Exhibit 10.1
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
     This Securities Purchase Agreement (this “Agreement”) is dated as of May
___, 2007, among Motorcar Parts of America, Inc., a New York corporation (the
“Company”), and the investors identified on the signature pages hereto (each, an
“Investor” and collectively, the “Investors”).
     Whereas, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below) and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Investor, and each Investor, severally and not jointly, desires to purchase from
the Company certain securities of the Company, as more fully described in this
Agreement.
     Now, Therefore, in Consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:
ARTICLE I.
DEFINITIONS
     1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
          “Action” means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility.
          “Affiliate” means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144.
          “Business Day” means any day except Saturday, Sunday and any day which
is a federal legal holiday or a day on which banking institutions in the State
of California are authorized or required by law or other governmental action to
close.
          “Closing” means the closing of the purchase and sale of the Securities
pursuant to Article II.
          “Closing Date” means the Business Day on which all of the conditions
set forth in Sections 5.1 and 5.2 hereof are satisfied, or such other date as
the parties may agree.

 

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          “Commission” means the Securities and Exchange Commission.
          “Common Stock” means the common stock of the Company, par value $0.01
per share, and any securities into which such common stock may hereafter be
reclassified.
          “Common Stock Equivalents” means any securities of the Company or any
Subsidiary which entitle the holder thereof to acquire Common Stock at any time,
including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
          “Company Counsel” means Dreier Stein & Kahan LLP and Dreier LLP.
          “Company Deliverables” has the meaning set forth in Section 2.2(a).
          “Disclosure Materials” has the meaning set forth in Section 3.1(h).
          “Effective Date” means the date that the Registration Statement
required by Section 2(a) of the Registration Rights Agreement is first declared
effective by the Commission.
          “Exchange Act” means the Securities Exchange Act of 1934, as amended.
          “GAAP” means U.S. generally accepted accounting principles.
          “Intellectual Property Rights” has the meaning set forth in
Section 3.1(n).
          “Investment Amount” means, with respect to each Investor, the
Investment Amount indicated on such Investor’s signature page to this Agreement.
          “Investor Deliverables” has the meaning set forth in Section 2.2(b).
          “Investor Party” has the meaning set forth in Section 4.7.
          “Lien” means any lien, charge, encumbrance, security interest, right
of first refusal or other restrictions of any kind.
          “Material Adverse Effect” means any of (i) a material and adverse
effect on the legality, validity or enforceability of any Transaction Document,
(ii) a material and adverse effect on the results of operations, assets,
business or condition (financial or other) of the Company and the Subsidiaries,
taken as a whole, or (iii) an adverse impairment to the Company’s ability to
perform on a timely basis its obligations under any Transaction Document.
          “New York Courts” means the state and federal courts sitting in the
City of New York, Borough of Manhattan.
          “Outside Date” means June 1, 2007.

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          “Per Share Purchase Price” equals $11.00.
          “Person” means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
          “Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
          “Registration Rights Agreement” means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Investors, in the form of Exhibit B hereto.
          “Registration Statement” means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Investors of the Shares and the Warrant Shares.
          “Rule 144” means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
          “SEC Reports” has the meaning set forth in Section 3.1(h).
          “Securities” means the Shares, the Warrants and the Warrant Shares.
          “Securities Act” means the Securities Act of 1933, as amended.
          “Shares” means the shares of Common Stock issued or issuable to the
Investors pursuant to this Agreement.
          “Short Sales” include, without limitation, all “short sales” as
defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and
all types of direct and indirect stock pledges, forward sale contracts, options,
puts, calls, swaps and similar arrangements (including on a total return basis),
and sales and other transactions through non-US broker dealers or foreign
regulated brokers.
          “Subsidiary” means any “significant subsidiary” as defined in
Rule 1-02(w) of the Regulation S-X promulgated by the Commission under the
Exchange Act.
          “Trading Day” means (i) a day on which the Common Stock is traded on a
Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock
is not listed on a Trading Market (other than the OTC Bulletin Board), a day on
which the Common Stock is traded in the over-the-counter market, as reported by
the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any
Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices); provided,

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that in the event that the Common Stock is not listed or quoted as set forth in
(i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.
          “Trading Market” means whichever of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ Global Market, the NASDAQ Capital Market, or
OTC Bulletin Board on which the Common Stock is listed or quoted for trading on
the date in question.
          “Transaction Documents” means this Agreement, the Warrants, the
Registration Rights Agreement, and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
          “Warrants” means the Common Stock purchase warrants in the form of
Exhibit A, which are issuable to the Investors at the Closing.
          “Warrant Shares” means the shares of Common Stock issuable upon
exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
     2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Investor, and
each Investor shall, severally and not jointly, purchase from the Company, the
Shares and the Warrants representing such Investor’s Investment Amount. The
aggregate Investment Amount is $___. The Closing shall take place at the offices
of Dreier Stein & Kahan LLP, The Water Garden 1620 26th Street Sixth Floor,
North Tower, Santa Monica, CA 90404 on the Closing Date or at such other
location or time as the parties may agree.
     2.2 Closing Deliveries.
          (a) At the Closing, the Company shall deliver or cause to be delivered
to each Investor the following (the “Company Deliverables”):
               (i) a certificate evidencing a number of Shares equal to such
Investor’s Investment Amount divided by the Per Share Purchase Price, registered
in the name of such Investor;
               (ii) a Warrant, registered in the name of such Investor, pursuant
to which such Investor shall have the right to acquire the number of shares of
Common Stock equal to 15% of the number of Shares issuable to such Investor
pursuant to Section 2.2(a)(i);
               (iii) a certificate of the Transfer Agent with respect to the
outstanding Common Stock number of the Company as of the most recent practicable
date;
               (iv) an Officer’s Certificate and Secretary Certificate, in
agreed form, duly executed by such officers of the Company;

