EXHIBIT 10.1
STRATEGIC ALLIANCE
SHARE PURCHASE AGREEMENT
THIS STRATEGIC ALLIANCE SHARE PURCHASE AGREEMENT (the "AGREEMENT") is made
and entered into as of May 9, 2007, by and among I/OMagic Corporation, a Nevada
corporation, with headquarters located at 4 Marconi, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(the "COMPANY"), and Jiangxi Greatsource Display Tech. Co. Ltd. (the
"INVESTOR").
WHEREAS:
A. The Investor specializes in the research and development and
commercialization of liquid crystal on silicon ("LCOS") display technology and
desires to make an investment in the Company in connection with the joint
development, manufacturing and marketing of LCOS and other display products in
the United States.
B. The Company is a provider of brand name magnetic and optical data
storage products sold through computer, consumer electronics and office supply
superstores and other retailers throughout North America.
C. The Company and the Investor is executing and delivering this Agreement
in reliance upon the exemptions from securities registration afforded by Rule
506 of Regulation D ("REGULATION D") or Regulation S as promulgated by the
United States Shares and Exchange Commission (the "SEC") under the Securities
Act of 1933, as amended (the "1933 ACT").
D. The Investor wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement, 21,750,000 shares
(collectively, the "SHARES") of the Company's common stock, $0.001 par value per
share (the "Common Stock").
NOW, THEREFORE, the Company and the Investor hereby agree as follows:
1. PURCHASE AND SALE OF THE SHARES.
(a) Purchase of the Shares.
(i) Purchase. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 5 and 6 below, the Company shall issue and sell
to the Investor, and the Investor shall purchase from the Company, a portion of
the Shares at such times (each, a "CLOSING") and in such amounts as set forth in
the Closing Dates and Payment Schedule (the "PURCHASE SCHEDULE") attached hereto
as Exhibit A.
(ii) Closings. The date and time of the Closings (each, a
"CLOSING DATE," and collectively, the "CLOSING DATES") shall be 10:00 a.m., Los
Angeles Time, on September 30, 2007 (the "FIRST CLOSING"), on any date between
March 31, 2008 and May 31, 2008, including March 31, 2008 and May 31, 2008 (the
"SECOND CLOSING") and MAY 31, 2008 (the "THIRD CLOSING") (or such other date as
is mutually agreed to by the Company and the Investor) at the offices of
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(iii) Purchase Price. The aggregate purchase price for the Shares
to be purchased by the Investor at the Closings (the "PURCHASE PRICE") shall be
US$95,000,000, which Purchase Price shall be payable as follows: (A)
US$24,000,000 at the First Closing, (B) US$41,000,000 at the Second Closing and
(C) US$30,000,000 at the Third Closing.
(b) Form of Payment. On each Closing Date, (i) the Investor shall pay
that portion of the Purchase Price to the Company for the Common Stock to be
issued and sold to the Investor at such Closing as set forth in Section
1(a)(iii) and in the Purchase Schedule, by wire transfer of immediately
available funds for in accordance with the Company's written wire transfer
instructions and (ii) the Company shall deliver to the Investor a stock
certificate registered in the name of the Investor or its designee(s), each of
whom shall be an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D, representing that number of shares of Common Stock which the
Investor is then purchasing at such Closing duly executed on behalf of the
Company and registered in the name of the Investor.
2. INVESTOR'S REPRESENTATIONS AND WARRANTIES.
The Investor represents and warrants that:
(a) No Public Sale or Distribution. The Investor is acquiring the
Shares for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, the Investor does not agree to hold any of
the Shares for any minimum or other specific term and reserves the right to
dispose of the Shares at any time in accordance with, or pursuant to a
registration statement or an exemption under the 1933 Act. The Investor is
acquiring the Shares hereunder in the ordinary course of its business. The
Investor does not presently have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Shares.
(b) Accredited Investor Status. The Investor is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. The Investor understands that the Shares
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and the
Investor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the Shares.
(d) Information. The Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares which
have been requested by the Investor. The Investor and its advisors, if any, have
been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by the Investor
or its advisors, if any, or its representatives shall modify, amend or affect
the Investor's right to rely on the Company's representations and warranties
contained herein. The Investor understands that its investment in the Shares
involves a high degree of risk. The Investor has sought such accounting, legal
and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Shares.
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(e) No Governmental Review. The Investor understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Shares or the
fairness or suitability of the investment in the Shares nor have such
authorities passed upon or endorsed the merits of the offering of the Shares.
(f) Transfer or Resale. The Investor understands that except as
provided in the Registration Rights Agreement (as defined below): (i) the Shares
have not been and are not being registered under the 1933 Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered, or (B) the Investor provides the Company
with reasonable assurance that such Shares can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor
rule thereto) (collectively, "RULE 144"); (ii) any sale of the Shares made in
reliance on Rule 144 may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of the Shares under
circumstances in which the seller (or the Person (as defined in Section 3(s))
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the ▇▇▇▇ ▇▇▇) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other Person is under any obligation to register the
Shares under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder.
