EXHIBIT 10.8
SUBSCRIPTION AND STOCK PURCHASE AGREEMENT
SUBSCRIPTION AND STOCK PURCHASE AGREEMENT, dated as of April 6, 1998
("Agreement"), between LINKON CORPORATION, a Nevada corporation (the "Company")
and RG CAPITAL FUND, LLC, a New York limited liability company (the "Investor").
W I T N E S S E T H:
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WHEREAS, the Investor wishes to subscribe to purchase 2,400,000 shares (the
"Shares") of the Company's common stock, $0.001 par value per share (the "Common
Stock") from the Company and the Company wishes to issue the Shares to the
Investor for the subscription price and upon the terms set forth herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. ISSUANCE AND SUBSCRIPTION OF SHARES.
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1.1 Issuance and Subscription of Shares. In reliance upon the
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representations and warranties made herein and subject to the terms and
conditions set forth herein, the Company hereby agrees to issue to the Investor,
and the Investor hereby agrees to subscribe to purchase, the Shares, for a
subscription price of $0.75 per share, or an aggregate subscription price of
$1,800,000 (the "Subscription Price").
1.2 Use of Proceeds. The net proceeds from the Investor's
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subscription to the Shares shall be used by the Company to pay concurrently with
the Second Closing (defined below) that certain promissory note in aggregate
principal amount of $300,000 to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, dated March 11, 1998, together
with interest thereon, and the balance shall be used by the Company for working
capital; payment shall be made concurrently with the Second Closing by wire
transfer to EAB for the account of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as follows: ABA # ▇▇▇▇▇▇▇▇▇,
Account # 130155781.
SECTION 2. CLOSINGS; DELIVERIES
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2.1 Closings; Delivery. (a) The issuance of and subscription to the
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Shares hereunder shall take place at two closings (the "First Closing" and the
"Second Closing", collectively referred to herein as the "Closings"), to be held
on the date hereof (the "First Closing Date") and one week thereafter (the
"Second Closing Date"), at the offices of Rosenman & Colin, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other places or on such other dates as the
parties hereto may agree.
(b) On the First Closing Date, the Company shall deliver to the
Investor certificates representing seventy percent (70%) of the Shares
(1,680,000 shares of Common
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Stock) against payment of seventy percent (70%) of the Subscription Price
($1,260,000) by wire transfer to the following:
(i) $1,093,833 to IBJ ▇▇▇▇▇▇▇▇ Bank & Trust Company, ABA #
▇▇▇▇▇▇▇▇▇, Attention ▇▇▇▇ ▇▇▇▇▇, Loan Department, Ref: Linkon
Corporation; and
(ii) $1,266,167 to Bank of New York for the account of the
Company, ABA # ▇▇▇▇▇▇▇▇▇, Account # 6300319422.
(c) On the Second Closing Date, the Company shall deliver to the
Investor or its designee certificates representing the remaining thirty percent
(30%) of the Shares (720,000) against payment of the balance of the Subscription
Price ($540,000) by wire transfer to Bank of New York for the account of the
Company, as follows: ABA # ▇▇▇▇▇▇▇▇▇, Account # 6300319422. The Second Closing
shall be subject to and conditioned upon (i) the representations and warranties
of the Company being true and accurate in all material respects at that time as
though made as of and at such time, and the delivery to the Investor or its
designee of a certificate of the President of the Company to such effect and
(ii) the designee of the Investor being made a party to the Registration Rights
Agreement attached as Exhibit A hereto.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to the Investor as follows:
3.1 Organization and Good Standing. The Company is a corporation
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duly organized, validly existing, and in good standing under the laws of the
state of its incorporation and has full corporate power and authority to enter
into and perform its obligations under this Agreement and to own, lease, license
and use its properties and to carry on its business as presently conducted. The
Company is duly qualified to do business and is in good standing as a foreign
corporation in every jurisdiction in which the failure to so qualify would have
a material adverse effect upon the Company.
