EXHIBIT 10(a)
DECEMBER EXECUTION COPY
THE SECURITIES REFERENCED IN THIS AGREEMENT HAVE NOT BEEN REGISTERED WITH
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"). THIS AGREEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION
OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE
RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION
OR EXEMPTION THEREFROM.
10% CONVERTIBLE PREFERRED PURCHASE AGREEMENT
EMB CORPORATION
THIS AGREEMENT is made as of this day of December 1997, between EMB
Corporation, a Hawaii corporation (the "Company"), with its principal offices at
3200 Bristol, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ and the Purchasers of the
securities referenced in this Agreement (each, individually, a "Purchaser" and
collectively the "Purchasers"), identified on Schedule I hereto.
IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Purchasers hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement:
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"Agreement" means this 10% Convertible Preferred Purchase Agreement
including all Exhibits and Attachment hereto.
"Closing" means the completion of the transactions required on the Closing
Date.
"Closing Date" means the date of the delivery of the original Preferred
Stock and original Warrants to the Purchasers against the Purchasers' payment,
by wire transfer, of the purchase price to the Company.
"Closing Price" shall mean the last transaction bid price as reported on
NASD, Electronic Bulletin Board or on any NASDAQ or other national or regional
securities exchange on which the Common Stock may subsequently be listed. In
the event no transaction is reported on any day during such period, Closing
Price shall be the closing bid price for the Common Stock on such day.
"Common Stock" means the Common Stock of the Company, no par value.
"Conversion Date" means the date on which the Purchaser has telecopied the
Notice of Conversion to the Company.
"Conversion Price" means an amount equal to the lesser of (a) One Hundred
(100%) percent of the average Closing Price for five (5) trading days ending on
the day before the Closing Date (the "Closing Date Price); or (b) Seventy-Five
(75%) Percent of the average Closing Price for the Common Stock during the five
(5) trading days ending on the day before the Conversion Date (the "Conversion
Date Price); provided, however, that not more than that number of shares
determined by dividing the principal amount by a conversion price of One Dollar
and Fifty Cents ($1.50) per share shall be required to be issued by the Company
upon conversion of the Preferred Stock. For example, with respect to Preferred
Stock in the principal amount of $100,000, not more than 66,666 Common Shares
shall be required to be issued. In the event that, upon conversion, the holders
of Preferred Stock will receive more than a maximum number of shares permitted
to be issued upon conversion of such Preferred Stock, then Section 2.3(b) of
this Agreement shall apply.
"Conversion Shares" means the Underlying Common Stock issued upon the
conversion of the Preferred Stock.
"Preferred Stock" means the 10% Convertible Preferred Stock, Series B, of
the Company, each Share convertible into Common Stock of the Company as herein
provided.
"Warrant" or "Warrants" means the Warrant from the Company to be purchased
on the Closing Date.
Section 2. Authorization and Sale of Preferred Stock.
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2.1 Agreement to Execute and Deliver the Preferred Stock. On the Closing
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Date, subject to the terms and conditions hereof, the Company will sell to each
Purchaser, and each Purchaser will purchase from the Company, that number of
shares of its Preferred Stock, no par value, set forth opposite the Purchaser's
name and signature on Schedule I hereto for the purchase price set forth
opposite such Purchaser's name and signature, having the privileges,
qualifications and designations set forth in Exhibit A hereto.
2.2 Authorization. Subject to the terms and conditions of this
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Agreement, the Company has authorized the execution and delivery of the
Preferred Stock.
2.3 Permissive/Mandatory Redemption.
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(a) In the event of any noticed conversion of the Preferred Stock at a
Conversion Price of less than One Dollar and Fifty Cents ($1.50) per common
share, the Company has the right to redeem the Preferred Stock within six (6)
business days of receipt of a Notice of Conversion from Purchaser, in whole or
in part, in cash at One Hundred Eighteen (118%) percent of the outstanding
purchase price of the Preferred Stock plus accrued unpaid dividends. Upon
notice of its right to redeem the Preferred Stock the Company shall immediately
wire transfer the appropriate amount of funds to the Purchaser. If after six
(6) business days from the date the notice of redemption is received by the
Purchaser the funds have not been received by the Purchaser, then the Purchaser
shall again have the right to convert the Preferred Stock and the Company shall
have the right to redeem the Preferred Stock but only upon simultaneously
sending a notice of redemption to the Purchaser and wire transferring the
appropriate amount of funds.
