Document:

EXHIBIT 10.76

 

NON-REDEEMABLE WARRANT

 

THIS WARRANT HAS NOT BEEN

REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY

STATE SECURITIES LAW.  NEITHER THIS

WARRANT NOR ANY WARRANT SHARES ISSUABLE UPON EXERCISE HEREOF NOR ANY INTEREST OR

PARTICIPATION HEREIN OR THEREIN MAY BE SOLD, ASSIGNED, OR TRANSFERRED EXCEPT IN

COMPLIANCE WITH THE ACT AND APPLICABLE STATE SECURITIES LAWS.

 

 

INSIGNIA SOLUTIONS

PLC

NON-REDEEMABLE

WARRANT

 

Original Issue Date:

October 17, 2002

 

This Non-Redeemable Warrant (“Warrant”) is issued in

connection with and pursuant to that certain Securities Subscription Agreement

(the “Subscription

Agreement”) dated as of October 17, 2002, by and between INSIGNIA

SOLUTIONS PLC, a company incorporated under the laws of England and

Wales (the “Company”) and FUSION CAPITAL FUND II, LLC (the “Buyer”).

 

FOR VALUE RECEIVED, the Buyer, the registered holder hereof, or its

permitted assigns (the “Holder”), is entitled to purchase from the Company,

during the period specified in this Warrant, 1,000,000 (subject to adjustment

as hereinafter provided) fully paid and non-assessable American depository

shares (each an “ADS” and collectively, the “ADSs”) of the Company at the

purchase price per ADS provided in Section 1.2 of this Warrant (the “Warrant

Exercise Price”), all subject to the terms and conditions set forth

in this Warrant.  Each ADS represents

one ordinary share, 20 pence per share nominal value, of the Company (the

“Ordinary Shares”).  The ADSs to be

purchased as described above are referred to herein as the “Warrant

Shares.”  All terms not

otherwise defined herein shall have the meaning ascribed to them in the

Subscription Agreement.

 

 

Section 1.              Period

for Exercise and Exercise Price; Redemption.

 

1.1          Period for

Exercise.  The right to purchase shares of Warrant

Shares represented by this Warrant shall be immediately exercisable, and shall

expire at 5:00 p.m., Chicago local time, September 30, 2007  (the “Expiration Date”).  From and after the Expiration Date this

Warrant shall be null and void and of no further force or effect whatsoever.

 

1.2          Warrant

Exercise Price.  The Warrant Exercise Price per share of

Warrant Shares shall be the U.S. Dollar equivalent of 20.5 pence per ADS

(subject to adjustment as hereinafter provided), calculated by reference to the

average currency conversion rate quoted by the Bank of America in London as the

price for Pounds Sterling purchased with U.S. Dollars prevailing at the date

the Warrant is exercised. Notwithstanding any provision hereof to the contrary

(and in particular any provision relating to adjustment to the Warrant Exercise

Price), the Company shall not be required or permitted to issue any Ordinary

Shares under this Warrant 

 

 

1

 

(or have its transfer agent or Depositary issue any ADSs), if such

issuance would breach the Company’s obligations under the United Kingdom

Companies Act 1985.

 

 

Section 2.              Exercise

of Warrant.

 

2.1          Manner

of Exercise.   The Holder may exercise this Warrant, in whole

or in part, immediately, but not after the Expiration Date, during normal

business hours on any Trading Day by surrendering this Warrant to the Company

at the principal office of the Company, accompanied by a Warrant Exercise Form

in substantially the form annexed hereto duly executed by the Buyer and by

payment of the Warrant Exercise Price for the number of Warrant Shares for

which this Warrant is then exercisable, either (i) in immediately available

funds, (ii) by delivery of an instrument evidencing indebtedness owing by the

Company to the Holder in the appropriate amount, (iii) by authorizing the

Company to retain ADSs which would otherwise be issuable upon exercise of this

Warrant (subject to and in accordance with Section 2.4 hereof) or (iv) in a combination

of (i), (ii) or (iii) above, provided, however, that in no event shall the

Holder be entitled to exercise this Warrant for a number of Warrant Shares in

excess of that number of Warrant Shares which, upon giving effect to such

exercise, would cause the aggregate number of ADSs or Ordinary Shares

beneficially owned by the Holder to exceed 9.9% of the outstanding ADSs or

Ordinary Shares following such exercise. 

For purposes of the foregoing proviso, the aggregate number of ADSs or

Ordinary Shares beneficially owned by the Holder shall include the number of

ADSs or Ordinary Shares issuable upon exercise of this Warrant with respect to

which determination of such proviso is being made, but shall exclude ADSs or

Ordinary Shares which would be issuable upon (i) exercise of the remaining,

unexercised Warrants beneficially owned by the Holder and (ii) exercise or

conversion of the unexercised or unconverted portion of any other securities of

the Company beneficially owned by the Holder subject to a limitation on

conversion or exercise analogous to the limitation contained herein.  Except as set forth in the preceding

sentence, for purposes of this paragraph, beneficial ownership shall be

calculated in accordance with Section 13(d) of the Securities Exchange Act of

1934, as amended.  The Holder may waive

the foregoing limitation by written notice to the Company upon not less than 61

days prior written notice (with such waiver taking effect only upon the

expiration of such 61 day notice period).

 

2.2          When Exercise

Effective.  Each exercise of this Warrant shall be

deemed to have been effected on the day on which all requirements of Section

2.1 shall have been met with respect to such exercise.  At such time the person in whose name any

certificate for shares of Warrant Shares shall be issuable upon such exercise

shall be deemed for all corporate purposes to have become the Holder of record

of such shares, regardless of the actual delivery of certificates evidencing

such shares.

 

2.3          Delivery of

Certificates.  As soon as practicable after each exercise

of this Warrant, and in any event no later than 3 Trading Days after such

exercise, the Company will issue Warrant Shares for the number of Warrant

Shares to which the Holder is entitled upon such Holder’s submission of the

applicable Warrant Exercise Form.

 

 

2

 

2.4          Cashless

Exercise.  The Holder may, by providing notice thereof

to the Company along with the Warrant Exercise Form, elect to exercise the

Warrant for a number of Warrant Shares determined in accordance with the

following formula:

 

	

  X =

  	

  Y(A–B)

  
	

   

  	

  A

  

 

Where:

 

X = The number of Warrant Shares to be issued to the

Holder.

Y = The number of Warrant Shares purchasable under

this Warrant (at the date of such exercise).

A = The fair market value of one ADS (or other

security for which the Warrant is then exercisable at the date of such

exercise).

B = Exercise Price (as adjusted to the date of such

exercise).

 

For purposes of this Section 2.4, the “fair market

value” per share shall be the Closing Sale Price of the ADSs for the Trading

Day immediately prior to the notice of exercise of the Warrant.  Notwithstanding any provisions herein to the

contrary, the “cashless exercise” of the Warrants contemplated hereunder shall

not be permitted to the extent that the Company is prohibited under the

corporate laws and regulations of England and Wales from effectuating such

“cashless exercise” of the Warrants.

 

 

Section 3. Adjustment of Purchase Price and Number of Shares. 

The Warrant Exercise Price and the kind of securities issuable upon

exercise of the Warrant shall be adjusted from time to time as follows (subject

to Section 1.2):

 

3.1          Subdivision

or Consolidation of Shares (Share Splits).  If the

Company at any time effects a subdivision or consolidation of the outstanding

ADSs or Ordinary Shares (through a split or otherwise), the number of Warrant

Shares shall be increased, in the case of a subdivision, or the number of

shares of Warrant Shares shall be decreased, in the case of a consolidation, in

the same proportions as the ADSs or Ordinary Shares are subdivided or

consolidated, in each case effective automatically upon, and simultaneously

with, the effectiveness of the subdivision or consolidation which gives rise to

the adjustment.

 

3.2          Dividends. 

If the Company at any time pays a dividend, or makes any other

distribution, to holders of ADSs or Ordinary Shares payable in ADSs or Ordinary

Shares, or fixes a record date for the determination of holders of ADSs or

Ordinary Shares entitled to receive a dividend or other distribution payable in

Ordinary Shares or ADSs, then the number of shares of Warrant Shares in effect

immediately prior to such action shall be proportionately increased so that the

Holder hereof may receive upon exercise of the Warrant the aggregate number of

ADSs which he or it would have owned immediately following such action if the

Warrant had been exercised immediately prior to such action.  The adjustment shall become effective

immediately as of the date the Company shall take a record of the holders of

ADSs or Ordinary Shares for the purpose of receiving such dividend or

distribution (or if no such record is taken, as of the effectiveness of such

dividend or distribution).

 

 

3

 

3.3          Reclassification, Consolidation or

Merger.  If at any time, as a result of:

 

(a)           a

capital reorganization or reclassification (other than a subdivision,

consolidation or dividend provided for elsewhere in this Section 3), or

 

(b)           a

merger or consolidation of the Company with another corporation (whether or not

the Company is the surviving corporation),

 

the ADSs issuable upon exercise of the Warrants shall be changed into

or exchanged for the same or a different number of shares of any class or

classes of shares of the Company or any other corporation, or other securities

convertible into such shares, then, as a part of such reorganization,

reclassification, merger or consolidation, appropriate adjustments shall be

made in the terms of the Warrants (or of any securities into which the Warrants

are exercised or for which the Warrants are exchanged), so that:

 

(y)           the

Holders of Warrants or of such substitute securities shall thereafter be

entitled to receive, upon exercise of the Warrants or of such substitute

securities, the kind and amount of shares, other securities, money and property

which such Holders would have received at the time of such capital

reorganization, reclassification, merger, or consolidation, if such Holders had

exercised their Warrants immediately prior to such capital reorganization,

reclassification, merger, or consolidation, and

 

(z)            the

Warrants or such substitute securities shall thereafter be adjusted on terms as

nearly equivalent as may be practicable to the adjustments theretofore provided

in this Section 3.3.

 

No consolidation or

merger in which the Company is not the surviving corporation shall be

consummated unless the surviving corporation shall agree, in writing, to the

provisions of this Section 3.3. The provisions of this Section 3.3 shall

similarly apply to successive capital reorganizations, reclassifications,

mergers and consolidations.

 

3.4          Other

Action Affecting ADSs or Ordinary Shares.  If at any

time the Company takes any action affecting ADSs or Ordinary Shares, other than

an action described in any of Sections 3.1 - 3.3 which could reasonably be

expected to have an adverse effect upon the exercise rights of the Warrants,

the Warrant Exercise Price or the kind of securities issuable upon exercise of

the Warrants, or both, shall be adjusted in such manner to be equitable in the

circumstances.

 

3.5          Notice of

Adjustment Events.  Whenever the Company contemplates the

occurrence of an event which would give rise to adjustments under this Section

3, the Company shall mail to each Warrant Holder, at least 5 days prior to the

record date with respect to such event or, if no record date shall be

established, at least 5 days prior to such event, a notice specifying (i) the

nature of the contemplated event, and (ii) the date on which any such record is

to be taken for the purpose of such event, and (iii) the date on which such

event is expected to become effective, and (iv) the time, if any is to be

fixed, when the holders of record shall be entitled to exchange their ADSs or

Ordinary Shares (or other securities) for securities or other property

deliverable in connection with such event.

 

 

4

 

3.6          Notice of

Adjustments.  Whenever the kind or number of securities

issuable upon exercise of the Warrants, or both, shall be adjusted pursuant to

Section 3, the Company shall deliver a certificate signed by its Chief

Executive Officer and by its Chief Financial Officer, setting forth, in

reasonable detail, the event requiring the adjustment, the amount of the

adjustment, the method by which such adjustment was calculated (including a

description of the basis of any determination hereunder), and the Warrant

Exercise Price and the kind of securities issuable upon exercise of the

Warrants after giving effect to such adjustment, and shall cause copies of such

certificate to be mailed (by first class mail postage prepaid) to each Warrant

Holder promptly after each adjustment.

 

Section 4. Reservation.  The Company

covenants and agrees that it will at all times have authorized, reserve and

keep available, solely for issuance and delivery upon the exercise of this

Warrant, the number of Ordinary Shares represented by ADSs from time to time

issuable upon the exercise of this Warrant. 

The Company further covenants and agrees that this Warrant is, and any

Warrants issued in substitution for or replacement of this Warrant and all

Warrant Shares, will upon issuance be duly authorized and validly issued and,

in the case of Ordinary Shares represented by ADSs issuable hereunder, upon

issuance will be fully paid and non-assessable  and free from all preemptive

rights of any shareholder, and from all taxes, liens and charges with respect

to the issue thereof.

 

 

Section 5.              Ownership,

Transfer and Substitution of Warrants.