3.2 Capitalization. (a) Prior to the consummation of the
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transactions contemplated hereby, the authorized capital stock of the Company
consisted of 24,900,000 shares of Common Stock, of which 10,896,252 shares are
issued and outstanding (13,169,157 shares issued and outstanding including
shares subject to issuance upon exercise of outstanding stock options and
warrants but excluding shares subject to issuance upon the conversion of certain
convertible debentures), and 1,000,000 shares of Preferred Stock, par value
$0.001 per share, of which 0 shares are issued and outstanding. All of the
issued and outstanding shares of Common Stock, including the Shares, have been
duly authorized and validly issued and are fully paid and nonassessable, free of
preemptive or similar rights. Except as set forth in Schedule 3.2 annexed hereto
or in the "SEC Reports" (defined below), there are no outstanding, nor is the
Company subject to any agreement under which there may become outstanding, any
right to purchase, or any
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security convertible into, or exercisable for, or exchangeable for, any capital
stock of the Company, including, but not limited to, options, warrants, or
rights. Except as set forth in Schedule 3.2 annexed hereto or in the SEC
Reports, there are no agreements, understandings, plans or arrangements in
existence which pertain to the dividend rights, voting, sale or transfer of any
capital stock of the Company.
3.3 Subsidiaries. Except as set forth on Schedule 3.3 annexed
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hereto, the Company does not own, directly or indirectly, any equity or debt
securities of any corporation, partnership, or other entity.
3.4 Books and Records. The minute books, stock ledgers and other
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books and records of the Company have been made available for inspection, are
complete and accurate and all signatures therein are genuine signatures of the
persons whose signatures appear thereon.
3.5 Financial Statements. The financial statements of the Company
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for each of the fiscal years ended January 31, 1997, 1996 and 1995 (the
"Financial Statements"), true and complete copies of which have heretofore been
delivered to the Investor, fairly present with respect to the Company the
financial position, the results of operations, and the other information
purported to be shown therein at the respective dates and for the respective
periods to which they apply. Such Financial Statements and schedules (including
the related notes) have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
("GAAP"), are correct and complete in all material respects, and are in
accordance with the books and records of the Company.
3.6 Proceedings. There is no material litigation, arbitration,
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claim, governmental or other proceeding (formal or informal), or investigation
by any governmental authority or agency, pending or, to the Company's knowledge,
threatened with respect to the Company or any of its operations, businesses,
properties or assets except as may be properly described in Schedule 3.6 annexed
hereto.
3.7 No Violation; Compliance. (a) The Company is not in violation of
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its Certificate of Incorporation or Bylaws. The Company is not in default or
breach with respect to any agreement or instrument to which it is a party or by
which it or any of its properties is subject, or, to the best of the Company's
knowledge, any statute or any order, rule, regulation, judgment or decree of any
court or governmental agency or body having jurisdiction over the Company or any
of its properties except as may be properly described in Schedule 3.7 annexed
hereto or in the SEC Reports or such as in the aggregate do not now have and
could not in the future have a material adverse effect upon the financial
position, results of operations, properties, business or prospects of the
Company; nor is the Company required to take any action in order to avoid any
such breach or default.
(b) The Company has properly filed all reports and other documents
required to be filed with any federal, state, local and foreign government or
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subdivision or agency thereof with respect to which the failure to file could
have a material adverse effect on the Company. The Company has not received any
notice not heretofore complied with in all material respects from any federal,
state or local authority or any insurance or inspection body that any of its
assets or business procedures or practices fails to comply with any applicable
law, ordinance, regulation, building or zoning law or requirement of any public
authority or body.
3.8 Authorization. The Company has all requisite power and authority
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to (i) execute, deliver, and perform its obligations under each of this
Agreement, the Registration Rights Agreement attached as Exhibit A hereto, the
Promissory Note attached as Exhibit B hereto and the Release and Termination
Agreement (the "Release") between the Company and IBJS Capital Corporation
("IBJS") attached as Exhibit C hereto (collectively, the "Documents") and (ii)
to issue, sell, and deliver the Shares. All necessary corporate proceedings of
the Company have been duly taken to authorize the execution, delivery, and
performance of the Documents. Concurrently with execution hereof and as a
condition to consummation of the transactions contemplated hereby the Company
has executed and delivered each of the Documents. Each Document has been duly
authorized by the Company and constitutes the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms.
3.9 No Consent. (a) No consent, authorization, approval, order,
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license, certificate or permit of or from, or declaration or filing with, any
federal, state, local or other governmental authority or any court or any other
tribunal is required by the Company in connection with the execution, delivery
or performance by the Company of the Documents or the issuance, sale, and
delivery of the Shares (except such filings and consents as may be required and
have been or at the Closings or within the appropriate time thereafter will have
been made or obtained under federal and state securities laws).