(g) Legends. The Investor understands that the certificates or other
instruments representing the Shares, until such time as the resale of the Shares
have been registered under the 1933 Act, except as set forth below, shall bear
any legend as required by the "blue sky" laws of any state and a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXCEPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
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The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Shares upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such Shares
are registered for resale under the 1933 Act, (ii) in connection with a sale,
assignment or other transfer, such holder provides the Company with an opinion
of counsel, in a generally acceptable form, to the effect that such sale,
assignment or transfer of the Shares may be made without registration under the
applicable requirements of the 1933 Act, or (iii) such holder provides the
Company with reasonable assurance that the Shares can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A.
(h) Validity; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and shall
constitute the legal, valid and binding obligations of the Investor enforceable
against the Investor in accordance with its terms, except as such enforceability
may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.
(i) No Conflicts. The execution, delivery and performance by the
Investor of this Agreement and the consummation by the Investor of the
transactions contemplated hereby will not (i) result in a violation of the
organizational documents of the Investor or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Investor is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws) applicable to the Investor, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Investor to perform its obligations
hereunder.
(j) Residency. The Investor is not a resident of the United States of
America.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Investor that:
(a) Organization and Qualification. The Company and its "SUBSIDIARIES"
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns capital stock or holds an equity or similar
interest) are entities duly organized and validly existing in good standing
under the laws of the jurisdiction in which they are formed, and have the
requisite power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign entity to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT"
means any material adverse effect on the business, properties, assets,
operations, results of operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole, or on the
transactions contemplated hereby and the other Transaction Documents or by the
agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below). The Company has
no Subsidiaries except as set forth on Schedule 3(a).
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(b) Authorization; Enforcement; Validity. The Company has the
requisite power and authority to enter into and perform its obligations under
this Agreement and each of the other agreements entered into or to be entered
into by the parties hereto in connection with the transactions contemplated by
this Agreement (collectively, the "TRANSACTION DOCUMENTS") and to issue the
Shares in accordance with the terms hereof and thereof. The execution and
delivery of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Shares, have been or will be on or prior to the
Closing duly authorized by the Company's Board of Directors and no further
filing, consent, or authorization is required by the Company, its Board of
Directors or its stockholders. This Agreement and the other Transaction
Documents have been or shall have been on or prior to each Closing duly executed
and delivered by the Company, and shall constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
(c) Issuance of Shares. The issuance of the Shares have been duly
authorized and as of each Closing the applicable portion of the Shares shall be
free from all taxes, liens and charges with respect to the issuance thereof The
offer and issuance by the Company of the Shares in accordance with this
Agreement is exempt from registration under the 1933 Act.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Shares) will not (i) result in a violation of the Articles of
Incorporation (as defined in Section 3(r)) of the Company or any of its
Subsidiaries, any capital stock of the Company or Bylaws (as defined in Section
3(r)) of the Company or any of its Subsidiaries or (ii) except as set forth on
Schedule 3(d), conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the OTC Bulletin Board
(the "PRINCIPAL MARKET")) applicable to the Company or any of its Subsidiaries
or by which any property or asset of the Company or any of its Subsidiaries is
bound or affected.
(e) Consents. Except as set forth on Schedule 3(e), the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms hereof or thereof. Except
as set forth in Section 5 and on Schedule 3(e), all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the Closing Date, and the Company and its Subsidiaries are unaware of any facts
or circumstances which might prevent the Company from obtaining or effecting any
of the registration, application or filings pursuant to the preceding sentence.
Except as set forth on Schedule 3(e), the Company is not in violation of the
listing requirements of the Principal Market and has no knowledge of any facts
which would reasonably lead to delisting or suspension of the Common Stock in
the foreseeable future.
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(f) Acknowledgment Regarding Investor's Purchase of Shares. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby and that no Investor is (i) an
officer or director of the Company, (ii) an "affiliate" of the Company (as
defined in Rule 144) or (iii) to the knowledge of the Company, a "beneficial
owner" of more than 10% of the shares of Common Stock (as defined for purposes
of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "1934
ACT")). The Company further acknowledges that the Investor is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given by the Investor or any of its representatives
or agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to the Investor's purchase
of the Shares. The Company further represents to the Investor that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
(g) No General Solicitation; Placement Agent's Fees. Neither the
Company, nor any of its affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Shares. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or brokers' commissions (other than for
persons engaged by any Investor or its investment advisor) relating to or
arising out of the transactions contemplated hereby. The Company shall pay, and
hold the Investor harmless against, any liability, loss or expense (including,
without limitation, attorney's fees and out-of-pocket expenses) arising in
connection with any such claim. The Company has not engaged any placement agent
or other agent in connection with the sale of the Shares.
(h) No Integrated Offering. None of the Company, its Subsidiaries, any
of their affiliates, and any Person acting on 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 require registration of any of
the Shares under the 1933 Act or cause this offering of the Shares to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated. None of the
Company, its Subsidiaries, their affiliates and any Person acting on their
behalf will take any action or steps referred to in the preceding sentence that
would require registration of any of the Shares under the 1933 Act or cause the
offering of the Shares to be integrated with other offerings.
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(i) [Intentionally Omitted.]