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               (v) certificates of good standing of the Company in its
jurisdiction of incorporation and in each jurisdiction in which qualification to
do business as a foreign corporation is required, except where failure to so
qualify would not have a Material Adverse Effect;
               (vi) the legal opinion of Company Counsel, in agreed form,
addressed to the Investors; and
               (vii) the Registration Rights Agreement, duly executed by the
Company.
          (b) At the Closing, each Investor shall deliver or cause to be
delivered to the Company the following (the “Investor Deliverables”):
               (i) its Investment Amount, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose; and
               (ii) the Registration Rights Agreement, duly executed by such
Investor.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
     3.1 Representations and Warranties of the Company. The Company hereby makes
the following representations and warranties to each Investor:
          (a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than as specified in the SEC Reports. Except as specified in
Schedule 3.1(a) attached hereto, the Company owns, directly or indirectly, all
of the capital stock of each Subsidiary free and clear of any and all Liens, and
all the issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive and
similar rights. Neither the Company nor any Subsidiary is party to any material
joint venture, nor has any ownership interest in any entity that is material to
the Company except as disclosed in the SEC Reports.
          (b) Organization and Qualification. The Company and each Subsidiary
are duly incorporated or otherwise organized and validly existing under the laws
of the jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority to own and use its properties and assets and
to carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the material provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. The Company and each Subsidiary are duly qualified to conduct
its respective businesses and are in good standing as a foreign corporation or
other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not,

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individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.
          (c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the 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, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.
          (d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as could not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.
          (e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) the filing with the Commission of one or more Registration
Statements in accordance with the requirements of the Registration Rights
Agreement, (ii) filings required by federal or state securities laws, (iii) the
filing of a Notice of Sale of Securities on Form D with the Commission under
Regulation FD of the Securities Act, (iv) the filings required in accordance
with Section 4.5, (v) such consents or waivers as may be required under
registration rights agreements entered into in connection with business
acquisitions effected prior to the date of this Agreement, (vi) the filing of
any requisite notices

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with the Trading Market and (vii) those that have been made or obtained prior to
the date of this Agreement.
          (f) Issuance of the Securities. The Securities have been duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens. The Company has reserved from its duly authorized
capital stock the shares of Common Stock issuable pursuant to this Agreement and
upon the exercise of the Warrants in order to issue the Shares and the Warrant
Shares.
          (g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company, and all shares of Common
Stock reserved for issuance under the Company’s various option and incentive
plans as of December 31, 2006, is accurately set forth in the SEC Reports.
Except as specified in the SEC Reports, no securities of the Company are
entitled to preemptive or similar rights. No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.
Except as specified in the SEC Reports, and other than stock options granted
pursuant to the Company’s stock option plans following December 31, 2006, there
are no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Securities will not, immediately or with the passage
of time, obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Investors) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities.
          (h) SEC Reports; Financial Statements. Except as disclosed or
reflected in the SEC Reports or press releases and except as specified on
Schedule 3.1(h), the Company has filed all reports, forms and schedules required
to be filed by it under the Securities Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the
date hereof (or such shorter period as the Company was required by law to file
such reports) (the foregoing materials being collectively referred to herein as
the “SEC Reports” and, together with the Schedules to this Agreement (if any),
the “Disclosure Materials”) on a timely basis or has timely filed a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. Except as disclosed or reflected in the SEC
Reports or press releases and except as specified on Schedule 3.1(h), the SEC
Reports, as amended, when filed, complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, as amended, when filed, 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
under which they were made, not misleading. Except as disclosed or reflected in
the SEC Reports or press releases and except as specified on Schedule 3.1(h),
the financial statements of the Company included in

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the SEC Reports, as amended, comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Except as disclosed or
reflected in the SEC Reports or press releases and except as specified on
Schedule 3.1(h), such financial statements have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, year-end audit adjustments.
          (i) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as disclosed or reflected in
the SEC Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables, accrued expenses and other liabilities incurred
in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock (other than in connection with repurchases of unvested stock issued to
employees of the Company), and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company stock option plans.
          (j) Litigation. Except as specified on Schedule 3.1(j), there is no
Action which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or
(ii) except as specifically disclosed in the SEC Reports, could, if there were
an unfavorable decision, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof (in his or her capacity as
such), is or has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim of breach of
fiduciary duty, except as specifically disclosed in the SEC Reports. Except as
disclosed in the Company’s filings with the Commission, there has not been, and
to the knowledge of the Company, there is not pending any investigation by the
Commission involving the Company or any current or former director or officer of
the Company (in his or her capacity as such). The Commission has not issued any
stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act.
          (k) Compliance. Except as specified in Schedule 3.1(k), neither the
Company nor any Subsidiary (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties

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is bound (whether or not such default or violation has been waived), (ii) is in
violation of, or in receipt of notice that it is in violation of, any order of
any court, arbitrator or governmental body, or (iii) is or has been in violation
of, or in receipt of notice that it is in violation of, any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety,
employment and labor matters and, to its knowledge, privacy, except in each case
as could not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect. The Company is in compliance with all
effective requirements of the Sarbanes-Oxley Act of 2002, as amended, and the
rules and regulations thereunder, that are applicable to it, except where such
noncompliance could not have or reasonably be expected to result in a Material
Adverse Effect.
          (l) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such permits.
          (m) Title to Assets. Neither the Company nor any of the Subsidiaries
own any real property. The Company and the Subsidiaries have good and marketable
title in all personal property owned by them that is material to their
respective businesses, in each case free and clear of all Liens, except for the
Union Bank Lien and Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under leases valid, subsisting and enforceable against the Company and the
Subsidiaries, and the Company and the Subsidiaries are in compliance with such
leases, except as could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect.
          (n) Patents and Trademarks. The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect (collectively, the “Intellectual Property
Rights”). Except as specified on Schedule 3.1(n), neither the Company nor any
Subsidiary has received a written notice that the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person and the Company has no knowledge of any such violation or
infringement, in each case which could reasonably be expected to result in a
Material Adverse Effect. Except as set forth in the SEC Reports, to the
knowledge of the Company, all such Intellectual Property Rights are enforceable.
          (o) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are

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prudent and customary for enterprises of similar size and stage of development
in the businesses in which the Company and the Subsidiaries are engaged. The
Company has no reason to believe that it will not be able to renew its and the
Subsidiaries’ existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary to continue
its business on terms consistent with market for the Company’s and such
Subsidiaries’ respective lines of business.
          (p) Transactions With Affiliates and Employees. Except as set forth in
the SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary required to be
disclosed in the SEC Reports (other than for services as employees, consultants,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
          (q) Internal Accounting Controls. Except as disclosed in the SEC
Reports, the Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
Except as disclosed in the SEC Reports, the Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within those
entities. The Company’s certifying officers have evaluated the effectiveness of
the Company’s controls and procedures in accordance with Item 307 of
Regulation S-K under the Exchange Act for the Company’s fiscal quarter ended
December 31, 2006 (such date, the “Evaluation Date”). The Company presented in
its most recently filed Form 10-Q the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company’s internal controls (as such term is
defined in Item 308(c) of Regulation S-K under the Exchange Act) or, to the
Company’s knowledge, in other factors that could significantly affect the
Company’s internal controls which was required to be disclosed in the SEC
Reports and was not so disclosed.
          (r) Certain Fees. Roth Capital Partners, LLC will receive brokerage or
finder fees or commissions payable by the Company with respect to the
transactions contemplated by this Agreement. The Investors shall have no
obligation with respect to any fees or with respect to any claims (other than
such fees or commissions owed by an Investor pursuant to written agreements
executed by such Investor which fees or commissions shall be the sole
responsibility

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of such Investor) made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the transactions
contemplated by this Agreement.
          (s) Certain Registration Matters. Assuming the accuracy of the
Investors’ representations and warranties set forth in Section 3.2(b)-(e), no
registration under the Securities Act is required for the offer and sale of the
Shares and Warrants and the offer of Warrant Shares by the Company to the
Investors under the Transaction Documents. The Company is eligible to register
its Common Stock for resale by the Investors under Form S-1 promulgated under
the Securities Act. The Company has not granted or agreed to grant to any Person
any rights (including “piggy-back” registration rights) to have any securities
of the Company registered with the Commission or any other governmental
authority that have not been satisfied.
          (t) Shareholder Approval. No approval of the shareholders of the
Company thereunder is required for the Company to issue and deliver to the
Investors the Securities contemplated by Transaction Documents.
          (u) Investment Company. The Company is not, and is not an Affiliate
of, and immediately following the Closing will not have become, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
          (v) Application of Takeover Protections. The Company has taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Investors as a
result of the Investors and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company’s issuance of the Securities and the Investors’ ownership
of the Securities.
          (w) No Additional Agreements. The Company does not have any agreement
or understanding with any Investor with respect to the transactions contemplated
by the Transaction Documents other than as specified in the Transaction
Documents.
          (x) Disclosure. Except to any Investor that has executed a
non-disclosure agreement with the Company, the Company confirms that neither it
nor any Person acting on its behalf (as such term is used in Regulation D) has
provided any Investor or its respective agents or counsel with any information
that the Company believes constitutes material, non-public information except
insofar as the existence and terms of the proposed transactions hereunder may
constitute such information. The Company understands and confirms that the
Investors will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All written disclosure provided to
the Investors regarding the Company, its business and the transactions
contemplated hereby, furnished by or on behalf of the Company (including the
Company’s representations and warranties set forth in this Agreement) are true
and correct and do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.