 

5.1          Ownership

of Warrants.  The Company may treat the person in whose

name any Warrant is registered on the register kept at the principal office of

the Company as the owner and Holder thereof for all purposes, notwithstanding

any notice to the contrary, but in all events recognizing any transfers made in

accordance with the terms of this Warrant.

 

5.2          Transfer

and Exchange of Warrants.  Upon the surrender of any

Warrant, properly endorsed, for registration of transfer or for exchange at the

principal office of the Company, the Company at its expense will execute and

deliver to the Holder thereof, upon the order of such Holder, a new Warrant or

Warrants of like tenor, in the name of such Holder or as such Holder may

direct, for such number of ADSs with respect to each such Warrant, the

aggregate number of ADSs in any event not to exceed the number of ADSs for

which the Warrant so surrendered had not been exercised.

 

5.3          REGISTRATION RIGHTS.  THE HOLDER OF THIS WARRANT IS

ENTITLED TO CERTAIN REGISTRATION RIGHTS WITH RESPECT TO THE WARRANT SHARES

ISSUABLE UPON EXERCISE THEREOF.  SAID

REGISTRATION RIGHTS ARE SET FORTH IN A REGISTRATION RIGHTS AGREEMENT BY AND

BETWEEN THE BUYER AND THE COMPANY.

 

5.4          Exemption

from Registration.  If an opinion of counsel provides that

registration is not required for the proposed exercise or transfer of this

Warrant or the proposed transfer of the Warrant Shares and that the proposed

exercise or transfer in the absence of registration would require the Company

to take any action including executing and filing  forms or other documents

with the Securities and Exchange Commission (the “SEC”) or any state

securities agency, or delivering to the Holder any form or document in order to

establish the right of the Holder to effectuate the proposed exercise or

transfer, the Company agrees promptly, at its 

 

 

5

 

expense, to take any such action. 

At any time after the registration statement contemplated in

Section 4(a) of the Subscription Agreement is declared effective by the SEC,

any Warrant Shares issued to the Holder in connection with any exercise of this

Warrant shall be issued in certificated form and shall bear no restrictive

legend.  At any time before the

registration statement contemplated in Section 4(a) of the Subscription

Agreement is declared effective by the SEC, any Warrant Shares issued to the

Holder in connection with any exercise of this Warrant shall be issued in

certificated form and shall bear the following 

restrictive legend:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE

NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE

STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY

NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN

EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF

1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF

COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS

NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD

PURSUANT TO RULE 144 UNDER SAID ACT.

 

On the Commencement Date (as defined in the Subscription

Agreement), the Company shall cause any restrictive legend on any outstanding

Warrant Shares to be removed.

 

 

Section 6.              No

Rights or Liabilities as Shareholder.  Nothing

contained in this Warrant shall be construed as conferring upon the Holder

hereof any rights as a shareholder of the Company or as imposing any

liabilities on such holder to purchase any securities or as a shareholder of

the Company, whether such liabilities are asserted by the Company or by

creditors of the Company.

 

 

Section 7.              Rule 144 Sales. 

At the request of any Holder who proposes to sell securities in

compliance with Rule 144 of the SEC, the Company will (i) forthwith furnish to

such Holder a written statement of compliance with the filing requirements of

the SEC as set forth in Rule 144, as such rules may be amended from time to

time and (ii) make available to the public and such Holder such information as

will enable the Holder to make sales pursuant to Rule 144.

 

 

Section 8.              Miscellaneous.

 

8.1          Amendment

and Waiver.  This Warrant may be amended with, and only

with, the written consent of the Company and the Holder.  Any waiver of any term, covenant, agreement

or condition contained in this Warrant shall not be deemed a waiver of any

other term, covenant, agreement or condition, and any waiver of any default in

any such term, covenant, agreement or condition shall not be deemed a waiver of

any later default thereof or of any default of any other term, covenant,

agreement or condition.

 

 

6

 

8.2          Representations

and Warranties to Survive Closing.  All representations, warranties and

covenants contained herein shall survive the execution and delivery of this

Warrant and the issuance of any Warrant Shares upon the exercise hereof.

 

8.3          Severability. 

In the event that any court or any governmental authority or agency

declares all or any part of any Section of this Warrant to be unlawful or

invalid, such unlawfulness or invalidity shall not serve to invalidate any

other Section of this Warrant, and in the event that only a portion of any

Section is so declared to be unlawful or invalid, such unlawfulness or

invalidity shall not serve to invalidate the balance of such Section.

 

8.4          Binding

Effect; No Third Party Beneficiaries.  All provisions of this Warrant shall be

binding upon and inure to the benefit of the parties and their respective

heirs, legatees, executors, administrators, legal representatives, successors,

and permitted transferees and assigns. 

No person other than the holder of this Warrant and the Company shall

have any legal or equitable right, remedy or claim under or in respect of, this

Warrant.

 

8.5          Notices.  Any notices, consents, waivers or other

communications required or permitted to be given under the terms of this

Warrant must be in writing and will be deemed to have been delivered: (i) upon

receipt, when delivered personally; (ii) upon receipt, when sent by facsimile

(provided confirmation of transmission is mechanically or electronically

generated and kept on file by the sending party); or (iii) one Trading Day

after deposit with a nationally recognized overnight delivery service, in each

case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such

communications shall be:

 

If to the Company:

Insignia

Solutions plc

41300

Christy Street

Fremont,

CA 94538

Telephone:            510-360-3700

Facsimile:                                            510-360-3701

Attention:              Chief

Financial Officer

 

With a copy to:

Venture Law Group

2800 Sand Hill Road

Menlo Park, CA  94025

Telephone:            650-854-4488

Facsimile:                                            650-233-8386

Attention:              Mark A. Medearis

 

If to the Holder:

Fusion

Capital Fund II, LLC

222

Merchandise Mart Plaza, Suite 9-112

Chicago,

IL 60654

Telephone:            312-644-6644

Facsimile:                                            312-644-6244

Attention:              Steven G. Martin

 

 

7

 

If to the Transfer Agent:

Bank of New York

ADR Department

620 Avenue of the

Americas, 6th Floor

New York, NY 10011

Telephone:            212-815-4305

Facsimile:                                            212-571-3050

Attention:              Tom Abbott

 

 

or at such other address and/or facsimile number and/or to the attention

of such other person as the recipient party has specified by written notice

given to each other party three (3) Trading Days prior to the effectiveness of

such change.  Written confirmation of

receipt (A) given by the recipient of such notice, consent, waiver or other

communication, (B) mechanically or electronically generated by the sender’s

facsimile machine containing the time, date, and recipient facsimile number or

(C) provided by a nationally recognized overnight delivery service, shall be

rebuttable evidence of personal service, receipt by facsimile or receipt from a

nationally recognized overnight delivery service in accordance with clause (i),

(ii) or (iii) above, respectively.

 

8.6          Taxes, Costs and Expenses.

The Company covenants and agrees that it will pay when due and payable any and

all United Kingdom, English, Welsh, federal, state and local taxes (other than

income taxes) and any other costs and expenses (including any and all transfer,

stamp or similar taxes) which may be payable in respect of the preparation,

issuance, delivery, exercise, or surrender of this Warrant pursuant to the

terms of this Warrant or the issuance of any shares of Warrant Shares as a

result thereof.  If any suit or action is instituted or attorneys employed to

enforce this Warrant or any part thereof, the Company promises and agrees to

pay all costs and expenses associated therewith, including reasonable

attorneys’ fees and court costs. 

 

8.7           Governing Law; Jurisdiction; Jury

Trial.  The corporate laws of England and Wales

shall govern all issues concerning the relative rights of the Company and its

shareholders and the powers and capacity of the Company. All other questions

concerning the construction, validity, enforcement and interpretation of this

Warrant shall be governed by the internal laws of the State of Illinois,

without giving effect to any choice of law or conflict of law provision or rule

(whether of the State of Illinois or any other jurisdictions) that would cause

the application of the laws of any jurisdictions other than the State of

Illinois.  Each party hereby irrevocably

submits to the exclusive jurisdiction of the state and federal courts sitting

in the City of Chicago, for the adjudication of any dispute hereunder or under

the other Transaction Documents or in connection herewith or therewith, or with

any transaction contemplated hereby or discussed herein, and hereby irrevocably

waives, and agrees not to assert in any suit, action or proceeding, any claim

that it is not personally subject to the jurisdiction of any such court, that

such suit, action or proceeding is brought in an inconvenient forum or that the

venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process

and consents to process being served in any such suit, action or proceeding by

mailing a copy thereof to such party at the address for such notices to it

under this Agreement and agrees that such service shall constitute good and

sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any

right to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY

HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE 

 

 

8

 

ADJUDICATION OF ANY DISPUTE

HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY

TRANSACTION CONTEMPLATED HEREBY.

 

8.8          Loss of

Warrant.  Upon receipt by the Company of evidence

reasonably satisfactory to it of the loss, theft, destruction or mutilation of

this Warrant, and (in the case of loss, theft or destruction) of

indemnification from the Holder, and upon surrender and cancellation of this

Warrant, if mutilated, the Company shall execute and deliver a new Warrant of

like tenor and date.

 

8.9          Entire

Agreement. This

Warrant, the Subscription Agreement and the Registration Rights Agreement of

even date herewith represent the entire agreement and understanding between the

parties concerning the subject matter hereof and supercede all prior and

contemporaneous agreements, understandings, representations and warranties with

respect thereto.

 

8.10        Headings. The headings used herein are used for

convenience only and are not to be considered in construing or interpreting

this Warrant.

 

 

 

	

  INSIGNIA SOLUTIONS PLC

  
	

   

  
	

  By: 

  	

  /s/ Richard M. Noling

  
	

  Name: Richard M. Noling

  
	

  Title: Chief Executive Officer

  

 

 

9

 

NON-REDEEMABLE WARRANT EXERCISE FORM

 

 

 

Date:

 

 

	

  INSIGNIA SOLUTIONS PLC

  
	

   

  
	

   

  

 

Attention:  

 

Ladies and Gentlemen:

 

The undersigned, being the registered holder of your Non-Redeemable

Warrant for the purchase of 1,000,000 Warrant Shares issued October 17, 2002

accompanying this letter, hereby irrevocably exercises such Non-Redeemable

Warrant for

                       

Warrant Shares (as defined in said Non-Redeemable Warrant), and herewith makes

payment therefor [via “cash-less exercise”] in accordance with the

Non-Redeemable Warrant, and requests that such Warrant Shares be issued in the

name of, and delivered to FUSION CAPITAL FUND II, LLC, at the

address shown below the signature line hereof.

 

If said number of Warrant Shares shall not be all the Warrant Shares

issuable upon exercise of the attached Non-Redeemable Warrant, a new

Non-Redeemable Warrant is to be issued in the name of the undersigned for the

balance remaining of such Warrant Shares.

FUSION CAPITAL FUND II, LLC

 

BY:

FUSION CAPITAL PARTNERS, LLC

 

	

  By:

  	

   

  
	

  Name:

  	

   

  
	

  Title:

  	

   

  

 

Fusion

Capital Fund II, LLC

222

Merchandise Mart Plaza, Suite 9-112

Chicago,

IL 60654

 

 

10Exhibit 10.77

SECURITIES SUBSCRIPTION AGREEMENT

 

                SECURITIES SUBSCRIPTION AGREEMENT (the

“Agreement”), dated as of October 17, 2002, by and between INSIGNIA SOLUTIONS PLC, a

public limited company incorporated under the laws of England and Wales

(registered number: 1961960) (the “Company”), and FUSION CAPITAL FUND II, LLC,

an Illinois limited liability company (the “Buyer”).  Capitalized terms used herein and not otherwise defined herein

are defined in Section 10 hereof.

 

WHEREAS:

 

                Subject to the terms and conditions set forth in this

Agreement, the Company wishes to issue to the Buyer, and the Buyer wishes to

subscribe for, up to Six Million Dollars ($6,000,000) of American depository

shares (each an “ADS” and collectively, the “ADSs”), each ADS representing one

ordinary share, 20 pence per share nominal value, of the Company (the “Ordinary

Shares”).  The ADSs to be subscribed for

as described above are referred to herein as the “Purchase Shares.”

 

                NOW

THEREFORE, the Company and the Buyer hereby agree as follows:

 

1.             PURCHASE OF ADSs.

 

                Subject to the terms and conditions set forth in

Sections 6, 7 and 9 below, the Company hereby agrees to issue to the Buyer, and

the Buyer hereby agrees to subscribe for, Ordinary Shares represented by the

ADSs as follows:

 

                (a)           Commencement

of Purchases of ADSs.  The issuance

of and subscription for ADSs hereunder shall commence (the “Commencement”)

within five (5) Trading Days following the date of satisfaction (or waiver) of

the conditions to the Commencement set forth in Sections 6 and 7 below (or such

later date as is mutually agreed to by the Company and Buyer) (the date of such

Commencement, the “Commencement Date”).

