
Documents are listed or quoted (if applicable) for trading on a Trading Market
(and the Company believes, in good faith, that trading of the Common Stock on a
Trading Market will continue uninterrupted for the foreseeable future), (iv)
there is a sufficient number of authorized but unissued and otherwise unreserved
shares of Common Stock for the issuance of all of the Draw Down Shares (issued
and to be issued pursuant to the applicable Draw Down), the Shares and the
Warrant Shares, (v) the issuance of the Draw Down Shares subject to the
applicable Draw Down would not violate the limitations set forth in Section
4.12, (vi) the daily trading volume for each Trading Day during such period
shall equal or exceed $10,000 of Common Stock (based on the VWAP on the
applicable day) and (vii) the Company, directly or indirectly, has not provided
the Purchaser with any material, non-public information that has not been made
publicly available in a widely disseminated release.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Exempt Issuance" means the issuance of (a) shares of Common Stock or
options to employees, officers or directors of the Company pursuant to any stock
or option plan duly adopted by a majority of the non-employee members of the
Board of Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon the
exercise or exchange of or conversion of any Securities issued hereunder and/or
other securities exercisable or exchangeable for or convertible into shares of
Common Stock issued and outstanding on the date of this Agreement, provided that
such securities have not been amended since the date of this Agreement to
increase the number of such securities or to decrease the exercise, exchange or
conversion price of any such securities, and (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors, provided any such issuance shall only be to a Person
which is, itself or through its subsidiaries, an operating company in a business
synergistic with the business of the Company and in which the Company receives
benefits in addition to the investment of funds, but shall not include a
transaction in which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is investing in
securities.
"FWS" means Feldman Weinstein & Smith LLP with offices located at 420
Lexington Avenue, Suite 2620, New York, New York 10170-0002.
"GAAP" shall have the meaning ascribed to such term in Section 3.1(h).
"Initial Closing" shall have the meaning assigned to such term in Section
2.2 hereof.
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"Initial Closing Date" shall have the meaning assigned to such term in
Section .2 hereof.
"Intellectual Property Rights" shall have the meaning ascribed to such term
in Section 3.1(o).
"Investment Amount" shall have the meaning assigned to such term in Section
6.1(c) hereof.
"Legend Removal Date" shall have the meaning ascribed to such term in
Section 4.1(c).
"Liens" means a lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction.
"Market Price" means, with respect to a Draw Down, the lowest VWAP during
the Draw Down Pricing Period applicable to such Draw Down.
"Material Adverse Effect" shall have the meaning assigned to such term in
Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such term in Section
3.1(m).
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Purchase Price" shall mean, with respect to Draw Down Shares purchased
during each applicable Draw Down Pricing Period, if the Market Price is less
than $0.60, 90% of the Market Price, if the Market Price is $0.60 or greater and
less than $0.90, 92.5% of the Market Price and if the Market Price is $0.90 or
greater, 95% of the Market Price. All prices are subject to adjustment subject
to adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.
"Purchaser Party" shall have the meaning ascribed to such term in Section
4.7.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated the date hereof, between the Company and the Purchaser, in the form of
Exhibit A attached hereto.
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"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchaser of the Draw Down Shares, the Shares and the Warrant
Shares.
"Required Approvals" shall have the meaning ascribed to such term in
Section 3.1(e).
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities" means the Draw Down Shares, the Shares, the Warrants and the
Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Settlement" shall mean the delivery of the Draw Down Shares into the
Purchaser's DTC account via DTC's DWAC system in exchange for payment therefor.
"Settlement Date" shall have the meaning assigned to such term in Section
6.1(f).
"Shares" shall mean the shares of Common Stock delivered to the Purchaser
pursuant to Section 2.3.
"Subsidiary" shall have the meaning ascribed to such term in Section
3.1(a).
"Short Sales" shall include all "short sales" as defined in Rule 200 of
Regulation SHO under the Exchange Act (but shall not be deemed to include the
location and/or reservation of borrowable shares of Common Stock).
"Subsidiary" means any subsidiary of the Company as set forth on Schedule
3.1(a).
"Trading Cushion" shall mean the mandatory 10 Trading Days between Draw
Down Pricing Periods.
"Trading Day" means a day on which the Common Stock is traded on a Trading
Market.
"Trading Market" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the Nasdaq
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Capital Market, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the OTC Bulletin Board.
"Transaction Documents" means this Agreement, the Warrants, and the
Registration Rights Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted for trading as reported by Bloomberg
Financial L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to
4:02 p.m. (New York City time); (b) if the OTC Bulletin Board is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock
is not then quoted for trading on the OTC Bulletin Board and if prices for the
Common Stock are then reported in the "Pink Sheets" published by Pink Sheets,
LLC (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common Stock so
reported; or (d) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith by the
Holder and reasonably acceptable to the Company.
"Warrants" means collectively the Common Stock purchase warrants, in the
form of Exhibit C delivered to the Purchaser in accordance with Section 2.3
hereof, which Warrants shall be exercisable immediately upon their issuance and
have a term of exercise equal to 5 years from the date of issuance.
"Warrant Shares" means the shares of Common Stock issuable upon exercise of
the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Purchase and Sale of Draw Down Shares. Upon the terms and subject to
the conditions of this Agreement, the Company may sell and issue to the
Purchaser and the Purchaser shall be obligated to purchase from the Company, up
to an aggregate of $1,000,000 worth of shares of Common Stock (the "Commitment
Amount").
2.2 Initial Closing. The execution and delivery of this Agreement and the
other agreements referred to herein (the "Initial Closing") shall take place at
the offices of FWS, 420 Lexington Avenue, Suite 2620, New York, New York 10170
(i) at 10:00 a.m. local time within 5 Trading Days of the date hereof, or (ii)
at such other time and place or on such date as the Purchaser and the Company
may agree upon (the "Initial Closing Date"). Each party shall deliver the
following documents, instruments and writings at or prior to the Initial
Closing:
(a) the Company shall deliver or cause to be delivered to the Purchaser the
following:
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(a) this Agreement duly executed by the Company;
(b) a legal opinion of Company Counsel, in the form of Exhibit B attached
hereto; and
(c) the Registration Rights Agreement duly executed by the Company.
(b) the Purchaser shall deliver or cause to be delivered to the Company the
following:
(a) this Agreement duly executed by the Purchaser; and
(b) the Registration Rights Agreement duly executed by the Purchaser.
2.3 Issuance of Warrants and Common Stock. On the Trading Day immediately
following the 10th Trading Day following the day the Common Stock is initially
listed or quoted for trading on a Trading Market, the Company shall issue the
Purchaser the following certificates registered in the name of the Purchaser:
(a) a Warrant to purchase up to 3 million shares of Common Stock, with an
exercise price equal to $0.27, subject to adjustment therein; and
(b) a certificate evidencing a number of 882,353 Shares.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules which Disclosure
Schedules shall be deemed a part hereof and to qualify any representation or
warranty otherwise made herein to the extent of such disclosure, the Company
hereby makes the representations and warranties set forth below to the
Purchaser:
(a) Subsidiaries. The Company currently owns, no subsidiaries either
directly or indirectly. If the Company has no subsidiaries, then all other
references in the Transaction Documents to the subsidiaries or any of them will
be disregarded.
(b) Organization and Qualification. The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
or default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result
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in (i) a material adverse effect on the legality, validity or enforceability of
any Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company's ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (ANY of (i), (ii) or (iii),
a "Material Adverse Effect") and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
(c) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, its board of directors or its stockholders in connection therewith
other than in connection with the Required Approvals. Each Transaction Document
has been (or upon delivery will have been) duly executed by the Company and,
when delivered in accordance with the terms hereof and thereof, will constitute
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Draw Down
Shares and the consummation by the Company of the other transactions
contemplated hereby and thereby do not and will not (i) conflict with or violate
any provision of the Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
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(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) filings required pursuant to Section 4.4 of this Agreement, (ii) the filing
with the Commission of the Registration Statement and any amendments or
supplements thereto, (iii) application(s) to each applicable Trading Market for
the listing of the Securities for trading thereon in the time and manner
required thereby, and (iv) the filing of Form D with the Commission and such
filings as are required to be made under applicable state securities laws
(collectively, the "Required Approvals").
(f) Issuance of the Securities. The Securities are duly authorized and,
when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Warrant Shares, when
issued in accordance with the terms of the Transaction Documents, will be
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable pursuant to
this Agreement and the Warrants.
(g) Capitalization. The capitalization of the Company is as set forth on
Schedule 3.1(g). The Company has not issued any capital stock other than as set
forth on Schedule 3.1(g). No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as a result of
the purchase and sale of the Securities, there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock or Common Stock
Equivalents. The issuance and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any Person (other
than the Purchaser) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under any
of such securities. All of the outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company's capital stock to which the Company is a party or, to
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the knowledge of the Company, between or among any of the Company's
stockholders.