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          (y) Insolvency. The Company is not as of the date hereof (subject to
the statements set forth on Schedule 3.1(y)), and after giving effect to the
transactions contemplated hereby to occur at the Closing will not, be Insolvent.
For purposes of this Agreement, “Insolvent” shall mean, with respect to any
Person, that (i) such Person is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured or (ii) such Person intends to incur or believes that it
will incur debts that would be beyond its ability to pay as such debts mature.
          (z) Tax Status. The Company and each of its Subsidiaries (i) has made
or filed all foreign, federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
and (ii) has paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith, except where the
failure to do so could not have or reasonably be expected to result in a
Material Adverse Effect. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company know of no basis for any such claim.
          (aa) Undisclosed Liabilities. No event, liability, development or
circumstance has occurred or exists with respect to the Company or its
respective business, properties, prospects, operations or financial condition,
that, as of the date hereof, would be required to be disclosed by the Company
under the Securities Act and the Exchange Act and the rules and regulations of
the Commission promulgated thereunder relating to an issuance and sale by the
Company of its securities and which has not been reported in accordance with
such rules and regulations of the Commission.
          (bb) Employee Relations. Other than with respect to the hourly
employees of the Company’s Subsidiary located in Tijuana, Mexico, neither
Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company and its Subsidiaries
believe that their relations with their employees are satisfactory. No executive
officer of the Company or any of its Subsidiaries (as defined in Rule 501(f) of
the Securities Act) has notified the Company or any such Subsidiary that such
officer intends to leave the Company or any such Subsidiary or otherwise
terminate such officer’s employment with the Company or any such Subsidiary. No
executive officer of the Company or any of its Subsidiaries, to the knowledge of
the Company or any such Subsidiary, is now, or expects to be, in violation of
any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract, agreement or any restrictive covenant, and the continued employment of
each such executive officer does not subject the Company or any such Subsidiary
to any liability with respect to any of the foregoing matters. The Company and
its Subsidiaries are in compliance with all federal, state and local laws and
regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect. There are no complaints or
charges against the Company or its Subsidiaries pending or, to the knowledge of
the Company and its Subsidiaries, threatened to be filed with any Governmental
Authority or arbitrator based

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on, arising out of, in connection with, or otherwise relating to the employment
or termination of employment by the Company or its Subsidiaries of any
individual, that would be reasonably likely to result in a Material Adverse
Effect.
          (cc) Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.
          (dd) Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Company
in its SEC Reports and is not so disclosed or that otherwise would be reasonably
likely to have a Material Adverse Effect.
          (ee) D&O Insurance. The Company has in effect directors’ and officers’
insurance coverage providing total coverage of not less than $20,000,000.00.
     3.2 Representations and Warranties of the Investors. Each Investor hereby,
for itself and for no other Investor, represents and warrants to the Company as
follows:
          (a) Organization; Authority. Such Investor is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations thereunder. The execution, delivery and performance by such
Investor of the transactions contemplated by this Agreement has been duly
authorized by all necessary corporate or, if such Investor is not a corporation,
such partnership, limited liability company or other applicable like action, on
the part of such Investor. Each of this Agreement and the Registration Rights
Agreement has been duly executed by such Investor, and when delivered by such
Investor in accordance with terms hereof, will constitute the valid and legally
binding obligation of such Investor, enforceable against it in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors’ rights and
remedies or by other equitable principles of general application.
          (b) Investment Intent. Such Investor is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Investor’s right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws. Subject to the immediately preceding
sentence, nothing contained herein shall be deemed a representation or warranty
by such Investor to hold the Securities for any period of time. Such Investor is
acquiring the Securities hereunder in the ordinary course of its business. Such
Investor does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.

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          (c) Investor Status. At the time such Investor was offered the
Securities, it was, and at the date hereof it is, and at the Closing and on each
date on which it exercises Warrants it will be, an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act. Such Investor is not a registered broker-dealer under Section 15 of the
Exchange Act or an entity engaged in a business that would require it to be so
registered.
          (d) General Solicitation. Such Investor is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
          (e) Access to Information. Such Investor acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor’s right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company’s representations and warranties
contained in the Transaction Documents.
          (f) Certain Trading Activities. Such Investor has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Investor, engaged in any transactions in the securities
of the Company (including, without limitations, any Short Sales involving the
Company’s securities) or otherwise sought to hedge its position in the
Securities since the earlier of (i) the time that such Investor was first
contacted by the Company or Roth Capital Partners, LLC regarding the investment
in the Company contemplated by this Agreement, or (ii) thirty (30) days prior to
the date hereof. Such Investor covenants that neither it nor any Person acting
on its behalf or pursuant to any understanding with it will engage in any
transactions in the securities of the Company (including Short Sales) prior to
the time that the transactions contemplated by this Agreement are publicly
disclosed by the Company. Such Investor has maintained, and covenants that until
such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company such Investor will maintain, the confidentiality of any
disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). Such Investor understands and
acknowledges, that the Commission currently takes the position that coverage of
Short Sales “against the box” prior to the Effective Date of the Registration
Statement is a violation of Section 5 of the Securities Act, as set forth in
Item 65, Section A, of the Manual of Publicly Available Telephone
Interpretations, dated July 1997, compiled by the Office of Chief Counsel,
Division of Corporation Finance.
          (g) Independent Investment Decision. Such Investor has independently
evaluated the merits of its decision to purchase Securities pursuant to the
Transaction

