SECURITIES PURCHASE AGREEMENT Dated as of May __, 2005 among LIGHTING SCIENCE GROUP CORPORATION and THE PURCHASERS LISTED ON EXHIBIT A
SECURITIES
PURCHASE
AGREEMENT
Dated
as of May
__, 2005
among
LIGHTING
SCIENCE GROUP CORPORATION
and
THE
PURCHASERS LISTED ON EXHIBIT A
ARTICLE I
Purchase and Sale of Preferred Stock and Warrants
|
Section
1.1 |
Purchase
and Sale of Preferred Stock and Warrants |
|
Section
1.2 |
Closing |
|
Section
1.3 |
Warrants |
|
Section
1.4 |
Conversion
Shares and Warrant Shares |
ARTICLE
II Representations and Warranties
|
Section
2.1 |
Representations
and Warranties of the Company |
|
Section
2.2 |
Representations
and Warranties of the Purchasers |
ARTICLE
III Covenants
|
Section
3.1 |
Disclosure
of Transactions and Other Material Information |
|
Section
3.2 |
Registration |
|
Section
3.3 |
Inspection
Rights |
|
Section
3.4 |
Compliance
with Laws |
|
Section
3.5 |
Keeping
of Records and Books of Account |
|
Section
3.6 |
Other
Agreements |
|
Section
3.7 |
Right
of First Refusal |
|
Section
3.8 |
Reservation
of Shares |
|
Section
3.9 |
Non-public
Information |
|
Section
3.11 |
Beneficial
Ownership Restrictions |
ARTICLE
IV Conditions
|
Section
4.1 |
Conditions
Precedent to the Obligation of the Company to Close and to Sell the Shares
and Warrants on the Closing Date |
|
Section
4.2 |
Conditions
Precedent to the Obligation of the Purchasers to Close and to Purchase the
Shares and Warrants on the Closing Date |
ARTICLE V
Certificate Legend
|
Section
5.1 |
Legend |
ARTICLE
VI Termination
|
Section
6.1 |
Termination
by Mutual Consent |
|
Section
6.2 |
Effect
of Termination |
ARTICLE
VII Indemnification
|
Section
7.1 |
General
Indemnity |
|
Section
7.2 |
Indemnification
Procedure |
ARTICLE
VIII Miscellaneous
|
Section
8.13 |
Further
Assurances |
--
Table of
Contents(continued)Page
This
SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated
as of May __,
2005, by and
among Lighting
Science Group Corporation, a
Delaware
corporation (the “Company”), and
the entities listed on Exhibit
A hereto
(each, a “Purchaser” and
collectively, the “Purchasers”), for
the purchase and sale by the Purchasers of shares of the Company’s 6%
Convertible Preferred Stock, par value $0.001 per share (the “Preferred
Stock”), and
warrants to purchase shares of the Company’s common stock, par value $0.001 per
share (the “Common
Stock”).
The
parties
hereto agree as follows:
ARTICLE
I
Purchase
and Sale of Preferred
Stock and Warrants
Section
1.1 Purchase
and Sale of Preferred Stock and Warrants.
Upon the
following terms and conditions, the Company shall issue and sell to the
Purchasers, and each Purchaser shall, severally but not jointly, purchase from
the Company, shares of Preferred Stock (the “Shares”) and
warrants to purchase shares of Common Stock (the “Warrants”), in
each case, as set forth opposite each such Purchaser’s name on Exhibit
A hereto,
for an aggregate purchase price to the Company from all Purchasers of
$________1 Not
less than $6,000,000 and up to $15,000,000. (the
“Purchase
Price”). The
Company and the Purchasers are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration
afforded by Section 4(2) of the U.S. Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the “Securities
Act”),
including Regulation D (“Regulation
D”),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
to be made hereunder.
Section
1.2 Closing.
The
closing of the sale to and purchase by each Purchaser of the Shares and Warrants
(the “Closing”)
shall
take place at the offices of ▇▇▇▇▇▇ ▇. Garden, P.C. located at ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., Central Time, (i) on or
before May __, 2005, provided, that
all of the conditions set forth in Sections 4.1 and 4.2 hereof shall have been
fulfilled or waived in accordance herewith, or (ii) at such other time and place
or on such date as the Purchasers and the Company may agree upon (the
“Closing
Date”). At the
Closing, the Company shall deliver to each Purchaser certificates and agreements
evidencing the Shares and Warrants being purchased by it on the Closing Date
which shall be registered in such Purchaser’s name as stated on Exhibit
A hereto,
against delivery to the Company of payment by certified check or wire transfer
in an amount equal to that amount set forth opposite such Purchaser’s name on
Exhibit
A hereto
under the heading “Dollar Amount of Investment at Closing”.
Section
1.3 Warrants. At the
Closing, the Company shall issue to the Purchasers Warrants to purchase an
aggregate of ______2 75%
Warrant coverage. shares
of Common Stock, in
substantially the form attached hereto as Exhibit
B. Such
Warrants shall be exercisable for five (5) years from the date of issuance and
shall have an initial exercise price equal to $0.96 per share.
Section
1.4 Conversion
Shares and Warrant Shares. The
Company has authorized and has reserved and covenants to continue to reserve,
free of preemptive rights and other similar contractual rights of stockholders,
a number of its authorized but unissued shares of Common Stock equal to the
aggregate number of shares of Common Stock necessary to effect the conversion of
all the Shares and the exercise of all the Warrants. Any shares of Common Stock
issuable upon conversion of the Shares (and such shares when issued) are herein
referred to as the “Conversion
Shares”. Any
shares of Common Stock issuable upon exercise of the Warrants (and such shares
when issued) are herein referred to as the “Warrant
Shares”. The
Shares, the Conversion Shares, the Warrants, the Warrant Shares and the PIK
Dividend Shares (as defined in the Registration Rights Agreement) are sometimes
collectively referred to herein as the “Securities”.
ARTICLE
II
Representations
and Warranties
Section
2.1 Representations
and Warranties of the Company. In
order to induce the Purchasers to enter into this Agreement and to purchase the
Shares and Warrants, the Company hereby makes the following representations and
warranties to the Purchasers, subject to in each case (i) that the Company
hereby makes no representations or warranties with respect to any period, or
with respect to any matters occurring, prior to October 1, 2003, and (ii) any
exceptions identified on any Schedule attached hereto:
(a) Organization,
Good Standing and Power. The
Company is a corporation, validly existing and in good standing under the laws
of the State of Delaware and has
the requisite corporate power to own, lease and operate its properties and
assets and to conduct its business as it is now being conducted. The Company
does not have any Subsidiaries (as defined in Section 2.1(g)) or own securities
of any kind in any other entity, except as disclosed in the Commission Documents
(as defined in Section 2.1(f)) or on Schedule
2.1(f) hereto.
The Company and each such Subsidiary is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material
Adverse Effect. For the purposes of this Agreement, “Material
Adverse Effect” means
any adverse effect on the business, operations, properties, prospects or
financial condition of the Company or its Subsidiaries and which is material to
such entity or other entities controlling or controlled by such entity or which
is likely to materially hinder the performance by the Company of its obligations
hereunder and under the other Transaction Documents (as defined in Section
2.1(b) hereof).
(b) Authorization;
Enforcement. The
Company has the requisite corporate power and authority to enter into and
perform this Agreement, the
Certificate of Designation establishing the Shares in the form of Exhibit
D attached
hereto (the “Certificate
of Designation”), the
Registration Rights Agreement in the form of Exhibit
E attached
hereto (the “Registration
Rights Agreement”), each
Lock-Up Agreement (for affiliates and non-affiliates, respectively) in the forms
of Exhibit
F-1 and Exhibit
F-2 attached hereto (the “Lock-Up
Agreements”), the
Warrants, and all other agreements and documents contemplated hereby and thereby
and executed by the Company or to which the Company is party (collectively, the
“Transaction
Documents”), and
to issue and sell the Shares and the Warrants in accordance with the terms
hereof. The execution, delivery and performance of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated thereby
have been duly and validly authorized by all necessary corporate action, and no
further consent or authorization of the Company, its Board of Directors or its
stockholders is required. This Agreement has been duly executed and delivered by
the Company. The other Transaction Documents will have been duly executed and
delivered by the Company at the Closing. Each of the Transaction Documents
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor’s rights and remedies or by other equitable principles of general
application.
(c) Capitalization. The
authorized capital stock of the Company and the shares thereof currently issued
and outstanding as of May __,
2005, are set
forth on Schedule
2.1(c) hereto.