 

                (b)           Buyer’s

Subscription Rights and Obligations. 

Subject to the Company’s right to suspend subscriptions under Section

1(d)(ii) hereof, the Buyer shall subscribe for Ordinary Shares represented by

ADSs on each Trading Day during each Monthly Period with an aggregate purchase

price equal to the Daily Purchase Amount (as defined in Section 1(c)(i)) at the

Purchase Price.  Within one (1) Trading

Day of receipt of Purchase Shares, the Buyer shall pay to the Company an amount

equal to the Purchase Amount with respect to such Purchase Shares as full

payment for the subscription for the Purchase Shares so received.  The Company shall not issue any fraction of

an ADS upon any subscription.  All ADSs

(including fractions thereof) issuable upon a subscription under this Agreement

shall be aggregated for purposes of determining whether the issue would result

in the issuance of a fraction of an ADS. 

If, after the aforementioned aggregation, the issuance would result in

the issuance of a fraction of an ADS, the Company shall round such fraction of

an ADS up or down to the nearest whole share. 

All payments made under this Agreement shall be made in lawful money of

the United States of America by check or wire transfer of immediately available

funds to such account as the Company may from time to time designate by written

notice in accordance with the provisions of this Agreement.  Whenever any amount expressed to be due by

the terms of this Agreement is due on any day that is not a Trading Day, the

same shall instead be due on the next succeeding day which is a Trading Day.

 

 

 

(c)           The

Daily Purchase Amount; Company’s Right to Decrease or Increase the Daily

Purchase Amount.

 

(i)            The

Daily Purchase Amount.  As used

herein the term “Original Daily Purchase Amount” shall mean Ten Thousand

Dollars ($10,000) per Trading Day. As used herein, the term “Daily Purchase

Amount” shall mean initially Ten Thousand Dollars ($10,000) per Trading Day,

which amount may be increased or decreased from time to time pursuant to this

Section 1(c).

 

(ii)           Company’s Right to Decrease the

Daily Purchase Amount.  The Company

shall always have the right at any time to decrease the amount of the Daily

Purchase Amount by delivering written notice (a “Daily Purchase Amount Decrease

Notice”) to the Buyer which notice shall specify the new Daily Purchase

Amount.  The decrease in the Daily

Purchase Amount shall become effective one Trading Day after receipt by the

Buyer of the Daily Purchase Amount Decrease Notice.  Any subscriptions by the Buyer which have a Purchase Date on or

prior to the first (1st) Trading Day after receipt by the Buyer of a Daily Purchase

Amount Decrease Notice must be honored by the Company as otherwise provided

herein.  The decrease in the Daily

Purchase Amount shall remain in effect until the Company delivers to the Buyer

a Daily Purchase Amount Increase Notice (as defined below).

 

 (iii)         Company’s

Right to Increase the Daily Purchase Amount.  The Company shall have the right (but not the obligation) to

increase the amount of the Daily Purchase Amount in accordance with the terms

and conditions set forth in this Section 1(c)(iii) by delivering written notice

to the Buyer stating the new amount of the Daily Purchase Amount (a “Daily

Purchase Amount Increase Notice”).  A

Daily Purchase Amount Increase Notice shall be effective five (5) Trading Days

after receipt by the Buyer.  The Company

shall always have the right at any time to increase the amount of the Daily

Purchase Amount up to the Original Daily Purchase Amount.  With respect to increases in the Daily

Purchase Amount above the Original Daily Purchase Amount, as the market price for

the ADSs increases the Company shall have the right from time to time to

increase the Daily Purchase Amount as follows. 

For every $0.25 increase in Threshold Price above $0.75 (subject to

equitable adjustment for any reorganization, recapitalization, non-cash

dividend, share split or other similar transaction), the Company shall have the

right to increase the Daily Purchase Amount by up to an additional $2,000 in

excess of the Original Daily Purchase Amount. 

“Threshold Price” for purposes hereof means the lowest Sale Price of the

ADSs during the five (5) consecutive Trading Days immediately prior to the

submission to the Buyer of a Daily Purchase Amount Increase Notice (subject to

equitable adjustment for any reorganization, recapitalization, non-cash dividend,

share split or other similar transaction). 

For example, if the Threshold Price is $1.00, the Company shall have the

right to increase the Daily Purchase Amount to up to $12,000 in the aggregate.  If the Threshold Price is $2.00, the Company

shall have the right to increase the Daily Purchase Amount to up to $20,000 in

the aggregate.  Any increase in the

amount of the Daily Purchase Amount shall continue in effect until the delivery

to the Buyer of a Daily Purchase Amount Decrease Notice.  However, if at any time during any Trading

Day the Sale Price of the ADSs is below the applicable Threshold Price, such

increase in the Daily Purchase Amount shall be void and the Buyer’s obligations

to subscribe for Purchase Shares hereunder in excess of the applicable maximum

Daily Purchase Amount shall be terminated. 

Thereafter, the Company shall again have the right to increase the

amount of the Daily Purchase Amount as set forth herein by delivery of a new

Daily Purchase Amount Increase Notice only if the Sale Price of the ADSs is

above the applicable Threshold Price on each of five (5) consecutive Trading

Days immediately prior to such new Daily Purchase Amount Increase Notice.

 

 

2

 

(d)           Limitations

on Purchases.

 

(i)            Limitation on Beneficial

Ownership. The Company shall not effect any issue of Ordinary Shares under

this Agreement and the Buyer shall not have the right to subscribe for ADSs

under this Agreement to the extent that after giving effect to such subscription

the Buyer together with its affiliates would beneficially own in excess of 4.9%

of the Company’s issued outstanding Ordinary Shares following such

subscription.  For purposes hereof, the

number of Ordinary Shares beneficially owned by the Buyer and its affiliates or

acquired by the Buyer and its affiliates, as the case may be, shall include the

number of Ordinary Shares issuable in connection with a subscription under this

Agreement with respect to which the determination is being made, but shall

exclude the number of Ordinary Shares which would be issuable upon (1) a

subscription of the remaining Available Amount which has not been submitted for

subscription, and (2) exercise or conversion of the unexercised or unconverted

portion of any other securities of the Company (including, without limitation,

any warrants) subject to a limitation on conversion or exercise analogous to

the limitation contained herein beneficially owned by the Buyer and its

affiliates.  If the 4.9% limitation is

ever reached the Company shall have the option to increase such limitation to

9.9% by delivery of written notice to the Buyer.  Thereafter, if the 9.9% limitation is ever reached this shall not

affect or limit the Buyer’s obligation to subscribe for the Daily Purchase

Amount as otherwise provided in this Agreement.  Specifically, even though the Buyer may not receive additional

ADSs in the event that the 9.9% limitation is ever reached, the Buyer is still

obligated to pay to the Company the Daily Purchase Amount on each Trading Day

as otherwise obligated under this Agreement, e.g. no Event of Default (as

defined in Section 9 hereof) has occurred, nor any event which, after notice

and/or lapse of time, would become an Event of Default.  Under such circumstances, the Buyer would

have the right to acquire additional ADSs in the future only at such time as

its ownership subsequently becomes less than the 9.9% limitation.  For purposes of this Section, in determining

the number of issued and outstanding Ordinary Shares the Buyer may rely on the

number of issued and outstanding Ordinary Shares as reflected in (1) the

Company’s most recent Form 10-Q or Form 10-K, as the case may be, (2) a more

recent public announcement by the Company or (3) any other written

communication by the Company or its Transfer Agent setting forth the number of

Ordinary Shares issued and outstanding. 

Upon the reasonable written or oral request of the Buyer, the Company

shall promptly confirm orally and in writing to the Buyer the number of

Ordinary Shares then issued and outstanding. 

In any case, the number of issued and outstanding Ordinary Shares shall

be determined after giving effect to any subscriptions under this Agreement by

the Buyer since the date as of which such number of outstanding Ordinary Shares

was reported.  Except as otherwise set

forth herein, for purposes of this Section 1(d)(i), beneficial ownership shall

be determined in accordance with Section 13(d) of the Securities Exchange Act

of 1934, as amended.

 

(ii)           Company’s Right to Suspend

Subscriptions.  The Company may, at

any time, give written notice (a “Purchase Suspension Notice”) to the Buyer

suspending subscriptions of Purchase Shares by the Buyer under this

Agreement.  The Purchase Suspension

Notice shall be effective only for subscriptions that have a Purchase Date

later than one (1) Trading Day after receipt of the Purchase Suspension Notice

by the Buyer. Any subscription by the Buyer that has a Purchase Date on or

prior to the first (1st) Trading Day after receipt by the Buyer of a Purchase

Suspension Notice from the Company must be honored by the Company as otherwise

provided herein.  Such subscription

suspension shall continue in effect until a revocation in writing by the

Company, at its sole discretion.  So

long as a Purchase Suspension Notice is in effect, the Buyer shall not be

obligated to subscribe for any Purchase Shares from the Company under Section 1

of this Agreement.

 

3

 

(iii)          Purchase Price Floor.  Notwithstanding any provision hereof to the

contrary, the Company shall not effect any issuance of Ordinary Shares under

this Agreement (or have its transfer agent or Depository issue any ADSs) and

the Buyer shall not have the right nor the obligation to subscribe for any Purchase

Shares under this Agreement on any Trading Day where the Purchase Price for any

subscriptions of Purchase Shares would be less than the Floor Price. The

Company may at any time give written notice (a “Floor Price Change Notice”) to

the Buyer increasing or decreasing the Floor Price, provided that the Company

shall not give a notice to decrease the Floor Price unless it has at the

relevant time sufficient authority under sections 80 and 89 of the United

Kingdom Companies Act 1985 to allot on a non-pre-emptive basis (or to allot on

a non-pre-emptive basis the right to subscribe for) to subscribe for the number

of additional Ordinary Shares to which Buyer may become entitled as a result of

such decrease.  The Floor Price Change

Notice shall be effective only for purchases that have a Purchase Date later

than one (1) Trading Day after receipt of the Floor Price Change Notice by the

Buyer.  Any subscription by the Buyer

that has a Purchase Date on or prior to the first Trading Day after receipt of

a Floor Price Change Notice from the Company must be honored by the Company as

otherwise provided herein.

 

(e)           Records

of Purchases.  The Buyer and the

Company shall each maintain records showing the remaining Available Amount at

any given time and the dates and Purchase Amounts for each subscription or

shall use such other method, reasonably satisfactory to the Buyer and the

Company.

 

(f)            Taxes.  The Company shall pay any and all transfer,

stamp or similar taxes that may be payable with respect to the issuance and

delivery of any Warrants, Ordinary Shares or ADSs to the Buyer made under or in

connection with this Agreement.

 

(g)           Compliance

with Principal Market Rules. Notwithstanding any provision hereof to the

contrary, the Company shall not effect any issuance of Ordinary Shares under

this Agreement (or have its transfer agent or Depository issue any ADSs) and

the Buyer shall not have the right nor the obligation to subscribe for any

Purchase Shares under this Agreement on any Trading Day where the Purchase Price

for any subscriptions of Purchase Shares would be less than the Base Price if

such issuance would breach the Company’s obligations under the rules or

regulations of the Principal Market. 

The “Base Price” is $0.38 which is the greater of (x) the Market Price,

and (y) the book value per Ordinary Share as of September 30, 2002.  “Market Price” shall mean $0.38, the Closing

Sale Price of the ADSs on the Trading Day immediately preceding the date of

this Agreement. The Company hereby represents and warrants to the Buyer that

the book value per Ordinary Share as of September 30, 2002 is $0.33.  Notwithstanding any provision hereof to the

contrary, the Company shall not be required or permitted to issue any Ordinary

Shares under this Agreement (or have its transfer agent or Depository issue any

ADSs) if such issuance would breach the Company’s obligations under the rules

or regulations of the Principal Market.

 

(h)           No

Issuance below Nominal Value. Notwithstanding any provision hereof to the

contrary, the Company shall not effect any issuance of Ordinary Shares under

this Agreement (or have its transfer agent or Depository issue any ADSs) and

the Buyer shall not have the right nor the obligation to subscribe for any

Purchase Shares under this Agreement on any Trading Day where the Purchase

Price for any subscriptions of Purchase Shares would be less than the

equivalent U.S. dollar amount of 102.5% of the then nominal value of the

Ordinary Shares calculated by reference to the Conversion Rate prevailing at

the date the relevant Ordinary Shares are issued to the Buyer.  “Conversion Rate” means on any given day the

average currency conversion rate quoted by the Bank of America in London as the

price for Pounds Sterling purchased with U.S. Dollars. As of the date of this Agreement,

the nominal 

 

 

4

 

value of the Ordinary

Shares is 20 U.K. pence.  The Company

shall give the Buyer at least five Trading Days prior written notice of any

changes to the nominal value of the Ordinary Shares.  Notwithstanding any provision hereof to the contrary, the Company

shall not be required or permitted to issue any Ordinary Shares under this

Agreement (or have its transfer agent or Depository issue any ADSs) if such

issuance would breach the Company’s obligations under the United Kingdom

Companies Act 1985.