(h) Financial Statements. Attached hereto as Schedule 3.1(h) are the
audited financial statements of the Company for the last one year and unaudited
financial statements for its most recent fiscal quarter ended September 30,
2007. Such financial statements comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto and except that unaudited financial statements may not contain
all footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Material Changes; Undisclosed Events, Liabilities or Developments.
Since the date of the latest audited financial statements attached hereto, (i)
there has been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company's financial statements pursuant to GAAP or disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
The Company does not have pending before the Commission any request for
confidential treatment of information. Except for the issuance of the Securities
contemplated by this Agreement or as set forth on Schedule 3.1(i), no event,
liability or development has occurred or exists with respect to the Company or
its Subsidiaries or their respective business, properties, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made that has not
been publicly disclosed at least 1 Trading Day prior to the date that this
representation is made.
(j) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "Action") which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor any director or officer thereof, is or has been
the subject of any Action involving a claim of violation of or liability under
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federal or state securities laws or a claim of breach of fiduciary duty. There
has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or any
current or former director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to the knowledge
of the Company, is imminent with respect to any of the employees of the Company
which could reasonably be expected to result in a Material Adverse Effect. None
of the Company's or its Subsidiaries' employees is a member of a union that
relates to such employee's relationship with the Company, and neither the
Company or any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relationships
with their employees are good. No executive officer, to the knowledge 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 or non-competition agreement, or any other contract or agreement or
any restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. The Company and its Subsidiaries
are in compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(1) Compliance. Neither the Company nor any Subsidiary (i) is in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary received
notice of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws
applicable to its business and all such laws that affect the environment, except
in each case as could not have or reasonably be expected to result in a Material
Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such permits could
not have or reasonably be expected to result in a Material Adverse Effect
("Material Permits"), and neither the Company nor any Subsidiary has received
any notice of proceedings relating to the revocation or modification of any
Material Permit.
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(n) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are in
compliance.
(o) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights necessary or
material for use in connection with their respective businesses and which the
failure to so have could have a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any. Subsidiary has
received a notice (written or otherwise) that the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights. The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties, except where failure to do so
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged, including, but not limited to, directors and
officers insurance coverage at least equal to $1,000,000. Neither the Company
nor any Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.
(q) Transactions With Affiliates and Employees. None of the officers or
directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $120,000
other than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii) for
12
other employee benefits, including stock option agreements under any stock
option plan of the Company.
(r) Internal Accounting Controls. The Company and the Subsidiaries maintain
a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(s) Certain Fees. The brokerage or finder's fees or commissions that are or
will be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by the Transaction Documents are as set forth on
Schedule 3.1(s). The Purchaser shall have no obligation with respect to any fees
or with respect to any claims made by or on behalf of other Persons for fees of
a type contemplated in this Section that may be due in connection with the
transactions contemplated by the Transaction Documents.
(t) Private Placement. Assuming the accuracy of the Purchaser
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Securities by the
Company to the Purchaser as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market.
(u) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an
Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.
(v) Registration Rights. Other than each of the Purchaser, no Person has
any right to cause the Company to effect the registration under the Securities
Act of any securities of the Company.
(w) Application of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchaser as a result of the Purchaser and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company's
issuance of the Securities and the Purchaser's ownership of the Securities.
13
(x) Disclosure. Except with respect to the material terms and conditions of
the transactions contemplated by the Transaction Documents, the Company confirms
that, neither it nor any other Person acting on its behalf has provided any of
the Purchaser or their agents or counsel with any information that it believes
constitutes or might constitute material, non-public information. The Company
understands and confirms that the Purchaser will rely on the foregoing
representation in effecting transactions in securities of the Company. All
disclosure furnished by or on behalf of the Company to the Purchaser regarding
the Company, its business and the transactions contemplated hereby, including
the Disclosure Schedules to this Agreement, with respect to the representations
and warranties made herein are true and correct with respect to such
representations and warranties and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The press releases disseminated by the Company during the
twelve months preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements, in
light of the circumstances under which they were made and when made, not
misleading. The Company acknowledges and agrees that no Purchaser makes or has
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2
hereof.
(y) No Integrated Offering. Assuming the accuracy of the Purchaser's
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of the Securities Act or any applicable shareholder approval
provisions of any Trading Market on which any of the securities of the Company
are listed or designated.
(z) Solvency. Based on the financial condition of the Company as of the
Closing Date after giving effect to the receipt by the Company of the proceeds
from the sale of the Securities hereunder, (i) the fair saleable value of the
Company's assets exceeds the amount that will be required to be paid on or in
respect of the Company's existing debts and other liabilities (including known
contingent liabilities) as they mature; (ii) the Company's assets do not
constitute unreasonably small capital to carry on its business as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its liabilities when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to be payable on
or in respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
14
within one year from the Closing Date. Schedule 3.1(z) sets forth as of the
dates thereof all outstanding secured and unsecured Indebtedness of the Company
or any Subsidiary, or for which the Company or any Subsidiary has commitments.
For the purposes of this Agreement, "Indebtedness" shall mean (a) any
liabilities for borrowed money or amounts owed in excess of $25,000 (other than
trade accounts payable incurred in the ordinary course of business), (b) all
guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is
in default with respect to any Indebtedness.
(aa) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary.
(bb) No General Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of
general solicitation or general advertising. The Company has offered the
Securities for sale only to the Purchaser and certain other "accredited
investors" within the meaning of Rule 501 under the Securities Act.
(cc) Foreign Corrupt Practices. Neither the Company, nor to the knowledge
of the Company, any agent or other person acting on behalf of the Company, has
(i) directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.
(dd) Accountants. The Company's accountants are set forth on Schedule
3.1(dd) of the Disclosure Schedule. To the knowledge of the Company, such
accountants, who the Company expects will express their opinion with respect to
the financial statements to be included in the Registration Statement, are a
registered public accounting firm as required by the Exchange Act.
(ee) Acknowledgment Regarding Purchaser's Purchase of Securities. The
Company acknowledges and agrees that each of the Purchaser is acting solely in
the capacity of an arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to the Transaction
15
Documents and the transactions contemplated thereby and any advice given by the
Purchaser or any of its respective representatives or agents in connection with
the Transaction Documents and the transactions contemplated thereby is merely
incidental to the Purchaser's purchase of the Securities. The Company further
represents to the Purchaser that the Company's decision to enter into this
Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.
(ff) Regulation M Compliance. The Company has not, and will not during the
term of this Agreement, and to its knowledge no one acting on its behalf has, or
will during the term of this Agreement, (i) taken, directly or indirectly, any
action designed to cause or to result in the stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of any
of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company's placement agent in connection with the
placement of the Securities.
(gg) Acknowledgement Regarding Purchaser's Trading Activity. Anything in
this Agreement or elsewhere herein to the contrary notwithstanding, it is
understood and acknowledged by the Company that none of the Purchaser have been
asked to agree, nor has the Purchaser agreed, to desist from purchasing or
selling long securities of the Company, including, without limitation, during
the periods that the value of the Draw Down Shares deliverable in connection
with a Draw Down are being determined. The Company acknowledges that such
aforementioned activities do not constitute a breach of any of the Transaction
Documents.
3.2 Representations and Warranties of the Purchaser. Purchaser hereby
represents and warrants as of the date hereof and as of each Closing Date to the
Company as follows:
(a) Organization: Authority. Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution, delivery and performance by the Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or similar action on the part of the Purchaser. Each Transaction
Document to which it is a party has been duly executed by the Purchaser, and
when delivered by the Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of the Purchaser,
enforceable against it in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
16
(b) Own Account. Purchaser understands that the Securities are "restricted
securities" and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Securities at the Initial
Closing as principal for its own account and not with a view to or for
distributing or reselling such Securities or any part thereof in violation of
the Securities Act or any applicable state securities law, has no present
intention of distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute or regarding
the distribution of such Securities (this representation and warranty not
limiting the Purchaser's right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal and
state securities laws) in violation of the Securities Act or any applicable
state securities law. Purchaser is acquiring the Securities hereunder in the
ordinary course of its business.
(c) Purchaser Status. At the time the Purchaser was offered the Securities,
it was, and at the date hereof it is, and on each date on which it exercises any
Warrants, it will be either: (i) an "accredited investor" as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a
"qualified institutional buyer" as defined in Rule 144A(a) under the Securities
Act. Purchaser is not required to be registered as a broker-dealer under Section
15 of the Exchange Act.
(d) Experience of Purchaser. Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.
(e) General Solicitation. Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
Confidentiality Prior To The Date Hereof. Other than to other Persons party
to this Agreement, the Purchaser has maintained the confidentiality of all
disclosures made to it in connection with this transaction (including the
existence and terms of this transaction).
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an affiliate of the Purchaser or in connection with a pledge as
17
contemplated in Section 4.1(b), the Company may require the transferor thereof
to provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of
the Purchaser under this Agreement and the Registration Rights Agreement, as to
issued Securities only.