All of the outstanding shares of the Company’s Common Stock and any other
security of the Company have been duly and validly authorized. Except as
disclosed in the Commission Documents or as set forth on Schedule
2.1(c) hereto,
no shares of Common Stock or any other security of the Company are entitled to
preemptive rights or registration rights and there are no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company. Furthermore, except as disclosed in the Commission
Documents or as set forth on Schedule
2.1(c) hereto,
there are no contracts, commitments, understandings, or arrangements by which
the Company is or may become bound to issue additional shares of the capital
stock of the Company or options, securities
or rights convertible into shares of capital stock of the Company. Except (i)
for customary transfer restrictions contained in agreements entered into by the
Company in order to sell restricted securities, or (ii) as disclosed in the
Commission Documents or as set forth on Schedule
2.1(c) hereto,
the Company is not a party to or bound by any agreement or understanding
granting registration or anti-dilution rights to any individual, corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind (a “Person”) with
respect to any of its equity or debt securities. The Company is not a party to,
and it has no knowledge of, any agreement or understanding restricting the
voting or transfer of any shares of the capital stock of the
Company. To the Company’s best knowledge, the offer and sale of all capital
stock, convertible securities, rights, warrants, or options of the Company
issued prior to the Closing has complied with all applicable federal and state
securities laws, and no holder of such securities has a right of rescission or
claim for damages with respect thereto which could have a Material Adverse
Effect. The Company has furnished or made available to the Purchasers true and
correct copies of the Company’s Certificate of Incorporation, as
amended, and as in
effect on the date hereof (the “Certificate”), and
the Company’s Bylaws, as amended, and as in effect on the date hereof (the
“Bylaws”).
(d) Issuance
of Securities. The
Shares and the Warrants to be issued at each Closing have been duly authorized
by all necessary corporate action and, when paid for or issued in accordance
with the terms hereof, the Shares shall be validly issued and outstanding, fully
paid and nonassessable and free and clear of all liens, encumbrances and rights
of refusal of any kind and the holders shall be entitled to all rights accorded
to a holder of Preferred Stock. When the Conversion Shares are issued and paid
for in accordance with the terms of the Preferred Stock, such shares will be
duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of refusal of any kind and the holders shall be entitled
to all rights accorded to a holder of Common Stock. When the Warrant Shares are
issued and paid for in accordance with the terms of the Warrants, such shares
will be duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of refusal of any kind and the holders shall be entitled
to all rights accorded to a holder of Common Stock. When the
PIK Dividend Shares are issued in accordance with the terms of the Certificate
of Designation, such shares will be duly authorized by all necessary corporate
action and validly issued and outstanding, fully paid and nonassessable, free
and clear of all liens, encumbrances and rights of refusal of any kind and the
holders shall be entitled to all rights accorded to a holder of Common
Stock.
(e) 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 do not and will not (i) violate any provision of the Certificate
or Bylaws or any Subsidiary’s comparable charter documents, (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, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries’ respective properties or assets are bound,
(iii) create or impose a lien, mortgage, security interest, charge or
encumbrance of any nature on any property or asset of the Company or any of its
Subsidiaries under any agreement or any commitment to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound or by which any of their respective properties or assets
are bound, or (iv) result in a violation of any federal, state, local or foreign
statute, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) 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, except, in all cases other than violations
pursuant to clauses (i) or (iv) (with respect to federal and state securities
laws) above, for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. To the
Company’s best knowledge, the business of the Company and its Subsidiaries is
not being conducted in violation of any laws, ordinances or regulations of any
governmental entity, except for possible violations which singularly or in the
aggregate do not and will not have a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is required under federal, state, foreign or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under the
Transaction Documents or issue and sell the Securities in
accordance with the terms hereof or thereof (other than any filings which may be
required to be made by the Company with the Securities and Exchange Commission
(the “Commission”) prior
to or subsequent to each Closing, or state securities administrators subsequent
to each Closing, or any registration statement which may be filed pursuant
hereto or thereto).
(f) Commission
Documents; Financial Statements. The
Common Stock is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as
amended (the “Exchange
Act”), and,
except as disclosed on Schedule
2.1(f) hereto,
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing,
including filings incorporated by reference therein, being referred to herein as
the “Commission
Documents”). The
Company has delivered or made available (through the SEC ▇▇▇▇▇ website) to the
Purchasers true and complete copies of the Commission Documents filed with the
Commission since October 1, 2003. Except as disclosed on Schedule
2.1(f) hereto,
the Company has not provided to the Purchasers any material non-public
information or other information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company but which has not
been so disclosed, other than with respect to the transactions contemplated by
this Agreement. To the best of the Company’s knowledge, at the time of its
filing, the Company’s Quarterly Report on Form 10-QSB for the fiscal quarter
ended September 30, 2004 (the “Form
10-Q”)
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated thereunder
and other
federal, state and local laws, rules and regulations applicable to such
documents, and the Form 10-Q did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. To the best of the Company’s knowledge, at
the time of its filing, the Company’s Annual Report on Form 10-KSB, as amended,
for the fiscal year ended December
31, 2004 (the
“Form
10-K”)
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such
documents, and, to the best of the Company’s knowledge, at the time of its
filing, the Form 10-K did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates (taking into
account all restatements thereof in subsequent Commission Documents), the
financial statements of the Company included in the Commission Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements
(taking into account all restatements thereof in subsequent Commission
Documents) have been prepared in accordance with generally accepted accounting
principles (“GAAP”)
applied on a consistent basis 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 not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects
the financial position of the Company and its Subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Subsidiaries.
Schedule
2.1(g) hereto
sets forth each Subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each Person’s
ownership of the outstanding stock or other interests of such Subsidiary. For
the purposes of this Agreement, “Subsidiary” shall
mean any Person of which at least a majority of the securities or other
ownership interest having ordinary voting power (absolutely or contingently)
for the election of directors or other Persons performing similar functions are
at the time owned directly or indirectly by the Company and/or any of its other
Subsidiaries. All of the outstanding shares of capital stock of each Subsidiary
have been duly authorized and validly issued, and are fully paid and
nonassessable. There are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon any
Subsidiary for the purchase or acquisition of any shares of capital stock of
any Subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Neither
the Company nor any Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any Subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence. Neither the
Company nor any Subsidiary is party to, nor has any knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of any
Subsidiary.
(h) No
Material Adverse Change. Since
December
31,
2004, the
Company has not experienced or suffered any Material Adverse
Effect.
(i) No
Undisclosed Liabilities. Except
as set forth on Schedule
2.1(i), neither
the Company nor any of its Subsidiaries has any liabilities, obligations, claims
or losses (whether liquidated or unliquidated, secured or unsecured, absolute,
accrued, contingent or otherwise) other than those set forth on the balance
sheet included in the Form 10-K or incurred in the ordinary course of the
Company’s or its Subsidiaries respective businesses since December
31,
2004, and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect on the Company or its Subsidiaries.
(j) No
Undisclosed Events or Circumstances. To the
best of the Company’s knowledge, since December
31,
2004, no
event or circumstance has occurred or exists with respect to the Company or its
Subsidiaries or their respective businesses, properties, prospects, operations
or financial condition, 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.
(k) Indebtedness.
Schedule
2.1(k) hereto
sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments. For purposes of this Agreement: (x) “Indebtedness” of any
Person means, without duplication (A) any indebtedness for borrowed money in
excess of $100,000, (B) any 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) in excess of $100,000, (C) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) any 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) any indebtedness in excess of $100,000 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 GAAP, consistently applied for the periods
covered thereby, is classified as a capital lease with a present value in excess
of $100,000, (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 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; and (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 in
excess of $100,000 due under leases required to be capitalized in accordance
with GAAP. Neither
the Company nor any Subsidiary is in default with respect to any
Indebtedness.
(l) Title
to Assets. Each of
the Company and the Subsidiaries has good and valid title to all of its real and
personal property, free and clear of any mortgages, pledges, charges,
liens, security interests or other encumbrances of any nature whatsoever, except
as disclosed in the Commission Documents or such that, individually or in the
aggregate, do not have a Material Adverse Effect. All leases to real and
personal property of the Company and each of its Subsidiaries are valid and
subsisting and in full force and effect.
(m) Actions
Pending. Except
as disclosed on Schedule
2.1(m) hereto,
there is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or other proceeding pending or, to the knowledge of
the Company,
threatened against the Company or any Subsidiary which questions the validity of
this Agreement or any of the other Transaction Documents or any of the
transactions contemplated hereby or thereby or any action taken or to be taken
pursuant hereto or thereto. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against or involving the
Company, any Subsidiary or any of
their respective properties or assets, which individually or in the aggregate,
would have a Material Adverse Effect. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any Subsidiary or any
officers or directors of the Company or any Subsidiary in their capacities as
such, which individually, or in the aggregate, would have a Material Adverse
Effect.
(n) Compliance
with Law. To the
best of the Company’s knowledge, the business of the Company and the
Subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or such that,
individually or in the aggregate, the noncompliance therewith would not have a
Material Adverse Effect. The Company and each of its Subsidiaries have all
franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. Except
as set forth on Schedule
2.1(o) hereto,
the Company and each of the Subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected in
the financial statements of the Company and the Subsidiaries for all current
taxes and other charges to which the Company or any Subsidiary is subject and
which are not currently due and payable. None of the federal income tax returns
of the Company or any Subsidiary have been audited by the Internal Revenue
Service. The Company has no knowledge of any additional assessments, adjustments
or contingent tax liability (whether federal or state) of any nature whatsoever,
whether pending or threatened against the Company or any
Subsidiary for any period, nor of any basis for any such assessment, adjustment
or contingency.