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Documents, and such Investor confirms that it has not relied on the advice of
any other Investor’s business and/or legal counsel in making such decision. Such
Investor has not relied on the business or legal advice of counsel to the
Company or Roth Capital Partners, LLC or any of its agents, counsel or
Affiliates in making its investment decision hereunder, and confirms that none
of such Persons has made any representations or warranties to such Investor in
connection with the transactions contemplated by the Transaction Documents.
          (h) Limited Ownership. The purchase by such Investor of the Securities
issuable to it at the Closing will not result in such Investor (individually or
together with any other Person with whom such Investor has identified, or will
have identified, itself as part of a “group” in a public filing made with the
Commission involving the Company’s securities) acquiring, or obtaining the right
to acquire, in excess of 19.999% of the outstanding shares of Common Stock or
the voting power of the Company on a post transaction basis that assumes that
the Closing shall have occurred. Such Investor does not presently intend to,
alone or together with others, make a public filing with the Commission to
disclose that it has (or that it together with such other Persons have)
acquired, or obtained the right to acquire, as a result of the Closing (when
added to any other securities of the Company that it or they then own or have
the right to acquire), in excess of 19.999% of the outstanding shares of Common
Stock or the voting power of the Company on a post transaction basis that
assumes that the Closing shall have occurred.
          (i) Reliance on Exemptions. Such Investor understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of such
Investor’s representations and warranties set forth herein in order to determine
the availability of such exemptions and the eligibility of such Investor to
acquire the Securities.
          (j) No Governmental Review. Such Investor understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
          (k) Transfer or Resale. Such Investor understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the Securities Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless
(A) subsequently registered thereunder, (B) such Investor shall have delivered
to the Company an opinion of counsel, in a form, scope and substance reasonably
acceptable to the Company, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) such Investor provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A promulgated under the Securities Act, as
amended, (or a successor rule thereto) (collectively, “Rule 144"); (ii) any sale
of the Securities made in reliance on Rule 144 may be made only in accordance
with the terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of the Securities under circumstances in which the seller (or the Person)
through whom the sale is made) may be deemed to be an

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underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the Commission thereunder; and (iii) neither the Company nor any
other Person is under any obligation to register the Securities under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
          (l) No Conflicts. The execution, delivery and performance by such
Investor of this Agreement and the Registration Rights Agreement and the
consummation by such Investor of the transactions contemplated hereby and
thereby will not (i) result in a violation of the organizational documents of
such Investor or (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which such Investor is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws) applicable to such
Investor, except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
ability of such Investor to perform its obligations hereunder.
          (m) Residency. Such Investor is a resident of that jurisdiction
specified below its address on the Schedule of Investors.
          (n) Experience of Such Investor. Such Investor, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Investor is able to bear
the economic risk of an investment in the Securities and, at the present time,
is able to afford a complete loss of such investment.
          (o) Brokers and Finders. Except for compensation payable to Roth
Capital Partners, LLC, no Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of such Investor.
          (p) Acknowledgement. Such Investor acknowledges and agrees that the
foregoing representations and warranties are made by it with the intention that
they may be relied upon by the Company and its agents and legal counsel in
determining its eligibility to purchase the Securities under applicable
securities law. Such Investor further agrees that by accepting delivery of the
Securities at the Closing Date, it shall be representing and warranting that the
foregoing representations and warranties are true and correct, in all material
respects, as at the Closing Date with the same force and effect as if they had
been made by such Investor at the Closing Date and that they shall survive the
purchase by such Investor of the Securities and continue in full force and
effect notwithstanding any subsequent disposition by such Investor of the
Securities.

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The Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
     4.1 (a) The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the Securities other
than pursuant to an effective registration statement, to the Company, to an
Affiliate of an Investor or in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act.
          (b) Certificates evidencing the Securities will contain the following
legend, until such time as they are not required under Section 4.1(c):
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED
BY SUCH SECURITIES.
          The Company acknowledges and agrees that an Investor may from time to
time pledge, and/or grant a security interest in some or all of the Securities
pursuant to a bona fide margin agreement in connection with a bona fide margin
account and, if required under the terms of such agreement or account, such
Investor may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval or consent
of the Company and no legal opinion of legal counsel to the pledgee, secured
party or pledgor shall be required in connection with the pledge, but such legal
opinion may be required in connection with a subsequent transfer following
default by the Investor transferee of the