(b) In the event that, upon conversion, the holders of any Preferred Stock
would be entitled to more than the maximum number of shares required to be
issued upon conversion thereof and redemption under subsection (a) of this
Section 2.3. is not invoked, then the Company shall issue the maximum number of
Conversion Shares and shall redeem at One Hundred and Eighteen (118%) percent of
the amount thereof the remaining outstanding purchase price of such Preferred
Stock plus accrued unpaid dividends, within six (6) business days thereafter, or
shall, in the alternative, issue Conversion Shares in excess of the maximum
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number, provided, however, that in no event shall the Company issue Conversion
Shares in excess of the number thereof registered pursuant to the Convertible
Shares Registration Rights Agreement.
2.4 Warrants Issuable Upon Closing. As additional consideration
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hereunder, the Company will sell, issue and deliver to Purchaser, Warrants to
purchase a total of Twelve Thousand Five Hundred (12,500) Shares of the
Company's Common Stock for each $100,000 of Preferred Stock being issued to the
Purchaser. The initial exercise price of the Warrants shall be the Closing
Price. The exercise price of the Warrants shall be subject to adjustment as
provided in the Warrants.
2.5 Time and Place of Closings. The Closings shall be held at the law
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offices of D. ▇▇▇▇▇ ▇▇▇▇▇.
2.6 Payment and Delivery. At or prior to the Closing, the following shall
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occur:
(a) The Company shall deliver or cause to be delivered to Purchaser the
Preferred Stock and Warrants, substantially in the form set forth in Exhibits A
and B hereto, respectively, bearing the original signatures of authorized
signatures. At such time Purchaser shall remit, by wire transfer, the Purchase
Price to the Company, or to the Company's Escrowee.
(b) Wire instructions are:
For the Company For the Escrowee
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Bank Name: Comercia Chase
Account Name: EMB Corporation, D. ▇▇▇▇▇ ▇▇▇▇▇,
General Account Special Escrow
Account #: 8681009497 876-500786765
Transit #: ▇▇▇▇▇▇▇▇▇ 021000021
Section 3. General Representations and Warranties of the Company. The
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Company hereby represents and warrants to, and covenants with, the Purchasers,
and each of them severally, that the following are true and correct as of the
date hereof.
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3.1 Organization; Qualification. The Company is a corporation duly
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organized and validly existing under the laws of Hawaii and is in good standing
under such laws. The Company has all requisite corporate power and authority to
own, lease and operate its properties and assets, and to carry on its business
as presently conducted. The Company is qualified to do business as a foreign
corporation in each jurisdiction in which the ownership of its property or the
nature of its business requires such qualification, except where failure to so
qualify would not have a material adverse effect on the Company.
3.2 Capitalization and Conversion. The authorized capital stock of the
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Company consists of: Shares of Common Stock, no par value, of which 8,191,176
shares of Common Stock have been duly authorized and validly issued as of
November 20, 1997, and are fully paid and nonassessable and 648,648 shares of
its 8% Preferred Stock, no par value, Series A. As of the Closing Date, the
Company had reserved from its authorized but unissued shares of Common Stock a
sufficient number of shares of Common Stock for issuance upon conversion of the
aggregate principal of the Preferred Stock and exercise of the Warrants.
3.3 Authorization. The Company has all requisite corporate right, power
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and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company,
the authorization, sale, issuance and delivery of the Conversion Shares and the
performance of the Company's obligations hereunder has been or will be taken
before the Closing Date. This Agreement has been duly executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy as they may apply to the indemnification
provisions set forth in Section 7.3 of this Agreement. Upon their issuance and
delivery pursuant to this Agreement, the Conversion Shares will be validly
issued, fully paid and nonassessable and will be free of any liens or
encumbrances except for those imposed by or on behalf of the Purchaser, its
creditors or agents.