(p) Certain
Fees. Except
for ▇▇▇▇▇▇▇▇ Curhan Ford & Co., Aspen Advisors, and ▇▇▇▇▇▇▇▇ Capital
Advisors, the Company has not employed any broker or finder or incurred any
liability for any brokerage or investment banking fees, commissions, finders’
structuring fees, financial advisory fees or other similar fees in connection
with the Transaction Documents.
(q) Disclosure. To the
best of the Company’s knowledge, neither this Agreement or the Schedules hereto
nor any other documents, certificates or instruments furnished to the Purchaser
by or on behalf of the Company or any Subsidiary in connection with the
transactions contemplated by this Agreement contain any untrue statement of a
material fact or omit to
state a material fact necessary in order to make the statements made herein or
therein, in the light of the circumstances under which they were made herein or
therein, not misleading.
(r) Intellectual
Property. The
Company and each of the Subsidiaries owns or possesses valid licenses under all
the Proprietary Rights owned by it and have no knowledge that such rights are in
conflict with the rights of others. As of
the date of this Agreement, neither the Company nor any of its Subsidiaries has
received any written notice that any Proprietary Rights have been declared
unenforceable or otherwise invalid by any court or governmental agency. As of
the date of this Agreement, there is, to the knowledge of the Company, no
material existing infringement, misuse or misappropriation of any Proprietary
Rights by others. From December
31,
2004 to the
date of this Agreement, neither the Company nor any of its Subsidiaries has
received any written notice alleging that the operation of the business of the
Company or any of its Subsidiaries infringes in any material respect upon the
intellectual property rights of others. “Proprietary
Rights” shall
mean patents, trademarks, domain names (whether or not registered) and any
patentable improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations, and all rights with respect to the
foregoing.
(s) Environmental
Compliance. The
Company and each of its Subsidiaries have obtained all material approvals,
authorization, certificates, consents, licenses, orders and permits or other
similar authorizations of all
governmental authorities, or from any other Person, that are required under any
Environmental Laws, the absence of which would have a Material Adverse Effect.
“Environmental
Laws” shall
mean all applicable laws relating to the protection of the environment
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. The Company has
all necessary governmental approvals required under all Environmental Laws and
used in its business or in the business of any of its Subsidiaries, except for
such instances as would not individually or in the aggregate have a Material
Adverse Effect. The Company and each of its Subsidiaries are also in compliance
with all other limitations, restrictions, conditions, standards, requirements,
schedules and timetables required or imposed under all Environmental Laws.
Except for such instances as would not individually or in the aggregate have a
Material Adverse Effect, there are no past or present events, conditions,
circumstances, incidents, actions or omissions relating to or in any way
affecting the Company or its Subsidiaries that violate or may violate
any Environmental Law after the Closing or that may give rise to any
Environmental Liabilities, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under
any Environmental
Law, or (ii) based on or related to the manufacture, processing, distribution,
use, treatment, storage (including, without limitation, underground storage
tanks), disposal, transport or handling, or the emission, discharge, release or
threatened release of any hazardous substance. “Environmental
Liabilities” means
all liabilities of a Person (whether such liabilities are owed by such
Person to governmental authorities, third parties or otherwise) whether
currently in existence or arising hereafter which arise under or relate to any
Environmental Law.
(t) Books
and Records; Internal Accounting Controls. To the
best of the Company’s knowledge, the books, records and documents of the Company
and its Subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the Subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or any Subsidiary. The
Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient, in the reasonable judgment of the Company’s Board of
Directors, to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
actions are taken with respect to any differences.
(u) Material
Agreements. Except
for those agreements disclosed on Schedule
2.1(u) hereto,
or the Transaction Documents, or those that are included as exhibits to the
Commission Documents, neither the Company nor any Subsidiary is a party to any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the Commission
(collectively, “Material
Agreements”) if the
Company or any Subsidiary were registering securities under the Securities Act.
The Company and each of its Subsidiaries has in all material respects performed
all the obligations required to be performed by them to date under the foregoing
agreements, have received no notice of default and, to the best of the Company’s
knowledge, are not in default under any Material Agreement now in effect, the
result of which could cause a Material Adverse Effect. No written or oral
contract, instrument, agreement, commitment, obligation, plan or arrangement of
the Company or of any Subsidiary limits or shall limit the payment of dividends
on its Common Stock.
(v) Transactions
with Affiliates. Except
for those agreements disclosed on Schedule
2.1(v) hereto
or as disclosed in the Commission Documents, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions between (a) the Company, any Subsidiary or any
of their respective customers or suppliers, on the one hand, and (b) on the
other hand, any officer, employee, consultant or director of the Company, or any
of its Subsidiaries, or any
Person owning 5% or more of the capital stock of the Company or any Subsidiary
or any member of the immediate family of such Person, officer, employee,
consultant, director or 5% or greater stockholder or any corporation or other
entity controlled by such officer, employee, consultant, director or stockholder.
(w) Securities
Act of 1933. The
Company has complied and will comply with all applicable federal and state
securities laws in connection with the offer, issuance and sale of the
Securities hereunder. To the best of the Company’s knowledge, neither the
Company nor anyone acting on its behalf, directly or indirectly, has or will
sell, offer to sell or solicit offers to buy any of the Securities, or similar
securities to, or solicit offers with respect thereto from, or enter into any
preliminary conversations or negotiations relating thereto with, any Person, or
has taken or will take any action so as to bring the issuance and sale of any of
the Securities under the registration provisions of the Securities
Act and applicable state securities laws. 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 under the Securities Act) in connection with the offer or sale of
any of the Securities.
(x) Governmental
Approvals. Except
for the filing of any notice prior or subsequent to each Closing that may be
required under applicable state and/or federal securities laws (which if
required, shall be filed on a timely basis),
no authorization, consent, approval, license, exemption of, filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for, or in connection with, the execution or delivery of the Shares and the
Warrants, or for the performance by the Company of its obligations under the
Transaction Documents.
(y) Employees. Neither
the Company nor any Subsidiary has any collective bargaining arrangements or
agreements covering any of its employees. Except as set forth in the Commission
Documents, neither the Company nor any Subsidiary has any employment contract,
agreement regarding proprietary information, non-competition agreement,
non-solicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such Subsidiary, which contract or
agreement is required to be disclosed in the Commission Documents but which is
not so disclosed. Since December 31, 2004, no
officer, consultant or key employee of the Company or any Subsidiary whose
termination, either individually or in the aggregate, could have a Material
Adverse Effect, has terminated or, to the knowledge of the Company, has any
present intention of terminating his or her employment or engagement with the
Company or any Subsidiary.
(z) Absence
of Certain Developments. Except
as disclosed on Schedule
2.1(z) hereto
or as set forth in the Commission Documents, since December
31,
2004, neither
the Company nor any Subsidiary has:
(i) issued
any stock, bonds or other corporate securities or any rights, options or
warrants with respect thereto other than under the Company’s stock option/stock
issuance plans;
(ii) borrowed
any amount or incurred or become subject to any liabilities (absolute or
contingent) except current liabilities incurred in the ordinary course of
business which are comparable in nature and amount to the current liabilities
incurred in the ordinary course of business during the comparable portion of its
prior fiscal year, as adjusted to reflect the current nature and volume of the
Company’s or such Subsidiary’s business;
(iii) discharged
or satisfied any lien or encumbrance or paid any obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business;
(iv) declared
or made any payment or distribution of cash or other property to stockholders
with respect to its stock, or purchased or redeemed, or made any agreements so
to purchase or redeem, any shares of its capital stock;
(v) sold,
assigned or transferred any other tangible assets, or canceled any debts or
claims, except in the ordinary course of business;
(vi) sold,
assigned or transferred any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights, or
disclosed any proprietary confidential information to any Person except in the
ordinary course of business or to the Purchasers or their
representatives;
(vii) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
prospective business;
(viii) made any
changes in employee compensation except in the ordinary course of business and
consistent with past practices;
(ix) made
capital expenditures or commitments therefor that aggregate in excess of
$25,000;
(x) entered
into any other transaction other than in the ordinary course of business, or
entered into any other material transaction, whether or not in the ordinary
course of business;
(xi) made
charitable contributions or pledges in excess of $25,000;
(xii) suffered
any material damage, destruction or casualty loss, whether or not covered by
insurance;
(xiii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment;
(xiv) effected
any two or more events of the foregoing kind which in the aggregate would cause
a Material Adverse Effect; or
(xv) entered
into an agreement, written or otherwise, to take any of the foregoing
actions.