 

 

 

2.             BUYER’S REPRESENTATIONS AND

WARRANTIES.

 

The Buyer represents and warrants to the Company that

as of the date hereof and as of the Commencement Date:

 

(a)           Investment

Purpose.  The Buyer is entering into

this Agreement and acquiring the Warrants (as defined in Section 4(f) hereof)

(this Agreement and the Warrants are collectively referred to herein as the

“Securities”), for its own account for investment only and not with a view

towards, or for resale in connection with, the public sale or distribution

thereof; provided however, by making the representations herein, the Buyer does

not agree to hold any of the Securities for any minimum or other specific term,

other than as provided in Section 4(f) below.

 

(b)           Accredited

Investor Status.  The Buyer is an

“accredited investor” as that term is defined in Rule 501(a)(3) of Regulation

D.

 

(c)           Reliance

on Exemptions.  The Buyer

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 in part upon the

truth and accuracy of, and the Buyer’s compliance with, the representations,

warranties, agreements, acknowledgments and understandings of the Buyer set

forth herein in order to determine the availability of such exemptions and the

eligibility of the Buyer to acquire the Securities.

 

(d)           Information.  The Buyer has been furnished with all materials

relating to the business, finances and operations of the Company and materials

relating to the offer and issue of the Securities that have been reasonably

requested by the Buyer, including, without limitation, the SEC Documents (as

defined in Section 3(f) hereof).  The

Buyer understands that its investment in the Securities involves a high degree

of risk.  The Buyer (i) is able to bear

the economic risk of an investment in the Securities including a total loss,

(ii) has such knowledge and experience in financial and business matters that

it is capable of evaluating the merits and risks of the proposed investment in

the Securities and (iii) has had an opportunity to ask questions of and receive

answers from the officers of the Company concerning the financial condition and

business of the Company and others matters related to an investment in the

Securities.  Neither such inquiries nor

any other due diligence investigations conducted by the Buyer or its

representatives shall modify, amend or affect the Buyer’s right to rely on the

Company’s representations and warranties contained in Section 3 below.  The Buyer has sought such accounting, legal

and tax advice as it has considered necessary to make an informed investment

decision with respect to its acquisition of the Securities.

 

(e)           No

Governmental Review.  The Buyer

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.

 

 

5

 

(f)            Transfer

or Resale.  The Buyer understands

that except as provided in the Registration Rights Agreement (as defined in

Section 6(a) hereof): (i) the Securities have not been and are not being

registered under the 1933 Act or any state securities laws, and may not be

offered for sale, sold, assigned or transferred unless (A) subsequently

registered thereunder or (B) an exemption exists permitting such Securities to

be sold, assigned or transferred without such registration; (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 underwriter (as that term is defined in the 1933 Act) may require

compliance with some other exemption under the 1933 Act or the rules and

regulations of the SEC thereunder; and (iii) neither the Company nor any other

person is under any obligation to register the Securities under the 1933 Act or

any state securities laws or to comply with the terms and conditions of any

exemption thereunder.

 

(g)           Validity;

Enforcement.  This Agreement has

been duly and validly authorized, executed and delivered on behalf of the Buyer

and is a valid and binding agreement of the Buyer enforceable against the Buyer

in accordance with its terms, subject as to enforceability to general

principles of equity and to applicable bankruptcy, insolvency, reorganization,

moratorium, liquidation and other similar laws relating to, or affecting

generally, the enforcement of applicable creditors’ rights and remedies.

 

(h)           Residency.  The Buyer is a resident of the State of

Illinois.

 

(i)            No

Prior Short Selling.  The Buyer

represents and warrants to the Company that at no time prior to the date of

this Agreement has any of the Buyer, its agents, representatives or affiliates

engaged in or effected, in any manner whatsoever, directly or indirectly, any

(i) “short sale” (as such term is defined in Rule 3b-3 of the 1934 Act) of the

ADSs or the Ordinary Shares or (ii) hedging transaction, which establishes a

net short position with respect to the ADSs or the Ordinary Shares.

 

 

3.             REPRESENTATIONS AND WARRANTIES OF

THE COMPANY.

 

The Company represents and warrants to the Buyer that

as of the date hereof and as of the Commencement Date:

 

(a)           Organization

and Qualification.  The Company and

its “Subsidiaries” (which for purposes of this Agreement means any entity in

which the Company, directly or indirectly, owns 50% or more of the voting stock

or capital stock or other similar equity interests) are corporations duly

organized and validly existing in good standing under the laws of the

jurisdiction in which they are incorporated, and have the requisite corporate

power and authority to own their properties and to carry on their business as

now being conducted.  Each of the

Company and its Subsidiaries is duly qualified as a foreign corporation to do

business and is in good standing in every jurisdiction in which its ownership

of property or the nature of the business conducted by it makes such

qualification necessary, except to the extent that the failure to be so

qualified or be in good standing could not reasonably be expected to have a

Material Adverse Effect.  As used in

this Agreement, “Material Adverse Effect” means any material adverse effect on

any of: (i) the business, properties, assets, operations, results of operations

or financial condition of the Company and its Subsidiaries, if any, taken as a

whole, or (ii) the authority or ability of the Company to perform its

obligations under the Transaction Documents (as defined in Section 3(b)

hereof).  The Company has no

Subsidiaries except as set forth on Schedule 3(a).

 

(b)           Authorization;

Enforcement; Validity.  (i) The

Company has the requisite corporate power and authority to enter into and

perform its obligations under this Agreement, the Registration

 

 

6

 

Rights Agreement (as

defined in Section 6(a) hereof), the Warrants and each of the other agreements

entered into by the parties on the Commencement Date and attached hereto as

exhibits to this Agreement (collectively, the “Transaction Documents”), and to

issue the Securities in accordance with the terms hereof and thereof, (ii) the

execution and delivery of the Transaction Documents by the Company and the

consummation by it of the transactions contemplated hereby and thereby,

including without limitation, the issuance of the Warrants, the reservation for

issuance and the issuance of the Commitment Shares (as defined in Section 4(f)

below) upon exercise of the Warrants, and the reservation for issuance and the

issuance of the Purchase Shares issuable under this Agreement, have been duly

authorized by the Company’s Board of Directors and no further consent or

authorization is required by the Company, its Board of Directors or its

shareholders, (iii) this Agreement has been, and each other Transaction

Document shall be on the Commencement Date, duly executed and delivered by the

Company and (iv) this Agreement constitutes, and each other Transaction

Document upon its execution on behalf of the Company, shall constitute, the

valid and binding obligations of the Company enforceable against the Company in

accordance with their terms, except as such enforceability may be limited by

general principles of equity or applicable bankruptcy, insolvency,

reorganization, moratorium, liquidation or similar laws relating to, or

affecting generally, the enforcement of creditors’ rights and remedies.  The Board of Directors of the Company has

approved the resolutions (the “Signing Resolutions”) substantially in the form

as set forth as Exhibit D-1 attached hereto to authorize this Agreement

and the transactions contemplated hereby. 

The Signing Resolutions are valid, in full force and effect and have not

been modified or supplemented in any respect other than by the resolutions set

forth in Exhibit D-2 attached hereto regarding the registration

statement referred to in Section 4 hereof. The Company has delivered to the

Buyer a certificate of the Secretary of the Company certifying the adoption of

the Signing Resolutions by the Board of Directors. No other approvals or

consents of the Company’s Board of Directors and/or shareholders is necessary

under applicable laws and the Company’s Articles of Association (the “Articles

of Association”) and/or Memorandum of Association (the “Memorandum of

Association”) to authorize the execution and delivery of this Agreement or any

of the transactions contemplated hereby, including, but not limited to, the

issuance of the Warrants, the reservation for issuance and the issuance of the

Commitment Shares upon exercise of the Warrants, and the issuance of the

Purchase Shares.

 

(c)           Capitalization.  As of the date hereof, the authorized share

capital of the Company consists of (i) 50,000,000 Ordinary Shares, of which as

of the date hereof, 20,083,539 shares are issued and outstanding, none are held

as treasury shares, 19,254,806 shares are represented by ADSs, 8,472,071 shares

are reserved for issuance pursuant to the Company’s stock option plans and

employee stock purchase plans, of which approximately 2,263,138 shares remain

available for future grants, and 2,191,334 shares are issuable and reserved for

issuance pursuant to securities (other than stock options issued pursuant to

the Company’s stock option plans) exercisable or exchangeable for, or

convertible into, Ordinary Shares and (ii) 3,000,000 Preferred Shares with an

amount paid up per share liquidation preference, of which as of the date hereof

no shares are issued and outstanding. 

All of such issued shares have been validly issued and are fully paid

and nonassessable. Except as disclosed in Schedule 3(c), (i) no shares of the

Company’s capital are subject to preemptive rights or any other similar rights

or any liens or encumbrances suffered or permitted by the Company, (ii) there

are no outstanding debt securities, (iii) there are no outstanding options,

warrants, scrip, rights to subscribe to, calls or commitments of any character

whatsoever relating to, or securities or rights convertible into, any shares in

the capital of the Company or any of its Subsidiaries, or contracts,

commitments, understandings or arrangements by which the Company or any of its

Subsidiaries is or may become bound to issue additional shares in the capital

of the Company or any of its Subsidiaries or options, warrants, scrip, rights

to subscribe to, calls or commitments of any character whatsoever relating to,

or securities or rights convertible into, any shares in the capital of the

Company or any of its Subsidiaries, (iv) there are no agreements or

arrangements under which the Company or any of its Subsidiaries is obligated to

register the sale of any

 

 

7

 

of their securities under

the 1933 Act (except the Registration Rights Agreement), (v) there are no

outstanding securities or instruments of the Company or any of its Subsidiaries

which contain any redemption or similar provisions, and there are no contracts,

commitments, understandings or arrangements by which the Company or any of its

Subsidiaries is or may become bound to redeem a security of the Company or any

of its Subsidiaries, (vi) there are no securities or instruments containing

anti-dilution or similar provisions that will be triggered by the issuance of

the Securities as described in this Agreement and (vii) the Company does not

have any stock appreciation rights or “phantom stock” plans or agreements or

any similar plan or agreement.  The Company

has furnished to the Buyer true and correct copies of the Company’s Articles of

Association, as currently in effect on the date hereof, and the Company’s

Memorandum of Association as currently in effect on the date hereof, and

summaries of the terms of all securities convertible into or exercisable for

Ordinary Shares or ADSs, if any, and copies of any documents containing the

material rights of the holders thereof in respect thereto.

 

(d)           Issuance

of Securities.  The Commitment

Shares (as defined in Section 4(f) of this Agreement) and the Ordinary Shares

represented by such Commitment Shares have been duly authorized and, upon

issuance in accordance with the terms hereof (and the terms of the Warrants, in

the case of the Commitment Shares), the Commitment Shares and the Ordinary

Shares represented by such Commitment Shares shall be (i) validly issued, fully

paid and non-assessable and (ii) free from all taxes, liens and charges with

respect to the issue thereof. 12,000,000 ADSs and 12,000,000 Ordinary Shares

represented by such ADSs have been duly authorized and reserved for issuance

under this Agreement. Upon issuance and payment therefore in accordance with

the terms and conditions of this Agreement, the Purchase Shares and the

Ordinary Shares represented by such Purchase Shares shall be validly issued,

fully paid and nonassessable and free from all taxes, liens and charges with

respect to the issue thereof, with the holders being entitled to all rights

accorded to a holder of Ordinary Shares.