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3.4 No Conflict. The execution and delivery of this Agreement do not, and
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the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Certificate of Incorporation, and any amendments thereto,
Bylaws and any amendments thereto of the Company or any material mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order decrees statute, law, ordinance, rule or
regulation applicable to the Company, its properties or assets.
3.5 Accuracy of Reports and Information. The Company is in compliance, to
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the extent applicable, with all reporting obligations under either Section
12(b), 12(g) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company has registered its Common Stock pursuant to Section
12 of the Exchange Act and the Common Stock is listed and trades on the NASD,
Electronic Bulletin Board Market.
The Company has filed all material required to be filed pursuant to all
reporting obligations, under either Section 13(a) or 15(d) of the Exchange Act
for a period of at least twelve (12) months immediately preceding the Closing
Date (or for such shorter period that the Company has been required to file such
material).
3.6 SEC Filings/Full Disclosure. None of the Company's filings with the
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Securities and Exchange Commission (the "Reports") contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances under which they were made, not misleading, and (ii) the Company
has timely filed all requisite forms, reports and exhibits thereto with the
Securities and Exchange Commission.
There is no fact known to the Company (other then general economic
conditions known to the public generally) that has not been publicly disclosed
by the Company or disclosed in writing to the Purchaser which (i) could
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise) or on earnings, business affairs, properties or assets
of the Company, or (ii) could reasonably be expected to materially and
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adversely affect the ability of the Company to perform its obligations pursuant
to this Agreement.
3.7 Absence of Undisclosed Liabilities. The Company has no material
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liabilities or obligations, absolute or contingent (individually or in the
aggregate), except as set forth in the Reports (as hereinafter defined) or as
incurred in the ordinary course of business after the date of the Reports.
3.8 Governmental Consent, etc. No consent, approval or authorization of or
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designation, declaration or filing with any governmental authority on the part
of the Company is required in connection with the valid execution and delivery
of this Agreement, or the offer, sale or issuance of the Preferred Stock, or the
consummation of any other transaction contemplated hereby, except the filing
with the SEC of a REGISTRATION statement for the purpose of registering the
Common Stock underlying the Preferred Stock.
3.9 Intellectual Property Rights. Except as disclosed in the Reports, the
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Company has sufficient trademarks, trade names, patent rights, copyrights and
licenses to conduct its business as presently conducted. To the Company's
knowledge, neither the Company nor its products is infringing or will infringe
any trademark, trade name, patent right, copyright, license, trade secret or
other similar right of others currently in existence; and there is no claim
being made against the Company regarding any trademark, trade name, patent,
copyright, license, trade secret or other intellectual property right which
could have a material adverse effect on the condition (financial or otherwise),
business, results of operations or prospects of the Company.
3.10 Material Contracts. Except as set forth in the Reports, the material
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agreements to which the Company is a party described in the Reports are valid
agreements, in full force and effect, the Company is not in material breach or
material default (with or without notice of lapse of time, or both) under any of
such agreements, and, to the Company's knowledge, the other contracting party or
parties thereto are not in material breach or material default (with or without
notice of lapse of time, or both) under any of such agreements.
3.11 Litigation. Except as disclosed in the Reports, there is no action,
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proceedings or investigation pending, or to the
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Company's knowledge threatened, against the Company which might result, either
individually or in the aggregate, in any material adverse change in the
business, prospects, conditions, affairs or operations of the Company. The
Company is not a party to or subject to the provisions of any order, writ
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company currently intends to initiate
which will materially effect the Company.
3.12 Title to Assets. Except as disclosed in the Reports, the Company has
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good and marketable title to all properties and material assets described in the
Reports as owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest other than such as are not material to
the business of the Company.
3.13 Subsidiaries. Except as disclosed in the Reports and the financial
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statements, the Company does not presently own or control, directly or
indirectly, any interest in any other corporation, partnership, association or
other business entity.