(aa) Use of
Proceeds. The
proceeds from the sale of the Shares and the Warrants shall be used by the
Company for working capital purposes only, and shall not be used to repay any
outstanding Indebtedness or any loans due to any officer, director, affiliate or
insider of the Company, except for the loans to the Company made by certain
directors of the Company that are set forth on Schedule
2.1(aa) hereto
(which loans may be repaid out of the proceeds from the sale of the Shares and
the Warrants).
(bb) Public
Utility Holding Company Act and Investment Company Act Status. The
Company is not a “holding company” or a “public utility company” as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended. The
Company is not, and as a result of and immediately upon each Closing will not
be, an “investment company” or a company
“controlled” by an “investment company”, within the meaning of the Investment
Company Act of 1940, as amended.
(cc) ERISA. No
liability to the Pension Benefit Guaranty Corporation has been incurred with
respect to any Plan by the Company or any of its Subsidiaries which is or would
cause a Material Adverse Effect. The execution and delivery of this Agreement
and the issue and sale of the Shares and the Warrants will not involve any
transaction which is subject to the prohibitions of Section 406 of ERISA or in
connection with which a tax could be imposed pursuant to Section 4975 of the
Internal Revenue Code of 1986, as amended (the “Code”);
provided that, if any Purchaser, or any Person that owns a beneficial interest
in any Purchaser, is an “employee pension benefit plan” (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a “party in
interest” (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable,
are met. As used in this Section 2.1(cc), the term “Plan” shall
mean an “employee pension benefit plan” (as defined in Section 3 of ERISA) which
is or has been established or maintained, or to which contributions are or have
been made, by the Company or any Subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any Subsidiary, is
under common control, as described in Section 414(b) or (c) of the
Code.
(dd) ▇▇▇▇▇▇▇▇-▇▇▇▇▇. The
Company is in compliance with any and all applicable requirements of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 that are effective and applicable to it as of the
date hereof, and any and all applicable rules and regulations promulgated by the
Commission thereunder that are effective as of the date hereof, except where
such noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.
Section
2.2 Representations
and Warranties of the Purchasers. Each of
the Purchasers hereby makes the following representations and warranties to the
Company with respect solely to itself and not with respect to any other
Purchaser:
(a) Organization
and Standing of the Purchasers. If such
Purchaser is an entity, such Purchaser is a corporation, limited liability
company or partnership duly incorporated or organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization
and Power. Such
Purchaser has the requisite power and authority to enter into and perform the
Transaction Documents and to purchase the Shares and Warrants being sold to it
hereunder. The execution, delivery and performance of the Transaction Documents
by such Purchaser and the consummation by it of the transactions
contemplated hereby
have been duly authorized by all necessary corporate, limited liability company
or partnership action, and no
further consent or authorization of such Purchaser or its Board of Directors,
stockholders, members, managers or partners, as the case may be, is required.
This Agreement has been duly authorized, executed and delivered by such
Purchaser. Each of
the Transaction Documents constitute, or shall constitute when executed and
delivered, valid and binding obligations of such Purchaser enforceable against
such Purchaser in accordance with their terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor’s rights and remedies or by
other equitable principles of general application.
(c) Acquisition
for Investment. Such
Purchaser is purchasing the Shares and acquiring the Warrants (and would acquire
the underlying Common Stock) solely for its own account for the purpose of
investment and not with a view to or for sale in connection with the
distribution thereof. Such Purchaser does not have a present intention to sell
any of the Securities, nor a present arrangement (whether or not legally
binding) or intention to effect any distribution of any of the Securities to or
through any Person; provided,
however, that by
making the representations herein and subject to Section 2.2(e) below, such
Purchaser does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to pledge any of the Securities for margin
purposes and/or to dispose of any of the Securities at any time in accordance
with federal and state securities laws applicable to such disposition. Such
Purchaser acknowledges that it (i) has such knowledge and experience in
financial and business matters such that such Purchaser is capable of evaluating
the merits and risks of its investment in the Company, (ii) is able to bear the
financial risks associated with an investment in the Securities, and (iii) has
been given
full access to such records of the Company and the Subsidiaries and to the
officers of the Company and the Subsidiaries as it has deemed necessary or
appropriate to conduct its due diligence investigation.
(d) Rule
144. Such
Purchaser understands that the Securities must be held indefinitely unless such
Securities are registered under the Securities Act or an exemption
from registration
is available. Such Purchaser acknowledges that it is familiar with Rule 144 of
the rules and regulations of the Commission, as amended, promulgated pursuant to
the Securities Act (“Rule
144”), and
that such Purchaser has been advised that Rule 144 permits resales only under
certain circumstances. Such Purchaser understands that to the extent that Rule
144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement. Such
Purchaser will not, prior to the effectiveness of the Registration Statement (as
defined in the Registration Rights Agreement), if then prohibited by law or
regulation, sell, offer to sell, solicit offers to buy, dispose of, loan, pledge
or grant any right with respect to the Securities. Without limiting the
generality of the foregoing, such Purchaser will not, prior to the effectiveness
of the Registration Statement, sell any of the Securities short “against the
box”.
(e) General. Such
Purchaser understands that the Securities are being offered and sold in reliance
on a transactional exemption from the registration requirements of federal and
state securities laws and the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of such Purchaser set forth herein in order to determine the applicability of
such exemptions and the suitability of such Purchaser to acquire the
Securities. Such
Purchaser understands that no United States federal or state agency or any
government or governmental agency has passed upon or made any recommendation or
endorsement of the Securities.
(f) Opportunities
for Additional Information. Such
Purchaser acknowledges that such Purchaser has had the opportunity to ask
questions of and receive answers from, or obtain additional information from,
the executive officers of the Company concerning the financial and other affairs
of the Company, and to the extent deemed necessary in light of such Purchaser’s
personal knowledge of the Company’s affairs, such Purchaser has asked such
questions and received answers to the full satisfaction of such Purchaser, and
such Purchaser desires to invest in the Company.
(g) No
General Solicitation. Such
Purchaser acknowledges that the Securities were not offered to such Purchaser by
means of any form of general or public solicitation or general advertising, or
publicly disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio, or
(ii) any seminar or meeting to which such Purchaser was invited by any of the
foregoing means of communications.
(h) Accredited
Investor. Such
Purchaser is an accredited investor (as defined in Rule 501 of Regulation D),
and such Purchaser has such experience in business and financial matters that it
is capable of evaluating the merits and risks of an investment in the
Securities. Such Purchaser acknowledges that an investment in the Securities is
speculative and involves a high degree of risk.
ARTICLE
III
Covenants
The
Company covenants with each Purchaser as follows, which covenants are for the
benefit of each Purchaser and its respective permitted assignees (and, where
expressly so indicated, the respective Purchasers severally and not jointly
covenant with and for the benefit of the Company as follows).
Section
3.1 Disclosure
of Transactions and Other Material Information.
Promptly after the Closing (but in any event no later than the fourth Business
Day immediately following the Closing Date), the Company shall file a Current
Report on Form 8-K with the Commission describing the terms of the transactions
contemplated by the Transaction Documents and including as exhibits to such
Current Report on Form 8-K this Agreement, the Warrants, the Certificate of
Designation, the Lock-Up Agreements and the Registration Rights Agreement, and
the schedules hereto and thereto in the form required by the Exchange Act
(including all attachments, the “8-K
Filing”). From
and after the filing of the 8-K Filing with the Commission, no Purchaser shall
be in possession of any material, nonpublic information received from the
Company, any of its Subsidiaries or any of their respective officers, directors,
employees or agents that is not disclosed in the 8-K Filing. The Company shall
not, and shall cause each of its Subsidiaries and its and each of their
respective officers, directors, employees and agents not to, provide any
Purchaser with any material, nonpublic information regarding the Company or any
of its Subsidiaries from and after the filing of the 8-K Filing with the
Commission without the express written consent of such Purchaser. Neither the
Company nor any Purchaser shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that
the Company shall be entitled, without the prior approval of any Purchaser, to
make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith, and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) above, the Purchasers shall
be consulted by the Company (although the consent of the Purchasers shall not be
required) in connection with any such press release or other public disclosure
prior to its release).
Section
3.2 Registration. The
Company will cause its Common Stock to continue to be registered under Section
12(b) or 12(g) of the Exchange Act, will comply in
all respects with its reporting and filing obligations under the Exchange Act,
will comply with all requirements related to any registration statement filed
pursuant to the Registration Rights Agreement, and will not take any action or
file any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted herein.
Section
3.3 Inspection
Rights. In the
event the Registration Statement is not effective or has been suspended, the
Company shall permit, during normal business hours and upon reasonable request
and reasonable notice, each Purchaser or any employees, agents or
representatives thereof, so long as such Purchaser shall be obligated hereunder
to purchase the Shares or shall beneficially own the Shares or Conversion
Shares, or shall own Warrant Shares or the Warrants which, in the aggregate,
represent more than two percent (2%) of the total combined voting power of all
Company voting securities then outstanding, to (subject to an appropriate
non-disclosure agreement) examine and make reasonable copies of and extracts
from the records and books of account of, and visit and inspect, during the term
of the Warrants, the properties, assets, operations and business of
the Company
and any
Subsidiary, and to discuss the
affairs, finances and
accounts of the Company and any Subsidiary with any of its officers,
consultants, directors, and key employees.