 

(e)           No

Conflicts.  Except as disclosed in

Schedule 3(e), the execution, delivery and performance of the Transaction

Documents by the Company and the consummation by the Company of the

transactions contemplated hereby and thereby (including, without limitation,

the reservation for issuance and issuance of the Purchase Shares and the

Ordinary Shares represented by such Purchase Shares) will not (i) result in a

violation of Articles of Association or the Memorandum of Association or (ii)

conflict with, or constitute a default (or an event which with notice or lapse

of time or both would become a default) under, or give to others any rights of

termination, amendment, acceleration or cancellation of, any agreement,

indenture or instrument to which the Company or any of its Subsidiaries is a

party, or result in a violation of any law, rule, regulation, order, judgment

or decree (including federal and state securities laws and regulations and the

rules and regulations of the Principal Market applicable to the Company or any

of its Subsidiaries) or by which any property or asset of the Company or any of

its Subsidiaries is bound or affected, except in the case of conflicts,

defaults and violations under clause (ii), which could not reasonably be

expected to result in a Material Adverse Effect.  Except as disclosed in Schedule 3(e), neither the Company nor its

Subsidiaries is in violation of any term of or in default under its Articles of

Association or the Memorandum of Association or their organizational charter or

by-laws, respectively.  Except as

disclosed in Schedule 3(e), neither the Company nor any of its Subsidiaries is

in violation of any term of or is in default under any material contract,

agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order

or any statute, rule or regulation applicable to the Company or its

Subsidiaries, except for possible conflicts, defaults, terminations or

amendments which could not reasonably be expected to have a Material Adverse

Effect.  The business of the Company and

its Subsidiaries is not being conducted, and shall not be conducted, in

violation of any law, ordinance or regulation of any governmental entity,

except for possible violations, the sanctions for which either individually or

in the aggregate could not reasonably be expected to have a Material Adverse

Effect.  Except as specifically

contemplated by this Agreement and as required under the 1933 Act or applicable

state securities laws, the Company is not required to obtain any consent, 

 

 

8

 

authorization or order

of, or make any filing or registration with, any court or governmental agency

or any regulatory or self-regulatory agency in order for it to execute, deliver

or perform any of its obligations under or contemplated by the Transaction

Documents in accordance with the terms hereof or thereof.  Except as disclosed in Schedule 3(e), all

consents, authorizations, orders, filings and registrations which the Company

is required to obtain pursuant to the preceding sentence shall be obtained or

effected on or prior to the Commencement Date. 

Except as listed in Schedule 3(e), since January 1, 2002, the Company

has not received nor delivered any notices or correspondence from or to the

Principal Market.  The Principal Market

has not commenced any delisting proceedings against the Company.

 

(f)            SEC

Documents; Financial Statements. Except as disclosed in Schedule 3(f),

since January 1, 2001, the Company has timely filed all reports, schedules,

forms, statements and other documents required to be filed by it with the SEC

pursuant to the reporting requirements of the Securities Exchange Act of 1934,

as amended (the “1934 Act”) (all of the foregoing filed prior to the date

hereof and all exhibits included therein and financial statements and schedules

thereto and documents incorporated by reference therein being hereinafter

referred to as the “SEC Documents”).  As

of their respective dates (except as they have been correctly amended), the SEC

Documents complied in all material respects with the requirements of the 1934

Act and the rules and regulations of the SEC promulgated thereunder applicable

to the SEC Documents, and none of the SEC Documents, at the time they were

filed with the SEC (except as they may have been properly amended), 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.  As of their respective dates (except as they

have been properly amended), the financial statements of the Company included

in the SEC Documents complied as to form in all material respects with

applicable accounting requirements and the published rules and regulations of

the SEC with respect thereto.  Such

financial statements have been prepared in accordance with generally accepted

accounting principles, consistently applied, during the periods involved (except

(i) as may be otherwise indicated in such financial statements or the notes

thereto or (ii) in the case of unaudited interim statements, to the extent they

may exclude footnotes or may be condensed or summary statements) and fairly

present in all material respects the financial position of the Company as of

the dates thereof and the results of its operations and cash flows for the

periods then ended (subject, in the case of unaudited statements, to normal

year-end audit adjustments).  Except as

listed in Schedule 3(f), the Company has received no notices or correspondence

from the SEC since January 1, 2002.  The

SEC has not commenced any enforcement proceedings against the Company or any of

its Subsidiaries.

 

(g)           Absence

of Certain Changes.  Except as

disclosed in Schedule 3(g), since June 30, 2002, there has been no material

adverse change in the business, properties, operations, financial condition or

results of operations of the Company or its Subsidiaries.  The Company has not taken any steps, and does

not currently expect to take any steps, to seek protection pursuant to any

Bankruptcy Law nor does the Company or any of its Subsidiaries have any

knowledge or reason to believe that its creditors intend to initiate

involuntary bankruptcy  or insolvency proceedings.  The Company is financially solvent and is

generally able to pay its debts as they become due.

 

(h)           Absence

of Litigation. There is no action, suit, proceeding, inquiry or

investigation before or by any court, public board, government agency,

self-regulatory organization or body pending or, to the knowledge of the

Company or any of its Subsidiaries, threatened against or affecting the

Company, the Ordinary Shares or any of the Company’s Subsidiaries or any of the

Company’s or the Company’s Subsidiaries’ officers or directors in their capacities

as such, which could reasonably be expected to have a Material Adverse

Effect.   A description of each action,

suit, proceeding, inquiry or investigation before or by any court, public

board, government agency, self-regulatory organization or 

 

 

9

 

body which, as of the

date of this Agreement, is pending or threatened in writing against or

affecting the Company, the Ordinary Shares or any of the Company’s Subsidiaries

or any of the Company’s or the Company’s Subsidiaries’ officers or directors in

their capacities as such, is set forth in Schedule 3(h).

 

(i)            Acknowledgment

Regarding Buyer’s Status.  The

Company acknowledges and agrees that the Buyer is acting solely in the capacity

of arm’s length purchaser with respect to the Transaction Documents and the

transactions contemplated hereby and thereby. 

The Company further acknowledges that the Buyer is not acting as a

financial advisor or fiduciary of the Company (or in any similar capacity) with

respect to the Transaction Documents and the transactions contemplated hereby

and thereby and any advice given by the Buyer or any of its representatives or

agents in connection with the Transaction Documents and the transactions

contemplated hereby and thereby is merely incidental to the Buyer’s

subscription for the Securities.  The

Company further represents to the Buyer that the Company’s decision to enter

into the Transaction Documents has been based solely on the independent

evaluation by the Company and its representatives and advisors.

 

(j)            No

General Solicitation.  Neither the

Company, nor any of its affiliates, nor any person acting on its or their

behalf, has engaged in any form of general solicitation or general advertising

(within the meaning of Regulation D under the 1933 Act) in connection with the

offer or sale of the Securities.

 

 (k)          Dilutive Effect.  The Company understands and acknowledges

that the number of Purchase Shares purchasable under this Agreement is not

fixed and will vary depending on the Purchase Price at which such shares are

purchased.  The Company further

acknowledges that its obligation to issue Purchase Shares under this Agreement

in accordance with the terms and conditions hereof is absolute and

unconditional, except as set forth in this Agreement, regardless of the

dilutive effect that such issuance may have on the ownership interests of other

shareholders of the Company.

 

(l)            Intellectual

Property Rights.  The Company and

its Subsidiaries own or possess adequate rights or licenses to use all material

trademarks, trade names, service marks, service mark registrations, service

names, patents, patent rights, copyrights, inventions, licenses, approvals,

governmental authorizations, trade secrets and rights necessary to conduct their

respective businesses as now conducted. 

Except as set forth on Schedule 3(l), none of the Company’s material

trademarks, trade names, service marks, service mark registrations, service

names, patents, patent rights, copyrights, inventions, licenses, approvals,

government authorizations, trade secrets or other intellectual property rights

have expired or terminated, or, by the terms and conditions thereof, could

expire or terminate within two years from the date of this Agreement.  The Company and its Subsidiaries do not have

any knowledge of any infringement by the Company or its Subsidiaries of any

material trademark, trade name rights, patents, patent rights, copyrights,

inventions, licenses, service names, service marks, service mark registrations,

trade secret or other similar rights of others, or of any such development of

similar or identical trade secrets or technical information by others and,

except as set forth on Schedule 3(l), there is no claim, action or proceeding

being made or brought against, or to the Company’s knowledge, being threatened

against, the Company or its Subsidiaries regarding trademark, trade name,

patents, patent rights, invention, copyright, license, service names, service

marks, service mark registrations, trade secret or other infringement, which

could reasonably be expected to have a Material Adverse Effect.

 

(m)          Environmental

Laws.  The Company and its

Subsidiaries (i) are in compliance with any and all applicable foreign,

federal, state and local laws and regulations relating to the protection of

human health and safety, the environment or hazardous or toxic substances or

wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received

all permits, licenses or other approvals required of them under applicable Environmental

Laws to conduct their respective businesses and (iii) are in compliance with

all terms and conditions of any such permit, license or approval, except where,

in each

 

 

10

 

of the three foregoing clauses,

the failure to so comply could not reasonably be expected to have, individually

or in the aggregate, a Material Adverse Effect.

 

(n)           Title.  The Company and its Subsidiaries have good

and marketable title in fee simple to all real property and good and marketable

title to all personal property owned by them which is material to the business

of the Company and its Subsidiaries, in each case free and clear of all liens,

encumbrances and defects except such as are described in Schedule 3(n) or such as

do not materially affect the value of such property and do not interfere with

the use made and proposed to be made of such property by the Company and any of

its Subsidiaries.  Any real property and

facilities held under lease by the Company and any of its Subsidiaries are held

by them under valid, subsisting and enforceable leases with such exceptions as

are not material and do not interfere with the use made and proposed to be made

of such property and buildings by the Company and its Subsidiaries.

 

(o)           Insurance.  The Company and each of its Subsidiaries are

insured by insurers of recognized financial responsibility against such losses

and risks and in such amounts as management of the Company believes to be

prudent and customary in the businesses in which the Company and its

Subsidiaries are engaged.  Neither the

Company nor any such Subsidiary has been refused any insurance coverage sought

or applied for and neither the Company nor any such Subsidiary has any reason

to believe that it will not be able to renew its existing insurance coverage as

and when such coverage expires or to obtain similar coverage from similar

insurers as may be necessary to continue its business at a cost that would not

materially and adversely affect the condition, financial or otherwise, or the

earnings, business or operations of the Company and its Subsidiaries, taken as

a whole.

 

(p)           Regulatory

Permits.  The Company and its

Subsidiaries possess all material certificates, authorizations and permits

issued by the appropriate federal, state or foreign regulatory authorities

necessary to conduct their respective businesses, and neither the Company nor

any such Subsidiary has received any notice of proceedings relating to the

revocation or modification of any such certificate, authorization or permit.

 

(q)           Tax

Status.  The Company and each of its

Subsidiaries has made or filed all federal and state income and all other

material tax returns, reports and declarations required by any jurisdiction to

which it is subject (unless and only to the extent that the Company and each of

its Subsidiaries has set aside on its books provisions reasonably adequate for

the payment of all unpaid and unreported taxes) and has paid all taxes and

other governmental assessments and charges that are material in amount, shown

or determined to be due on such returns, reports and declarations, except those

being contested in good faith and has set aside on its books provision

reasonably adequate for the payment of all taxes for periods subsequent to the

periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material

amount claimed to be due by the taxing authority of any jurisdiction, and the

officers of the Company know of no basis for any such claim.

 

(r)            Transactions

With Affiliates.  Except as set

forth on Schedule 3(r) and other than the grant or exercise of stock options

disclosed on Schedule 3(c), none of the officers, directors, or employees of

the Company is presently a party to any transaction with the Company or any of

its Subsidiaries (other than for services as employees, 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

corporation, partnership, trust or other entity in which any officer, director,

or any such employee has an interest or is an officer, director, trustee or

partner.

 

 

11

 

(s)           Application

of Takeover Protections.  The

Company and its board of directors have taken or will take prior to the

Commencement Date 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 Certificate of Incorporation or the laws of the state of its

incorporation which is or could become applicable to the Buyer as a result of

the transactions contemplated by this Agreement, including, without limitation,

the Company’s issuance of the Securities and the Buyer’s ownership of the

Securities.

 

(t)            Foreign

Corrupt Practices.  Neither the

Company, nor any of its Subsidiaries, nor any director, officer, agent,

employee or other person acting on behalf of the Company or any of its

Subsidiaries has, in the course of its actions for, or on behalf of, the Company,

used any corporate funds for any unlawful contribution, gift, entertainment or

other unlawful expenses relating to political activity; made any direct or

indirect unlawful payment to any foreign or domestic government official or

employee from corporate funds; violated or is in violation of any provision of

the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any

unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful

payment to any foreign or domestic government official or employee.

 

 

4.             COVENANTS.

 

(a)           Filing

of Registration Statement.  The

Company shall within ten (10) Trading Days after the date hereof file a new

registration statement covering the sale of the Commitment Shares and at least

10,000,000 Purchase Shares.  The Buyer

and its counsel shall have a reasonable opportunity to review and comment upon

such registration statement or amendment to such registration statement and any

related prospectus prior to its filing with the SEC.  Buyer shall furnish all information reasonably requested by the

Company for inclusion therein.  The

Company shall use its best efforts to have such registration statement or

amendment declared effective by the SEC at the earliest possible date.

 

(b)           Blue

Sky. The Company shall take such action, if any, as is reasonably necessary

in order to obtain an exemption for or to qualify (i) the initial issue of the

Warrants, the Commitment Shares and any Purchase Shares to the Buyer under this

Agreement and (ii) any subsequent resale of the Commitment Shares and any

Purchase Shares by the Buyer, in each case, under applicable securities or

“Blue Sky” laws of the states of the United States in such states as is

reasonably requested by the Buyer from time to time, and shall provide evidence

of any such action so taken to the Buyer.