(b) Except as described in Schedule 3.9 annexed hereto, no consent of
any party to any contract, agreement, instrument, lease, license, arrangement or
under standing to which the Company is a party or to which any of its properties
or assets are subject is required for the execution, delivery, or performance by
the Company of any of the Documents or the issuance or delivery of the Shares.
3.10 No Conflict. The execution, delivery and performance of this
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Agreement and the other Documents and the consummation of the transactions
herein and therein contemplated, including the issuance of the Shares, will not
conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any agreement or instrument to
which the Company is a party or by which it is bound or to which any of the
property of the Company is subject, the Certificate of Incorporation or By-laws
of the Company, or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of its
properties, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company.
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3.11 No Misstatements or Omissions. This Agreement and all other
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documents or instruments furnished by the Company to the Investor in connection
with the transaction contemplated hereby do not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or herein or necessary to make the statements therein or herein not misleading.
Without limiting the generality of the foregoing, there has been no material
adverse change, and the Company is aware of no fact which might result in a
material adverse change, in the financial condition, results of operations,
business, properties, assets, liabilities or prospects of the Company from the
latest information set forth in the Financial Statements other than losses
occurring in the ordinary course of business that have either been disclosed in
the SEC Reports or incurred since October 31, 1997.
3.12 IBJS. Concurrently with the First Closing of the transaction
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contemplated hereby, and as a condition thereto, the Company has used the
proceeds of the Promissory Note to repay in full that certain 10% Senior Secured
Convertible Debenture (the "Debenture") dated October 27, 1994, as amended, in
principal amount of $1,000,000 issued by the Company to IBJS, and has obtained
the surrender and cancellation of the Debenture and those certain warrants for
IBJS to acquire an additional 200,000 shares, subject to adjustment, of Common
Stock at an initial exercise price of $2.00 per share and those certain warrants
for IBJS to acquire 60,000 shares of Common Stock at an initial exercise price
of $1.50 per share. The foregoing shall be accomplished pursuant to the Release
and such other documentation reasonably acceptable to the Investor. The Company
has no further obligations, arrangements or relationship of any kind with IBJS
or any of its affiliates.
3.13 Securityholders Voting Rights. Except as set forth in Schedule
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3.13, neither the Company nor to the Company's knowledge any of its shareholders
are a party to any voting trust, agreement or arrangement affecting the exercise
of voting rights of the outstanding common stock of the Company.
3.14 Registration Rights. Except as set forth in the Registration
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Rights Agreement or in Schedule 3.14 annexed hereto or in the SEC Reports,
neither the Company nor its shareholders are a party to any agreement pursuant
to which any other person or entity has the right to require the Company to
register any securities of the Company under any federal or state securities
laws.
3.15 Employees. Except as set forth in the SEC Reports or in
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Schedule 3.15 annexed hereto or in the SEC Reports, the Company is not a party
to any existing employment agreement with executive officers of the Company,
deferred compensation, stock option, bonus, consulting, or retirement agreements
or plans, or other employee benefit plans of any kind including without
limitation any pension or welfare benefit plans. The Company does not maintain,
or ever has maintained, an Employee Pension Benefit Plan as defined in Section
3(a) of the ERISA or a multiemployer plan as defined in Section 3(37) of ERISA.
No employee of the Company is represented by any labor union or
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collective bargaining agreement, nor is any union organization effort pending or
threatened against the Company.
3.16 Brokers. No broker's, finder's or similar fees will be payable
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by the Company in connection with the transactions contemplated by this
Agreement.
3.17 Properties. The Company has good and marketable title to its
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material properties and assets. Such properties and assets are not subject to
any liens, mortgages, pledges, encumbrances or charges of any kind except liens
for current taxes and assessments not delinquent or those which are not material
in scope or amount and do not interfere with the conduct of the Company's
business and except those described in Schedule 3.17 annexed hereto or in the
SEC Reports. All leases pursuant to which the Company leases real or personal
property are in good standing and are valid and effective in accordance with
their respective terms and there exists no default or occurrence or condition
which could result in a default or termination of any such leases. The
Company's equipment and other tangible assets are in good operating condition
and are usable in the ordinary course of business, and the Company owns, or has
a valid leasehold interest in, all assets necessary for the conduct of its
business as presently conducted.