Section
3.4 Compliance
with Laws. The
Company shall comply, and cause each Subsidiary to comply, with all applicable
laws, rules, regulations and orders, the noncompliance with which could have a
Material Adverse Effect.
Section
3.5 Keeping
of Records and Books of Account. The
Company shall keep and cause each Subsidiary to keep adequate records and books
of account, in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the
Company and its Subsidiaries, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be
made.
Section
3.6 Other
Agreements. The
Company shall not enter into any agreement in which the terms of such agreement
would restrict or impair the right or ability of the
Company or any Subsidiary to perform under any Transaction
Document.
Section
3.7 Right
of First Refusal.
(a) Until the
18-month anniversary of the Closing Date, the Company hereby grants to each
Purchaser (including for such purposes its assigns) that (A) still owns Shares
immediately prior to the issuance of the “New Securities” (as defined in
Section 3.7(b)), (B) purchased Shares on the Closing Date, and (C) was not
an officer or director of the Company as of the Closing Date (any such
Purchaser, for such purpose, an “Eligible
Purchaser”), a
right (the “Right
of First Refusal”) to
purchase all or any part of such Eligible Purchaser’s pro rata share of any New
Securities that the Company may, from time to time, propose to sell and issue.
The pro rata share for each Eligible Purchaser, for purposes of the Right of
First Refusal, is the ratio of (x) the number of shares of Common Stock
then held or deemed to be held by such Eligible Purchaser immediately prior to
the issuance of the New Securities (assuming the full conversion of the Shares
and the full exercise of the Warrants), to (y) the total number of shares
of Common Stock of the Company then held or deemed to be held by all Eligible
Purchasers immediately prior to the issuance of the New Securities (assuming the
full conversion of the Shares and the full exercise of the
Warrants).
(b) For
purposes of this Section 3.7, “New
Securities” shall
mean any Common Stock or Preferred Stock, whether or not authorized on the date
hereof, and rights, options or warrants to purchase Common Stock or Preferred
Stock and securities of any type whatsoever that are, or may become, convertible
into Common Stock or Preferred Stock; provided,
however, that
“New Securities” does not include the following:
(i) shares of
capital stock of the Company issued or issuable upon conversion or exercise of
any currently outstanding securities or any New Securities issued in accordance
with this Agreement (including the Conversion Shares, the Warrant Shares and the
PIK Dividend Shares);
(ii) shares or
options or warrants for Common Stock granted to officers, directors and
employees of, and consultants to, the Company pursuant to stock option or
purchase plans or other compensatory agreements approved by the Board of
Directors;
(iii) shares of
Common Stock or Preferred Stock issued in connection with any pro rata stock
split, stock dividend (including PIK Dividend Shares) or recapitalization by the
Company;
(iv) shares of
capital stock, or options or warrants to purchase capital stock, issued to a
strategic investor in connection with a strategic commercial agreement as
determined by the Board of Directors;
(v) shares of
capital stock, or options or warrants to purchase capital stock, issued to an
investor in connection with a joint venture arrangement where the Company is a
participant (including, but not limited to, the joint venture arrangement with
▇▇▇▇▇▇▇▇ Capital Advisors, LLC);
(vi) shares of
capital stock, or options or warrants to purchase capital stock, issued pursuant
to the acquisition of another corporation or entity by the Company by
consolidation, merger, purchase of all or substantially all of the assets, or
other reorganization in which the Company acquires, in a single transaction or
series of related transactions, all or substantially all of the assets of such
other corporation or entity or fifty percent (50%) or more of the voting power
of such other corporation or entity or fifty percent (50%) or more of the equity
ownership of such other corporation or entity;
(vii) shares of
capital stock issued in an underwritten public securities offering pursuant to a
registration statement filed under the Securities Act;
(viii) shares of
capital stock, or options or warrants to purchase capital stock, issued to
current or prospective customers or suppliers of the Company approved by the
Board of Directors as compensation or accommodation in lieu of other payment,
compensation or accommodation to such customer or supplier;
(ix) shares of
capital stock, or warrants to purchase capital stock, issued to any Person that
provides services to the Company as compensation therefor pursuant to an
agreement approved by the Board of Directors;
(x) shares of
capital stock, or options or warrants to purchase capital stock, offered in a
transaction where purchase of such securities by any Purchaser would cause such
transaction to fail to comply with applicable federal or state securities laws
or would cause an applicable registration or qualification exemption to fail to
be available to the Company; provided,
however, that
this clause (x) shall apply only to the Purchaser or Purchasers who would cause
any such failure, and not to any of the other Purchasers; and
(xi) securities
issuable upon conversion or exercise of the securities set forth in paragraphs
(i) - (x) above.
(c) In the
event that the Company proposes to undertake an issuance of New Securities, it
shall give each Eligible Purchaser written notice (the “Notice”) of its
intention, describing the type of New Securities, the price, and the general
terms upon which the Company proposes to issue the same. Each Eligible Purchaser
shall have five (5) Business Days after receipt of such Notice to agree to
purchase all or any portion of its pro rata share of such New Securities at the
price and upon the terms specified in the Notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased. In
the event that any New Securities subject to the Right of First Refusal are not
purchased by the Eligible Purchaser within the five (5) Business Day period
specified above, the Company shall have ninety (90) days thereafter to sell (or
enter into an agreement pursuant to which the sale of New Securities that had
been subject to the Right of First Refusal shall be closed, if at all, within
sixty (60) days from the date of said agreement) the New Securities with respect
to which the rights of the Purchaser were not exercised at a price and upon
terms, including manner of payment, no more favorable to the purchasers thereof
than specified in the Notice. In the event the Company has not sold all offered
New Securities within such ninety (90) day period (or sold and issued New
Securities in accordance with the foregoing within sixty (60) days from the date
of such agreement), the Company shall not thereafter issue or sell any New
Securities, without first complying again with the procedures set forth in this
Section 3.7.
Section
3.8 Reservation
of Shares. So long
as the Shares or Warrants remain outstanding, the Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, the maximum number of shares of Common Stock to effect the conversion
of the Shares and the exercise of the Warrants.
Section
3.9 Non-public
Information. Neither
the Company nor any of its officers or agents shall disclose any material
non-public information about the Company to any Purchaser, and no Purchaser or
any of its affiliates, officers or agents will solicit any material non-public
information from the Company.
Section
3.10 S-3
Eligibility. The
Company shall use its commercially reasonable best efforts to become eligible
(and then upon becoming eligible, to remain eligible) to use a Form S-3
registration statement.
Section
3.11 Beneficial
Ownership Restrictions.
(a) Notwithstanding
anything to the contrary set forth in this Agreement or any other Transaction
Document (including, without limitation, the Warrants and the Certificate of
Designation), at no time may a Purchaser convert or exercise a Security if the
number of shares of Common Stock to be issued pursuant to such conversion or
exercise, when aggregated with all other shares of Common Stock owned by such
Purchaser at such time, would result in such Purchaser beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act, and the rules
thereunder) in excess of 4.99% of the then issued and outstanding shares of
Common Stock outstanding at such time; provided,
however, that
upon a Purchaser providing the Company with sixty-one (61) days notice (the
“Waiver
Notice”) that
such Purchaser would like to waive this Section 3.11(a) with regard to any or
all shares of Common Stock issuable upon conversion or exercise of any Security,
this Section 3.11(a) shall be of no force or effect with regard to those
Securities referenced in the Waiver Notice; provided,
further, that
any Purchaser may waive this Section 3.11(a) by so indicating on the signature
page to this Agreement, any such waiver to be effective on and as of the date of
this Agreement.
(b) Notwithstanding
anything to the contrary set forth in this Agreement or any other Transaction
Document (including, without limitation, the Warrants and the Certificate of
Designation), at no time may a Purchaser convert or exercise a Security if the
number of shares of Common Stock to be issued pursuant to such conversion or
exercise, when aggregated with all other shares of Common Stock owned by such
Purchaser at such time, would result in such Purchaser beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act, and the rules
thereunder) in excess of 9.99% of the then issued and outstanding shares of
Common Stock outstanding at such time; provided,
however, that
upon a Purchaser providing the Company with a Waiver Notice that such Purchaser
would like to waive this Section 3.11(b) with regard to any or all shares of
Common Stock issuable upon conversion or exercise of a Security, this Section
3.11(b) shall be of no force or effect with regard to those Securities
referenced in the Waiver Notice.