(b) The Purchaser agrees to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that the Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Securities to a
financial institution that is an "accredited investor" as defined in Rule 501(a)
under the Securities Act and who agrees to be bound by the provisions of this
Agreement and the Registration Rights Agreement and, if required under the terms
of such arrangement, the Purchaser may transfer pledged or secured Securities to
the pledgees or secured parties. Such a pledge or transfer would not be subject
to approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the Purchaser's expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are subject to
registration pursuant to the Registration Rights Agreement, the preparation and
18
filing of any required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.
(e) Certificates evidencing the Draw Down Shares, the Shares and Warrant
Shares shall not contain any legend (including the legend set forth in Section
4.1(b)), (i) while a registration statement (including the Registration
Statement) covering the resale of such security is effective under the
Securities Act, or (ii) following any sale of such Draw Down Shares, the Shares
or Warrant Shares pursuant to Rule 144, or (iii) if such Draw Down Shares, the
Shares or Warrant Shares are eligible for sale under Rule 144(k), or (iv) if
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission). The Company shall cause its counsel to issue a legal opinion to
the Company's transfer agent promptly after the Effective Date if required by
the Company's transfer agent to effect the removal of the legend hereunder. If
all or any portion of a Warrant is exercised at a time when there is an
effective registration statement to cover the resale of the Warrant Shares, such
Warrant Shares shall be issued free of all legends. The Company agrees that
following the Effective Date or at such time as such legend is no longer
required under this Section 4.1(c), it will, no later than three Trading Days
following the delivery by the Purchaser to the Company or the Company's transfer
agent of a certificate representing Draw Down Shares, Shares or Warrant Shares,
as the case may be, issued with a restrictive legend (such third Trading Day,
the "Legend Removal Date"), deliver or cause to be delivered to the Purchaser a
certificate representing such shares that is free from all restrictive and other
legends. All Draw Down Shares shall be delivered without any restrictive
legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section. Certificates for Securities subject to
legend removal hereunder shall be transmitted by the transfer agent of the
Company to the Purchaser by crediting the account of the Purchaser's prime
broker with the Depository Trust Company System.
(d) In addition to the Purchaser's other available remedies, the Company
shall pay to the Purchaser, in cash, as partial liquidated damages and not as a
penalty, for each $1,000 of Draw Down Shares, Shares or Warrant Shares (based on
the VWAP of the Common Stock on the date such Securities are submitted to the
Company's transfer agent) delivered for removal of the restrictive legend and
subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading
Day five (5) Trading Days after such damages have begun to accrue) for each
Trading Day after the Legend Removal Date until such certificate is delivered
without a legend. Nothing herein shall limit the Purchaser's right to pursue
actual damages for the Company's failure to deliver certificates representing
any Securities as required by the Transaction Documents, and the Purchaser shall
have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.
(e) Purchaser agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1 is
predicated upon the Company's reliance that the Purchaser will sell any
Securities pursuant to either the registration requirements of the Securities
19
Act, including any applicable prospectus delivery requirements, or an exemption
therefrom, and that if Securities are sold pursuant to a Registration Statement,
they will be sold in compliance with the plan of distribution set forth therein.
4.2 Furnishing of Information. As long as Purchaser owns any Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as the
Purchaser owns any Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchaser and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchaser to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, to the extent required from time to time to
enable such Person to sell such Securities without registration under the
Securities Act within the requirements of the exemption provided by Rule 144.
4.3 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchaser or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
4.4 Securities Laws Disclosure: Publicity. The Company shall, by 8:30 a.m.
Eastern time on the Trading Day immediately following the date hereof, issue a
Current Report on Form 8-K, disclosing the material terms of the transactions
contemplated hereby, and shall attach the Transaction Documents thereto. The
Company and the Purchaser shall consult with each other in issuing any other
press releases with respect to the transactions contemplated hereby, and neither
the Company nor the Purchaser shall issue any such press release or otherwise
make any such public statement without the prior consent of the Company, with
respect to any press release of the Purchaser, or without the prior consent of
the Purchaser, with respect to any press release of the Company, which consent
shall not unreasonably be withheld or delayed, except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or communication.
4.5 Shareholder Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that the
Purchaser is an "Acquiring Person" under any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or similar anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that the Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchaser.
4.6 Non-Public Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
20
Company covenants and agrees that neither it nor any other Person acting on its
behalf will provide the Purchaser or its agents or counsel with any information
that the Company believes constitutes material nonpublic information, unless
prior thereto the Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information. The Company understands and
confirms that the Purchaser shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
4.7 Indemnification of Purchaser. Subject to the provisions of this Section
4.7, the Company will indemnify and hold the Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls the Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any the Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against the
Purchaser, or any of its Affiliates, by any stockholder of the Company who is
not an Affiliate of the Purchaser, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon a
breach of the Purchaser's representations, warranties or covenants under the
Transaction Documents or any agreements or understandings the Purchaser may have
with any such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by the Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant
to this Agreement, the Purchaser Party shall promptly notify the Company in
writing, and the Company shall have the right to assume the defense thereof with
counsel of its own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of the Purchaser Party except to the extent that
(i) the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of the Purchaser
Party, in which case the Company shall be responsible for the reasonable fees
and expenses of no more than one such separate counsel. The Company will not be
liable to any Purchaser Party under this Agreement (i) for any settlement by the
Purchaser Party effected without the Company's prior written consent, which
shall not be unreasonably withheld or delayed; or (ii) to the extent, but only
to the extent that a loss, claim, damage or liability is attributable to any
Purchaser Party's breach of any of the representations, warranties, covenants or
agreements made by the Purchaser Party in this Agreement or in the other
Transaction Documents.
21
4.8 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Draw Down Shares pursuant to
this Agreement and Warrant Shares pursuant to any exercise of the Warrants.
4.9 Listing of Common Stock. The Company hereby agrees to use best efforts
to maintain the listing of the Common Stock on a Trading Market, and as soon as
reasonably practicable following the Initial Closing (but not later than the
Effective Date) to list all of the Draw Down Shares, the Shares and Warrant
Shares on such Trading Market. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Trading Market, it will
include in such application all of the Draw Down Shares, the Shares and Warrant
Shares, and will take such other action as is necessary to cause all of the Draw
Down Shares, the Shares and Warrant Shares to be listed on such other Trading
Market as promptly as possible. The Company will take all action reasonably
necessary to continue the listing and trading of its Common Stock on a Trading
Market and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Trading Market.
4.10 Short Sales and Confidentiality After The Date Hereof. Purchaser
covenants that neither it nor any Affiliate acting on its behalf or pursuant to
any understanding with it will execute any Net Short Sales (as defined below)
during the following period commencing on the date hereof and at the Discussion
Time and ending on the earliest of (i) the 24 month anniversary of the Effective
Date, (ii) such time that the Company has exercised Draw Downs for the entire
Commitment Amount hereunder, (iii) the 36 month anniversary of the date of this
Agreement and (iv) the termination of this Agreement. Purchaser covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 4.4, the Purchaser will
maintain the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction). For
purposes of this Section 4.10, a "Net Short Sale" by the Purchaser shall mean a
sale of Common Stock by such Purchaser that is marked as a short sale and that
is made at a time when there is no equivalent offsetting long position in Common
Stock held by such Purchaser. For purposes of determining whether there is an
equivalent offsetting long position in Common Stock held by the Purchaser,
shares of Common Stock underlying the Warrants (ignoring any exercise
limitations therein) shall be deemed to be held long by the Purchaser, plus any
shares of Common Stock otherwise then held by such Purchaser.
4.11 Form D; Blue Sky Filings. The Company agrees to timely file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof, promptly upon request of the Purchaser. The Company shall take
such action as the Company shall reasonably determine is necessary in order to
obtain an exemption for, or to qualify the Securities for, sale to the Purchaser
at the Closing under applicable securities or "Blue Sky" laws of the states of
the United States, and shall provide evidence of such actions promptly upon
request of Purchaser.
4.12 The Shares. Anything in this Agreement to the contrary
notwithstanding, the Company may not make a Draw Down to the extent that such
22
Draw Down exceeds 9.999% of the then issued and outstanding shares of Common
Stock as reported in the Company's most recent periodic report filed with the
Commission.
4.13 Accuracy of Registration Statement. On each Settlement Date, the
Registration Statement and the prospectus therein (including any prospectus
supplement) shall not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading in light of the circumstances under
which they were made; and on such Settlement Date the Registration Statement and
the prospectus therein will not include any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, the Company makes no representations or
warranties as to the information contained in or omitted from the Registration
Statement and the prospectus therein in reliance upon and in conformity with the
information furnished in writing to the Company by the Purchaser specifically
for inclusion in the Registration Statement and the prospectus therein.
4.14 Notice of Certain Events Affecting Registration; Suspension of Right
to Request a Draw Down. The Company will promptly notify the Purchaser in
writing upon the occurrence of any of the events set forth in Section 3(d) of
the Registration Rights Agreement. The Company shall not deliver to the
Purchaser any Draw Down Notice during the continuation of any of the foregoing
events. The Company shall promptly make available to the Purchaser any such
supplements or amendments to the related prospectus, at which time, provided
that the registration statement and any supplements and amendments thereto are
then effective, the Company may recommence the delivery of Draw Down Notices.