3.18 Environmental Health and Safety. Except as set forth in
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Schedule 3.18 annexed hereto, the Company has, to the best of the Company's
knowledge, complied with all applicable federal, state, local and foreign
statutes, laws and regulations, ordinances, rules, judgements, orders, decrees,
permits, licenses or codes that are currently in effect and that relate to the
environment (hereinafter collectively referred to as the "Environmental Health
and Safety Laws") and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
the Company alleging any failure to comply. Without limiting the generality of
the preceding sentence, except as set forth in Schedule 3.18 or in the SEC
Reports, the Company has obtained and been in compliance with all of the terms
and conditions of all permits, licenses, and other authorizations which are
required under and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
time tables which are contained in the Environmental Health and Safety Laws. To
the best of the Company's knowledge, the Company has no liability or has not
handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance or
condition or owned or operated any property or facility in any manner that could
form the basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against the Company giving
rise to any liability for damage to any site, location or body of water (surface
or subsurface) for any illness of or personal injury to any employee or other
individual or for any reason under any Environmental Health and Safety Law. To
the best of the Company's knowledge, all properties and equipment used in the
business of the Company have been free of asbestos, PCB'S, methylene chloride,
trichloroethylene, dioxin, dibenzofurans or any other extremely hazardous
substance.
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3.19 Material Contracts. Annexed hereto as Schedule 3.19 is a true
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and complete list of all material contracts, agreements, instruments, leases,
licenses, arrangements or understandings, written or oral, to which the Company
is a party or to which any of its properties or assets are subject (collectively
with the documents listed in the SEC Reports, the "Material Contracts"), which
are not already listed as exhibits to the SEC Reports. All of the Material
Contracts are valid, binding and enforceable and in full force and effect and
the Company has substantially performed all of its current obligations
thereunder. No party to a Material Contract has made a claim to the effect that
the Company has failed to perform an obligation thereunder. Except as set forth
on Schedule 3.19, there is no known plan, intention or indication of any
contracting party to a Material Contract to cause the termination, cancellation
or modification of such Material Contract or to reduce or otherwise change its
activity thereunder so as to adversely affect the Company.
3.20 Loan Obligations and Commitments. Except for accounts payable
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incurred in the ordinary course of business and except as set forth in Schedule
3.20 annexed hereto or in the SEC Reports, the Company is not a party to any
loan agreement, promissory note or other evidence of indebtedness and the
Company does not have any obligation for borrowed money. Neither the execution
nor consummation of this Agreement requires the consent of any lender or other
party.
3.21 Tax Returns and Payments. All federal, state and other tax
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returns and reports of the Company required by law to be filed have been duly
filed, and all federal, state and other taxes, assessments, fees and other
governmental charges imposed upon the Company or any of its properties, assets,
income or franchises which are due and payable, or claimed by the taxing
authority to be due and payable, have been paid. Without limiting the
foregoing, the Company has paid all applicable income, withholding, excise,
unemployment, social security, occupation, transfer, franchise, property, sales
and use taxes, import duties and all penalties and interest in respect thereof.
3.22 Licenses, Patents, Trademarks.
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(a) Ownership. The Company's Annual Report on Form 10-K
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(Item 1 - Description of Business) contains a narrative description of the
status of the Company's licenses, patents, copyrights, trade names and
trademarks (including applications therefor) owned by the Company or any
employee of the Company except for those owned by employees which are unrelated
to the business of the Company, other than any of the foregoing already
described in the SEC Reports. The Company owns, free and clear of all liens and
encumbrances, all the licenses, patents, copyrights, trade names, trademarks,
trade secrets and processes necessary for the conduct of its business as
presently conducted and as presently proposed to be conducted and has the
unrestricted right to use the foregoing without the payment of any royalty
except as described in Schedule 3.22 or in the SEC Reports. The Company has
taken reasonable security measures to protect the secrecy, confidentiality and
value of its trade secrets and other technical information.
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(b) No Infringement. Except as set forth in Schedule 3.22 or in the
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SEC Reports, no person has asserted a claim that the Company has infringed any
patent, trade secret, copyright, trade name or trademark and the Company has not
made any claim that, and is unaware that, any third party is infringing any
license, patent, copyright, trademark, tradename, trade secret or other
intellectual property owned by or used by the Company. The Company does not,
and will not under its proposed plan of business, operate to conflict with,
infringe, override or interfere with the rights of any other person in any
license, patent, copyright, trade name, trademark, trade secret or process or
rights pertaining thereto and the Company has full right and authority to
utilize the processes, systems and techniques which it presently utilizes or
which it expects to utilize in the future.