 

(c)           Notice

of Variable Priced Financing.  The

Company agrees to provide to the Buyer prior written notice (“Equity Financing

Notice”) of any equity financing (including any debt financing with an equity

component) that the Company intends to enter into involving the issuance of any

equity securities of the Company or any Subsidiary or securities convertible or

exchangeable into or for equity securities of the Company or any Subsidiary

(including debt securities with an equity component) which, in any case (i) are

convertible into or exchangeable for an indeterminate number of Ordinary Shares

or ADSs, (ii) are convertible into or exchangeable for Ordinary Shares or ADSs

at a price which varies with the market price of the ADSs, (iii) directly or

indirectly provide for any “re-set” or adjustment of the purchase price,

conversion rate or exercise price after the issuance of the security, or (iv)

contain any “make-whole” provision based upon, directly or indirectly, the market

price of the Ordinary Shares or ADSs after the issuance of the security, in

each case, other than reasonable and customary anti-dilution adjustments for

issuance of Ordinary Shares or ADSs at a price which is below the market price

of the ADSs.  Such Equity Financing

Notice shall be delivered to the Buyer five (5) Trading Days prior to the

Company entering into definitive documentation with respect to such equity

financing, together with copies of all proposed definitive documentation

relating to such equity financing.

 

 

12

 

(d)           Listing.  The Company shall promptly secure the

listing of all of the Purchase Shares and Commitment Shares upon each national

securities exchange and automated quotation system, if any, upon which shares

of ADSs are then listed (subject to official notice of issuance) and shall

maintain, so long as any other shares of ADSs shall be so listed, such listing

of all such securities from time to time issuable under the terms of the Transaction

Documents.  The Company shall use its

best efforts to maintain the ADSs’ authorization for quotation on the Principal

Market.  Neither the Company nor any of

its Subsidiaries shall take any action that would be reasonably expected to

result in the delisting or suspension of the ADSs on the Principal Market.  The Company shall promptly, and in no event

later than the following Trading Day, provide to the Buyer copies of any

notices it receives from the Principal Market regarding the continued eligibility

of the ADSs for listing on such automated quotation system or securities

exchange.  The Company shall pay all

fees and expenses in connection with satisfying its obligations under this

Section.

 

(e)           Limitation

on Short Sales and Hedging Transactions. 

The Buyer agrees that beginning on the date of this Agreement and ending

on the date of termination of this Agreement as provided in Section 11(k), the

Buyer and its agents, representatives and affiliates shall not in any manner

whatsoever enter into or effect, directly or indirectly, any (i) “short sale”

(as such term is defined in Rule 3b-3 of the 1934 Act) of the ADSs or Ordinary

Shares or (ii) hedging transaction, which establishes a net short position with

respect to the ADSs or Ordinary Shares.

 

(f)            Issuance

of Warrants; Limitation on Sales of Commitment Shares. Upon the execution

of this Agreement, the Company hereby delivers to the Buyer one redeemable

warrant for ADSs representing 1,000,000 Ordinary Shares in the form attached

hereto as Exhibit F (the “Redeemable Warrant”), and one non-redeemable

warrant for ADSs representing 1,000,000 Ordinary Shares in the form attached

hereto as Exhibit G (the “Non-Redeemable Warrant” and together with the

Redeemable Warrant, the “Warrants”).  The

terms of the Warrants are as set forth in such exhibits. The ADSs issuable upon

exercise of the Warrants are collectively referred to herein as the “Commitment

Shares.”  The Buyer agrees that the

Buyer shall not transfer or sell the Commitment Shares until the earlier of 600

Trading Days (30 Monthly Periods) from the date hereof or date on which this

Agreement has been terminated, provided, however, that such restrictions shall

not apply: (i) in connection with any transfers to or among affiliates (as

defined in the 1934 Act), or (ii) if an Event of Default has occurred, or any

event which, after notice and/or lapse of time, would become an Event of

Default, including any failure by the Company to timely issue Purchase Shares

under this Agreement.  Notwithstanding

the foregoing, the Buyer may transfer Commitment Shares to a third party in

order to settle a sale made by the Buyer where the Buyer reasonably expects the

Company to deliver Purchase Shares to the Buyer under this Agreement so long as

the Buyer maintains ownership of the same overall number of ADSs (and Ordinary

Shares represented by such ADSs) by “replacing” the Commitment Shares so

transferred with Purchase Shares when the Purchase Shares are actually issued

by the Company to the Buyer.

 

(g)           Due

Diligence.  The Buyer shall have the

right, from time to time as the Buyer may reasonably deem appropriate, to

perform reasonable due diligence on the Company during normal business

hours.  The Company and its officers and

employees shall reasonably cooperate with the Buyer in connection with any

reasonable request by the Buyer related to the Buyer’s due diligence of the

Company.  Each party hereto agrees not

to disclose any Confidential Information of the other party to any third party

and shall not use the Confidential Information for any purpose other than in

connection with, or in furtherance of, the transactions contemplated

hereby.  Each party hereto acknowledges

that the Confidential Information shall remain the property of the disclosing

party and agrees that it shall take all reasonable measures to protect the

secrecy of any Confidential Information disclosed by the other party.

 

 

13

 

 

5.             TRANSFER AGENT INSTRUCTIONS.

 

On the Commencement Date, the Company shall cause any

restrictive legend on any outstanding Commitment Shares to be removed.  Thereafter, all of the Commitment Shares and

Purchase Shares to be issued under the Warrants or this Agreement shall be

issued without any restrictive legend. 

The Company shall issue irrevocable instructions to the Transfer Agent,

and any subsequent transfer agent, to issue Purchase Shares in the name of the

Buyer for the Purchase Shares and to issue the Commitment Shares in the name of

the Buyer upon exercise of the Warrants (the “Irrevocable Transfer Agent

Instructions”).  The Company warrants to

the Buyer that no instruction other than the Irrevocable Transfer Agent

Instructions referred to in this Section 5, will be given by the Company to the

Transfer Agent with respect to the Purchase Shares and that the Commitment

Shares and the Purchase Shares shall otherwise be freely transferable on the

books and records of the Company as and to the extent provided in this

Agreement and the Registration Rights Agreement subject to the provisions of

Section 4(f) in the case of the Commitment Shares.

 

 

6.                                      CONDITIONS

TO THE COMPANY’S OBLIGATION TO COMMENCE

ISSUANCE OF PURCHASE SHARES.

 

The obligation of the Company hereunder to commence

issuance of the Purchase Shares is subject to the satisfaction of each of the

following conditions on or before the Commencement Date (the date that

issueances begin) and once such conditions have been initially satisfied, there

shall not be any ongoing obligation to satisfy such conditions after the

Commencement has occurred; provided that these conditions are for the Company’s

sole benefit and may be waived by the Company at any time in its sole

discretion by providing the Buyer with prior written notice thereof:

 

(a)           The

Buyer shall have executed each of the Transaction Documents and delivered the

same to the Company including the Registration Rights Agreement substantially

in the form of Exhibit A hereto (the “Registration

Rights Agreement”).

 

(b)           Subject

to the Company’s compliance with Section 4(a), a registration statement

covering the sale of all of the Commitment Shares  and at least 10,000,000

Purchase Shares shall have been declared effective under the 1933 Act by the

SEC and no stop order with respect to the Registration Statement shall be

pending or threatened by the SEC.

 

(c)           The

representations and warranties of the Buyer shall be true and correct in all

material respects as of the date when made and as of the Commencement Date as

though made at that time (except for representations and warranties that speak

as of a specific date), and the Buyer shall have performed, satisfied and

complied in all material respects with the covenants, agreements and conditions

required by this Agreement to be performed, satisfied or complied with by the

Buyer at or prior to the Commencement Date.

 

 

14

 

7.                                      CONDITIONS

TO THE BUYER’S OBLIGATION TO COMMENCE

SUBSCRIPTIONS

FOR PURCHASE SHARES.

 

The obligation of the Buyer to commence subscriptions

for Purchase Shares under this Agreement is subject to the satisfaction of each

of the following conditions on or before the Commencement Date (the date that

sales begin) and once such conditions have been initially satisfied, there

shall not be any ongoing obligation to satisfy such conditions after the

Commencement has occurred; provided that these conditions are for the Buyer’s

sole benefit and may be waived by the Buyer at any time in its sole discretion

by providing the Company with prior written notice thereof:

 

(a)           The

Company shall have executed each of the Transaction Documents and delivered the

same to the Buyer including the Registration Rights Agreement substantially in

the form of Exhibit A hereto.

 

(b)           The

Company shall have issued to the Buyer the Warrants.

 

(c)           The

ADSs shall be authorized for quotation on the Principal Market, trading in the

ADSs shall not have been within the last 365 days suspended by the SEC or the

Principal Market and the Purchase Shares and the Commitment Shares shall be

approved for listing upon the Principal Market.

 

(d)           The

Buyer shall have received the opinions of the Company’s legal counsel dated as

of the Commencement Date substantially in the form of Exhibit B attached

hereto.

 

(e)           The

representations and warranties of the Company shall be true and correct in all

material respects (except to the extent that any of such representations and

warranties is already qualified as to materiality in Section 3 above, in which

case, such representations and warranties shall be true and correct without further

qualification) as of the date when made and as of the Commencement Date as

though made at that time (except for representations and warranties that speak

as of a specific date) and the Company shall have performed, satisfied and

complied with the covenants, agreements and conditions required by the

Transaction Documents to be performed, satisfied or complied with by the

Company at or prior to the Commencement Date. 

The Buyer shall have received a certificate, executed by the CEO,

President or CFO of the Company, dated as of the Commencement Date, to the

foregoing effect in the form attached hereto as Exhibit C.

 

(f)            The

Board of Directors of the Company shall have adopted resolutions in the form

attached hereto as Exhibit D which shall be in full force and

effect without any amendment or supplement thereto as of the Commencement Date.

 

(g)           As

of the Commencement Date, the Company shall have reserved out of its authorized

and unissued Ordinary Shares, (A) solely for the purpose of effecting issuances

of Purchase Shares hereunder, at least 10,000,000 Ordinary Shares and (B)

2,000,000 Ordinary Shares for issuance upon exercise of the Warrants.

 

(h)           The

Irrevocable Transfer Agent Instructions, in form acceptable to the Buyer shall

have been delivered to and acknowledged in writing by the Company and the

Company’s Transfer Agent.

 

(i)            To

the extent reasonably obtainable, the Company shall have delivered to the Buyer

a certificate evidencing the existence and good standing of the Company under

the laws of England and 

 

 

15

 

Wales issued by the

appropriate authorities as of a date within ten (10) Trading Days of the

Commencement Date.

 

(j)            [Intentionally

Omitted.]

 

(k)           The

Company shall have delivered to the Buyer a secretary’s certificate executed by

the Secretary of the Company, dated as of the Commencement Date, in the form

attached hereto as Exhibit E.

 

(l)            A

registration statement covering the sale of all of the Commitment Shares and at

least 10,000,000 Purchase Shares shall have been declared effective under the

1933 Act by the SEC and no stop order with respect to the registration

statement shall be pending or threatened by the SEC.  The Company shall have prepared and delivered to the Buyer a

final form of prospectus to be used by the Buyer in connection with any sales

of any Commitment Shares or any Purchase Shares. The Company shall have made

all filings under all applicable federal and state securities laws necessary to

consummate the issuance of the Commitment Shares and the Purchase Shares

pursuant to this Agreement in compliance with such laws.

 

(m)          No

Event of Default (as defined in Section 9 below), or any event which, after

notice and/or lapse of time, would become an Event of Default, shall have

occurred.

 

(n)           On

or prior to the Commencement Date, the Company shall take all necessary action,

if any, and such actions as reasonably requested by the Buyer, in order to

render inapplicable any control share acquisition, business combination,

shareholder rights plan or poison pill (including any distribution under a

rights agreement) or other similar anti-takeover provision under the Articles

of Association or the laws of England and Wales which is or could become

applicable to the Buyer as a result of the transactions contemplated by this

Agreement, including, without limitation, the Company’s issuance of the

Securities and the Buyer’s ownership of the Securities.