4.15 Participation in Future Financing.
(a) During the Commitment Period, upon any issuance by the Company or any
of its Subsidiaries of Common Stock or Common Stock Equivalents for cash
consideration (a "Subsequent Financing"), the Purchaser shall have the right to
participate in up to an amount of the Subsequent Financing equal to 100% of the
Subsequent Financing (the "Participation Maximum") on the same terms, conditions
and price provided for in the Subsequent Financing.
(b) At least 5 Trading Days prior to the closing of the Subsequent
Financing, the Company shall deliver to the Purchaser a written notice of its
intention to effect a Subsequent Financing ("Pre-Notice"), which Pre-Notice
shall ask such Purchaser if it wants to review the details of such financing
(such additional notice, a "Subsequent Financing Notice"). Upon the request of
the Purchaser, and only upon a request by such Purchaser, for a Subsequent
Financing Notice, the Company shall promptly, but no later than 1 Trading Day
after such request, deliver a Subsequent Financing Notice to such Purchaser. The
Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be raised
thereunder and the Person or Persons through or with whom such Subsequent
Financing is proposed to be effected and shall include a term sheet or similar
document relating thereto as an attachment.
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(c) If the Purchaser desires to participate in such Subsequent Financing it
must provide written notice to the Company by not later than 5:30 p.m. (New York
City time) on the 5th Trading Day it receives the Pre-Notice that the Purchaser
is willing to participate in the Subsequent Financing, the amount of the
Purchaser's participation, and that the Purchaser has such funds ready, willing,
and available for investment on the terms set forth in the Subsequent Financing
Notice. If the Company receives no notice from the Purchaser as of such 5th
Trading Day, such Purchaser shall be deemed to have notified the Company that it
does not elect to participate.
(d) If by 5:30 p.m. (New York City time) on the 5th Trading Day after the
Purchaser has received the Pre-Notice, notification by the Purchaser of its
willingness to participate in the Subsequent Financing (or to cause their
designees to participate) is, in the aggregate, less than the total amount of
the Subsequent Financing, then the Company may effect the remaining portion of
such Subsequent Financing on the terms and with the Persons set forth in the
Subsequent Financing Notice.
(e) The Company must provide the Purchaser with a second Subsequent
Financing Notice, and the Purchaser will again have the right of participation
set forth above in this Section 4.15, if the Subsequent Financing subject to the
initial Subsequent Financing Notice is not consummated for any reason on the
terms set forth in such Subsequent Financing Notice within 90 Trading Days after
the date of the initial Subsequent Financing Notice.
(f) Notwithstanding the foregoing, this Section 4.15 shall not apply in
respect of (i) an Exempt Issuance or (ii) an underwritten public offering of
Common Stock.
4.16 Subsequent Equity Sales.
(a) From the date hereof until 3 months after the Effective Date and during
the 60 day period following any Draw Down Pricing Period, neither the Company
nor any Subsidiary shall issue shares of Common Stock or Common Stock
Equivalents; provided, however, the 3 month period set forth in this Section
4.16 shall be extended for the number of Trading Days during such period in
which (i) trading in the Common Stock is suspended by any Trading Market, or
(ii) following the Effective Date, the Registration Statement is not effective
or the prospectus included in the Registration Statement may not be used by the
Purchaser for the resale of the Shares and Warrant Shares.
(b) Until the expiration of the Commitment Period, the Company shall be
prohibited from effecting or entering into an agreement to effect any Subsequent
Financing involving a "Variable Rate Transaction". The term "Variable Rate
Transaction" shall mean a transaction in which the Company issues or sells (i)
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion, exercise or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the
shares of Common Stock at any time after the initial issuance of such debt or
equity securities, or (B) with a conversion, exercise or exchange price that is
24
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock or (ii) enters into any agreement, including, but not limited
to, an equity line of credit, whereby the Company may sell securities at a
future determined price. The Purchaser shall be entitled to obtain injunctive
relief against the Company to preclude any such issuance, which remedy shall be
in addition to any right to collect damages.
(c) Notwithstanding the foregoing, this Section 4.16 shall not apply in
respect of an Exempt Issuance, except that no Variable Rate Transaction shall be
an Exempt Issuance.
ARTICLE V.
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
5.1 Conditions Precedent to the Obligation of the Company to Sell the Draw
Down Shares. The obligation hereunder of the Company to proceed to close this
Agreement and to issue and sell the Draw Down Shares to the Purchaser is subject
to the satisfaction or waiver, at or before the Initial Closing, and as of each
Settlement Date of each of the conditions set forth below. These conditions are
for the Company's sole benefit and may be waived by the Company in writing at
any time in its sole discretion.
(a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser shall be true and correct in all
material respects as of the date when made and as of the Initial Closing and as
of each Settlement Date as though made at that time (except for representations
and warranties that speak as of a particular date, which shall be true and
correct in all material respects as of such dates).
(b) Performance by the Purchaser. The Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchaser at or prior to the Initial Closing and as of each
Settlement Date.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(d) No Proceedings or Litigation. No material Action shall have been
commenced against the Purchaser or the Company or any subsidiary, or any of the
officers, directors or affiliates of the Company or any subsidiary, seeking to
restrain, prevent or change the transactions contemplated by this Agreement, or
seeking damages in connection with such transactions.
(e) Initial Closing Deliveries. The delivery by the Purchaser of the items
set forth in Section 2.2(b) of this Agreement.
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(f) The Shares. A registration statement covering the resale of the Shares
by the Purchaser shall have been declared effective by the Commission within 6
months from the date hereof.
5.2 Conditions Precedent to the Obligation of the Purchaser to Close. The
obligation hereunder of the Purchaser to perform its obligations under this
Agreement and to purchase the Draw Down Shares is subject to the satisfaction or
waiver, at or before the Initial Closing, of each of the conditions set forth
below. These conditions are for the Purchaser's sole benefit and may be waived
by the Purchaser in writing at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of the
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Initial Closing as
though made at that time (except for representations and warranties that speak
as of a particular date, which shall be true and correct in all material
respects as of such date).
(b) Performance by the Company. The Company shall have performed, satisfied
and complied in all material respects with all material covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Initial Closing.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(d) No Proceedings or Litigation. No material Action shall have been
commenced, against the Purchaser or the Company or any subsidiary, or any of the
officers, directors or affiliates of the Company or any subsidiary seeking to
restrain, prevent or change the transactions contemplated by this Agreement, or
seeking damages in connection with such transactions.
(e) Initial Closing Deliveries. The delivery by the Company of the items
set forth in Section 2.2(a) of this Agreement.
5.3 Conditions Precedent to the Obligation of the Purchaser to Accept a
Draw Down and Purchase the Draw Down Shares. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Draw Down
Shares is subject to the satisfaction at or before each Settlement Date, of each
of the conditions set forth below.
(a) Satisfaction of Conditions to Initial Closing. The Company shall have
satisfied at the Initial Closing, or the Purchaser shall have waived at the
Initial Closing, the conditions set forth in Section 5.2 hereof.
(b) No Suspension. Trading in the Common Stock shall not have been
suspended by the Commission or the Trading Market (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the delivery of each Draw Down Notice), and, at any time
prior to such Draw Down Notice, trading in securities generally as reported on
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the Trading Market shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported on the
Trading Market unless the general suspension or limitation shall have been
terminated prior to the delivery of such Draw Down Notice.
(c) Material Adverse Effect. No Material Adverse Effect has occurred.
(d) Opinion of Counsel. The Purchaser shall have received a "bring-down"
letter from the Company's counsel, confirming that there is no change from the
counsel's previously delivered opinion, or else specifying with particularity
the reason for any change and an opinion as to the additional items specified in
Exhibit D hereto.
(e) Minimum Investment Amount. The Investment Amount for the applicable
Draw Down Notice, as permitted pursuant to Section 6.1(c), shall exceed $20,000.
For purposes of clarification, if the maximum Investment Amount as determined
pursuant to Section 6.1(c) is less than $20,000, then the Company shall be
precluded from exercising a Draw Down at such time.
(f) Equity Conditions. During the Draw Down Pricing Period through the
Settlement Date, all of the Equity Conditions have been met.
(g) Prospectus Supplement. On the Trading Day that the Company delivers a
Draw Down Notice, the Company shall have filed with the Commission a prospectus
supplement pursuant to Rule 424 under the Securities Act setting forth the terms
of the Draw Down.
(h) Involuntary Suspension During Draw Down Pricing Period. If during any
Trading Day during the Draw Down Pricing Period trading of the Common Stock on
the Trading Market is suspended for more than 3 hours, in the aggregate, or if
any Trading Day during the Draw Down Pricing Period is shortened because of a
public holiday.