(c) Assignment. All rights to processes, systems, patents, copyrights
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and techniques used by the Company which were developed by any employee of or
consultant to the Company have been duly and validly assigned to the Company.
3.23 Securities Laws Compliance; Registration Rights. Based in part
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upon the representations of the Investor contained in Section 4 hereof (and with
respect to the Second Closing, of the designee of the Investor, if applicable,
pursuant to documentation substantially in the form hereof), the offer and sale
of the Shares has complied with all applicable federal and state securities
laws. The Company has complied with all applicable federal and state securities
laws in connection with all offers and sales of securities prior to the date of
this Agreement.
3.24 No Anti-Dilution Adjustments. Except as described in Schedule
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3.24 annexed hereto, the issuance and sale of the Shares pursuant to this
Agreement will not result in an adjustment to the conversion price or exercise
price or in any other adjustment under any preferred stock, warrant, option,
note, debenture or other security of the Company.
3.25 SEC Reports. The Company has filed all reports, registration
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statements, definitive proxy statements and other document and all amendments
thereto and supplements thereof (the "SEC Reports") required to be filed by it
with the Securities and Exchange Commission (the "Commission") since April 30,
1995, all of which have complied in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations promulgated thereunder. As of the respective dates of
filing in final or definitive form (or, if amended or superseded by a subsequent
filing, then on the date of such subsequent filing), none of the Company's SEC
Reports, including, without limitation, any financial statements or schedules
included therein, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances in which they were
made, not misleading. The balance sheets (including the related notes) in the
Company's SEC Reports fairly present the financial position of the Company as of
the respective dates thereof, and the other related financial statements
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(including the related notes) included therein fairly presented the results of
operations and changes in financial position of the Company for the periods
indicated, except, in the case of interim financial statements, for year-end
audit adjustments, consisting only of normal recurring accruals. The financial
statements (including the related notes) included in the Company's SEC Reports
have been prepared in accordance with GAAP, except as otherwise noted therein
or, in the case of unaudited financial statements, as permitted by the
applicable rules and regulations of the Commission.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
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The Investor hereby represents and warrants to the Company as follows:
4.1 Organization and Good Standing. The Investor is a limited
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liability company duly formed, validly existing, and in good standing under the
laws of the state of its formation and has full power and authority to enter
into and perform its obligations under this Agreement.
4.2 Authorization. The Investor has all requisite power and
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authority to (i) execute, deliver, and perform its obligations under each of the
Documents and (ii) to subscribe for the Shares. All necessary corporate
proceedings of the Investor have been duly taken to authorize the execution,
delivery, and performance of the Documents. Each Document has been duly
authorized by the Investor and, when executed and delivered by the Investor,
will constitute the legal, valid and binding obligations of the Investor
enforceable against the Investor in accordance with their respective terms.
4.3 No Consent. No consent, authorization, approval, order, license,
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certificate or permit of or from, or declaration or filing with, any federal,
state, local or other governmental authority or any court or any other tribunal
is required by the Investor in connection with the execution, delivery or
performance by the Investor of the Documents or subscription for the Shares
(except such filings and consents as may be required and have been or at the
Closings or within the appropriate time thereafter will have been made or
obtained under federal and state securities laws).
4.4 The Investor is an "Accredited Investor" as that term is defined
in Section 501(a) of Regulation D promulgated under the Securities Act.
4.5 The Investor represents that: (i) the Company has made available
to it all information which it deemed material to making an informed investment
decision in connection with its purchase of the Shares or (ii) the Investor is
in a position regarding the Company which has enabled the Investor to obtain
information from the Company necessary to evaluate the merits and risks of an
investment in the Shares.
4.6 The Investor has such knowledge and experience in finance,
securities, investments and other business matters so as to be able to protect
its interests in connection
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with this transaction, and the Investor's investment in the Company hereunder is
not material when compared to the Investor's total financial capacity.
4.7 The Investor understands the various risks of an investment in
the Company as proposed herein and can afford to bear such risks, including, but
not limited to, the risks of losing the entire investment.