(j) Application of Takeover Protections; Rights Agreement. 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 Articles of Incorporation or the laws of the
jurisdiction of its formation which is or could become applicable to the
Investor as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Shares and the
Investor's ownership of the Shares. The Company has not adopted a stockholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
(k) SEC Documents; Financial Statements. Except as disclosed in
Schedule 3(k), during the two (2) years prior to the date hereof, the Company
has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements, notes and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the "SEC DOCUMENTS"). The Company has delivered to the Investor or their
respective representatives true, correct and complete copies of the SEC
Documents not available on the ▇▇▇▇▇ system. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and except as set forth on Schedule 3(k), none
of the SEC Documents, at the time they were filed with the SEC, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. As of
their respective dates, except as set forth on Schedule 3(k), the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Except as set forth on
Schedule 3(k), Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Investor which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading.
(l) Absence of Certain Changes. Except as disclosed in Schedule 3(l),
since December 31, 2006, there has been no material adverse change and no
material adverse development in the business, properties, operations, condition
(financial or otherwise), results of operations or prospects of the Company or
its Subsidiaries. Except as disclosed in Schedule 3(l), since December 31, 2006,
the Company has not (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $100,000 outside of the ordinary
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course of business or (iii) had capital expenditures, individually or in the
aggregate, in excess of $100,000. The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company is not as of the date hereof,
and after giving effect to the transactions contemplated hereby to occur at the
Closing, will not be Insolvent (as defined below). For purposes of this Section
3(l), "INSOLVENT" means (i) the present fair saleable value of the Company's
assets is less than the amount required to pay the Company's total Indebtedness
(as defined in Section 3(s)), (ii) the Company is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) the Company has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.
(m) No Undisclosed Events, Liabilities, Developments or Circumstances.
No event, liability, development or circumstance has occurred or exists, or is
contemplated to occur with respect to the Company, its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form S-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
(n) Conduct of Business; Regulatory Permits. Neither the Company nor
its Subsidiaries is in violation of any term of or in default under its Articles
of Incorporation or Bylaws or their organizational charter or certificate of
incorporation or bylaws, respectively. Neither the Company nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Company or its Subsidiaries, and
neither the Company nor any of its Subsidiaries will conduct its business in
violation of any of the foregoing, except for possible violations which would
not, individually or in the aggregate, have a Material Adverse Effect. Since
December 31, 2006, except as set forth in Schedule 3(n), (i) the Common Stock
has been designated for quotation on the Principal Market, (ii) trading in the
Common Stock has not been suspended by the SEC or the Principal Market and (iii)
the Company has received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or delisting of the Common Stock from
the Principal Market. The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate regulatory authorities
necessary to conduct their respective businesses, except where the failure to
possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
(o) Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor to the Company's knowledge, any director, officer, agent,
employee or other Person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the Company
(i) used any corporate funds for any unlawful contribution, gift, entertainment
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or other unlawful expenses relating to political activity; (ii) made any direct
or indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
(p) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. The Company is in compliance with any and all
applicable requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof.
(q) Transactions With Affiliates. Except as set forth in the SEC
Documents filed at least ten days prior to the date hereof and other than the
grant of stock options disclosed on Schedule 3(q), none of the officers,
directors or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for ordinary course
services as employees, officers or 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 such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
(r) Equity Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 100,000,000 shares of Common Stock,
of which as of the date hereof, 4,540,292 are issued and outstanding, 354,850
shares are reserved for issuance pursuant to the Company's stock option and
purchase plans and pursuant to securities (other than the Common Stock)
exercisable or exchangeable for, or convertible into, shares of Common Stock and
(ii) 10,000,000 shares of preferred stock, par value $0.001 per share, of which
as of the date hereof, none is issued and outstanding. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable. Except as disclosed in Schedule 3(r): (i) none of the
Company's share capital is subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company; (ii)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any share capital of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional share capital of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any share capital of the
Company or any of its Subsidiaries; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing Indebtedness of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or may become
bound; (iv) there are no financing statements securing obligations in any
material amounts, either singly or in the aggregate, filed in connection with
the Company or any of its Subsidiaries; (v) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except the
Registration Rights Agreement); (vi) there are no outstanding securities or
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instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Shares; (viii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement; and (ix)
the Company and its Subsidiaries have no liabilities or obligations required to
be disclosed in the SEC Documents but not so disclosed in the SEC Documents,
other than those incurred in the ordinary course of the Company's or its
Subsidiaries' respective businesses and which, individually or in the aggregate,
do not or would not have a Material Adverse Effect. The Company has furnished to
the Investor true, correct and complete copies of the Company's Articles of
Incorporation, as amended and as in effect on the date hereof (the "ARTICLES OF
INCORPORATION"), and the Company's Bylaws, as amended and as in effect on the
date hereof (the "BYLAWS"), and the terms of all securities convertible into, or
exercisable or exchangeable for, shares of Common Stock and the material rights
of the holders thereof in respect thereto.