(i) Voluntary Suspension During Draw Down Pricing Period. If during any
Trading Day during the Draw Down Pricing Period sales of Draw Down Shares
pursuant to the Registration Statement are suspended by the Company for more
than three (3) hours, in the aggregate.
ARTICLE VI.
DRAW DOWN TERMS
6.1 Draw Down Terms. Subject to the satisfaction of the conditions set
forth in this Agreement, the parties agree as follows:
(a) The Company may, in its sole discretion, issue and exercise draw downs
against the Commitment Amount (each a "Draw Down") during the Commitment Period,
which Draw Downs the Purchaser shall be obligated to accept, subject to the
terms and conditions under this Agreement. Before the Company shall exercise a
Draw Down, the Company shall have caused a sufficient number of shares of Common
27
Stock to be registered to cover the Draw Down Shares to be issued in connection
with such Draw Down (using a good faith estimate based on the recent market
price of the Common Stock), and, on the Trading Day that such request is made,
the Company shall have filed with the Commission a prospectus supplement
pursuant to Rule 424 under the Securities Act setting forth the terms of the
Draw Down.
(b) Only one Draw Down shall be allowed in each Draw Down Pricing Period
and the Company may not exercise a Draw Down until the applicable Trading
Cushion has elapsed since the end of the previous Draw Down Pricing Period.
(c) The Company must inform the Purchaser by delivering a Draw Down notice,
in the form of Exhibit E attached hereto (the "Draw Down Notice"), via facsimile
transmission, in accordance with Section 8.3, as to the dollar amount of the
Draw Down (the "Investment Amount") the Company wishes to exercise.
(d) The maximum Investment Amount as to each Draw Down shall be equal to
the lesser of (i) the average daily dollar trading volume of the Common Stock on
the Trading Market during the 20 Trading Days immediately prior to the
applicable Commencement Date and (ii) $200,000. For purposes of clarification,
such average in clause (i) shall be determined by averaging the daily dollar
trading volumes for each Trading Day during such period, not by aggregating the
volume over such period and dividing by 20.
(e) The number of Draw Down Shares to be issued on a Settlement Date shall
equal the Investment Amount applicable to such Settlement Date divided by the
lesser of the Purchase Price as calculated during the applicable Draw Down
Pricing Period and, if the applicable Draw Down Shares are not delivered on or
before the applicable Settlement Date, the Purchase Price as calculated during
the applicable Draw Down Pricing Period, but assuming such Draw Down Pricing
Period is extended through the Trading Day immediately prior to the date the
applicable Draw Down Shares are actually delivered to the Purchaser.
(f) On the Trading Day immediately following the last day of the Draw Down
Pricing Period, the Company shall deliver to the Purchaser and the Purchaser
shall acknowledge to the Company a settlement statement (the "Settlement
Statement") setting forth the calculation of the Purchase Price and the
Investment Amount as to the applicable Draw Down Pricing Period. The issuance of
the Draw Down Shares as to a Draw Down and the payment of the Investment Amount
as to a Draw Down shall occur within 1 Trading Day of the end of the applicable
Draw Down Pricing Period (the "Settlement Date").
(g) On or before the Settlement Date, the applicable Draw Down Shares shall
be delivered to the Depository Trust Company ("DTC") account of the Purchaser,
or its designees, as designated by the Purchaser in the Settlement Statement,
via DTC's Deposit Withdrawal Agent Commission system ("DWAC"). Upon the Company
electronically delivering such Draw Down Shares to the DTC account of the
Purchaser, or its designees, via DWAC by 9:30 a.m. ET, the Purchaser shall, on
28
the same day (or the next Business Day if such day is not a Business Day) wire
transfer immediately available funds to the Company's bank account, as
designated by the Company in the Settlement Statement, for the amount of the
Investment Amount of such Draw Down Shares. Upon the Company electronically
delivering the applicable Draw Down Shares to the Purchaser or its designee's
DTC account via DWAC after 9:30 a.m. ET, the Purchaser shall wire transfer next
day available funds to the Company's designated account on such day (or the next
Business Day if such day is not a Business Day) for the amount of the Investment
Amount of such Draw Down Shares. In the event that following the Initial Closing
the Company elects to establish an escrow account pursuant to a written escrow
agreement for the receipt of the Investment Amount payable in connection with
Draw Downs, provided the terms and conditions of any such escrow agreement are
reasonably acceptable to the Purchaser and the Company instructs the Purchaser
to pay an applicable Investment Amount to such escrow agent when it delivers a
Draw Down Notice, the Draw Down Shares shall be credited by the Company to the
DTC account designated by the Purchaser via DWAC upon receipt by such escrow
agent of payment for the Draw Down Shares into such escrow agent's escrow
account and notice to the Company thereof.
(h) The Company understands that a delay in the delivery of the Draw Down
Shares into the Purchaser's DTC account beyond the Settlement Date could result
in economic loss to the Purchaser. In addition to the Purchaser's other
available remedies, the Company shall pay to the Purchaser, in cash, as partial
liquidated damages and not as a penalty, for each $1,000 of Draw Down Shares
(based on the VWAP of the Common Stock on the applicable Settlement Date)
required to be delivered on the Settlement Date, $10 per Trading Day (increasing
to $20 per Trading Day five (5) Trading Days after such damages have begun to
accrue) for each Trading Day after the Settlement Date until such Draw Down
Shares are delivered pursuant to this Article VI. Nothing herein shall limit the
Purchaser's right to pursue actual damages for the Company's failure to deliver
certificates representing any Securities as required by the Transaction
Documents, and the Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.
ARTICLE VII.
TERMINATION
7.1 Term. The term of this Agreement shall begin on the date hereof and
shall end on the earlier of (i) 24 months from the Effective Date or as
otherwise set forth in Section 7.2 and (ii) 36 months from the date hereof;
provided, however, if the Purchaser has not honored three consecutive duly
issued Draw Down Notices from the Company in violation of this Agreement, the
Company may terminate this Agreement with 90 days prior written notice to such
Purchaser.
7.2 Other Termination. This Agreement shall terminate if (i) the Common
Stock is de-listed from the Trading Market unless such de-listing is in
connection with a subsequent listing on another Trading Market, (ii) the Company
files for protection from creditors under any applicable law or (iii) the
29
Registration Statement is not declared effective by the Commission on the
12-month anniversary of the date hereof.
ARTICLE VIII.
MISCELLANEOUS
8.1 Fees and Expenses. The Company has agreed to pay the non-accountable
sum of $10,000 to the Purchaser for its legal fees and expenses in connection
with the transactions contemplated hereunder, all of which has been paid prior
to the date hereof. Except as expressly set forth in the Transaction Documents
to the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the delivery of
any Securities to the Purchaser.
8.2 Entire Agreement. The Transaction Documents, together with the exhibits
and schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
8.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the 2nd Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
8.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waived provision is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right.
8.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
30
8.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors. Neither party may assign
this Agreement or any rights or obligations hereunder (other than by merger).
8.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.7.
8.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or is an inconvenient venue for such proceeding. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner permitted by law. The parties hereby waive
all rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys' fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
8.9 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery of the Draw Down Shares, the Shares and
Warrant Shares.
8.10 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a ".pdf' format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or ".pdf' signature page were an original thereof.
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8.11 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
8.12 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction. The applicant
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with the
issuance of such replacement Securities.
8.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchaser and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
8.14 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
8.15 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
(Signature Pages Follow)
32
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed b their respective authorized signatories as of
the date first indicated above.
EASY ENERGY Address of Notice:
By: /s/ GUY OFIR
-----------------------
Name: Guy Ofir
Title: President
With a copy to (shall not constitute notice)
[REMINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
33
[PURCHASER SIGNATURE PAGES TO ESYE SECURITIES PURCHASE AGREEMENT}:
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Purchaser: Tailor-Made Capital Ltd.
Signature of Authorized Signatory of Holder: /s/ TAILOR-MADE CAPITAL LTD
Name of Authorized Signatory: /s/ YONATAN MALCA /s/ITZIK SHENIDORSKY
Title of Authorized Signatory: _____________________________.
Email Address of Purchaser: liorosta@meitav.co.il.
Fax Number of Purchaser: +972-3-7778201
Address for Notice of Purchaser: 4 Berkowitz St., Tel Aviv 61880, Israel.
Address for Delivery of Securities for Purchaser (if not same as above):
Commitment amount: $1,000,000.
Shares: 882,353
Warrants: 3,000,000.
[SIGNATURE PAGE CONTINUE]
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EXHIBIT C
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
EASY ENERGY, INC.
Warrant Shares: [_______ Initial Exercise Date: March __, 2008
THIS COMMON STOCK PURCHASE WARRANT (the "WARRANT") certifies that, for
value received, _____________ (the "HOLDER") is entitled, upon the terms and
subject to the limitations on exercise and the conditions hereinafter set forth,
at any time on or after March ___, 2013 (the "INITIAL EXERCISE DATE") and on or
prior to the close of business on the five year anniversary of the Initial
Exercise Date (the "TERMINATION DATE") but not thereafter, to subscribe for and
purchase from Easy Energy, Inc., a Nevada corporation (the "COMPANY"), up to
______ shares (the "WARRANT SHARES") of Common Stock. The purchase price of one
share of Common Stock under this Warrant shall be equal to the Exercise Price,
as defined in Section 2(b).