 

 

8.                                      INDEMNIFICATION.

 

In consideration of the Buyer’s execution and delivery

of the Transaction Documents and acquiring the Securities hereunder and in

addition to all of the Company’s other obligations under the Transaction

Documents, the Company shall defend, protect, indemnify and hold harmless the

Buyer and all of its affiliates, shareholders, officers, directors, employees

and direct or indirect investors and any of the foregoing person’s agents or

other representatives (including, without limitation, those retained in

connection with the transactions contemplated by this Agreement) (collectively,

the “Indemnitees”) from and against any and all actions, causes of action,

suits, claims, losses, costs, penalties, fees, liabilities and damages, and

expenses in connection therewith (irrespective of whether any such Indemnitee

is a party to the action for which indemnification hereunder is sought), and

including reasonable attorneys’ fees and disbursements (the “Indemnified

Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or

relating to (a) any misrepresentation or breach of any representation or

warranty made by the Company in the Transaction Documents or any other

certificate, instrument or document contemplated hereby or thereby, (b) any

breach of any covenant, agreement or obligation of the Company contained in the

Transaction Documents or any other certificate, instrument or document

contemplated hereby or thereby, or (c) any cause of action, suit or claim

brought or made against such Indemnitee and arising out of or resulting from

the execution, delivery, performance or enforcement of the Transaction

Documents or any other certificate, instrument or  document contemplated hereby or thereby, other than with respect

 

 

16

 

to Indemnified

Liabilities which directly and primarily result from the gross negligence or

willful misconduct of the Indemnitee. 

To the extent that the foregoing undertaking by the Company may be

unenforceable for any reason, the Company shall make the maximum contribution

to the payment and satisfaction of each of the Indemnified Liabilities which is

permissible under applicable law. 

Promptly after receipt by an Indemnitee of notice of the commencement of

any action or proceeding (including any governmental action or proceeding) for

which indemnification may be sought hereunder, such  Indemnitee shall, deliver to the Company a written notice of the

commencement thereof, and the  Company

shall have the right to participate in, and, to the extent the Company so

desires, to assume control of the defense thereof with counsel mutually

satisfactory to the Company and the Indemnitee, as the case may be; provided,

however, that an Indemnitee shall have the right to retain its own counsel with

the fees and expenses to be paid by the Company, if, in the reasonable opinion

of counsel retained by the  Indemnitee,

the representation by such counsel of the Indemnitee and the Company would be

inappropriate due to actual or potential differing interests between such

Indemnitee and any other party represented by such counsel in such proceeding.

The Indemnitee shall cooperate fully with the Company in connection with any

negotiation or defense of any such action or claim by the Company and shall

furnish to the Company all information reasonably available to the Indemnitee

which relates to such action or claim. 

The Company shall keep the Indemnitee fully apprised at all times as to

the status of the defense or any settlement negotiations with respect thereto.

The Company shall not be liable for any settlement of any action, claim or

proceeding effected without its written consent, provided, however, that the

Company shall not unreasonably withhold, delay or condition its consent.  The Company shall not, without the consent

of the Indemnitee, consent to entry of any judgment or enter into any

settlement or other compromise which does not include as an unconditional term

thereof the giving by the claimant or plaintiff to such Indemnitee of a release

from all liability in respect to such claim or litigation.   Following indemnification as provided for

hereunder, the Company shall be subrogated to all rights of the Indemnitee with

respect to all third parties, firms or corporations relating to the matter for

which indemnification has been made. The failure to deliver written notice to the

Company within a reasonable time of the commencement of any such action shall

not relieve the Company of any liability to the  Indemnitee under this Section 8, except to the extent that the

Company is prejudiced in its ability to defend such action.

 

 

9.             EVENTS OF DEFAULT.

 

An “Event of Default” shall be deemed to have occurred

at any time as any of the following events occurs:

 

(a)           while

any registration statement is required to be maintained effective pursuant to

the terms of the Registration Rights Agreement, the effectiveness of such

registration statement lapses for any reason (including, without limitation,

the issuance of a stop order) or is unavailable to the Buyer for sale of all of

the Registrable Securities (as defined in the Registration Rights Agreement) in

accordance with the terms of the Registration Rights Agreement, and such lapse

or unavailability continues for a period of ten (10) consecutive Trading Days

or for more than an aggregate of thirty (30) Trading Days in any 365-day

period;

 

(b)           the

suspension from trading or failure of the ADSs to be listed on the Principal

Market for a period of three (3) consecutive Trading Days;

 

(c)           the

delisting of the Company’s ADSs from the Principal Market, provided, however,

that the ADSs are not immediately thereafter trading on the New York Stock

Exchange, the Nasdaq SmallCap Market or the American Stock Exchange;

 

 

17

 

(d)           the

failure for any reason by the Transfer Agent to issue to the Buyer within five

(5) Trading Days after the applicable Purchase Date, Purchase Shares which the

Buyer is entitled to receive;

 

(e)           [Intentionally

Omitted.];

 

(f)            the

Company breaches any representation, warranty, covenant or other term or

condition under any Transaction Document if such breach could have a Material

Adverse Effect and except, in the case of a breach of a covenant which is

reasonably curable, only if such breach continues for a period of at least ten

(10) Trading Days;

 

(g)           any

payment default under any contract whatsoever or any acceleration prior to

maturity of any mortgage, indenture, contract or instrument under which there

may be issued or by which there may be secured or evidenced any indebtedness

for money borrowed by the Company or for money borrowed the repayment of which

is guaranteed by the Company, whether such indebtedness or guarantee now exists

or shall be created hereafter, which, with respect to any such payment default

or acceleration prior to maturity, is in excess of $1,000,000;

 

(h)           if any

Person commences a proceeding against the Company pursuant to or within the

meaning of any Bankruptcy Law;

 

(i)            if

the Company pursuant to or within the meaning of any Bankruptcy Law; (A)

commences a voluntary case or adopts a voluntary arrangement, (B) consents to

the entry of an order for relief against it in an involuntary case or consents

to the making of an administration order against it, (C) consents to the

appointment of a Custodian of it or for all or substantially all of its

property, (D) makes a general assignment for the benefit of its creditors, (E)

becomes insolvent, or (F) is generally unable to pay its debts as the same

become due; or

 

(j)            a

court of competent jurisdiction enters an order or decree under any Bankruptcy

Law that (A) is for relief against the Company in an involuntary case or

approves a scheme of arrangement of the Company, (B) appoints a Custodian of

the Company or for all or substantially all of its property, or (C) orders the

liquidation or administration of the Company or any Subsidiary.

 

In addition to any other

rights and remedies under applicable law and this Agreement, including the

Buyer termination rights under Section 11(k) hereof, so long as an Event of

Default has occurred and is continuing, or if any event which, after notice

and/or lapse of time, would become an Event of Default, has occurred and is

continuing, or so long as the Purchase Price is below the Floor Price, the

Buyer shall not be obligated to subscribe for any ADSs under this Agreement.  If pursuant to or within the meaning of any

Bankruptcy Law, the Company commences a voluntary case or adopts a voluntary

arrangement or any Person commences a proceeding against the Company, a

Custodian is appointed for the Company or for all or substantially all of its

property, or the Company makes a general assignment for the benefit of its

creditors, (any of which would be an Event of Default as described in Sections

9(h), 9(i) and 9(j) hereof) this Agreement shall automatically terminate

without any liability or payment to the Company without further action or

notice by any Person.  No such

termination of this Agreement under Section 11(k)(i) shall affect the Company’s

or the Buyer’s obligations under this Agreement with respect to pending

purchases and the Company and the Buyer shall complete their respective

obligations with respect to any pending purchases under this Agreement.

 

 

18

 

10.          CERTAIN DEFINED TERMS.

 

For purposes of this Agreement, the following terms shall

have the following meanings:

 

(a)           “1933

Act” means the Securities Act of 1933, as amended.

 

(b)           “Available

Amount” means initially Six Million Dollars ($6,000,000) in the aggregate which

amount shall be reduced by the Purchase Amount each time the Buyer subscribes

for ADSs pursuant to Section 1 hereof.

 

(c)           “Bankruptcy

Law” means Title 11, U.S. Code, the United Kingdom Insolvency Act 1986 or any

similar United Kingdom, United States federal or state law for the relief of

debtors.

 

(d)           “Closing

Sale Price” means, for any security as of any date, the last closing trade

price for such security on the Principal Market as reported by Bloomberg, or,

if the Principal Market is not the principal securities exchange or trading

market for such security, the last closing trade price of such security on the

principal securities exchange or trading market where such security is listed

or traded as reported by Bloomberg.

 

(e)           “Confidential

Information” means any information disclosed by either party to the other

party, either directly or indirectly, in writing, orally or by inspection of

tangible objects (including, without limitation, documents, prototypes,

samples, plant and equipment), which is designated as “Confidential,”

“Proprietary” or some similar designation. Information communicated orally

shall be considered Confidential Information if such information is confirmed

in writing as being Confidential Information within ten (10) business days

after the initial disclosure. Confidential Information may also include

information disclosed to a disclosing party by third parties. Confidential

Information shall not, however, include any information which (i) was publicly

known and made generally available in the public domain prior to the time of

disclosure by the disclosing party; (ii) becomes publicly known and made

generally available after disclosure by the disclosing party to the receiving

party through no action or inaction of the receiving party; (iii) is already in

the possession of the receiving party at the time of disclosure by the

disclosing party as shown by the receiving party’s files and records

immediately prior to the time of disclosure; (iv) is obtained by the receiving

party from a third party without a breach of such third party’s obligations of

confidentiality; (v) is independently developed by the receiving party without

use of or reference to the disclosing party’s Confidential Information, as

shown by documents and other competent evidence in the receiving party’s

possession; or (vi) is required by law to be disclosed by the receiving party,

provided that the receiving party gives the disclosing party prompt written

notice of such requirement prior to such disclosure and assistance in obtaining

an order protecting the information from public disclosure.

 

(f)            “Custodian”

means any receiver, trustee, assignee, liquidator or similar official under any

Bankruptcy Law.

 

(g)           “Floor

Price” means initially $0.50, which amount may be increased or decreased from

time to time pursuant to Section 1(d)(iii) hereof, except that in no case shall

the Floor Price be less than $0.15. The Floor Price shall be appropriately

adjusted for any reorganization, recapitalization, non-cash dividend, share

split or other similar transaction.

 

 

19

 

(h)           “Maturity

Date” means the date that is 600 Trading Days (30 Monthly Periods) from the

Commencement Date which such date may be extended by up to an additional six

(6) Monthly Periods by the Company, in its sole discretion, by written notice

to the Buyer.

 

(i)            “Monthly

Period” means each successive 20 Trading Day period commencing with the

Commencement Date.

 

(j)            “Person”

means an individual or entity including any limited liability company, a

partnership, a joint venture, a corporation, a trust, an unincorporated

organization and a government or any department or agency thereof.

 

(k)           “Principal

Market” means the Nasdaq National Market; provided however, that in the event

the Company’s ADSs are ever listed or traded on the Nasdaq SmallCap Market, the

New York Stock Exchange or the American Stock Exchange, then the “Principal

Market” shall mean such other market or exchange on which the Company’s ADSs

are then listed or traded.

 

(l)            “Purchase

Amount” means the portion of the Available Amount to be subscribed for by the

Buyer pursuant to Section 1 hereof.

 

(m)          “Purchase

Date” means the actual date that the Buyer is to subscribe for Purchase Shares

pursuant to Section 1 hereof.

 

(n)           “Purchase

Price” means, as of any date of determination the lower of the (A) the lowest

Sale Price of the ADSs on such date of determination and (B) the arithmetic

average of the five (5) lowest Closing Sale Prices for the ADSs during the

fifteen (15) consecutive Trading Days ending on the Trading Day immediately preceding

such date of determination (to be appropriately adjusted for any

reorganization, recapitalization, non-cash dividend, subdivision or

consolidation of shares or other similar transaction).

 

(o)          

“Sale Price” means, for any security as of any date, any trade price for such

security on the Principal Market as reported by Bloomberg, or, if the Principal

Market is not the principal securities exchange or trading market for such

security, the trade price of such security on the principal securities exchange

or trading market where such security is listed or traded as reported by

Bloomberg.

 

(p)           “SEC”

means the United States Securities and Exchange Commission.

 

(q)          

“Transfer Agent” means the transfer agent of the Company as set forth in

Section 11(f) hereof or such other person who is then serving as the transfer

agent for the Company in respect of the ADSs.

 

(r)           

“Trading Day” means any day on which the Principal Market is open for customary

trading.

 

(s)           “Preferred

Shares” means cumulative redeemable preferred ordinary shares of nominal value

10 pence each in the capital of the Company.