(s) Indebtedness and Other Contracts. Except as disclosed in Schedule
3(s), neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument would result in a Material
Adverse Effect, (iii) is in violation of any term of or in default under any
contract, agreement or instrument relating to any Indebtedness, except where
such violations and defaults would not result, individually or in the aggregate,
in a Material Adverse Effect, or (iv) is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which, in the
judgment of the Company's officers, has or is expected to have a Material
Adverse Effect. Schedule 3(s) provides a detailed description of the material
terms of any such outstanding Indebtedness. For purposes of this Agreement: (x)
"INDEBTEDNESS" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
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owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "CONTINGENT OBLIGATION" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
"PERSON" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(t) Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by the Principal Market, any court, public
board, government agency, self-regulatory organization or body pending or, to
the knowledge of the Company, threatened against or affecting the Company, the
Shares or any of the Company's Subsidiaries or any of the Company's or its
Subsidiaries' officers or directors, except as set forth in Schedule 3(t).
(u) Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
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 at a cost that would not have a Material Adverse Effect.
(v) Employee Relations.
(i) Neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or employs any member of a union. The
Company and its Subsidiaries believe that their relations with their employees
are good. No executive officer of the Company or any of its Subsidiaries (as
defined in Rule 501(f) of the ▇▇▇▇ ▇▇▇) has notified the Company or any such
Subsidiary that such officer intends to leave the Company or any such Subsidiary
or otherwise terminate such officer's employment with the Company or any such
Subsidiary. No executive officer of the Company or any of its Subsidiaries, to
the knowledge of the Company or any such Subsidiary, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any such Subsidiaries to any liability with respect to
any of the foregoing matters.
(ii) The Company and its Subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
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(w) Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as do not materially affect the value of such property, do
not interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries and as set forth in Schedule 3(w). Any real
property and facilities held under lease by the Company and any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.
(x) Intellectual Property Rights. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights
("INTELLECTUAL PROPERTY RIGHTS") necessary to conduct their respective
businesses as now conducted. Except as set forth in Schedule 3(x), none of the
Company's Intellectual Property Rights have expired or terminated, or are
expected to expire or terminate, within three years from the date of this
Agreement. The Company does not have any knowledge of any infringement by the
Company or its Subsidiaries of Intellectual Property Rights of others. There is
no claim, action or proceeding being made or brought, or to the knowledge of the
Company, being threatened, against the Company or its Subsidiaries regarding its
Intellectual Property Rights. The Company is unaware of any facts or
circumstances which might give rise to any of the foregoing infringements or
claims, actions or proceedings. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties.
(y) Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. The term "ENVIRONMENTAL LAWS" means
all federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
- 12 -
(z) Subsidiary Rights. Except as set forth in Schedule 3(z), the
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
(aa) Tax Status. The Company and each of its Subsidiaries (i) has made
or filed all foreign, federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
(bb) Internal Accounting Controls. The Company and each of its
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 generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference.
(cc) Form SB-2 Eligibility. As of the Closing, the Company will be
eligible to register the Shares for resale by the Investor using Form SB-2
promulgated under the 1933 Act.
(dd) Manipulation of Price. The Company has not, and to its knowledge
no one acting on its behalf has 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
Shares.
(ee) Disclosure. All disclosure provided to the Investor regarding the
Company, its business and the transactions contemplated hereby, including the
Schedules to this Agreement, furnished by or on behalf of the Company is true
and correct and does not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each press release issued by the Company during the twelve (12)
months preceding the date of this Agreement did not at the time of release
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
therein, in the light of the circumstances under which they are made, not
misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.
- 13 -
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 5
and 6 of this Agreement.
(b) Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Shares as required under Regulation D and to provide a copy
thereof to the Investor promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Shares for sale to the Investor at the Closing pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States (or
to obtain an exemption from such qualification), and shall provide evidence of
any such action so taken to the Investor on or prior to the Closing Date. The
Company shall make all filings and reports relating to the offer and sale of the
Shares required under applicable securities or "Blue Sky" laws of the states of
the United States following the Closing Date.
(c) Reporting Status. Until the date on which the Investors (as
defined in the Registration Rights Agreement) shall have sold all the Shares
(the "REPORTING PERIOD"), the Company shall file all reports required to be
filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate
its status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would otherwise permit such
termination.
(d) Use of Proceeds. The Company will use the proceeds from the sale
of the Shares as set forth on Schedule 4(d).
(e) Financial Information. The Company agrees to send the following to
the Investor during the Reporting Period (i) unless the following are filed with
the SEC through ▇▇▇▇▇ and are available to the public through the ▇▇▇▇▇ system,
within one (1) Business Day after the filing thereof with the SEC, a copy of its
Annual Reports on Form 10-K or 10-KSB, any interim reports or any consolidated
balance sheets, income statements, stockholders' equity statements and/or cash
flow statements for any period other than annual, any Current Reports on Form
8-K and any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act, (ii) on the same day as the release thereof, facsimile
or e-mailed copies of all press releases issued by the Company or any of its
Subsidiaries, and (iii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.
(f) Listing. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which the Common Stock is then listed (subject to official notice of
issuance) and shall maintain such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents. The Company
shall maintain the Common Stock's authorization for quotation on the Principal
Market. Neither the Company nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Stock on the Principal Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(f).
- 14 -
(g) Fees. Each party shall be responsible for the payment of any
placement agent's fees, financial advisory fees, or broker's commissions
incurred pursuant to a written agreement with any such placement agent, advisor
or broker and relating to or arising out of the transactions contemplated
hereby. Each party shall pay, and hold the other party harmless against, any
liability, loss or expense (including, without limitation, reasonable attorney's
fees and out-of-pocket expenses) arising in connection with any claim relating
to any such payment. Except as otherwise set forth in the Transaction Documents,
each party to this Agreement shall bear its own expenses in connection with the
sale of the Shares to the Investor.