4.8 The Investor has been advised by the Company that the Shares have
not been registered under the Securities Act, that the Securities will be issued
on the basis of the statutory exemption provided by Section 4(2) of the Act or
Regulation D promulgated thereunder, or both, relating to transactions by an
issuer not involving any public offering and under similar exemptions under
certain state securities laws. In particular, the Investor agrees that no sale,
assignment, or transfer of any of the Shares shall be valid or effective, and
the Company shall not be required to give any effect to any such sale,
assignment or transfer, unless (i) the sale, assignment or transfer of the
Shares is registered under the Act, it being understood that the Shares are not
currently registered for sale and that the Company has no obligation or
intention to so register the Shares except as contemplated in the Registration
Rights Agreement or (ii) such Shares are sold, assigned or transferred in
accordance with all the requirements and limitations of Rule 144 under the Act,
or (iii) such sale, assignment or transfer is otherwise exempt from registration
under the Act. The Investor acknowledges that the Shares shall be subject to a
stop transfer order and the certificate or certificates evidencing the Shares
shall bear the following or a substantially similar legend and such other
legends as may be required by state blue sky laws:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
or any state securities laws and neither such securities nor any
interest therein may be offered, sold, pledged, assigned, or otherwise
transferred unless (1) a registration statement with respect thereto
is effective under the Act and any applicable state securities laws or
(2) the Company receives an opinion of counsel to the holder of such
securities, which counsel and opinion are reasonably satisfactory to
the Company, that such securities may be offered, sold, pledged,
assigned, or transferred in the manner contemplated without an
effective registration statement under the Act or applicable state
securities laws."
4.9 The Investor is acquiring the Shares for the Investor's own
account for investment and not with a view to the sale or distribution thereof
or the granting of any participation therein, and has no present intention of
distributing or selling to others any of such interest or granting any
participation therein.
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4.10 Concurrently with the execution hereof and as a condition to the
consummation of the transactions contemplated hereby, the Investor has executed
and delivered each of the Documents to which it is a party and has transferred
to the Company the funds contemplated by the Promissory Note.
4.11 Accuracy of Representations and Warranties. No representation
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or warranty of the Investor in this Agreement or the schedules or exhibits
hereto contains any untrue statement of material fact or omits to state any
material fact necessary to make the statements made not misleading.
SECTION 5. COVENANTS BY THE COMPANY.
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5.1 Board of Directors. From and after the date hereof and for a
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period of five years, the Company shall permit a designee of the Investor (the
"Designee") to be an unpaid advisor to the Board of Directors of the Company
(the "Board"), provided that notwithstanding anything to the contrary contained
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herein or in the By-Laws or any other document affecting the governance of the
Company, such Designee shall have no voting rights otherwise conferred upon
directors of the Company but shall have all rights of a director with respect to
receiving notice of and attending meetings of the Board and any committees
thereof. The initial Designee shall be ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
5.2 Access to Information. From and after the date hereof and until
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the fifth anniversary of the date hereof, the Company will furnish the following
to the Investor or its Designee:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within 90 days thereafter, and as soon as practicable
after the end of each fiscal quarter of the Company and in any event within 45
days thereafter, consolidated balance sheets of the Company as of the end of
such fiscal period, and the related statements of income, cash flow and
shareholders' equity of the Company for such period, prepared in accordance with
GAAP and setting forth in each case in comparative form the figures for the
previous fiscal period, all in reasonable detail and certified with respect to
annual financial statements, if any, by independent public accountants of nation
ally recognized standing, it being agreed that the Company's current accountants
are acceptable to the Investor.
(b) As soon as practicable, but in any event not less than 3 days
after filing, copies of any documents or reports filed by the Company with the
Commission.
(c) Such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or the
Designee may from time to time reasonably request.
SECTION 6. COVENANTS BY THE INVESTOR.
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6.1 Voting of Shares. From and after the date hereof, provided that
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the Company is not in default of its obligations hereunder or under any other
Document, which default has continued for a period of 15 days after the
occurrence thereof, and/or that no Event of Default, as such term is defined in
the Promissory Note has occurred and is continuing, the Investor shall vote all
of the Shares in accordance with the recommendations of the Board. Subject to
any such breach, the covenants of the Investor set forth in this paragraph 6.1
shall survive and continue until such time as the Investor and its affiliates
own less than 5% of the Company's Common Stock calculated in accordance with the
provisions of Section 13(d) of the Exchange Act.
6.2 Purchase of Common Stock. The Investor agrees not to purchase
------------------------
any additional shares of Common Stock on the open market or from any person or
entity other than the Company without the prior written consent of the Company.