 

 

20

 

11.          MISCELLANEOUS.

 

(a)           Governing Law; Jurisdiction; Jury

Trial.  The corporate laws of

England and Wales shall govern all issues concerning the relative rights of the

Company and its shareholders and the powers and capacity of the Company. All

other questions concerning the construction, validity, enforcement and

interpretation of this Agreement and the other Transaction Documents shall be

governed by the internal laws of the State of Illinois, without giving effect

to any choice of law or conflict of law provision or rule (whether of the State

of Illinois or any other jurisdictions) that would cause the application of the

laws of any jurisdictions other than the State of Illinois.  Each party hereby irrevocably submits to the

exclusive jurisdiction of the state and federal courts sitting in the City of

Chicago, for the adjudication of any dispute hereunder or under the other

Transaction Documents or in connection herewith or therewith, or with any

transaction contemplated hereby or discussed herein, and hereby irrevocably

waives, and agrees not to assert in any suit, action or proceeding, any claim

that it is not personally subject to the jurisdiction of any such court, that

such suit, action or proceeding is brought in an inconvenient forum or that the

venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process

and consents to process being served in any such suit, action or proceeding by

mailing a copy thereof to such party at the address for such notices to it

under this Agreement and agrees that such service shall constitute good and

sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any

right to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY

HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY

DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR

ANY TRANSACTION CONTEMPLATED HEREBY.

 

(b)           Counterparts.  This Agreement may be executed in two or

more identical counterparts, all of which shall be considered one and the same

agreement and shall become effective when counterparts have been signed by each

party and delivered to the other party; provided that a facsimile signature

shall be considered due execution and shall be binding upon the signatory

thereto with the same force and effect as if the signature were an original,

not a facsimile signature.

 

(c)           Headings.  The headings of this Agreement are for

convenience of reference and shall not form part of, or affect the

interpretation of, this Agreement.

 

(d)           Severability.  If any provision of this Agreement shall be

invalid or unenforceable in any jurisdiction, such invalidity or

unenforceability shall not affect the validity or enforceability of the

remainder of this Agreement in that jurisdiction or the validity or

enforceability of any provision of this Agreement in any other jurisdiction.

 

(e)           Entire

Agreement; Amendments.  With the

exception of the Financial Non-disclosure Confidentiality Agreement between the

parties dated as of September 19, 2002, this Agreement supersedes all other

prior oral or written agreements between the Buyer, the Company, their

affiliates and persons acting on their behalf with respect to the matters

discussed herein, and this Agreement, the other Transaction Documents and the instruments

referenced herein contain the entire understanding of the parties with respect

to the matters covered herein and therein and, except as specifically set forth

herein or therein, neither the Company nor the Buyer makes any representation,

warranty, covenant or undertaking with respect to such matters.  No provision of this Agreement may be

amended other than by an instrument in writing signed by the Company and the

Buyer, and no provision hereof may be waived other than by an instrument in

writing signed by the party against whom enforcement is sought.

 

 

21

 

(f)            Notices.  Any notices, consents, waivers or other

communications required or permitted to be given under the terms of this

Agreement must be in writing and will be deemed to have been delivered: (i)

upon receipt, when delivered personally; (ii) upon receipt, when sent by

facsimile (provided confirmation of transmission is mechanically or

electronically generated and kept on file by the sending party); or (iii) one

Trading Day after deposit with a nationally recognized overnight delivery

service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such

communications shall be:

 

If to the Company:

Insignia Solutions plc

41300 Christy Street

Fremont, CA 94538

Telephone:        510-360-3700

Facsimile:                                510-360-3701

Attention:          Chief Financial Officer

 

With a copy to:

Venture Law Group

2800 Sand Hill Road

Menlo Park, CA  94025

Telephone:        650-854-4488

Facsimile:                                650-233-8386

Attention:          Mark A. Medearis

 

If to the Buyer:

Fusion Capital Fund II,

LLC

222 Merchandise Mart

Plaza, Suite 9-112

Chicago, IL 60654

Telephone:        312-644-6644

Facsimile:                                312-644-6244

Attention:          Steven G. Martin

 

If to the Transfer Agent:

Bank of New York

ADR Department

620 Avenue of the

Americas, 6th Floor

New York, NY 10011

Telephone:        212-815-4305

Facsimile:                                212-571-3050

Attention:          Tom Abbott

 

or at such other address

and/or facsimile number and/or to the attention of such other person as the

recipient party has specified by written notice given to each other party three

(3) Trading Days prior to the effectiveness of such change.  Written confirmation of receipt (A) given by

the recipient of such notice, consent, waiver or other communication, (B)

mechanically or electronically generated by the sender’s facsimile machine

containing the time, date, and recipient facsimile number or (C) provided by a

nationally recognized overnight delivery service, shall be rebuttable evidence

of personal service, receipt by facsimile or receipt from a nationally

recognized overnight delivery service in accordance with clause (i), (ii) or

(iii) above, respectively.

 

 

22

 

(g)           Successors

and Assigns.  This Agreement shall

be binding upon and inure to the benefit of the parties and their respective

successors and assigns.  The Company

shall not assign this Agreement or any rights or obligations hereunder without

the prior written consent of the Buyer, including by merger or

consolidation.  The Buyer may not assign

its rights or obligations under this Agreement.

 

(h)           No

Third Party Beneficiaries.  This

Agreement is intended for the benefit of the parties hereto and their

respective permitted successors and assigns, and is not for the benefit of, nor

may any provision hereof be enforced by, any other person.

 

(i)            Publicity.  The Buyer shall have the right to approve

before issuance any press releases or any other public disclosure (including

any filings with the SEC) with respect to the transactions contemplated hereby;

provided, however, that the Company shall be entitled, without the prior

approval of the Buyer, to make any press release or other public disclosure

(including any filings with the SEC) with respect to such transactions as is

required by applicable law and regulations (although the Buyer shall be

consulted by the Company in connection with any such press release or other

public disclosure prior to its release and shall be provided with a copy

thereof).

 

(j)            Further

Assurances.  Each party shall do and

perform, or cause to be done and performed, all such further acts and things,

and shall execute and deliver all such other agreements, certificates,

instruments and documents, as the other party may reasonably request in order

to carry out the intent and accomplish the purposes of this Agreement and the

consummation of the transactions contemplated hereby.

 

(k)           Termination.  This Agreement may be terminated only as

follows:

 

(i)            By the Buyer any time an Event of

Default exists without any liability or payment to the Company.  However, if pursuant to or within the

meaning of any Bankruptcy Law, the Company commences a voluntary case or any

Person commences a proceeding against the Company, a Custodian is appointed for

the Company or for all or substantially all of its property, or the Company

makes a general assignment for the benefit of its creditors, (any of which

would be an Event of Default as described in Sections 9(h), 9(i) and 9(j)

hereof) this Agreement shall automatically terminate without any liability or

payment to the Company without further action or notice by any Person.  No such termination of this Agreement under

this Section 11(k)(i) shall affect the Company’s or the Buyer’s obligations

under this Agreement with respect to pending purchases and the Company and the

Buyer shall complete their respective obligations with respect to any pending

purchases under this Agreement.

 

(ii)           In the event that the Commencement

shall not have occurred, the Company shall have the option to terminate this

Agreement for any reason or for no reason without liability of any party to any

other party.

 

(iii)          In the event that the Commencement

shall not have occurred on or before December 31, 2002, due to the failure to

satisfy the conditions set forth in Sections 6 and 7 above with respect to the

Commencement (and the nonbreaching party’s failure to waive such unsatisfied

condition(s)), the nonbreaching party shall have the option to terminate this

Agreement at the close of business on such date or thereafter without liability

of any party to any other party.

 

(iv)          If by the Maturity Date (including any

extension thereof by the Company pursuant to Section 10(h) hereof), for any

reason or for no reason the full Available Amount 

 

 

23

 

under this Agreement has

not been purchased as provided for in Section 1 of this Agreement, by the Buyer

without any liability or payment to the Company.

 

(v)            At any time after the Commencement Date,

the Company shall have the option to terminate this Agreement for any reason or

for no reason by delivering notice (a “Company Termination Notice”) to the

Buyer electing to terminate this Agreement without any liability or payment to

the Buyer.  The Company Termination

Notice shall not be effective until one (1) Trading Day after it has been

received by the Buyer.

 

(vi)          This Agreement shall automatically

terminate on the date that the Company sells and the Buyer purchases the full

Available Amount as provided herein, without any action or notice on the part

of any party.

 

Except as set forth in

Sections 11(k)(i) (in respect of an Event of Default under Sections 9(h), 9(i)

and 9(j)) and 11(k)(vi), any termination of this Agreement pursuant to this

Section 11(k) shall be effected by written notice from the Company to the

Buyer, or the Buyer to the Company, as the case may be, setting forth the basis

for the termination hereof.  The

representations and warranties of the Company and the Buyer contained in Sections

2 and 3 hereof, the indemnification provisions set forth in Section 8 hereof

and the agreements and covenants set forth in Section 11, shall survive the

Commencement and any termination of this Agreement.  No termination of this Agreement shall affect the Company’s or

the Buyer’s obligations under this Agreement with respect to pending purchases

and the Company and the Buyer shall complete their respective obligations with

respect to any pending purchases under this Agreement.

 

(l)            No

Financial Advisor, Placement Agent, Broker or Finder. The Company

acknowledges that it has retained First Albany Corporation as financial advisor

in connection with the transactions contemplated hereby.  The Company represents and warrants to the

Buyer that it has not engaged any other financial advisor, placement agent,

broker or finder in connection with the transactions contemplated hereby.  The Buyer represents and warrants to the

Company that it has not engaged any financial advisor, placement agent, broker

or finder in connection with the transactions contemplated hereby.  The Company shall be responsible for the

payment of any fees or commissions, if any, of any financial advisor, placement

agent, broker or finder relating to or arising out of the transactions contemplated

hereby.  The Company shall pay, and hold

the Buyer harmless against, any liability, loss or expense (including, without

limitation, attorneys’ fees and out of pocket expenses) arising in connection

with any such claim.

 

(m)          No

Strict Construction.  The language

used in this Agreement will be deemed to be the language chosen by the parties

to express their mutual intent, and no rules of strict construction will be

applied against any party.

 

(n)           Remedies,

Other Obligations, Breaches and Injunctive Relief.  The Buyer’s remedies provided in this

Agreement shall be cumulative and in addition to all other remedies available

to the Buyer under this Agreement, at law or in equity (including a decree of

specific performance and/or other injunctive relief), no remedy of the Buyer

contained herein shall be deemed a waiver of compliance with the provisions

giving rise to such remedy and nothing herein shall limit the Buyer’s right to

pursue actual damages for any failure by the Company to comply with the terms of

this Agreement.  The Company

acknowledges that a breach by it of its obligations hereunder will cause

irreparable harm to the Buyer and that the remedy at law for any such breach

may be inadequate.  The Company

therefore agrees that, in the event of any such breach or threatened breach,

the Buyer shall be entitled, in addition to all other

 

 

24

 

available remedies, to an

injunction restraining any breach, without the necessity of showing economic

loss and without any bond or other security being required.

 

(o)           Changes

to the Terms of this Agreement. 

This Agreement and any provision hereof may only be amended by an

instrument in writing signed by the Company and the Buyer.  The term “Agreement” and all reference

thereto, as used throughout this instrument, shall mean this instrument as

originally executed, or if later amended or supplemented, then as so amended or

supplemented.

 

(p)           Enforcement

Costs.  If: (i) this Agreement is

placed by the Buyer in the hands of an attorney for enforcement or is enforced

by the Buyer through any legal proceeding; or (ii) an attorney is retained to

represent the Buyer in any bankruptcy, reorganization, receivership or other

proceedings affecting creditors’ rights and involving a claim under this

Agreement; or (iii) an attorney is retained to represent the Buyer in any other

proceedings whatsoever in connection with this Agreement, then the Company

shall pay to the Buyer, as incurred by the Buyer, all reasonable costs and expenses

including attorneys’ fees incurred in connection therewith, in addition to all

other amounts due hereunder.

 

(q)           Failure

or Indulgence Not Waiver.  No

failure or delay in the exercise of any power, right or privilege hereunder

shall operate as a waiver thereof, nor shall any single or partial exercise of

any such power, right or privilege preclude other or further exercise thereof

or of any other right, power or privilege.

 

 

 

*    

*     *     *     *

 

 

25

 

IN

WITNESS WHEREOF,

the Buyer and the Company have caused this Securities Subscription Agreement to

be duly executed as of the date first written above.

 

 

 

	

   

  	

  THE COMPANY:

  
	

   

  	

   

  	

   

  
	

   

  	

  INSIGNIA SOLUTIONS plc

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Richard M. Noling

  
	

   

  	

  Name:

  	

  Richard M. Noling

  
	

   

  	

  Title:

  	

  Chief Executive Officer

  
	

   

  	

   

  	

   

  
	

   

  	

  BUYER:

  
	

   

  	

   

  	

   

  
	

   

  	

  FUSION CAPITAL FUND II, LLC

  
	

   

  	

  BY:

  	

  FUSION

  CAPITAL PARTNERS, LLC

  
	

   

  	

  BY:

  	

  SGM HOLDINGS CORP.

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Steven G. Martin

  
	

   

  	

  Name:

  	

  Steven G. Martin

  
	

   

  	

  Title:

  	

  President

  

 

 

26

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