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pledge. No notice shall be required of such pledge. At the appropriate
Investor’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably request
in connection with a pledge or transfer of the Securities including the
preparation and filing of any required prospectus supplement under
Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders
thereunder.
          (c) Certificates evidencing the Shares and Warrant Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)):
(i) following a sale or transfer of such Shares or Warrant Shares pursuant to an
effective registration statement (including the Registration Statement), or
(ii) following a sale or transfer of such Shares or Warrant Shares pursuant to
Rule 144 (assuming the transferor is not an Affiliate of the Company), or
(iii) while such Shares or Warrant Shares are eligible for sale under
Rule 144(k), or (iv) if in the opinion of counsel to the Company such legend is
not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the Staff of the
Commission). Upon the earlier of (i) the Effective Date or (ii) Rule 144(k)
becoming available for the resale of Registrable Securities, Company shall
(A) deliver to the transfer agent for the Common Stock (the “Transfer Agent”)
irrevocable instructions that the Transfer Agent shall reissue a certificate
representing shares of Common Stock without legends upon receipt by such
Transfer Agent of the legended certificates for such shares, together with
either (1) a customary representation by the Investor in a form reasonably
acceptable to counsel to the Company that Rule 144(k) applies to the shares of
Common Stock represented thereby or (2) a statement by the Investor that such
Investor has sold the shares of Common Stock represented thereby in accordance
with the Plan of Distribution contained in the Registration Statement, and
(B) cause its counsel to deliver to the Transfer Agent one or more blanket
opinions to the effect that the removal of such legends in such circumstances
may be effected under the Securities Act. From and after the earlier of such
dates, upon an Investor’s written request, the Company shall promptly cause
certificates evidencing the Investor’s Shares to be replaced with certificates
which do not bear such restrictive legends. When the Company is required to
cause unlegended certificates to replace previously issued legended certificates
under this Section, if unlegended certificates are not delivered to an Investor
within three (3) Trading Days of submission by that Investor of legended
certificate(s) to the Transfer Agent as provided above (the “Delivery Date”),
and if after such Delivery Date and prior to the receipt of such unlegended
certificates, the Investor or the Investor’s broker purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Investor of the Shares which the Investor anticipated receiving upon
such request (a “Buy In”), then the Company shall (1) pay in cash to the
Investor the amount by which (x) the Investor’s total purchase price (including
reasonable brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (A) the number of
Shares that the Company was required to deliver to the Investor on the Delivery
Date by (B) the closing bid price of the Common Stock on the Delivery Date and
(2) deliver to such Investor the number of shares of Common Stock that would
have been issued had the Company timely complied with its delivery obligations
hereunder. The Investor shall provide the Company written notice indicating the
amounts payable to the Investor in respect of the Buy In.

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     4.2 Furnishing of Information. As long as any Investor owns the Securities,
the Company covenants to use its commercially reasonable efforts to timely file
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. As long as any Investor owns Securities, if the
Company is not required to file reports pursuant to such laws, it will prepare
and furnish to the Investors and make publicly available in accordance with Rule
144(c) such information as is required for the Investors to sell the Shares and
Warrant Shares under Rule 144. The Company further covenants that it will take
such further action as any holder of Securities may reasonably request, all to
the extent required from time to time to enable such Person to sell the Shares
and Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
     4.3 Integration. The Company shall not, and shall use its commercially
reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities
to the Investors, or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading Market in a
manner that would require stockholder approval of the sale of the securities to
the Investors.
     4.4 Subsequent Registrations. Other than pursuant to the Registration
Statement, prior to the Effective Date, the Company may not file any
registration statement (other than on Form S-8) with the Commission with respect
to any securities of the Company.
     4.5 Securities Laws Disclosure; Publicity. By 9:30 a.m. (New York time) on
the Trading Day following the execution of this Agreement, and by 9:30 a.m. (New
York time) on the Trading Day following the Closing Date, the Company shall
issue press releases disclosing the transactions contemplated hereby and the
Closing. On the Trading Day following the execution of this Agreement the
Company will file a Current Report on Form 8-K disclosing the material terms of
the Transaction Documents (and attach as exhibits thereto the Transaction
Documents), and on the Trading Day following the Closing Date the Company will
file an additional Current Report on Form 8-K to disclose the Closing. In
addition, the Company will make such other filings and notices in the manner and
time required by the Commission and the Trading Market on which the Common Stock
is listed. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Investor, or include the name of any Investor in any
filing with the Commission (other than the Registration Statement and any
exhibits to filings made in respect of this transaction in accordance with
periodic filing requirements under the Exchange Act) or any regulatory agency or
Trading Market, without the prior written consent of such Investor, except to
the extent such disclosure is required by law or Trading Market regulations.
     4.6 Limitation on Issuance of Future Priced Securities. During the six
months following the Closing Date, the Company shall not issue any “Future
Priced Securities” as such term is described by Nasdaq IM-4350-1.