The covenants of the Investor set forth in this paragraph 6.2 shall survive and
continue until such time as the Investor and its affiliates own less than 5% of
the Company's Common Stock calculated in accordance with the provisions of
Section 13(d) of the Exchange Act.
6.3 Resales of Shares. Until the second anniversary of the date
-----------------
hereof, the Investor shall not in any way sell, assign or otherwise transfer any
interest in the Shares (other than a distribution to the members of the
Investor, provided that the restrictions of this Section 6 shall continue to be
applicable to the Shares and such transferees shall agree in writing to be bound
by the provisions of this Agreement affecting the Shares so transferred);
provided, however, that the foregoing restriction shall not apply to any
-------- -------
transfer by the Investor in connection with an underwritten offering of shares
of Common Stock which has been registered with the Commission and provided,
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further that during such two year period the Investor shall be permitted to
-------
transfer shares of Common Stock in a privately negotiated transaction and/or
pursuant to registration of the Shares under the Registration Rights Agreement
in a non-underwritten offering in amounts that would otherwise be permitted
under Rule 144 of the Securities Act but without giving effect to the holding
period requirements thereof.
SECTION 7. INDEMNIFICATION.
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7.1 Indemnification by the Company. The Company agrees to indemnify
------------------------------
and hold the Investor, its officers, directors, employees and agents harmless
against and in respect of any loss, cost, expense, liability or damage
(including, without limitation, attorneys' fees, expenses and disbursements)
suffered or incurred by the Investor arising from (a) any breach or failure to
perform by the Company of any of its respective covenants, agreements or other
obligations hereunder or under any Document, (b) any breach of any
representation or warranty of the Company contained herein in any exhibit,
certificate or document furnished or required to be furnished pursuant to this
Agreement by the Company to the Investor, or if any documents furnished to the
Investor in connection with the Closings hereunder shall be false or misleading
in any material respect, and (c) the allegation by a third party of a claim
based upon a state of facts which, if true, would
12
constitute a breach of a representation, warranty or covenant of the Company
contained herein or in any exhibit, certificate or document furnished or
required to be furnished pursuant to this Agreement by the Company to the
Investor.
7.2 Indemnification by the Investor. The Investor agrees to
-------------------------------
indemnify and hold the Company, its officers, directors, employees and agents
harmless against and in respect of any loss, cost, expense, liability or damage
(including, without limitation, attorneys' fees, expenses and disbursements)
suffered or incurred by the Company arising from (a) any breach or failure to
perform by the Investor of any of its respective covenants, agreements or other
obligations hereunder or under any Document, (b) any breach of any
representation or warranty of the Investor contained herein, in any exhibit,
certificate or document furnished or required to be furnished pursuant to this
Agreement by the Investor or if any documents furnished to the Company in
connection with the Closings shall be false or misleading in any material
respect, and (c) the allegation by a third party of a claim based upon a state
of facts which, if true, would constitute a breach of a representation, warranty
or covenant of the Purchaser contained herein or in any exhibit, certificate or
document furnished or required to be furnished pursuant to this Agreement by the
Investor to the Company.
7.3 Notice. If any event shall occur which may result in
------
indemnification hereunder, the indemnified party or parties agree to give the
indemnifying party or parties prompt written notice thereof. If such event
involves a claim by a third party, the indemnifying party or parties shall have
the right at its or their sole expense to control and assume the defense of the
matter giving rise to such indemnification with counsel reasonably satisfactory
to the indemnified party or parties and to compromise or settle any such matter,
provided that such compromise or settlement entirely and unconditionally
--------
releases the indemnified party or parties from all liability with respect
thereto. If the indemnifying party or parties shall assume the defense of the
indemnified party or parties, the indemnified party or parties shall have the
right to participate in such defense but only at its or their own expense and
the indemnifying party or parties shall not be obligated to pay the fees of
counsel to the indemnified party or parties incurred after such assumption. If
the indemnifying party or parties do not assume the defense of such matter
within a reasonable time after notice thereof, the indemnified party or parties
may defend, settle or compromise such matter for the account and at the expense
of the indemnifying party or parties.
7.4 No Limitation of Remedies. The indemnification provided herein
-------------------------
shall not be the exclusive remedy of the indemnified party or parties and in no
manner shall limit any other remedy available to such party or parties under
this Agreement whether at law, in equity or otherwise.