3.14 Required Governmental Permits. The Company is in possession of, and
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operating in material compliance with, all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
3.15 Listing of the Common Stock. The Company will maintain the listing of
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its Common Stock on the NASD, Electronic Bulletin Board, and intends to promptly
seek listing of the Common Stock on the American Stock Exchange or NASDAQ.
3.16 Other Outstanding Securities. Except as disclosed in the Reports,
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there are no other material outstanding debt or equity securities presently
Convertible into Common Stock.
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3.17 Legal Opinion. Purchaser shall, upon the purchase of the Preferred
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Stock and Warrants, receive an opinion letter from ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., P.C.,
as special counsel to the Company to the effect that:
(i) The Company is duly authorized and validly existing under the laws and
jurisdiction of its incorporation. The Company and/or its subsidiaries are duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company and/or its subsidiaries owns or leases
properties, maintains employees or conducts business, except for jurisdictions
in which the failure to so qualify would not have a material adverse effect on
the Company, and has all requisite corporate power and authority to own its
properties and conducts its business.
(ii) There is no action, proceeding or investigation pending, or, to such
counsel's knowledge, threatened, against the Company which might result, either
individually or in the aggregate, in any material adverse change in the
business, prospects, conditions, affairs or operations of the Company.
(iii) The Company is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality.
(iv) There is no action, suit, proceeding or investigation by the Company
currently pending or which the Company currently intends to initiate.
(v) All issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable.
(vi) The Preferred Stock to be issued at the closing has been properly
issued under the Company's Certificate of Incorporation.
(vii) The Purchase Agreement, the issuance of the Preferred Stock and the
Warrants and the issuance of Common Stock upon conversion of the Preferred Stock
and exercise of the Warrants, have been duly approved by all required corporate
action and that all such securities, upon delivery, shall be validly issued and
outstanding, fully paid and nonassessable.
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(viii) The issuance of the Preferred Stock will not violate the applicable
listing agreement between the Company and any securities exchange or market on
which the Company's securities are listed.
(ix) Assuming the accuracy of the representations and warranties of the
Company and the Purchaser set forth in the Agreement, the offer, issuance and
sale of the Preferred Stock, Warrants, Conversion Shares and the Warrant Shares
to be issued upon exercise to the Purchaser pursuant to the Convertible
Preferred Purchase Agreement are or will be exempt from the REGISTRATION
requirements of the Securities Act, upon compliance with Rule 506 of Regulation
D promulgated under the Act.
3.18 Dilution. The Company is aware and acknowledges that conversion of the
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Preferred Stock could cause dilution to existing shareholders and could
significantly increase the outstanding number of shares of Common Stock.
Section 4. Representations, Warranties and Covenants of the Purchasers.
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Each Purchaser, severally as to itself, and not as to any other Purchaser,
represents and warrants to, and covenants with the Company that the following
are true and correct as of the date hereof and will be true and correct as of
the Closing Date.
4.1 Authority. The Purchaser has all requisite right, power and authority
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to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All action on the party of the Purchaser, members or
partners necessary for the authorization, execution, delivery and performance of
this Agreement, and the purchase of the Preferred Stock and Warrants as well as
its respective conversion and exercise, and the performance of the Purchaser's
obligations hereunder, has been taken. The Purchaser's signatory has all
right, power, authority and capacity to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Purchaser and will constitute the legal,
valid and binding obligations of the Purchaser, enforceable in accordance with
its terms subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and to limitations
of public policy as
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they may apply to the indemnification provisions set forth in Section 7.3 of
this Agreement.
4.2 Investment Experience. Purchaser is an "accredited investor" as
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defined in Rule 501(a) of Regulation D under the Securities Act. Purchaser is
aware of the Company's business affairs and financial condition and has had
access to and has acquired sufficient information about the Company, including
but not limited to the Reports, to reach an informed and knowledgeable decision
to acquire the Preferred Stock and Warrants. Purchaser has such business and
financial experience as is required to give it the capacity to protect its own
interests in connection with the purchase of the Preferred Stock and Warrants.