ARTICLE
IV
Conditions
Section
4.1 Conditions
Precedent to the Obligation of the Company to Close and to Sell the Shares and
Warrants on the Closing Date. The
obligation hereunder of the Company to close and issue and sell the Shares and
the Warrants to the Purchasers on the Closing Date is subject to the
satisfaction
or waiver, at or before the Closing, of the conditions set forth below. These
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion.
(a) Accuracy
of the Purchasers’ Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance
by the Purchasers. Each
Purchaser shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Purchaser at or prior to the
Closing Date.
(c) No
Injunction. No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.
(d) Delivery
of Purchase Price. The
Purchase Price for the Shares and Warrants being purchased at the Closing shall
have been delivered to the Company at the Closing.
(e) Delivery
of Transaction Documents. The
Transaction Documents to which the Purchasers are party shall have been duly
executed and delivered by the Purchasers to the Company.
Section
4.2 Conditions
Precedent to the Obligation of the Purchasers to Close
and to Purchase the Shares and Warrants on the Closing Date. The
obligation hereunder of the Purchasers to purchase the Shares and Warrants on
the Closing Date and consummate the transactions contemplated by this Agreement
is subject to the satisfaction or waiver, at or before the Closing, of each of
the conditions set forth below. These conditions are for the Purchasers’ sole
benefit and may be waived by the Purchasers at any time in their sole
discretion.
(a) Accuracy
of the Company’s Representations and Warranties. Each of
the representations and warranties of the Company in this Agreement and in each
of the other Transaction Documents shall be true and correct in all material
respects as of the Closing Date, except for representations and warranties that
speak as of a particular date, which shall be true and correct in all material
respects as of such date.
(b) Performance
by the Company. The
Company shall have performed, satisfied and complied in all respects with all
covenants, agreements and conditions required by this Agreement
to be performed, satisfied or complied with by the Company at or prior to the
Closing Date.
(c) No
Suspension, Etc. Trading
in the Company’s Common Stock shall not have been suspended by the Commission
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as reported by
Bloomberg Financial Markets (“Bloomberg”) shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, nor shall
a banking
moratorium have been declared either by the United States or California State
authorities, nor
shall there have occurred any national or international calamity or crisis of
such magnitude in its effect on any financial market which, in each case, in the
reasonable judgment of the Purchasers, makes it impracticable or inadvisable to
purchase the Shares and the Warrants being purchased on the Closing
Date.
(d) No
Injunction. No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.
(e) No
Proceedings or Litigation. Except
as disclosed on Schedule
2.1(m) hereto,
no action, suit or proceeding before any arbitrator or any governmental
authority shall have been commenced, and no investigation by any
governmental authority shall have been threatened, against the Company or any
Subsidiary, or any of the officers, directors or affiliates of the Company or
any Subsidiary, unless by or at the behest of a Purchaser, seeking to restrain,
prevent or change
the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(f) Opinion
of Counsel, Etc. The
Purchasers shall have received an opinion of counsel to the Company, dated the
Closing Date, in the form of Exhibit
C hereto,
and such other certificates and documents as the Purchasers or their counsel
shall reasonably require incident to the Closing.
(g) Warrants
and Shares. The
Company shall have delivered to the Purchasers the originally executed Warrants
(in such denominations as each Purchaser may request) and shall have delivered
certificates representing the Shares (in such denominations as each Purchaser
may request) being acquired by the Purchasers at the Closing.
(h) Resolutions. The
Board of Directors of the Company shall have adopted resolutions consistent with
Section 2.1(b) hereof in a form reasonably acceptable to the Purchasers (the
“Resolutions”).
(i) Certificate
of Designation. As of
the Closing Date, the Company shall have filed with the Delaware Secretary of
State the Certificate of Designation.
(j) Reservation
of Shares. As of
the Closing Date, the Company shall have reserved out of its authorized and
unissued Preferred Stock, solely for the purpose of effecting the issuance of
the Shares, a number of shares of Preferred Stock equal to the aggregate number
of the Shares. As of the Closing Date, the Company shall have reserved out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Shares and the exercise of the Warrants, a number of
shares of Common Stock equal to the number of Conversion Shares and the number
of Warrant Shares issuable upon conversion of the Preferred Stock and the
exercise of the Warrants, respectively, assuming all of the Warrants were
granted on the Closing Date (after giving effect to the Warrants to be issued on
the Closing Date and assuming the Warrants were fully exercisable on such date
regardless of any limitation on the timing or amount of such
exercises).
(k) Secretary’s
Certificate. The
Company shall have delivered to the Purchasers a secretary’s certificate, dated
as of the Closing Date, as to (i) the Resolutions, (ii) the Certificate, (iii)
the Bylaws, each as in effect at the Closing, and (iv) the authority and
incumbency of the officers of the Company executing the Transaction Documents
and any other documents required to be executed or delivered in connection
therewith.
(l) Officer’s
Certificate. On the
Closing Date, the Company shall have delivered to the Purchasers a certificate
of an executive officer of the Company, dated as of the Closing Date,
confirming
the accuracy of the Company’s representations, warranties and covenants as of
the Closing Date and confirming the compliance by the Company with the
conditions precedent set forth in this Section 4.2 as of the Closing
Date.
(m) Fees
and Expenses. As of
the Closing Date, all Purchasers’ fees and expenses contractually required to be
paid by the Company shall have been or authorized to be paid by the Company as
of the Closing Date.
(n) Registration
Rights Agreement. The
Company shall have entered into the Registration Rights Agreement.
(o) Lock-Up
Agreements. Each
officer, director and holder of 10% or more of the Common Stock shall have
executed and delivered to the Purchasers a Lock-Up Agreement in the form
attached hereto as Exhibit
F-1.
(p) Material
Adverse Effect. No
Material Adverse Effect shall have occurred since the date of this
Agreement.
ARTICLE
V
Certificate
Legend
Section
5.1 Legend. Each
certificate representing the Securities shall be stamped or otherwise imprinted
with a legend substantially in the following
form (in addition to any legend required by applicable state securities or “blue
sky” laws), which legend shall not be considered an encumbrance for the purpose
of Section 2.1(d):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR LIGHTING SCIENCE GROUP CORPORATION SHALL HAVE RECEIVED
AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.
The
Company agrees to prepare to reissue certificates representing any of the
Securities, without the legend set forth above, in the hands of the transferee,
if at such time, prior to making any transfer of any such Securities, such
holder thereof shall give written notice to the Company describing the manner
and terms of such transfer and removal as the Company may reasonably request.
Such proposed transfer will not be effected until: (a) the Company has notified
such holder that either (i) in the opinion of Company counsel, the registration
of such Securities is not required in connection with such proposed transfer, or
(ii) a registration statement under the Securities Act covering such proposed
disposition has been filed by the Company with the Commission and has become
effective under the Securities Act; and (b) the Company has notified such holder
that either (i) in the opinion of Company counsel, the registration or
qualification under the securities or “blue sky” laws of any state is not
required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or “blue sky” laws has been effected. The Company
will use its best efforts to respond to any such notice from a holder within
five (5) days. In the case of any proposed transfer under this Section 5.1, the
Company will use reasonable efforts to comply with any such applicable state
securities or “blue sky” laws, but shall in no event be required, in connection
therewith, to qualify to do business in any state where it is not then qualified
or to take any action that would subject it to tax or to the general service of
process in any state where it is not then subject. The restrictions on transfer
contained in this Section 5.1 shall be in addition to, and not by way of
limitation of, any other restrictions on transfer contained in any other section
of this Agreement.
ARTICLE
VI
Termination
Section
6.1 Termination
by Mutual Consent. This
Agreement may be terminated at any time prior to the Closing Date by the mutual
written consent of the Company and the Purchasers.
Section
6.2 Effect
of Termination. In the
event of termination by the Company or the Purchasers, written notice thereof
shall forthwith be given to the other party and the transactions contemplated by
this Agreement shall be terminated without further action by any party.
If this
Agreement is terminated as provided in Section 6.1 herein, this Agreement shall
become void and of no further force and effect, except for Sections 8.1 and 8.2,
and Article VII herein.
Nothing in this Section 6.2 shall be deemed to release the Company or any
Purchaser from any liability for any breach under this Agreement, or to
impair the rights of the Company or such Purchaser to compel specific
performance by the other party of its obligations under this
Agreement.
ARTICLE
VII
Indemnification
Section
7.1 General
Indemnity. The
Company agrees to indemnify and hold harmless each Purchaser (and its respective
directors, officers, employees, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys’ fees, charges and disbursements) incurred by each
Purchaser or any such Person as a result of any inaccuracy in or breach of the
representations, warranties or covenants
made by the Company herein. The Purchasers severally but not jointly agree to
indemnify
and hold harmless the Company and its directors, officers, employees,
affiliates, agents, successors and assigns from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys’ fees, charges and disbursements)
incurred by the Company as result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Purchasers
herein.