(h) Pledge of Shares. The Company acknowledges and agrees that the
Shares may be pledged by an Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the Shares.
The pledge of Shares shall not be deemed to be a transfer, sale or assignment of
the Shares hereunder, and no Investor effecting a pledge of Shares shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(f) hereof; provided that an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(f) hereof in order to effect a sale, transfer or assignment of Shares
to such pledgee. The Company hereby agrees to execute and deliver such
documentation as a pledgee of the Shares may reasonably request in connection
with a pledge of the Shares to such pledgee by an Investor.
(i) Restriction on Redemption and Cash Dividends. So long as any
Shares are held by the Investor, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, the Common Stock
without the prior express written consent of the Investor.
(j) [Intentionally Omitted.]
(k) Corporate Existence. So long as any Investor beneficially owns any
Shares, the Company shall not be party to any Fundamental Transaction unless the
Company is in compliance with the applicable provisions governing Fundamental
Transactions. "FUNDAMENTAL TRANSACTION" means that the Company shall, directly
or indirectly, in one or more related transactions, (i) consolidate or merge
with or into (whether or not the Company is the surviving corporation) another
Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company to another Person,
or (iii) allow another Person to make a purchase, tender or exchange offer that
is accepted by the holders of more than the 50% of either the outstanding shares
of Common Stock (not including any shares of Common Stock held by the Person or
Persons making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer), or (iv) consummate a
stock purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires more than
the 50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
purchase agreement or other business combination).
- 15 -
(l) Reservation of Shares. The Company shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, after
the date hereof, 100% of the number of Shares issuable hereunder.
(m) Conduct of Business. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
(n) [Intentionally Omitted.]
(o) Employee Options. For as long as the Investor holds any of the
Shares, the Company may not, without first obtaining the written consent of the
Investor, issue any of the Company's securities to its employees other than (i)
employee stock options to purchase, in the aggregate, 3,000,000 shares of the
Company's Common Stock with an exercise price equal to US$3.00 per share and
with an exercise period of 5 years (the "ALLOWED EMPLOYEE OPTIONS"), and (ii)
pursuant to the employment agreement with ▇▇. ▇▇▇▇▇▇▇ described in Section
4(p)(iii) below. The Allowed Employee Options may be issued in the sole
discretion of the Company's board of directors or its compensation committee.
(p) Additional Transaction Documents. Between the date hereof and June
9, 2007, the parties agree to negotiate the terms and conditions of the
following agreements (collectively, the "ADDITIONAL TRANSACTION DOCUMENTS"),
each of which shall be deemed a "TRANSACTION DOCUMENT," in each case in form and
substance satisfactory, in their sole discretion, to each of the Company and the
Investor:
(i) a registration rights agreement to register the Shares (the
"REGISTRATION RIGHTS AGREEMENT");
(ii) subject to the consent of the Company's Board of Directors,
an employment agreement between the Company and ▇▇. ▇▇▇▇▇▇▇, the Company's
President and Chief Executive Officer, which employment agreement shall provide
for, among other things, the opportunity for ▇▇. ▇▇▇▇▇▇▇ to receive a bonus in
connection with the successful negotiation of this Agreement, which bonus shall
be payable in the form of shares of Common Stock at each Closing Date as
follows: (A) at the First Closing, such number of shares of Common Stock when
combined with the number of shares of Common Stock owned by ▇▇. ▇▇▇▇▇▇▇ prior to
such issuance will result in ▇▇. ▇▇▇▇▇▇▇ having a direct ownership interest in
the Company equal to 25.76% of the then outstanding shares of Common Stock
calculated on a fully-diluted basis, (B) at the Second Closing, such number of
shares of Common Stock when combined with the number of shares of Common Stock
owned by ▇▇. ▇▇▇▇▇▇▇ prior to such issuance will result in ▇▇. ▇▇▇▇▇▇▇ having a
direct ownership interest in the Company equal to 16.60% of the then outstanding
shares of Common Stock calculated on a fully-diluted basis, and (C) at the Third
Closing, such number of shares of Common Stock when combined with the number of
shares of Common Stock owned by ▇▇. ▇▇▇▇▇▇▇ prior to such issuance will result
in ▇▇. ▇▇▇▇▇▇▇ having a direct ownership interest in the Company equal to 990%
of the then outstanding shares of Common Stock calculated on a fully-diluted
basis(collectively, the "▇▇▇▇▇▇▇ Stock"). The ▇▇▇▇▇▇▇ Stock shall be registered
on Form S-8;
- 16 -
(iii) a voting agreement between the Investor and the Company
relating to, among other things, future amendments to this Agreement; and
(iv) such other agreements as the parties deem necessary and
appropriate in connection with the transactions contemplated by this Agreement.
(q) Additional Issuances. Except with respect to the Allowed Employee
Options, prior to the date of the First Closing (as described in Exhibit A), the
Company shall not, in any manner, issue or sell any rights, warrants or options
to subscribe for or purchase Common Stock or directly or indirectly convertible
into or exchangeable or exercisable for Common Stock without the prior written
consent of the Investor.