4.3 Investment Intent. Without limiting its ability to resell the
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underlying Common Stock pursuant to an effective REGISTRATION statement,
Purchaser represents that it is purchasing the Preferred Stock and Warrants for
its own account as principal for investment purposes only, and not with a view
to a re-distribution. thereof. Purchaser understands that its acquisition of
the Preferred Stock and Warrants have not been registered under the Securities
Act or registered or qualified under any state securities law in reliance on
specific exemptions therefrom, which exemptions may depend upon, among other
things, the bona fide nature of Purchaser's investment intent as expressed
herein. Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchaser or
otherwise acquire or take a pledge of) any of the Preferred Stock, Warrants or
the underlying Common Stock, except in compliance with the Securities Act and
any applicable state securities laws, and the rules and regulations promulgated
thereunder.
4.4 Registration or Exemption Requirements. Purchaser further
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acknowledges and understands that the Preferred Stock, Warrants or the
Conversion Shares may not be resold or otherwise transferred except in a
transaction registered under the Securities Act and any applicable state
securities laws or unless an exemption from such registration is available.
Purchaser understands that the Preferred Stock, Warrants and, if converted or
exercised as the case may be, the Conversion Shares and Shares underlying the
Warrants will be imprinted with a legend that prohibits the transfer of such
securities unless (i) registered or such
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registrations is not required pursuant to an exemption therefrom, and (ii) if
the transfer is pursuant to an exemption from registration other than Rule 144
under the Securities Act and an opinion of counsel reasonably satisfactory to
the Company is obtained to the effect that the transaction is so exempt.
4.5 No Legal, Tax or Investment Advice. Purchaser understands that
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nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the Preferred Stock and Warrants
constitutes legal, tax or investment advice. Purchaser has consulted such
legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of the Preferred Stock
and the Warrants.
4.6 Purchaser Review. Purchaser hereby represents and warrants that the
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Purchaser has carefully examined the Reports, and the financial statements
contained therein. The Purchaser acknowledges that the Company has made
available to the Purchaser all documents and information that it has requested
relating to the Company and has provided answers to all of its questions
concerning the Company, the Preferred Stock and the Warrants.
4.7 Certain Risks. The Purchaser recognizes that the purchase of the
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Preferred Stock, Warrants and the Conversion Shares and shares underlying the
Warrants involves a high degree of risk in that:
(i) an investment in the Company is highly speculative and only investors
who afford the loss of their entire investment should consider investing in the
Company and the Preferred Stock, Warrants and the respective underlying
securities;
(ii) the Purchaser may not be able to liquidate its investment;
(iii) transferability of the Preferred Stock, Warrants and Conversion
Shares and shares underlying the Warrants is extremely limited;
(iv) in the event of any disposition, Purchaser could sustain substantial
losses on its investment;
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(v) the holders of the Preferred Stock are not entitled to a controlling
vote in the business and affairs of the Company;
(vi) no return on investment, whether through distributions, appreciation,
transferability or otherwise, and no performance by, through or of the Company,
has been promised, assured, represented or warranted by the Company, or by any
director, officer, employee, agent or representative thereof;
(vii) while the Common stock is presently quoted and traded on the NASD,
Electronic Bulletin Board Market, and while this Agreement provides for certain
registration rights, the Preferred Stock, Warrants and the Conversion Shares and
the shares underlying the Warrants:
(a) are not registered under applicable federal or state securities laws,
and thus may not be sold, conveyed, assigned or transferred unless registered
under such laws or unless an exemption from registration is available under such
laws, as more fully described below; and
(b) are not quoted, traded or listed for trading or quotation on any
organized market or quotation system, and there is therefore no present public
or other market for such Preferred Stock or Warrants, nor can there by any
assurance that the Common Stock will continued to be quoted, traded or listed
for trading or quotation on the NASD, Electronic Bulletin Board Market or on any
other organized market or quotation system.