Section
7.2 Indemnification
Procedure. Any
party entitled to indemnification under this Article VII (an “indemnified
party”) will
give written notice to the indemnifying party of any matters giving rise to a
claim for indemnification; provided, that
the failure of any party entitled to indemnification hereunder to give notice as
provided herein shall not relieve the indemnifying party of
its obligations under this Article VII except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any action, proceeding or claim is brought
against an indemnified party in respect of which indemnification is sought
hereunder, the indemnifying party shall be entitled to participate in and,
unless in the reasonable judgment of the indemnified party a conflict of
interest between it and the indemnifying party may exist with respect to such
action, proceeding or claim, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. In the event that the
indemnifying party advises an indemnified party that it will contest such a
claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such Person of its election to defend, settle or
compromise, at its sole cost and expense,
any action, proceeding
or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does
so assume the defense of any such claim,
proceeding or action, the indemnified party’s costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available
to the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall be
entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent. Notwithstanding anything in this Article VII to the
contrary, the indemnifying party shall not, without
the indemnified party’s prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release
from all liability in respect of such claim. The indemnification required by
this Article VII shall
be made by periodic payments of the amount thereof during the course of
investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition
to (a) any cause of action or similar rights of the indemnified party
against the
indemnifying party or others, and (b) any liabilities the indemnifying party may
be subject to pursuant to the law.
ARTICLE
VIII
Miscellaneous
Section
8.1 Fees
and Expenses. Each
party shall pay the fees and expenses of its advisors, counsel, accountants and
other experts, if any, and all other expenses, incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of this
Agreement; provided,
however, that
the Company shall pay a flat $50,000 to
Western Reserve Hedged Equity, LP (“WRHE”), the
lead Purchaser, to reimburse WRHE for the fees and expenses (including
attorneys’ fees and expenses) incurred by it in connection with its due
diligence review of the Company and the preparation, negotiation, execution,
delivery and performance of this Agreement and the other Transaction Documents
and the transactions contemplated thereunder, $15,000 of which
has already been paid and is non-refundable, and the remaining $35,000 of which
shall be due and payable in cash at the Closing (and only if the Closing
occurs). The payment of the remaining $35,000 will be paid only by Company check
or money wire in immediately available funds. In
addition, the Company shall pay all reasonable fees and expenses incurred by the
Purchasers in connection with any amendments, modifications or waivers of this
Agreement or any of the other Transaction Documents or incurred in connection
with the enforcement of this Agreement and any of the other Transaction
Documents, including, without limitation, all reasonable attorneys’ fees,
disbursements and expenses.
Section
8.2 Specific
Enforcement; Consent to Jurisdiction.
(a) The
Company and the Purchasers acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement or the other
Transaction Documents were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement or the other Transaction Documents and to enforce
specifically the terms and provisions hereof or thereof, this being in addition
to any other remedy to which any of them may be entitled by law or
equity.
(b) The
Company and each
Purchaser
(i) hereby irrevocably submit to the exclusive jurisdiction of the United States
District Court sitting in the Northern District of Texas and the courts of the
State of Texas located in Dallas,
Texas, County
for the purposes of any suit, action or proceeding arising out of or relating to
this Agreement or any of the other Transaction Documents or the transactions
contemplated hereby or thereby, and (ii) hereby waive, and agree not to assert
in any such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such court, that the suit, action or proceeding
is brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper. The Company and each
Purchaser
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section 8.2
shall affect or limit any right to serve process in any other manner permitted
by law. The Company and the Purchasers hereby
agree that the prevailing party in any suit, action or proceeding arising out of
or relating to the Shares, the Warrants or any Transaction Document, shall be
entitled to reimbursement for reasonable legal fees from the non-prevailing
party.
Section
8.3 Entire
Agreement; Amendment. This
Agreement and the Transaction Documents contain the entire understanding and
agreement of the parties with respect to the matters covered hereby and, except
as specifically set forth herein or in the other Transaction Documents, neither
the Company nor any Purchaser make any representation, warranty, covenant or
undertaking with respect to such matters, and they supersede all prior
understandings and agreements with respect to said subject matter, all of which
are merged herein; provided,
however, that
any non-disclosure agreement is not so superseded. No provision of this
Agreement may be waived or amended other than by a written instrument signed by
the Company and the holders of at least a majority in interest of the
then-outstanding Shares, and no provision hereof may be waived other than by a
written instrument signed by the party against whom enforcement of any such
amendment or waiver is sought.
No such amendment
shall be effective to the extent that it applies to less than all of the holders
of the 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
is also offered to all of the parties to the Transaction Documents or holders of
Shares, as the case may be.
Section
8.4 Notices. Any
notice, demand, request, waiver or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery by telecopy or facsimile at the address or number designated below (if
delivered on a Business Day during normal business hours where such notice is to
be received), or the first Business Day following such delivery (if delivered
other than on a Business Day during normal business hours where such notice is
to be received), or (b) on the second Business Day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or
upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the
Company: Lighting
Science Group Corporation
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇. ▇▇▇ ▇▇▇▇, Chairman & CEO
Telecopier:
(▇▇▇) ▇▇▇-▇▇▇▇
with
copies (which copies
shall not
constitute notice
to the
Company) to: ▇▇▇▇▇▇
▇▇▇▇▇ LLP
▇▇▇▇ ▇
▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇,
▇.▇. ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telecopier:
(▇▇▇) ▇▇▇-▇▇▇▇
If to any
Purchaser: At the
address of such Purchaser set forth on Exhibit
A to this
Agreement.
Any party
hereto may from time to time change its address for notices by giving at least
ten (10) days written notice of such changed address to the other party
hereto.
Section
8.5 Waivers. No
waiver by any party of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder in
any manner impair the exercise of any such right accruing to it
thereafter.
Section
8.6 Headings. The
article, section and subsection headings in this Agreement are for convenience
only and shall not constitute a part of this Agreement for any other purpose and
shall not be deemed to limit or affect any of the provisions
hereof.
Section
8.7 Successors
and Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. After the Closing, the assignment by a party to
this Agreement of any rights hereunder shall not affect the obligations of such
party under this Agreement. After
the Closing, the Purchasers, in compliance with all applicable securities laws,
may assign the Shares, the Warrants and their rights under this
Agreement and the other Transaction Documents and any other rights hereto and
thereto without the consent of the Company.
Section
8.8 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 (other
than indemnified parties, as contemplated by Article VII).
Section
8.9 Governing
Law. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of Delaware, without giving effect to the
choice of law provisions. This
Agreement shall not be interpreted or construed with any presumption against the
party causing this Agreement to be drafted.
Section
8.10 Survival. The
representations and warranties of the Company and the Purchasers contained in
Sections 2.1(o) and 2.1(s) shall survive indefinitely and those contained in
Article II, with the exception of Sections 2.1(o) and 2.1(s), shall survive the
execution and delivery hereof
and each Closing until the date two (2) years from the Closing Date, and the
agreements and covenants set forth in Articles I, III, V, VII and VIII of this
Agreement shall survive
the execution and delivery hereof and the Closing hereunder.
Section
8.11 Counterparts. This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and shall become
effective when counterparts have been signed by each party and delivered
(including by facsimile and/or by photocopy) to the other parties
hereto, it being understood that all parties need not sign the same
counterpart.
Section
8.12 Severability. The
provisions of this Agreement are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or
part of the provisions contained in this Agreement shall, for any reason, be
held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement and this
Agreement shall be
reformed and construed as if such invalid or illegal or unenforceable provision,
or part of such
provision, would be valid, legal and enforceable to the maximum extent
possible.
Section
8.13 Further
Assurances. From
and after the date of this Agreement, upon the request of the Purchasers or the
Company, the Company and each Purchaser shall execute and deliver such
instruments, documents and other writings as may be reasonably necessary
or desirable
to confirm and carry out and to effectuate fully the intent and purposes of this
Agreement and the other Transaction Documents.
Section
8.14 Independent
Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Purchaser Transaction Document. Nothing contained herein or
in any other Purchaser Transaction Document, and no action taken by any
Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers 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 Purchaser confirms that it has
independently participated in the negotiation of the transactions contemplated
hereby with the advice of its own counsel and advisors. Each Purchaser 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 Purchaser to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser (other than WRHE) hereby agrees and acknowledges that (a) ▇▇▇▇▇▇
▇. Garden, P.C. was retained solely by WRHE in connection with its due diligence
review of the Company and the preparation, negotiation, execution, delivery and
performance of this Agreement and the other Transaction Documents and the
transactions contemplated thereunder, and in such capacity has provided legal
services solely to WRHE, (b) ▇▇▇▇▇▇ ▇. Garden, P.C. has not represented,
nor will it represent, any Purchaser (other than WRHE) in connection with the
preparation, negotiation, execution, delivery and performance of this Agreement
or the other Transaction Documents or the transactions contemplated thereunder,
and (c) each Purchaser (other than WRHE) should, if it wishes counsel with
respect to the preparation, negotiation, execution, delivery and performance of
this Agreement or the other Transaction Documents or the transactions
contemplated thereunder, retain its own independent counsel with respect
thereto.