(r) Appointment of Directors. On June 10, 2007, the Company shall the
appointment to its Board of Directors a nominee of the Investor; provided,
however, that if this Agreement is amended to increase the time by which either
party may terminate this Agreement because of its due diligence investigation of
the other party pursuant to the first sentence of Section 8 below, then the
obligation of the Company to appoint a nominee of the Investor to the Company's
Board of Directors shall arise on the first day after the last day upon which
either party may terminate this Agreement pursuant to the terms contained in the
first sentence of Section 8 below. Upon the First Closing, the Company shall
cause to appoint to its Board of Directors such number of nominees of the
Investor equal to two-thirds of the then total number of directors comprising
the Board of Directors, and shall obtain all such consents as required to
effectuate the intent of this sentence.
(s) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company ("DTC"), registered in the name of the Investor or its
respective nominee(s), for the Shares issued at each Closing in the form of
Exhibit B attached hereto (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 4(t), and stop transfer instructions to
give effect to Section 2(g) hereof, will be given by the Company to its transfer
agent, and that the Shares shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this Agreement and
the other Transaction Documents. If the Investor effects a sale, assignment or
transfer of the Shares in accordance with Section 2(f), the Company shall permit
the transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such
name and in such denominations as specified by the Investor to effect such sale,
transfer or assignment.
(t) HSR Act Filing. To the extent the transactions covered by this
Agreement require the Company and the Investor to make a filing under the
▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Company and the Investor shall (i) file or cause to be filed, as
promptly as practicable but in no event later than the tenth (10th) business day
after the execution and delivery of this Agreement, with the Federal Trade
- 17 -
Commission and the United States Department of Justice, all reports and other
documents required to be filed by such party under the HSR Act concerning the
transactions contemplated hereby and (ii) promptly comply with or cause to be
complied with any requests by the Federal Trade Commission or the United States
Department of Justice for additional information concerning such transactions,
in each case so that the initial thirty (30) day waiting period applicable to
this Agreement and the transactions contemplated hereby under the HSR Act shall
expire as soon as practicable after the execution and delivery of this
Agreement. The Company and the Purchaser each agree to request, and to cooperate
with the other party in requesting, early termination of any applicable waiting
period under the HSR Act.
(u) Delivery of Disclosure Schedules. The Schedules relating to this
Agreement shall be delivered as soon as practicable after the execution of this
Agreement by the parties hereto and, in any event, no later than June 9, 2007.
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
(a) Closing Dates. The obligation of the Company hereunder to issue
and sell that portion of the Shares to the Investor at each Closing as set forth
in Exhibit A is subject to the satisfaction, at or before each applicable
Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing the Investor with prior written
notice thereof:
(i) The Investor shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
(ii) The Company, the Investor and ▇▇▇▇ ▇▇▇▇▇▇▇ shall have
successfully negotiated the terms and conditions of the Additional Transaction
Documents to which it or he is a party and the Investor and ▇▇. ▇▇▇▇▇▇▇ shall
have executed each of the Additional Transaction Documents to which it or he is
a party and delivered the same to the Company.
(iii) The Investor shall have delivered to the Company that
portion of the Purchase Price for the portion of Shares being purchased by the
Investor at the applicable Closing by wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.
(iv) The representations and warranties of the Investor shall be
true and correct in all material respects as of the date when made and as of
each Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Investor shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Investor at or prior to each Closing Date.
(v) The Company shall have obtained any and all consents,
waivers, approvals or authorizations, with or by any governmental body and all
consents, waivers, approvals or authorizations of any other Person required for
the valid execution of this Agreement and each of the other Transaction
Documents and for the consummation of the transactions contemplated hereby and
thereby, and the purchase and payment of the Shares at the Closing Dates on the
terms and conditions as provided herein shall not violate any law applicable to
the Company.
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6. CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE.
(a) Closing Dates. The obligation of the Investor hereunder to
purchase that portion of the Shares at each Closing as set forth in Exhibit A is
subject to the satisfaction, at or before the First Closing, of each of the
following conditions, provided that these conditions are for the Investor's sole
benefit and may be waived by the Investor at any time in its sole discretion by
providing the Company with prior written notice thereof, and provided further,
that the conditions of set forth in Section 6(a)(iii)(B), (ix) and (x) shall be
applicable to all Closings:
(i) The Investor shall have obtained certain governmental
approvals in the People's Republic of China (the "PRC") to secure the funds
necessary to purchase all of the Shares.
(ii) Any waiting period under the HSR Act applicable to the
transactions contemplated hereby, shall have expired or been terminated.
(iii) The Company shall have executed and delivered to the
Investor (A) each of the Transaction Documents, and (B) stock certificates
representing that portion of the Shares being purchased by the Investor at such
Closing pursuant to this Agreement.
(iv) The Company and the Investor shall have successfully
negotiated the terms and conditions of the Additional Transaction Documents and
the Company shall have executed the Additional Transaction Documents to which it
is a party and delivered the same to the Investor.