4.8 No Registration, Review or Approval. The Purchaser acknowledges and
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understands that the private offering and sale of the Preferred Stock, Warrants
and the Conversion Shares pursuant to this Agreement has not been reviewed or
approved by the SEC or by any state securities commission, authority or agency,
and is not registered under the Act or under the securities or "blue sky" laws,
rules or regulations of any state. The Purchaser acknowledges, understands and
agrees that the Preferred Stock, Warrants and the Conversion Shares are being
offered and sold hereunder pursuant to (i) a private placement exemption to the
registration provisions of the Act pursuant to Section 4(2) of such Act and
Regulation D promulgated thereunder and (ii) a similar exemption to the
registration provisions of applicable state securities laws.
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Section 5. Conditions to the Purchaser's Obligation to Purchase. The
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Company understands that the Purchaser's obligation to purchase the Preferred
Stock and Warrants is conditioned upon:
(a) Acceptance by Purchaser of this Convertible Preferred Purchase
Agreement, as evidenced by the execution of this Agreement by its authorized
officers;
(b) Delivery of the Original Preferred Stock and Warrants to Purchaser;
(c) Delivery of legal opinion as required by this Agreement; and
(d) Execution and delivery by the Company of the Registration Rights
Agreement in the form of Attachment I;
Section 6. Conditions to Company's Obligation to Sell. Purchaser
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understands that the Company's obligation to sell the Preferred Stock and
Warrants is conditioned upon:
(a) The receipt and acceptance by the Company of this Convertible
Preferred Purchase Agreement, as evidence by execution of this Agreement by any
duly authorized signatory for the Purchaser; and
(b) Delivery to the Company of good funds as payment in full for the
purchase of the Preferred Stock and Warrants.
(c) Execution and delivery by the Purchaser of the Registration Rights
Agreement in the form Attachment I.
Section 7. Compliance with the Securities Act.
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7.1 Registration Rights Agreement. The parties will enter into a
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Registration Rights Agreement, annexed hereto as Attachment I.
7.2 Underwriter. The Company understands that the Purchaser disclaims
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being an "underwriter" (as such term is defined under the Securities Act and the
rules and regulations promulgated thereunder (an "Underwriter"), but Purchaser
being deemed an Underwriter shall
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not relieve the Company of any obligation it has hereunder, except as may be
required by law.
7.3 Indemnification. Each of the Company and the Purchaser agrees to
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indemnify the other and to hold the other harmless from and against any and all
losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) which the other may sustain or incur in connection with the
breach by the indemnifying party of any representation, warranty or covenant
made by it in this Agreement.
7.4 Information Available. So long as any Preferred Stock is outstanding,
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the Company will furnish to Purchaser:
(a) as soon as possible after available (but in the case of the Company's
Annual Report to Stockholders, within 150 days after the end of each fiscal year
of the Company), one copy of (i) its Annual Report to Stockholders (which Annual
report shall contain financial statements audited in accordance with generally
accepted accounting principles by certified public accountants); (ii) each of
its Quarterly Reports to Stockholders, and its Quarterly Reports on Form 10-QSB;
and (iii) a full copy of the registration statement covering the Conversion
Shares (the foregoing, in each case, including exhibits); and
(b) upon the reasonable request of Purchaser, such other information that
is generally available to the public.
7.5 Rule 144 Reporting. With a view to making available the benefits of
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certain rules and regulations of the SEC which may at any time permit the sale
of the Conversion Shares to the public without registration, the Company agrees
to use its best efforts to:
(a) make adequate public information available on a timely basis, as such
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date on which the Company becomes subject to the
reporting requirements of the Exchange Act;
(b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Exchange Act;
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(c) to furnish to Purchaser forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of said Rule
144, and of the Securities Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtainable by the Company as Purchaser may reasonably request in availing itself
of any rule or regulation of the SEC allowing Purchaser to sell any of the
Conversion Shares without registration.