SECTION 1. DEFINITIONS. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase
Agreement (the "PURCHASE AGREEMENT"), dated March __, 2008, among the Company
and the purchasers signatory thereto.
SECTION 2. EXERCISE.
a) EXERCISE OF WARRANT. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company of a duly executed facsimile copy of the Notice of Exercise Form annexed
hereto (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of the Holder
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appearing on the books of the Company); and, within 3 Trading Days of the date
said Notice of Exercise is delivered to the Company, the Company shall have
received payment of the aggregate Exercise Price of the shares thereby purchased
by wire transfer or cashier's check drawn on a United States bank.
Notwithstanding anything herein to the contrary, the Holder shall not be
required to physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the Warrant has
been exercised in full, in which case, the Holder shall surrender this Warrant
to the Company for cancellation within 3 Trading Days of the date the final
Notice of Exercise is delivered to the Company. Partial exercises of this
Warrant resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the outstanding
number of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased. The Holder and the Company shall
maintain records showing the number of Warrant Shares purchased and the date of
such purchases. The Company shall deliver any objection to any Notice of
Exercise Form within 1 Business Day of receipt of such notice. In the event of
any dispute or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. THE HOLDER AND ANY ASSIGNEE, BY
ACCEPTANCE OF THIS WARRANT, ACKNOWLEDGE AND AGREE THAT, BY REASON OF THE
PROVISIONS OF THIS PARAGRAPH, FOLLOWING THE PURCHASE OF A PORTION OF THE WARRANT
SHARES HEREUNDER, THE NUMBER OF WARRANT SHARES AVAILABLE FOR PURCHASE HEREUNDER
AT ANY GIVEN TIME MAY BE LESS THAN THE AMOUNT STATED ON THE FACE HEREOF.
b) EXERCISE PRICE. The exercise price per share of the Common Stock under
this Warrant shall be $0.27, subject to adjustment hereunder (the "EXERCISE
PRICE").
c) CASHLESS EXERCISE. If at any time after the completion of the
then-applicable holding period required by Rule 144, or any successor provision
then in effect, which would allow "tacking" of the holding period of this
Warrant and the Warrant Shares pursuant to the SEC Manual of Publicly Available
Telephone Interpretations or other Commission rule or guidance, there is no
effective Registration Statement registering, or no current prospectus available
for, the resale of the Warrant Shares by the Holder at a time when such
Registration Statement is required to be effective pursuant to the Registration
Rights Agreement, then this Warrant may also be exercised at such time by means
of a "cashless exercise" in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the date of such
election;
(B) = the Exercise Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise of this Warrant
in accordance with the terms of this Warrant by means of a cash
exercise rather than a cashless exercise.
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Notwithstanding anything herein to the contrary, on the Termination Date,
this Warrant shall be automatically exercised via cashless exercise pursuant to
this Section 2(c).
d) HOLDER'S RESTRICTIONS. The Company shall not effect any exercise of this
Warrant, and a Holder shall not have the right to exercise any portion of this
Warrant, pursuant to Section 2 or otherwise, to the extent that after giving
effect to such issuance after exercise as set forth on the applicable Notice of
Exercise, the Holder (together with the Holder's Affiliates, and any other
person or entity acting as a group together with the Holder or any of the
Holder's Affiliates), would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below). For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially owned by the Holder and its
Affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which such determination is being made,
but shall exclude the number of shares of Common Stock which would be issuable
upon (A) exercise of the remaining, nonexercised portion of this Warrant
beneficially owned by the Holder or any of its Affiliates and (B) exercise or
conversion of the unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other Common Stock Equivalents)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its affiliates.
Except as set forth in the preceding sentence, for purposes of this Section
2(d)(i), beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder,
it being acknowledged by the Holder that the Company is not representing to the
Holder that such calculation is in compliance with Section 13(d) of the Exchange
Act and the Holder is solely responsible for any schedules required to be filed
in accordance therewith. To the extent that the limitation contained in this
Section 2(d)(i) applies, the determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Warrant is exercisable shall be in
the sole discretion of the Holder, and the submission of a Notice of Exercise
shall be deemed to be the Holder's determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Warrant is exercisable, in each
case subject to the Beneficial Ownership Limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such determination. In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. For purposes of this Section 2(d)(i), in
determining the number of outstanding shares of Common Stock, a Holder may rely
on the number of outstanding shares of Common Stock as reflected in (x) the
Company's most recent Form 10-Q (or10-QSB) or Form 10-K (or 10-KSB), as the case
may be, (y) a more recent public announcement by the Company or (z) any other
notice by the Company or the Company's Transfer Agent setting forth the number
of shares of Common Stock outstanding. Upon the written or oral request of a
Holder, the Company shall within two Trading Days confirm orally and in writing
to the Holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after
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giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates since the date as of
which such number of outstanding shares of Common Stock was reported. The
"BENEFICIAL OWNERSHIP LIMITATION" shall be 4.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon exercise of this Warrant. The Beneficial
Ownership Limitation provisions of this Section 2(d)(i) may be waived by the
Holder, at the election of the Holder, upon not less than 61 days' prior notice
to the Company to change the Beneficial Ownership Limitation to 9.99% of the
number of shares of the Common Stock outstanding immediately after giving effect
to the issuance of shares of Common Stock upon exercise of this Warrant, and the
provisions of this Section 2(d)(i) shall continue to apply. Upon such a change
by a Holder of the Beneficial Ownership Limitation from such 4.99% limitation to
such 9.99% limitation, the Beneficial Ownership Limitation may not be further
waived by the Holder. The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of
this Section 2(d)(i) to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Warrant.
e) MECHANICS OF EXERCISE.
i. DELIVERY OF CERTIFICATES UPON EXERCISE. Certificates for shares
purchased hereunder shall be transmitted by the transfer agent of the Company to
the Holder by crediting the account of the Holder's prime broker with the
Depository Trust Company through its Deposit Withdrawal Agent Commission
("DWAC") system if the Company is a participant in such system and there is an
effective Registration Statement permitting the resale of the Warrant Shares by
the Holder, and otherwise by physical delivery to the address specified by the
Holder in the Notice of Exercise within 3 Trading Days from the delivery to the
Company of the Notice of Exercise Form, surrender of this Warrant (if required)
and payment of the aggregate Exercise Price as set forth above ("WARRANT SHARE
DELIVERY DATE"). This Warrant shall be deemed to have been exercised on the date
the Exercise Price is received by the Company. The Warrant Shares shall be
deemed to have been issued, and Holder or any other person so designated to be
named therein shall be deemed to have become a holder of record of such shares
for all purposes, as of the date the Warrant has been exercised by payment to
the Company of the Exercise Price (or by cashless exercise, if permitted) and
all taxes required to be paid by the Holder, if any, pursuant to Section
2(e)(vi) prior to the issuance of such shares, have been paid. If the Company
fails for any reason to deliver to the Holder certificates evidencing the
Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery
Date, the Company shall pay to the Holder, in cash, as liquidated damages and
not as a penalty, for each $1,000 of Warrant Shares subject to such exercise
(based on the VWAP of the Common Stock on the date of the applicable Notice of
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Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth
Trading Day after such liquidated damages begin to accrue) for each Trading Day
after such Warrant Share Delivery Date until such certificates are delivered.
ii. DELIVERY OF NEW WARRANTS UPON EXERCISE. If this Warrant shall have been
exercised in part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to Holder a new
Warrant evidencing the rights of Holder to purchase the unpurchased Warrant
Shares called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant.
iii. RESCISSION RIGHTS. If the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing the Warrant
Shares pursuant to this Section 2(e)(i) by the Warrant Share Delivery Date, then
the Holder will have the right to rescind such exercise.
iv. COMPENSATION FOR BUY-IN ON FAILURE TO TIMELY DELIVER CERTIFICATES UPON
EXERCISE. In addition to any other rights available to the Holder, if the
Company fails to cause its transfer agent to transmit to the Holder a
certificate or certificates representing the Warrant Shares pursuant to an
exercise on or before the Warrant Share Delivery Date, and if after such date
the Holder is required by its broker to purchase (in an open market transaction
or otherwise) or the Holder's brokerage firm otherwise purchases, shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such exercise (a "BUY-IN"),
then the Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder's total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue times (B) the
price at which the sell order giving rise to such purchase obligation was
executed, and (2) at the option of the Holder, either reinstate the portion of
the Warrant and equivalent number of Warrant Shares for which such exercise was
not honored or deliver to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted exercise of shares of Common Stock with an aggregate sale price
giving rise to such purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In and, upon request of the
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Company, evidence of the amount of such loss. Nothing herein shall limit a
Holder's right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.
v. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall at its election, either pay a
cash adjustment in respect of such final fraction in an amount equal to such
fraction multiplied by the Exercise Price or round up to the next whole share.
vi. CHARGES, TAXES AND EXPENSES. Issuance of certificates for Warrant
Shares shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate, all
of which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; PROVIDED, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
vii. CLOSING OF BOOKS. The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.