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     4.7 Indemnification of Investors. In addition to the indemnity provided in
the Registration Rights Agreement, the Company will indemnify and hold the
Investors and their directors, officers, shareholders, partners, employees,
Affiliates and agents (each, an “Investor Party”) harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation (collectively, “Losses”)
that any such Investor Party may suffer or incur as a result of or relating to
any misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.
     4.8 Certain Trading Activities. Prior to the earliest to occur of (a) the
termination of this Agreement or (b) the earlier of (i) the Effective Date, or
(ii) the Effectiveness Date (as defined in the Registration Rights Agreement),
no Investor will, nor will any Person acting on such Investor’s behalf or
pursuant to any understanding with it, engage, directly or indirectly, in any
transaction in the Securities involving (A) any Short Sales, whether or not
against the box, the establishment of any “put equivalent position” (as defined
in Rule 16a-1(h) under the Exchange Act) with respect to the Securities, the
borrowing or pre-borrowing of any shares of Common Stock, or the granting of any
other right (including, without limitation, any put or call option) with respect
to Securities, or the hedging of its position in the Securities, or (B) any
sale, assignment, pledge, hypothecation, put, call, or other transfer of any of
the Securities acquired hereunder.
     4.9 Non-Public Information. The Company covenants and agrees that it shall
not and shall use commercially reasonable efforts to cause any other Person
acting on its behalf not to provide any Investor or its agents or counsel with
any information that the Company believes constitutes material non-public
information, unless prior thereto such Investor shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Investor shall be relying on the foregoing
covenant and agreement in effecting transactions in securities of the Company.
     4.10 Listing of Securities. The Company agrees, (i) if the Company applies
to have the Common Stock traded on any other Trading Market, it will include in
such application the Shares and Warrant Shares, and will take such other action
as is necessary or desirable to cause the Shares and Warrant Shares to be listed
on such other Trading Market as promptly as possible, and (ii) it will take all
action reasonably necessary to continue the listing and trading of its Common
Stock on a Trading Market and will comply in all material respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of
the Trading Market.
     4.11 Use of Proceeds. The Company will use the net proceeds from the sale
of the Securities hereunder for general corporate purposes, which may include
working capital and reduction of contractual obligations.

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     4.12 Form D; Blue Sky Filings. The Company will file a Form D with respect
to the offering and sale of the Securities contemplated hereby with the
Commission in accordance with applicable securities law. The Company will make
such filings with respect to the offering and sale of the Securities
contemplated hereby under applicable “blue sky” laws as determined by the
Company in consultation with its blue sky counsel.
ARTICLE V.
CONDITIONS PRECEDENT TO CLOSING
     5.1 Conditions Precedent to the Obligations of the Investors to Purchase
Securities. The obligation of each Investor to acquire Securities at the Closing
is subject to the satisfaction or waiver by such Investor, at or before the
Closing, of each of the following conditions:
          (a) Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing as though made on and as
of such date;
          (b) Performance. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by it at or prior to the Closing;
          (c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;
          (d) Adverse Changes. Since the date of execution of this Agreement, no
event or series of events shall have occurred that reasonably could have or
result in a Material Adverse Effect;
          (e) No Suspensions of Trading in Common Stock; Listing. Trading in the
Common Stock shall not have been suspended by the Commission or any Trading
Market (except for any suspensions of trading of not more than one Trading Day
solely to permit dissemination of material information regarding the Company) at
any time since the date of execution of this Agreement, and the Common Stock
shall have been at all times since such date listed for trading on a Trading
Market;
          (f) Company Deliverables. The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a);
          (g) No Governmental Prohibition. The sale of the Securities by the
Company shall not be prohibited by any law or governmental order or regulation;
          (h) No Stop Order. No stop order or suspension of trading shall have
been imposed by the Trading Market, the SEC or any other government or
regulatory body with respect to public trading in the Common Stock; and

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          (i) Termination. This Agreement shall not have been terminated as to
such Investor in accordance with Section 6.5 herein.
     5.2 Conditions Precedent to the Obligations of the Company to sell
Securities. The obligation of the Company to sell Securities at the Closing is
subject to the satisfaction or waiver by the Company, at or before the Closing,
of each of the following conditions:
          (a) Representations and Warranties. The representations and warranties
of each Investor contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made on
and as of such date;
          (b) Performance. Each Investor shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by such Investor at or prior to the Closing;
          (c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;
          (d) Investors Deliverables. Each Investor shall have delivered its
Investors Deliverables in accordance with Section 2.2(b);
          (e) No Governmental Prohibition. The sale of the Securities by the
Company shall not be prohibited by any law or governmental order or regulation;
          (f) No Stop Order. No stop order or suspension of trading shall have
been imposed by the Trading Market, the SEC or any other government or
regulatory body with respect to public trading in the Common Stock; and
          (g) Termination. This Agreement shall not have been terminated as to
such Investor in accordance with Section 6.5 herein.
ARTICLE VI.
MISCELLANEOUS
     6.1 Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of the Transaction Documents. The Company shall pay all
stamp and other taxes and duties levied in connection with the sale of the
Shares.
     6.2 Entire Agreement. The Transaction Documents, together with the Exhibits
and Schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and

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representations, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules.
     6.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile (provided the sender
receives a machine-generated confirmation of successful transmission and
reasonably promptly following such transmission sends such notice or
communication via U.S. mail or overnight courier) at the facsimile number
specified in this Section prior to 5:00 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 5:00 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or
(d) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as follows:

     
If to the Company:
  Motorcar Parts of America, Inc.
 