7.6 Temporary Cessation of Offers and Sales by Purchaser. The Purchaser
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acknowledges that there may occasionally be times when the Company may be
required to suspend the use of the prospectus forming part of the Registration
Statement for sale of the Conversion Shares until such time as an amendment to
the Registration Statement has been filed by the Company and declared effective
by the Commission and until the prospectus is supplemented or amended to comply
with the Securities Act, or until such time as the Company has filed an
appropriate report with the Commission pursuant to the Exchange Act. The
Company agrees to file any necessary amendments, supplements and reports as soon
as practicable under the circumstances. Purchaser hereby covenants that it will
not sell any Common Stock pursuant to said prospectus commencing at the time at
which the Company gives the Purchaser notice of the suspension of the use of
said prospectus and ending at the time the Company gives the Purchaser notice
that the Purchaser may thereafter effect sales pursuant to sales prospectus, as
the same may have been supplemented or amended.
7.7 Transfer of Common Stock After Registration. Purchaser hereby
-------------------------------------------
covenants with the Company not to make any sale of the Common Stock except
either (i) in accordance with the Registration Statement, in which case
Purchaser covenants to comply with the requirement of delivering a current
prospectus or (ii) in accordance with Rule 144, in which case Purchaser
covenants to comply with Rule 144.
7.8 Termination of Obligations. The obligations of the Company pursuant
--------------------------
to the Registration Rights Agreement shall cease and terminate upon the earlier
to occur of (i) such time as all of the Common Stock have been re-sold, or (ii)
such time as all of the Common Stock remaining to be sold may be re-sold in any
three-month period pursuant to Rule 144 under the Securities Act.
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7.9 Legend. The certificate or certificates representing the Preferred
------
Stock, Warrants and, upon conversion, the Conversion Shares shall be subject to
a legend restricting transfer under the Securities Act of 1933, such legend to
be substantially as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION UNDER SAID ACT IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO
THE COMPANY."
Such securities shall also include any legends required by any applicable
state securities laws.
With respect to the Conversion Shares and the shares underlying the
Warrants, the legend(s) shall be removed and the Company shall issue a
replacement certificate without such legend to the holder of such certificate if
the shares are then registered and are being sold or transferred in accordance
with the Registration Statement or if such holder provides to the Company an
opinion of counsel reasonably acceptable to the Company, to the effect that a
public sale, transfer or assignment of such stock may be made without
registration.
Section 8. Legal Fees and Expenses. Each party shall pay the reasonable
-----------------------
fees and expenses (including the fees of any attorneys, accountants, appraisers
or others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby.
Section 9. Notice of Conversion. Conversion of the Preferred Stock to
--------------------
Common Stock may be exercised in whole or in part by Holder telecopying an
executed and completed Notice of Conversion (in the form annexed hereto as
Exhibit C) to the Company and delivering by express courier within three (3)
business days of exercise. Each date on which a Notice of Conversion is
telecopied to the Company in accordance with the provisions hereof shall be
deemed a Conversion Date. The Company shall notify the transfer agent to
transmit the certificates representing the Common Stock issuable upon conversion
of all or any part of the Preferred Stock (together with the certificates
representing any portion of the Preferred Stock not so converted) to the
Purchaser via express
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courier within five (5) business days after the Company has received the
original Notice of Conversion and Preferred Stock certificate being so
converted. In addition to any other remedies which may be available to the
Purchaser, in the event that the Company fails for any reason to effect delivery
of such shares of Common Stock within such five (5) business day period, the
Purchaser will be entitled to revoke the relevant Notice of Conversion by
delivering by telecopier with an original by overnight courier a notice to such
effect to the positions immediately prior to the delivery of the Notice of
Conversion. Upon receipt of such Notice the Company shall return by overnight
courier the original certificate representing the Preferred Stock. The Notice of
Conversion and certificates representing the portion of the Preferred Stock
converted shall be delivered as follows:
To the Company:
c/o: ▇▇▇ ▇▇▇▇▇
EMB Corporation
3200 Bristol, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇)▇▇▇-▇▇▇▇
or to such other person at such other place as the Company shall designate
to the Purchaser in writing.