[Remainder
of page intentionally left blank. Signature pages to follow.]
--
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers or agents as of the date first
above written.
LIGHTING
SCIENCE GROUP CORPORATION
By: __________________________
Name: ▇▇▇
▇▇▇▇
Title: Chairman
and Chief Executive Officer
Address
for Notice:
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Phone:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
With a
copy to:
▇▇▇▇▇▇
▇▇▇▇▇, LLP
▇▇▇▇ ▇
▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Phone:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Attn:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇
[Signatures
of Purchasers to follow on next pages.]
--
PURCHASER:
WESTERN
RESERVE HEDGED EQUITY, LP
By: /s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, Director
PURCHASER:
WESTERN
RESERVE HEDGED EQUITY OFFSHORE, LTD
By: /s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, Director
PURCHASER:
AG
DOMESTIC CONVERTIBLES L.P.
By: ▇▇▇▇▇▇,
▇▇▇▇▇▇ & Co., LP
Investment
Manager
By: /s/
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇.
▇▇▇▇▇▇, CEO
PURCHASER:
AG
DOMESTIC CONVERTIBLES L.P.
By: ▇▇▇▇▇▇,
▇▇▇▇▇▇ & Co., LP
Investment
Manager
By: /s/
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇.
▇▇▇▇▇▇, CEO
PURCHASER:
AG
OFFSHORE CONVERTIBLES LTD
By: ▇▇▇▇▇▇,
▇▇▇▇▇▇ & Co., LP
Investment
Manager
By: /s/
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇.
▇▇▇▇▇▇, CEO
PURCHASER:
AG
OFFSHORE CONVERTIBLES LTD
By: ▇▇▇▇▇▇,
▇▇▇▇▇▇ & Co., LP
Investment
Manager
By: /s/
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇.
▇▇▇▇▇▇, CEO
PURCHASER:
GRYPHON
MASTER FUND, LP
By: /s/
▇.▇. ▇▇▇▇ ▇▇
▇.▇. ▇▇▇▇
▇▇, Authorized Agent
PURCHASER:
GRYPHON
MASTER FUND, LP
By: /s/
▇.▇. ▇▇▇▇ ▇▇
▇.▇. ▇▇▇▇
▇▇, Authorized Agent
PURCHASER:
GSSF
MASTER FUND, LP
By: /s/
▇.▇. ▇▇▇▇ ▇▇
▇.▇. ▇▇▇▇
▇▇, Authorized Agent
PURCHASER:
GSSF
MASTER FUND, LP
By: /s/
▇.▇. ▇▇▇▇ ▇▇
▇.▇. ▇▇▇▇
▇▇, Authorized Agent
PURCHASER:
XERION
PARTNERS I LLC
BY: Paloma
GP LLC
Manager
By: /s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Vice President
PURCHASER:
XERION
PARTNERS I LLC
BY: Paloma
GP LLC
Manager
By: /s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Vice President
PURCHASER:
XERION
PARTNERS II MASTER FUND LIMITED
By: /s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Attorney-in-Fact
PURCHASER:
XERION
PARTNERS II MASTER FUND LIMITED
By: /s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Attorney-in-Fact
PURCHASER:
TELEMARK
ASSET MANAGEMENT, LLC
By: /s/
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇.
▇▇▇▇▇, President
PURCHASER:
TELEMARK
ASSET MANAGEMENT, LLC
By: /s/
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇.
▇▇▇▇▇, President
PURCHASER:
▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇ JTWRS
By: /s/
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇
PURCHASER:
▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇ JTWRS
By: /s/
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇
PURCHASER:
LIGHTING
SCIENCE PREFERRED OFFERING
By: /s/
▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇.
▇▇▇▇
PURCHASER:
LIGHTING
SCIENCE PREFERRED OFFERING
By: /s/
▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇.
▇▇▇▇
1
2
EXHIBIT
A
LIST
OF PURCHASERS
|
Names
and Addresses
of
Purchasers |
Dollar
Amount of Investment
at
Closing |
Number
of Shares Purchased at
Closing |
Number
of Warrants Purchased at
Closing |
|
Totals |
|||
A-
EXHIBIT
B
FORM
OF WARRANT
B-
EXHIBIT
C
FORM
OF OPINION
C-
EXHIBIT
D
FORM
OF CERTIFICATE OF DESIGNATION
D-
EXHIBIT
E
FORM
OF REGISTRATION RIGHTS AGREEMENT
E-
EXHIBIT
F-1
FORM
OF AFFILIATE LOCK-UP AGREEMENT
EXHIBIT
F-2
3863071v3
FORM
OF NON-AFFILIATE LOCK-UP AGREEMENT EXHIBIT
G
PLAN
OF DISTRIBUTION
We are
registering the shares of common stock on behalf of the selling
stockholders.
The common stock may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market prices, at varying prices determined at the time of sale, or
at negotiated prices. These sales may be effected at various times in one or
more of the following transactions, or in other kinds of transactions:
| · |
transactions
on any national securities exchange or U.S. inter-dealer system of a
registered national securities association on which the common stock may
be listed or quoted at the time of sale; |
| · |
in
the over-the-counter market; |
| · |
in
private transactions and transactions otherwise than on these exchanges or
systems or in the over-the-counter market; |
| · |
in
connection with short sales of the shares made after the date of this
prospectus; |
| · |
by
pledge to secure or in payment of debt and other obligations;
|
| · |
through
the writing of options, whether the options are listed on an options
exchange or otherwise; |
| · |
in
connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions in
standardized or over-the-counter options; or |
| · |
through
a combination of any of the above transactions. |
The
selling stockholders and their successors, including their transferees, pledgees
or donees or their successors, may sell the common stock directly to purchasers
or through underwriters, broker-dealers or agents, who may receive compensation
in the form of discounts, concessions or commissions from the selling
stockholders or the purchasers. These discounts, concessions or commissions as
to any particular underwriter, broker-dealer or agent may be in excess of those
customary in the types of transactions involved.
In
addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 of the Securities Act may be sold under Rule 144 rather
than pursuant to this prospectus.
We
entered into a registration rights agreement for the benefit of the selling
stockholders to register the common stock under applicable federal and state
securities laws. The registration rights agreement provides for
cross-indemnification of the selling stockholders and us and our respective
directors, officers and controlling persons against specific liabilities in
connection with the offer and sale of the common stock, including liabilities
under the Securities Act. We will pay substantially all of the expenses incurred
in connection with registering the common stock for resale by the selling
stockholders. The selling stockholders, however, will pay all of the
underwriting and brokerage commissions and discounts (if any) incident to the
offering and sale of their common stock.
Each
selling stockholder has been advised, and has acknowledged to us, that the
Commission currently takes the position that coverage of short sales of shares
of our common stock “against the box” made prior to the effective date of the
registration statement of which this prospectus is a part with any security
covered by this prospectus is a violation of Section 5 of the Securities Act, as
set forth in Item 65, Section 5 under Section A, of the Manual of Publicly
Available Telephone Interpretations, dated June 1997, compiled by the Office of
Chief Counsel, Division of Corporation Finance. Accordingly, each selling
stockholder has agreed (on behalf of itself or any person over which it has
direct control) not to use any of the securities covered by this prospectus to
cover any short sales, hedging or similar transactions with the same economic
effect as a short sale, made prior to the effective date of the registration
statement. In addition, each selling stockholder has agreed to comply with
Regulation M under the federal securities laws.
3863073v3
EXHIBIT
H
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
[Name and
address of Transfer Agent]
_________________
_________________
_________________
Attn:
____________
Re: Lighting
Science Group Corporation
Ladies
and Gentlemen:
We are
counsel to Lighting Science Group Corporation, a Delaware corporation (the
“Company”), and
have represented the Company in connection with that certain Securities Purchase
Agreement (the “Purchase
Agreement”), dated
as of May __, 2005, by and among the Company and the purchasers (the
“Purchasers” and the
“Holders”) named
therein pursuant to which the Company issued to the Purchasers its 6%
Convertible Preferred Stock and other securities. Pursuant to the Purchase
Agreement, the Company has also entered into a Registration Rights Agreement
with the Purchasers (the “Registration
Rights Agreement”), dated
as of May __, 2005, pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), under the Securities Act of 1933, as amended (the “1933
Act”). In
connection with the Company’s obligations under the Registration Rights
Agreement, on ___________, 2005, the Company filed a Registration Statement on
Form S-__ (File No. 333-________) (the “Registration
Statement”) with
the Securities and Exchange Commission (the “SEC”)
relating to the resale of the Registrable Securities which names the Holders as
selling stockholders thereunder.
In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [ENTER
TIME OF EFFECTIVENESS] on
[ENTER
DATE OF EFFECTIVENESS] and we
have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC and,
accordingly, the Registrable Securities are available for resale under the 1933
Act in the manner specified in, and pursuant to the terms of, the Registration
Statement.
Very
truly yours,
By:
cc: [PURCHASERS]