(v) The Investor shall have received the opinion of ▇▇▇▇▇ &
▇▇▇▇▇▇, LLP, the Company's outside counsel, dated as of the First Closing, in
form and substance mutually agreed upon the parties hereto.
(vi) The Company shall have delivered to the Investor a copy of
the Irrevocable Transfer Agent Instructions, in the form of Exhibit B attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(vii) The Company shall have delivered to the Investor a
certificate evidencing the formation and good standing of the Company and each
of its Subsidiaries in such entity's jurisdiction of formation issued by the
Secretary of State (or comparable office) of such jurisdiction, as of a date
within 10 days of the First Closing.
(viii) The Company shall have delivered to the Investor a
certificate evidencing the Company's qualification as a foreign corporation and
good standing issued by the Secretary of State (or comparable office) of each
jurisdiction in which the Company conducts business, as of a date within 10 days
of the First Closing.
- 19 -
(ix) The Company shall have delivered to the Investor a certified
copy of the Articles of Incorporation as certified by the Secretary of State of
the State of Nevada within ten (10) days of the First Closing.
(x) The Company shall have delivered to the Investor a
certificate, executed by the Secretary of the Company and dated as of the First
Closing, as to (i) the resolutions consistent with Section 3(b) as adopted by
the Company's Board of Directors in a form reasonably acceptable to the
Investor, (ii) the Articles of Incorporation and (iii) the Bylaws, each as in
effect at each Closing, in form and substance mutually agreed upon the parties
hereto.
(xi) The representations and warranties of the Company shall be
true and correct as of the date when made and as of each Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied in
all respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to each Closing Date. Such Investor shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
each Closing Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Investor.
(xii) The Company shall have delivered to the Investor a letter
from the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of each Closing Date.
(xiii) The Common Stock (I) shall be designated for quotation or
listed on the Principal Market and (II) shall not have been suspended, as of the
First Closing, by the SEC or the Principal Market from trading on the Principal
Market nor shall suspension by the SEC or the Principal Market have been
threatened, as of the Closing Date, either (A) in writing by the SEC or the
Principal Market or (B) by falling below the minimum listing maintenance
requirements of the Principal Market.
(xiv) All reports, including, but not limited to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2006, which
Annual Report shall contain certain restated financial statements, including
without limitations those relating to the Company's fiscal years ended December
31, 2005 and 2004, that the Company is obligated to file under the Shares
Exchange Act of 1934, as amended, shall have been filed. The "E" modifier
appended to the Company's trading symbol as quoted on the Principal Market shall
have been removed.
(xv) The Company shall have obtained all governmental, regulatory
or third party consents and approvals, if any, necessary for the sale of the
Shares.
(xvi) The Company shall have delivered to the Investor such other
documents relating to the transactions contemplated by this Agreement as the
Investor or its counsel may reasonably request, including, but not limited to
the Company's most recent business plan.
7. TRADE CREDIT FACILITY. In furtherance of the strategic alliance
between the Company and the Investor pursuant to this Agreement, the Investor
hereby provides the Company with a trade credit facility (the "CREDIT FACILITY")
upon the terms and conditions set forth in this Section 7.
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(a) The Credit. The Investor hereby extends to the Company, pursuant
to PRC banking approval, the Credit Facility in the aggregate amount not to
exceed US$15,000,000. The Credit Facility shall terminate on date of the Third
Closing.
(b) Use of the Credit. The Company agrees that the Credit Facility may
be used in connection with purchases by the Company of products (collectively,
the "PRODUCTS") from any supplier to the Company including the Investor. The
aggregate amount available to be drawn under the Credit Facility shall be
reduced, dollar for dollar, by the aggregate amount of unpaid invoices for the
Products.
(c) Payment Terms. For each purchase of the Products in reliance on
the Credit Facility, the Company shall promptly comply with payment terms equal
to net 75 days for each such purchase.
8. TERMINATION. Either party may terminate this Agreement on or before
June 8, 2007 based upon the results of such party's due diligence investigation
of the other party. In the event that the Investor fails to obtain PRC
governmental approval as required by Section 6(a)(i) on or prior to August 31,
2007, the Company may terminate this Agreement immediately. In the event that
the First Closing shall not have occurred on or before September 30, 2007 due to
the Company's or the Investor's failure to satisfy the conditions set forth in
Sections 5 and 6, respectively, (and the nonbreaching party's failure to waive
such unsatisfied condition(s)), the non-breaching party shall have the option to
terminate this Agreement at the close of business on such date without liability
of the non-breaching party to the breaching party. The foregoing
notwithstanding, if this Agreement is terminated pursuant to this Section 8, the
obligations of each party pursuant to Section 4(g) above shall remain.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of California, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of California or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of California.
Each party hereby irrevocably submits to the exclusive jurisdiction of the state
and federal courts sitting in Los Angeles, California, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. 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 to such party at the
address for such 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 manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY.