In the event that the Common Stock issuable upon conversion of the
Preferred Stock is not delivered within six (6) business days of receipt by the
Company of a valid Conversion Notice and the Preferred Stock to be converted
(such date of receipt referred to as the "Conversion Date"), the Company shall
pay to the Purchaser, by wire transfer, as non-cumulative additional interest
for such failure and not as a penalty, for each Preferred Stock conversion, the
greater of $300 per day or .30 of one percent (.30%) of the face amount proposed
to be converted, for each day thereafter that the Conversion Shares are not
delivered, which non-cumulative additional interest shall run from the seventh
business day after the Conversion Date.
Notwithstanding any other provision herein contained or in any Warrant now
held by the Purchaser or hereunder being acquired by the Purchaser, the
Preferred Stock may not be converted, and the Warrants may not be exercised in
whole or in part at any time if,
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at the time of such conversion or exercise, such conversion or exercise would
cause the Purchaser to be the owner of five (5%) percent or more of any class of
the Company's registered securities.
Section 10. Notices. All notices, requests, consents and other
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communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, and shall be deemed given when
so mailed:
(a) if to the Company, to:
c/o: ▇▇▇ ▇▇▇▇▇
EMB Corporation
3200 Bristol, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇)▇▇▇-▇▇▇▇
or to such other person at such other place as the Company shall designate
to the Purchaser in writing:
(b) if to the Purchaser, to it at the address set forth opposite such
Purchaser's name on Schedule I hereto.
or at such other address or addresses as may have been furnished to the
Company in writing; or
(c) if to any transferee or transferees of a Purchaser, at such address or
addresses as shall have been furnished to the Company at the time of the
transfer or transfers, or at such other address or addresses as may have been
furnished by such transferee or transferees to the Company in writing.
Section 11. Miscellaneous.
-------------
11.1 Entire Agreement. This Agreement, including all Exhibits and
----------------
Attachments embody the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersedes all prior oral
or written agreements and understandings relating to the subject matter hereof.
No statement, representation, warranty, covenant or agreement or any kind not
expressly set forth in this Agreement shall affect, or be
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used to interpret, change or restrict, the express terms and provisions of this
Agreement.
11.2 Amendments. This Agreement may not be modified or amended except
----------
pursuant to an instrument in writing signed by Purchaser.
11.3 Headings. The headings of the various sections of this Agreement
--------
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
11.4 Severability. In case any provision contained in this Agreement
------------
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
11.5 Governing Law/Jurisdiction. This Agreement will be construed and
--------------------------
enforced in accordance with and governed by the laws of the State of New York,
United States of America, without reference to principles of conflicts of laws,
except for matters arising under the 1933 Act. Each of the parties consents to
the jurisdiction of the federal district court of the Southern District of New
York in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
----- --- ----------
in such jurisdictions. Each party hereby agrees that if either party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to its under local
law and agrees to the enforcement of such a judgment. Each party to this
Agreement irrevocably consents to the service of process in any such proceedings
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address set forth herein. Nothing herein shall
affect the right of any party to serve process in any other manner permitted by
law.
11.6 Recovery of Attorney's Fees. Should any party bring an action to
---------------------------
enforce the terms of this Agreement then, if Purchaser prevails in such action
it should be entitled to recovery of its
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attorney's fees from the Company, and if the Company prevails in such action it
shall be entitled to recovery of its attorney's fees from the Purchaser.
11.7 Fees. The Company acknowledges that Purchaser shall have no
----
responsibility for the payment of any of the Company's fees in connection with
this Agreement. The Company shall pay finders fees or placement costs incurred
in connection herewith.
11.8 Counterparts/Facsimile. This Agreement may be executed in two or
----------------------
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
11.9 Publicity. The Purchaser shall not issue any press release or
---------
otherwise make any public statement with respect to the transactions
contemplated by this Agreement without the prior written consent of the Company,
except as may be required by applicable law or regulation.
11.10 Survival. The representations and warranties in this Agreement
--------
shall survive Closing.
11.11 Separate Agreement. Each Purchaser shall sign a separate Schedule
------------------
I. The Company's obligations to the Purchasers hereunder shall be identical and
uniform. The Purchasers may enforce their rights separately or jointly and
severally, at their election.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives the day and year first above
written.
EMB CORPORATION
By
---------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
PURCHASERS
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(Signature on Schedule I)
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