SECTION 3. CERTAIN ADJUSTMENTS.
a) STOCK DIVIDENDS AND SPLITS. If the Company, at any time while this
Warrant is outstanding: (A) pays a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company upon exercise of this Warrant), (B) subdivides outstanding shares of
Common Stock into a larger number of shares, (C) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares, or (D) issues by reclassification of shares of the Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number
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of shares of Common Stock outstanding immediately after such event and the
number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted such that the aggregate Exercise Price of this Warrant shall remain
unchanged. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
b) SUBSEQUENT EQUITY SALES. If the Company or any Subsidiary thereof, as
applicable, at any time while this Warrant is outstanding, shall sell or grant
any option to purchase, or sell or grant any right to reprice, or otherwise
dispose of or issue (or announce any offer, sale, grant or any option to
purchase or other disposition) any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock, at an effective price
per share less than the then Exercise Price (such lower price, the "BASE SHARE
PRICE" and such issuances collectively, a "DILUTIVE ISSUANCE") (if the holder of
the Common Stock or Common Stock Equivalents so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to warrants,
options or rights per share which are issued in connection with such issuance,
be entitled to receive shares of Common Stock at an effective price per share
which is less than the Exercise Price, such issuance shall be deemed to have
occurred for less than the Exercise Price on such date of the Dilutive
Issuance), then the Exercise Price shall be reduced and only reduced to equal
the Base Share Price and the number of Warrant Shares issuable hereunder shall
be increased such that the aggregate Exercise Price payable hereunder, after
taking into account the decrease in the Exercise Price, shall be equal to the
aggregate Exercise Price prior to such adjustment. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued.
Notwithstanding the foregoing, no adjustments shall be made, paid or issued
under this Section 3(b) in respect of an Exempt Issuance. The Company shall
notify the Holder in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalents subject to this Section
3(b), indicating therein the applicable issuance price, or applicable reset
price, exchange price, conversion price and other pricing terms (such notice the
"DILUTIVE ISSUANCE NOTICE"). For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon
the occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Warrant Shares based upon
the Base Share Price regardless of whether the Holder accurately refers to the
Base Share Price in the Notice of Exercise.
c) SUBSEQUENT RIGHTS OFFERINGS. If the Company, at any time while the
Warrant is outstanding, shall issue rights, options or warrants to all holders
of Common Stock (and not to Holders) entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the VWAP at the record
date mentioned below, then the Exercise Price shall be multiplied by a fraction,
of which the denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of the Common Stock
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outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered (assuming receipt by the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such VWAP.
Such adjustment shall be made whenever such rights or warrants are issued, and
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such rights, options or warrants.
d) PRO RATA DISTRIBUTIONS. If the Company, at any time while this Warrant
is outstanding, shall distribute to all holders of Common Stock (and not to
Holders of the Warrants) evidences of its indebtedness or assets (including cash
and cash dividends) or rights or warrants to subscribe for or purchase any
security other than the Common Stock (which shall be subject to Section 3(b)),
then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on such
record date less the then per share fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be described in a
statement provided to the Holder of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share
of Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date mentioned
above.
e) FUNDAMENTAL TRANSACTION. If, at any time while this Warrant is
outstanding, (A) the Company effects any merger or consolidation of the Company
with or into another Person, (B) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (each "FUNDAMENTAL
TRANSACTION"), then, upon any subsequent exercise of this Warrant, the Holder
shall have the right to receive, for each Warrant Share that would have been
issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the "ALTERNATE CONSIDERATION") receivable as a
result of such merger, consolidation or disposition of assets by a holder of the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
8
any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. To the extent necessary to effectuate
the foregoing provisions, any successor to the Company or surviving entity in
such Fundamental Transaction shall issue to the Holder a new warrant consistent
with the foregoing provisions and evidencing the Holder's right to exercise such
warrant into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of this Section
3(e) and insuring that this Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a "Rule 13e-3
transaction" as defined in Rule 13e-3 under the Securities Exchange Act of 1934,
as amended, or (3) a Fundamental Transaction involving a person or entity not
traded on a national securities exchange, the Nasdaq Global Select Market, the
Nasdaq Global Market, or the Nasdaq Capital Market, the Company or any successor
entity shall pay at the Holder's option, exercisable at any time concurrently
with or within 30 days after the consummation of the Fundamental Transaction, an
amount of cash equal to the value of this Warrant as determined in accordance
with the Black Scholes Option Pricing Model obtained from the "OV" function on
Bloomberg L.P. using (i) a price per share of Common Stock equal to the VWAP of
the Common Stock for the Trading Day immediately preceding the date of
consummation of the applicable Fundamental Transaction, (ii) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the
remaining term of this Warrant as of the date of consummation of the applicable
Fundamental Transaction and (iii) an expected volatility equal to the 100 day
volatility obtained from the "HVT" function on Bloomberg L.P. determined as of
the Trading Day immediately following the public announcement of the applicable
Fundamental Transaction.
f) CALCULATIONS. All calculations under this Section 3 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and outstanding.
g) VOLUNTARY ADJUSTMENT BY COMPANY. The Company may at any time during the
term of this Warrant reduce the then current Exercise Price to any amount and
for any period of time deemed appropriate by the Board of Directors of the
Company.
h) NOTICE TO HOLDER.
i. ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise Price is adjusted
pursuant to any provision of this Section 3, the Company shall promptly mail to
the Holder a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. If the
Company enters into a Variable Rate Transaction (as defined in the Purchase
9
Agreement), despite the prohibition thereon in the Purchase Agreement, the
Company shall be deemed to have issued Common Stock or Common Stock Equivalents
at the lowest possible conversion or exercise price at which such securities may
be converted or exercised.
ii. NOTICE TO ALLOW EXERCISE BY HOLDER. If (A) the Company shall declare a
dividend (or any other distribution in whatever form) on the Common Stock; (B)
the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock; (C) the Company shall authorize the granting to
all holders of the Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights; (D) the approval of
any stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; then, in each case, the Company shall cause to be
mailed to the Holder at its last address as it shall appear upon the Warrant
Register of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to mail such notice
or any defect therein or in the mailing thereof shall not affect the validity of
the corporate action required to be specified in such notice. The Holder is
entitled to exercise this Warrant during the period commencing on the date of
such notice to the effective date of the event triggering such notice.
SECTION 4. TRANSFER OF WARRANT.
a) TRANSFERABILITY. Subject to compliance with any applicable securities
laws and the conditions set forth in Section 4(d) hereof and to the provisions
of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder
(including, without limitation, any registration rights) are transferable, in
whole or in part, upon surrender of this Warrant at the principal office of the
Company or its designated agent, together with a written assignment of this
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Warrant substantially in the form attached hereto duly executed by the Holder or
its agent or attorney and funds sufficient to pay any transfer taxes payable
upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.
b) NEW WARRANTS. This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice. All Warrants issued on transfers or
exchanges shall be dated the original Issue Date and shall be identical with
this Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) WARRANT REGISTER. The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the "WARRANT REGISTER"), in
the name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.
d) TRANSFER RESTRICTIONS. If, at the time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of this Warrant
shall not be registered pursuant to an effective registration statement under
the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such transfer (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the Securities
Act and under applicable state securities or blue sky laws, (ii) that the holder
or transferee execute and deliver to the Company an investment letter in form
and substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or
(a)(8) promulgated under the Securities Act or a "qualified institutional buyer"
as defined in Rule 144A(a) under the Securities Act.
11
SECTION 5. MISCELLANEOUS.
a) NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof as set forth in Section 2(e)(i).
b) LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
c) SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.
d) AUTHORIZED SHARES.
The Company covenants that during the period the Warrant is outstanding, it
will reserve from its authorized and unissued Common Stock a sufficient number
of shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for the Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such reasonable action as
may be necessary to assure that such Warrant Shares may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock may be listed.
The Company covenants that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant will, upon exercise
of the purchase rights represented by this Warrant, be duly authorized, validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
created by the Company in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation, amending its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
12
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
e) JURISDICTION. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) RESTRICTIONS. The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered, will have restrictions
upon resale imposed by state and federal securities laws.
g) NONWAIVER AND EXPENSES. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date. If the Company willfully and knowingly fails to comply with any provision
of this Warrant, which results in any material damages to the Holder, the
Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.
h) NOTICES. Any notice, request or other document required or permitted to
be given or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
i) LIMITATION OF LIABILITY. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
13
j) REMEDIES. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees to waive and
not to assert the defense in any action for specific performance that a remedy
at law would be adequate.
k) SUCCESSORS AND ASSIGNS. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any the Holder or holder of Warrant Shares.
l) AMENDMENT. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
m) SEVERABILITY. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.
n) HEADINGS. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************
14
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized as of the date first above indicated.