  2929 California Street
 
  Torrance, California 90503
 
  Facsimile No.: (310) 943-1630
 
  Telephone No.: (310) 972-4015
 
  Attention: Michael Umansky, Vice President and General
 
  Counsel
 
   
With a copy to:
  Dreier Stein & Kahan, LLP
 
  The Water Garden
 
  1620 26th Street Sixth Floor, North Tower
 
  Santa Monica, CA 90404
 
  Facsimile No.: (310) 828-9101
 
  Attention: Robert L. Kahan
 
   
and to:
  Dreier LLP
 
  499 Park Avenue
 
  New York, NY 10022
 
  Facsimile No.: (212) 328-6101
 
  Attention: Glenn Burlingame
 
   
If to an Investor:
  To the address set forth under such Investor’s name
 
  on the signature pages hereof;

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
     6.4 Amendments; Waivers; No Additional Consideration. No provision of this
Agreement may be waived or amended except in a written instrument signed by the
Company

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and the Investors holding a majority of the Securities. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. No consideration shall be
offered or paid to any Investor to amend or consent to a waiver or modification
of any provision of any Transaction Document unless the same consideration is
also offered to all Investors who then hold Shares.
     6.5 Termination. This Agreement may be terminated prior to Closing:
          (a) by written agreement of the Investors and the Company; and
          (b) by the Company or an Investor (as to itself but no other Investor)
upon written notice to the other, if the Closing shall not have taken place by
5:00 p.m. (New York City time) on the Outside Date; provided, that the right to
terminate this Agreement under this Section 6.5(b) shall not be available to any
Person whose failure to comply with its obligations under this Agreement has
been the cause of or resulted in the failure of the Closing to occur on or
before such time.
     In the event of a termination pursuant to this Section, the Company shall
promptly notify all non-terminating Investors. Upon a termination in accordance
with this Section 6.5, the Company and the terminating Investor(s) shall not
have any further obligation or liability (including as arising from such
termination) to the other and no Investor will have any liability to any other
Investor under the Transaction Documents as a result therefrom.
     6.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
     6.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. Other
than in connection with a merger, consolidation, sale of all or substantially
all of the Company’s assets or other similar change in control transaction, the
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors holding a majority of the
Shares. Any Investor may assign any or all of its rights under this Agreement to
any Person to whom such Investor assigns or transfers any Securities, provided
such transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions hereof that apply to the “Investors.”
     6.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of,

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nor may any provision hereof be enforced by, any other Person, except as
otherwise set forth in Section 4.7 (as to each Investor Party).
     6.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys’ fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Proceeding.
     6.10 Survival. The agreements, covenants, representation and warranties
contained herein shall survive the Closing and the delivery of the Securities.
     6.11 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
     6.12 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

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     6.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Investor exercises a right, election, demand
or option under a Transaction Document and the Company does not timely perform
its related obligations within the periods therein provided, then such Investor
may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.
     6.14 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
     6.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investors and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
     6.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Investor pursuant to any Transaction Document or an Investor
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
     6.17 Independent Nature of Investors’ Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Each Investor’s obligations
hereunder are expressly not conditioned on the purchase by any or all of the
other Investors of the Shares and the Warrants. Nothing contained herein or in
any Transaction Document, and no action taken by

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any Investor pursuant thereto, shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investors are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Investor acknowledges that no other Investor has
acted as agent for such Investor in connection with making its investment
hereunder and that no Investor will be acting as agent of such Investor in
connection with monitoring its investment in the Securities or enforcing its
rights under the Transaction Documents. Each Investor shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose. The Company acknowledges
that each of the Investors has been provided with the same Transaction Documents
for the purpose of closing a transaction with multiple Investors and not because
it was required or requested to do so by any Investor. The Company’s obligations
to each Investor under this Agreement are identical to its obligations to each
other Investor other than such differences resulting solely from the number of
Securities purchased by each Investor, but regardless of whether such
obligations are memorialized herein or in another agreement between the Company
and an Investor.
     6.18 Limitation of Liability. Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that the liability of an Investor
arising directly or indirectly, under any Transaction Document of any and every
nature whatsoever shall be satisfied solely out of the assets of such Investor,
and that no trustee, officer, other investment vehicle or any other Affiliate of
such Investor or any investor, shareholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.
[Remainder of Page Intentionally Left Blank]

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     In Witness Whereof, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

                  Motorcar Parts of America, Inc.     
 
           
 
  By:         
 
           
 
    Name:      
 
    Title:      

[Signature Pages For Investors Follows]

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     In Witness Whereof, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

                          Name of Investor     
 
                             
 
                   
 
  By:                              
 
  Name:                              
 
  Title:                              
 
                        Investment Amount: $        
 
                   
 
                        Tax ID No.:                               

                  Address For Notice    
 
           
 
  c/o:        
 
     
 
    
 
           
 
  Street:        
 
           
 
           
 
  City/State/Zip:        
 
           
 
           
 
  Attention:        
 
           
 
           
 
  Tel:        
 
           
 
           
 
  Fax:        
 
           

                  Delivery Instructions
(if different from above)     
 
           
 
  c/o:        
 
           
 
           
 
  Street:        
 
           
 
           
 
  City/State/Zip:        
 
           
 
           
 
  Attention:        
 
           
 
           
 
  Tel:        
 
           

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