SECTION 8. MISCELLANEOUS.
-------------
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8.1 Representations and Agreements to Survive Delivery. All
--------------------------------------------------
representations, warranties, covenants, indemnities and agreements of the
parties hereto contained in this Agreement and in any agreement delivered or to
be delivered pursuant to this Agreement shall remain operative and in full force
and effect for a period of two years after the date hereof (unless, with respect
to the covenants of the parties, any covenant expressly indicates that it shall
remain operative and in full force and effect for a longer period) regardless of
any investigation made by or on behalf any party hereto notwithstanding
knowledge or notice of a breach thereof.
8.2 Notices. All notices and other communications given under this
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Agreement shall be in writing and shall be deemed to have been given (i) on the
date delivered, if delivered personally or (ii) on the date deposited in the
United States mail, if sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the parties as follows:
(a) if to the Company:
Linkon Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇, President
Copy to:
▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(b) if to the Investor:
RG Capital Fund LLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Copy to:
Rosenman & Colin LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
or to such other address as any party shall have specified by notice in writing
to the others in compliance with this Section 8.2, except that any notice
specifying a change in address shall only be deemed given when actually
received.
8.3 Agreement Binding on Successors. This Agreement shall be binding
-------------------------------
upon and inure to the benefit of the parties hereto, the successors and assigns
of the Com pany, and the permitted successors, assigns, heirs and personal
representatives of the Investor.
8.4 Expenses. The Company shall pay the fees and expenses of its
--------
counsel, accountants and other experts, and all other expenses incurred by it
incident to the negotiation, preparation, execution and delivery of this
Agreement and consummation of the transactions contemplated hereby. In
addition, the Company shall pay the fees and expenses of the Investor's counsel,
accountants and other experts, and all other expenses incurred by the Investor
incident to the negotiation, preparation, execution and delivery of this
Agreement and consummation of the transactions contemplated hereby, in an amount
not to exceed $15,000.
8.5 Headings. The headings in this Agreement are solely for
--------
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
8.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.7 Governing Law. This Agreement has been negotiated and shall be
-------------
consummated in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflict of laws.
8.8 Consent to Jurisdiction. The parties hereto irrevocably consent
-----------------------
to the jurisdiction of the courts of the State of New York and of any federal
court located in such State in connection with any action or proceeding arising
out of or relating to this Agreement, any document or instrument delivered
pursuant to, in connection with or simultaneously with this Agreement, or a
breach of this Agreement or any such document or instrument. In any such action
or proceeding, each party hereto waives personal service of any summons,
complaint or other process and agrees that service thereof may be made in
accordance with Section 8.2. Within 30 days after such service, or such other
time as may be mutually agreed upon in writing by the attorneys for the parties
to such action or proceeding, the party so served shall appear or answer such
summons, complaint, or other process. Should the party so served fail to appear
or answer within such 30-day period or
15
such extended period, as the case may be, such party shall be deemed in default
and judgment may be entered against such party for the amount as demanded in any
summons, complaint or other process so served.
8.9 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable laws, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.10 Transferability. Neither this Agreement, nor any interest of
---------------
the undersigned herein, shall be assignable or transferable by the undersigned
in whole or in part except by operation of law.
8.11 Entire Agreement. This Agreement and the exhibits hereto set
----------------
forth the entire understanding of the parties with respect to the subject matter
hereof, supersede all existing agreements among them concerning such subject
matter and may be modified only by a written instrument duly executed by the
party to be charged.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first set forth above.
LINKON CORPORATION
By:______________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
RG CAPITAL FUND LLC
By: SG Capital Corp.,
its Managing Director
By:______________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
17
SCHEDULES
Schedule 3.2 - Outstanding Options, Warrants, Rights, etc.
Schedule 3.3 -Subsidiaries
Schedule 3.6 - Litigation
Schedule 3.7 - Violations; Compliance
Schedule 3.9 - Consents
Schedule 3.13 - Securityholders Voting Rights
Schedule 3.14 - Registration Rights
Schedule 3.15 - Employees
Schedule 3.17 - Liens, etc.
Schedule 3.18 - Environmental Health and Safety
Schedule 3.19 - Material Contracts
Schedule 3.20 - Loan Obligations and Commitments
Schedule 3.22 - Licenses, Patents, Trademarks
Schedule 3.24 - Anti-Dilution Adjustments
Schedule 5.3 - Permitted Existing Indebtedness
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