- 21 -
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which 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; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement and the other
Transaction Documents supersede all other prior oral or written agreements
between the Investor, the Company, their Affiliates and Persons acting on their
behalf with respect to the matters discussed herein and therein, and this
Agreement, the other Transaction Documents and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the holders of at least a majority of the aggregate number of
Registrable Securities issued and issuable hereunder, and any amendment to this
Agreement made in conformity with the provisions of this Section 9(e) shall be
binding on all Investor and holders of Shares, as applicable. No provision
hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the applicable Shares
then outstanding. No consideration shall be offered or paid to any Person to
amend or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration also is offered to all of
the parties to the Transaction Documents, or holders of Shares, as the case may
be. The Company has not, directly or indirectly, made any agreements with any
Investor relating to the terms or conditions of the transactions contemplated by
the Transaction Documents except as set forth in the Transaction Documents.
Without limiting the foregoing, the Company confirms that, except as set forth
in this Agreement, no Investor has made any commitment or promise or has any
other obligation to provide any financing to the Company or otherwise.
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
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If to the Company:
I/OMagic Corporation
▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to the Investor:
(TM)Jiangxi Greatsource Display Tech. Co., Ltd.
▇▇▇▇ ▇▇▇ Avenue
Nanchang Economic & Technological Development Zone
Nanchang,
Jiangxi, People's Republic of China
Telephone: ▇▇-▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇-▇▇▇-▇▇▇-▇▇▇▇
Attention: Fanghong Li
with a copy (for informational purposes only) to:
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
- 23 -
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Shares and, in the case of the Company, any
trustee, examiner with expanded powers, responsible officer, or other person
appointed as an estate representative for the Company. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of at least a majority of the aggregate number of
Registrable Securities issued and issuable hereunder, including by way of a
Fundamental Transaction (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions.). A Investor may assign some or
all of its rights hereunder without the consent of the Company, in which event
such assignee shall be deemed to be a Investor hereunder with respect to such
assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Investor contained in
Sections 2 and 3, respectively, and the agreements and covenants set forth in
Sections 4, 7 and 9 shall survive the Closing. Each Investor shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
(j) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(k) Indemnification. In consideration of the Investor's execution and
delivery of the Transaction Documents and acquiring the Shares thereunder and in
addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless the
Investor and each other holder of the Shares and all of their stockholders,
partners, members, officers, directors, employees and direct or indirect
investors and any of the foregoing persons' agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "INDEMNITEES")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
- 24 -
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Shares, (iii) any
disclosure made by the Investor pursuant to Section 4(i), or (iv) the status of
the Investor or holder of the Shares as an investor in the Company pursuant to
the transactions contemplated by the Transaction Documents. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. Except as otherwise set forth herein, the mechanics and procedures with
respect to the rights and obligations under this Section 9(k) shall be the same
as those set forth in the Registration Rights Agreement.
(l) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
(m) Remedies. Each Investor and each holder of the Shares shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Investor. The Company
therefore agrees that the Investor shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other security.
(n) Payment Set Aside. To the extent that the Company makes a payment
or payments to the Investor hereunder or pursuant to any of the other
Transaction Documents or the Investor enforce or exercise their rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, foreign, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
- 25 -
(o) Independent Nature of Investor' Obligations and Rights. The
obligations of the Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Investor pursuant hereto
or thereto, shall be deemed to constitute the Investor as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investor are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Investor confirms that it has independently
participated in the negotiation of the transaction contemplated hereby with the
advice of its own counsel and advisors. Each Investor shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose.
[SIGNATURE PAGE FOLLOWS]
- 26 -
IN WITNESS WHEREOF, the Investor and the Company have caused their
respective signature page to this Strategic Alliance Shares Purchase Agreement
to be duly executed as of the date first written above.
COMPANY:
I/OMAGIC CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
IN WITNESS WHEREOF, the Investor and the Company have caused their
respective signature page to this Strategic Alliance Shares Purchase Agreement
to be duly executed as of the date first written above.
INVESTOR:
JIANGXI GREATSOURCE DISPLAY
TECH. CO., LTD.
By: /s/ ▇▇ ▇▇▇▇ HONG
----------------------------
Name: ▇▇ ▇▇▇▇ Hong
Title: General Manager
EXHIBIT A
CLOSING DATES AND PAYMENT SCHEDULE
CLOSING DATE SHARES OF COMMON STOCK AMOUNT OF PAYMENT
---------------------------------- ------------------------ -----------------
September 30, 2007 8,000,000 shares US$24,000,000
On any date between March 31, 2008 10,000,000 shares US$41,000,000
and May 31, 2008, including March
31, 2008 and May 31, 2008
May 31, 2008 3,750,000 shares US$30,000,000
Total 21,750,000 shares US$95,000,000
EXHIBIT B
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
SCHEDULE 4(D)
USE OF PROCEEDS
The Company covenants to use the proceeds of the Purchase Price (as defined in
the Strategic Alliance Share Purchase Agreement) as follows:
PROCEEDS: USE OF PROCEEDS:
--------- ----------------
Proceeds from the
First Closing o To set up a factory and SKD assembly line with
capacity to produce 150,000 to 300,000 sets of
LCOS displays and related products ("Products")
o To initiate and conduct sales and marketing
campaigns for the Products in the US
o To set up and maintain distribution channels to
distribute units of the Products in the US
o To set up and maintain service and support
facilities for the Products
o Normal course of existing business operations of
the Company
Proceeds from the
Second Closing o To increase and maintain distribution channels to
distribute units of the Products in the US
Proceeds from the
Third Closing o To establish and commence research and development
of the Products