EASY ENERGY, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
15
NOTICE OF EXERCISE
To: Easy Energy, Inc.
(1) The undersigned hereby elects to purchase ________ Warrant Shares of
the Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] [if permitted] the cancellation of such number of Warrant
Shares as is necessary, in accordance with the formula set forth
in subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).
(3) Please issue a certificate or certificates representing said Warrant
Shares in the name of the undersigned or in such other name as is specified
below:
----------------------------------------
The Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:
----------------------------------------
----------------------------------------
----------------------------------------
(4) ACCREDITED INVESTOR. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity: _____________________________________________________
Signature of Authorized Signatory of Investing Entity: ________________________
Name of Authorized Signatory: _________________________________________________
Title of Authorized Signatory: ________________________________________________
Date: _________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing
Warrant and all rights evidenced thereby are hereby assigned to
_______________________________________________ whose address is
________________________________________________________________
________________________________________________________________
Dated: ______________, _______
Holder's Signature: ___________________________
Holder's Address: ___________________________
___________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
Tshuva Victor & Co'
Law Offices
Ha'yezira St 3
Belt Shaap 81h floor
Ramat Gan 52521
Israel
Tel.+972-3- 6138484
Fax.+972-3-6138585
E-mail: victor@hlnlaw.co.il
Tshuva Victor, Adv.
Akselrod Eli, Adv.
Stainherts Amir, Adv.
Kaiser Yaron, Adv.
To:
Tailor Made
Capital, Ltd.
4 Borkowits St.
Tel Aviv, 61180
Israel
Ladies and Gentlemen:
We have acted as counsel to Easy Energy, Inc., a Nevada corporation (the
"Company"), in connection with the execution and delivery by the Company of the
Securities Purchase Agreement dated as of March 10, 2008 (the "Agreement"), by
and among the Company and the purchasers identified on the signature pages
thereto (the "Purchasers"). This opinion IS given to you pursuant to Article V
of the Agreement. (CAPITALIZED TERMS NOT OTHERWISE DEFINED HEREIN ARE DEFINED AS
SET FORTH IN THE AGREEMENT.)
We have participated in the preparation and negotiation of the Agreement
and the Exhibits and Schedules thereto, and the other documents referred to
therein. We also have examined such certificates of public officials, corporate
documents and records and other certificates, opinions, agreements and
instruments and have made such other investigations as We have deemed necessary
in connection with the opinions hereinafter set forth.
Based on the foregoing and upon such investigation as we have deemed
necessary, we give you our opinion as follows:
1. The Company is a corporation duly organized, validly existing and good
standing under the laws of Nevada. The Company has all requisite power and
authority, and all material governmental licenses, authorizations, consents and
approvals, required to own and operate its pr properties and assets and to carry
on its business as now conducted and as proposed to be conducted. The Company is
duly qualified to transact business and is in good standing in each jurisdiction
in which the failure to qualify could have a Material Adverse Effect on the
Company.
2. The Company has all requisite power and authority to execute, deliver
and perform the Transaction Documents, to issue, sell and deliver the Shares,
the Warrants, and, upon exercise of the Warrants, the Warrant Shares pursuant to
the Transaction Documents and to carry out and perform it obligations under, and
to consummate the transactions contemplated by, the Transaction Documents.
3. All action on the part of the Company, its directors and its
stockholders necessary for the authorization, execution and delivery by the
Company of the Transactions Documents, the a authorization, issuance, sale and
delivery of the Shares and the Warrants pursuant to the Agreement, the issuance
and delivery the Warrant Shares and the consummation by the Company o the
transactions contemplated by the Transaction Documents has been duly taken. The
Transaction Documents have been duly and validly executed and delivered by the
Company and constitute the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with their terms, except (a) that
such enforceability may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights in general an (b) that the
remedies of specific performance and injunctive and other forms of injunctive
relief may be subject to equitable defenses.
4. After giving effect to the transactions contemplated by the Agreement,
and immediately after he Closing, the authorized capital stock of the Company
will consist of an aggregate of 1,000,000,000 shares of Common Stock, of which
89,303,717 shares will be issued and outstanding an 1 12,029,440 shares will be
reserved for issuance upon conversion of issued and outstanding options,
warrants and other derivative securities. All presently issued and outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable and free of any preemptive or similar rights, and
have been issued in compliance with applicable securities laws and regulations.
The Warrants and Shares which are being issued on the date hereof pursuant to
the Agreement have been duly authorized and validly issued and are full;' paid
and nonassessable and free of preemptive or similar rights, and have been issued
in compliance with applicable securities laws, rules and regulations. The
Warrant Shares have been duly and validly authorized and reserved for issuance,
and when issued in accordance with the exercise of the Warrants in accordance
with their respective terms will be validly issued, fully paid and
nonassessable, and free of any preemptive or similar rights. To our knowledge,
except for rights described in the Company's SB/2 effective December 17, 200,
there are no other options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire from the Company any
capital stock or other securities of the Company, or any other agreements to
issue any such securities or rights. The rights, privileges and preferences of
the Common Stock are as stated in the Company's SB/2.
5. Based in part upon the representations of the Purchasers contained in
the Agreement, the Shares, the Warrants and the Warrant Shares may be issued to
the Purchasers without registration under the Securities Act of 1933, as
amended.
2
6. The execution, delivery and performance by the Company of, and the
compliance by the company with the terms of, the Transaction Documents and the
issuance, sale and delivery of the Shares, the Draw Down Shares, the Warrants
and the Warrant Shares pursuant to the Agreement do not (a) conflict with or
result in a violation of any provision of law, rule or regulation or any rule or
regulation of any Trading Market applicable to the Company or its Subsidiaries
or of the certificate of incorporation or by-laws or other similar
organizational documents of the Company or its Subsidiaries, (b) conflict with,
result in a breach of or constitute a default (or an event which with notice or
lapse of time or both would become: a default) under, or result in or permit the
termination or modification of, any agreement, instrument, order, writ, judgment
or decree known to us to which the Company of its Subsidiaries is a party or is
subject or (c) result in the creation or imposition of any lien, claim or
encumbrance on any of the assets or properties of the Company or its
Subsidiaries.
7. To our knowledge, there is no claim, action, suit, proceeding,
arbitration, Investigation or inquiry, pending or threatened, before any court
or governmental or administrative body or agency, or any private arbitration
tribunal, against the Company or its Subsidiaries, or an of its officers,
directors or employees (in connection with the discharge Of their duties as
officers, directors and employees), or affecting any of its properties or
assets.
8. In connection with the valid execution, delivery and performance by the
Company of the Transaction Documents, or the offer, sale, issuance or delivery
of the Shares, the Draw Down Shares, the Warrants and the Warrant Shares or the
consummation of the transactions contemplated thereby, no consent, license,
permit, waiver, approval or authorization of, or designation, declaration,
registration or filing with, any court, governmental or regulatory authority, or
self-regulatory organization, is required.
9. The Company is not, and after the consummation of the transactions
Contemplated by the Transaction Documents shall not be, an Investment Company
within the meaning of the Investment Company Act of 1940, as amended.
/s/ Victor Tshuva
-----------------------------
Victor Tshuva, Adv.
3
ESYE
Shares Warrants
------ --------
Total shares according to the SB/2 80,333,190 17/12/2007
Meir Duke 4,285,714 16/01/2008
Victor Tshuva 300,000 1,000,000 03/03/2008
Meitav Group 3,676,480 11,029,440 28/02/2008
Anatoli Abramov 208,333 28/02/2008
Moshe Buskila 500,000 15/02/2008
Total as of March 10, 2008 89,303,717 12,029,440 10/03/2008
EXHIBIT D
DRAW DOWN NOTICE/COMPLIANCE CERTIFICATE
EASY ENERGY INC.
The undersigned hereby certifies, with respect to shares of Common Stock of
Easy Energy, Inc. (the "Company") issuable in connection with this Draw Down
Notice and Compliance Certificate dated _________ (the "Notice"), delivered
pursuant to the Securities Purchase Agreement dated as March __, 2008 (the
"Agreement"), as follows:
1. The undersigned is the duly appointed Chief Executive Officer or Chief
Financial Officer of the Company.
2. Except as set forth on the schedules attached hereto, the
representations and warranties of the Company set forth in the Agreement are
true and correct in all material respects as though made on and as of the date
hereof, except for representations and warranties are expressly made as of a
particular date.
3. The Company has performed in all material respects all covenants and
agreements and conditions required under the Agreement to be performed by the
Company on or prior to the date of this Draw Down Notice.
4. The Investment Amount is $___________.
The undersigned has executed this Certificate this ____ day of ________,
_____.
EASY ENERGY, INC.
By:
------------------------------------
Name:
Title: