Document:

ex10-1.htm

Exhibit 10.1

 

 

This agreement and the proposed private placement of the company's common stock contemplated herein are highly confidential and represent material inside information of the company, and should not be disclosed or disseminated by the recipient other than to the recipient's advisors who are under an obligation of confidentiality.  Recipients should refrain from trading in securities of the company until such time as the company has publicly disclosed the offering contemplated hereby.

 

 

 

COMMON STOCK PURCHASE AGREEMENT

 

DATED JANUARY 18, 2011

 

 

BETWEEN VISION-SCIENCES, INC.

 

AND

 

PURCHASER

 

 

  

 

  

 

COMMON STOCK PURCHASE AGREEMENT

 

This Common Stock Purchase Agreement is dated as of January 18, 2011 (this “Agreement”), between Vision-Sciences, Inc., a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”).

 

Subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act (as defined below), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company in the aggregate, up to $11,250,000 of shares of Common Stock on the Closing Date(s).

 

Accordingly, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1      Definitions.

 

In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings indicated in this Section 1.1:

 

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 144.  With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.

 

“Closing” means the closing of the purchase and sale of the Common Stock pursuant to Section 2.1.

 

“Closing Date(s)” means the Trading Day when this Agreement has been executed and delivered by the applicable parties thereto with respect to all or a portion of the shares of Common Stock to be sold hereunder, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver such Shares have been satisfied or waived.

 

“Commission” or “SEC” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.01 per share.

 

  

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“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

 “Disclosure Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.

 

“Effective Date” means the date that the initial registration statement filed by the Company for the Registrable Securities is first declared effective by the Commission.

 

“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(r).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“FDA” shall have the meaning ascribed to such term in Section 3.1(l).

 

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Indemnified Person” shall have the meaning ascribed to such term in Section 4.6.

 

“Indemnified Liabilities” shall have the meaning ascribed to such term in Section 4.6.

 

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).

 

“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).

 

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Material Adverse Effect” shall have the meaning ascribed to such term in Section 3.1(b).

 

“Material Contract” means any contract of the Company or any of its Subsidiaries that has been filed or was required to have been filed as an Exhibit to the SEC Reports pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K.

 

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).

 

 “Per Share Purchase Price” equals $1.50, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions relating to the Common Stock that occur after the date of this Agreement.

 

  

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“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.6.

 

“Registrable Securities” means all of the Shares held by such Purchasers, together with any shares of Common Stock issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing.

 

 “Registration Statement” means a registration statement covering the resale of the Registrable Securities.

 

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities Act” means the Securities Act of 1933, as amended.

 

 “Shares” means the shares of Common Stock issued or issuable to each Purchaser pursuant to this Agreement.

 

“Subscription Amount” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature page hereto, in United States dollars and in immediately available funds.

 

“Subsidiary” shall mean the subsidiaries of the Company, if any, set forth on Schedule 3.1(a).

 

“Trading Day” means a day on which the Common Stock is traded on a Trading Market.

 

 “Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE Amex (formerly the American Stock Exchange), the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq National Market, the Nasdaq Capital Market or the OTC Bulletin Board.

 

  

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ARTICLE II.

PURCHASE AND SALE

 

2.1      Closing.  On a Closing Date, each Purchaser shall purchase from the Company, severally and not jointly with the other Purchasers, and the Company shall issue and sell to each Purchaser, a number of Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price.  The aggregate Subscription Amounts for the Shares sold hereunder shall be up to $11,250,000.  Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3, each Closing shall occur at the offices of Proskauer Rose LLP or such other location as the parties shall mutually agree.

 

2.2      Deliveries.

 

(a)      On the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

 

(i)            this Agreement duly executed by the Company;

 

(ii)           a copy of the irrevocable instructions to the Company’s transfer agent instructing the transfer agent to deliver, on an expedited basis, a certificate evidencing a number of Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser;

 

(iii)           a certificate, in form reasonably satisfactory to the Purchaser, executed by an executive officer of the Company, dated as of the Closing Date, certifying as to the fulfillment of the conditions specified in Sections 2.3(b)(i) and (ii); and

 

(iv)           a legal opinion of Proskauer Rose LLP, or other legal counsel to the Company, in the form of Exhibit A attached hereto.

 

(b)      On the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:

 

(i)             this Agreement duly executed by such Purchaser; and

 

(ii)           such Purchaser’s Subscription Amount by wire transfer to the account as specified by the Company on Annex A hereto.

 

2.3      Closing Conditions.

 

(a)      The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)            all representations and warranties of the Purchasers contained herein shall be accurate in all material respects (except for those representations and warranties which are qualified as to materiality, in which case such representations and warranties shall be true and correct in all respects) when made and on the Closing Date, as though made on and as of such date, except for such representations that speak as of a specific date;

 

  

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(ii)           all obligations, covenants and agreements of the Purchasers required to be performed at or prior to the Closing Date shall have been performed; and

 

(iii)           the delivery by the Purchasers of the items set forth in Section 2.2(b) of this Agreement.

 

(b)           The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)             all representations and warranties of the Company contained herein shall be accurate in all material respects (except for those representations and warranties which are qualified as to materiality, in which case such representations and warranties shall be true and correct in all respects) when made and on the Closing Date, as though made on and as of such date, except for such representations that speak as of a specific date;

 

(ii)           all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

 

(iii)           the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;

 

(iv)           there shall have been no Material Adverse Effect nor any event or series of events that could have or reasonably be expected to result in a Material Adverse Effect since the date hereof;

 

(v)            from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Trading Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing); and

 

(vi)          The Trading Market shall have approved the listing of additional shares application for the Shares on or prior to the Closing Date.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1      Representations and Warranties of the Company.  Except as set forth under the corresponding section of the Disclosure Schedules which Disclosure Schedules shall be deemed a part hereof, the Company hereby makes, as of the date hereof and the Closing Date, the representations and warranties set forth below to each Purchaser:

 

  

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(a)      Subsidiaries.  All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a).  The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.  If the Company has no subsidiaries, then references in this Agreement to the Subsidiaries will be disregarded.

 

(b)      Organization and Qualification.  The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of this Agreement, (ii) a material adverse effect on the results of operations, assets, business, or financial condition of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under this Agreement (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c)      Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations thereunder.  The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company in connection therewith other than in connection with the Required Approvals.  This Agreement has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

 

(d)      No Conflicts.  The execution, delivery and performance of this Agreement by the Company, the issuance and sale of the Shares and the consummation by the Company of the other transactions contemplated hereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, including, without limitation, any Material Contract or Material Permit, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

  

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(e)      Filings, Consents and Approvals.  The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Agreement, other than (i) application(s) to each applicable Trading Market for the listing of the Shares for trading thereon in the time and manner required thereby, (ii) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws, and (iii) a Form 8-K disclosing the sale of the Shares hereunder, (collectively, the “Required Approvals”).

 

(f)      Issuance of the Shares.  The Shares are duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in this Agreement.

 

(g)      Capitalization.  The capitalization of the Company is as set forth on Schedule 3.1(g).  All of the issued and outstanding capital shares of the Company (i) have been duly authorized and validly issued and are fully paid and nonassessable, (ii) are not in violation of any first refusal, preemptive right, right of participation, or any similar right applicable to the company's capital stock and (iii) have been offered, issued and sold by the Company in compliance with all applicable federal and state securities laws.  The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock incentive plans and the issuance of restricted shares of Common Stock to employees pursuant to the Company’s stock incentive plan.  No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement.  There are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents other than pursuant to this Agreement and as disclosed in the Company’s SEC filings.  No further approval or authorization of any stockholder, the Board of Directors of the Company or other Person is required for the issuance and sale of the Shares.  Except for this Agreement, there are no stockholders agreements, voting agreements, registration rights agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

  

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(h)      SEC Reports; Financial Statements.  The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  The Company has never been an issuer subject to Rule 144(i) under the Securities Act.  Each of the Material Contracts to which the Company or any Subsidiary is a party or to which the property or assets of the Company or any of its Subsidiaries are subject has been filed (or incorporated by reference) as an exhibit to the SEC Reports. Each of the Material Contacts is in full force and effect, and constitutes a legal, valid and binding obligation enforceable in accordance with its terms against the Company, except for those Material Contracts that have been terminated or expired in accordance with their terms.  The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

(i)       Material Changes.  Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports or on the Disclosure Schedules, (i) there has been no event, occurrence or development that has had a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock incentive plans.  The Company does not have pending before the Commission any request for confidential treatment of information.

 

  

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(j)      Litigation.  There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of this Agreement or (ii) or could reasonably be expected to result in a Material Adverse Effect.

 

(k)      Labor Relations.  No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect.  No officer, consultant or key employee of the Company or any Subsidiary whose termination could reasonably be expected to result in a Material Adverse Effect has terminated or, to the knowledge of the Company, has any present intention of terminating his or her employment or engagement with the Company or any Subsidiary.

 

(l)      Compliance.  Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), including, without limitation, the Material Contracts and the Material Permits, (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business, including, without limitation, all applicable rules, regulations, guidelines and policies of the U.S. Food and Drug Administration ("FDA) and any governmental authority exercising authority comparable to that of the FDA (including any non-governmental authority whose approval or authorization is required under foreign law comparable to that administered by the FDA) and all applicable foreign, federal, state and local statutes, rules and regulations relating to taxes,  environmental safety and protection, occupational health and safety, product quality and safety, and employment and labor matters, except in each case as could not reasonably be expected to have a Material Adverse Effect.

 

  

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(m)      Regulatory Permits.  The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, including, without limitation, all such approvals, certificates authorizations and permits required by the FDA and any governmental authority exercising authority comparable to that of the FDA (including any non-governmental authority whose approval or authorization is required under foreign law comparable to that administered by the FDA), except where the failure to possess such permits could not have or reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.  All of the Material Permits are valid and in full force and effect, except where the invalidity of such Material Permit or the failure of such Material Permit to be in full force and effect, could not reasonably be expected have a Material Adverse Effect.

 

(n)      Title to Assets.  The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance in all material respects.

 

(o)      Patents and Trademarks.  To the knowledge of the Company, the Company and the Subsidiaries own, possess, license or have other rights to use, all patents, patent applications, trademarks, trademark applications and registrations, service marks, trade names, trade secrets, inventions, copyrights, licenses and other similar rights necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).  Neither the Company nor any Subsidiary has received any notice (written or otherwise) that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person.  To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights.  The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights.

 

(p)      Insurance.  The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance.  To the Company’s knowledge, such insurance contracts and policies are accurate and complete.  Neither the Company nor any 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 without a significant increase in cost.

 

  

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(q)      Transactions With Affiliates and Employees.  Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (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 entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $60,000 other than (i) for payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) for other employee benefits, including stock option agreements under any stock option plan of the Company.

 

(r)      Disclosure Controls and Procedures and Accounting Controls. The Company has established and maintains disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are effective in all material respects to ensure that material information relating to the Company is made known to its chief executive officer and chief financial officer by others within those entities.  The Company's certifying officers have evaluated the effectiveness of the Company's controls and procedures as of the end of the period covered by the most recently filed quarterly or annual periodic report under the Exchange Act (such date, the "Evaluation Date").  The Company presented in its most recently filed quarterly or annual periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no significant changes in the Company's internal controls (as such term is defined in Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company's knowledge, in other factors that could significantly affect the Company's internal controls.  The Company maintains a system of accounting controls sufficient to provide reasonable assurances that (a) transactions are executed in accordance with management's general or specific authorization; (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (c) access to assets is permitted only in accordance with management's general or specific authorization; and (d) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

(s)      Private Placement. Assuming the accuracy of the Purchasers representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Shares by the Company to the Purchasers as contemplated hereby.  The issuance and sale of the Shares hereunder does not contravene the rules and regulations of the Trading Market.

 

  

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(t)      Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Shares, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.  The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act.

 

(u)      Listing and Maintenance Requirements.  The Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration.  The Company's Common Stock is listed on The Nasdaq Capital Market, and there are no proceedings pending, or the best of the Company's knowledge threatened to revoke or suspend such listing.  The Company is in compliance with the requirements of the Nasdaq Capital Market for continued listing of the Common Stock thereon.

 

(v)      Anti-takeover Protections.  The Company has taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill, shareholder rights agreements or other similar anti-takeover provision under the Company's articles of incorporation and bylaws or any applicable state laws that is or could become applicable to each Purchaser's purchase and ownership of the Shares.

 

(w)     No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor to the Company’s knowledge, any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Shares to be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable shareholder approval provisions, including, without limitation, under the rules and regulations of any Trading Market on which any of the securities of the Company are listed or designated, other than successive offerings and sales of Shares under this Agreement.

 

(x)      General Solicitation.  Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Shares by any form of general solicitation or general advertising.  The Company has offered the Shares for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

(y)      Foreign Corrupt Practices Act.  Neither the Company nor any of its Subsidiaries, nor any of their respective directors, officers, employees or agents has (i) directly or indirectly, used any corporate funds for unlawful contributions, gifts, entertainment or made any other unlawful expenses relating to political activity to government officials, candidates or members of political parties or organizations, (ii) paid, accepted or received any unlawful contributions, payments, expenditures or gifts, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any Person authorized to act on its behalf) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended, any export restrictions, anti-boycott regulations, embargo regulations or other similar applicable domestic or foreign laws and regulations.

 

  

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(z)      No Broker Fees.  No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company.  No Purchaser shall have any obligation with respect to any such fees or any claims made by or on behalf of any such Persons that any such fees are due.

 

(aa)     No Additional Agreements.  The Company does not have any agreements or understanding with any Purchaser with respect to the transactions contemplated by this Agreement other than as specified in this Agreement.

 

3.2      Representations and Warranties of the Purchasers.

 

Each Purchaser hereby, for itself and for no other Purchaser, represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:

 

(a)      Organization; Authority.  Such Purchaser (other than a Purchaser that is an individual) is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations thereunder. The execution, delivery and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or similar action on the part of such Purchaser.  This Agreement has been duly executed by the Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(b)      Own Account.  Such Purchaser understands that the Shares are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Shares as principal for its own account and not with a view to or for distributing or reselling such Shares or any part thereof, has no present intention of distributing any of such Shares and has no arrangement or understanding with any other persons regarding the distribution of such Shares.  Such Purchaser does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Shares.

 

  

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(c)      Purchaser Status.  At the time such Purchaser was offered the Shares, it was, and at the date hereof it is, either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.

 

(d)      Experience of Such Purchaser.  Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic risk of an investment in the Shares and, at the present time, is able to afford a complete loss of such investment.

 

(e)      General Solicitation.  Such Purchaser is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

The Company acknowledges and agrees that each Purchaser does not make or has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2.

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1      Transfer Restrictions.

 

(a)      The Shares may only be disposed of in compliance with state and federal securities laws.  In connection with any transfer of Shares other than pursuant to an effective Registration Statement or Rule 144, to the Company or to an affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Shares under the Securities Act.  As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement.

 

(b)      The Purchasers agree to the imprinting, so long as is required by this Section 4.1(b), of a legend on any of the Shares in the following or its equivalent form:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

  

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(c)      Certificates evidencing the Shares shall not contain any legend (including the legend set forth in Section 4.1(b)), (i) while a registration statement covering the resale of such security is effective under the Securities Act, or (ii) following any sale of such Shares pursuant to Rule 144, or (iii) if such Shares are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such securities and without volume or manner-of-sale restrictions, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the Staff of the Commission) and such lack of requirement is confirmed by a legal opinion satisfactory to the Company.  The Company shall cause its counsel to issue a legal opinion to the Company’s transfer agent promptly after the Effective Date if required by the Company’s transfer agent to effect the removal of the legend hereunder.  The Company agrees that following the Effective Date or at such other time as a legend is no longer required under this Section 4.1(c), it will, no later than three Trading Days following the delivery by a Purchaser to the Company or the Company’s transfer agent of a certificate representing Shares issued with a restrictive legend (such date, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such Shares that is free from all restrictive and other legends.  The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section.  Certificates for Shares subject to legend removal hereunder may be transmitted by the transfer agent of the Company to the Purchasers by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System.

(d)      Each Purchaser, severally and not jointly with the other Purchasers, agrees that the removal of the restrictive legend from certificates representing Shares as set forth in this Section 4.1 is predicated upon the Company’s reliance that the Purchaser will sell any Shares pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom.

 

(e)      In order to enable the Purchasers to sell the Shares under Rule 144, the Company shall use its reasonable best efforts to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act.  If the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Shares under Rule 144.

 

  

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4.2      Publicity.  The Company shall not publicly disclose the name of any Purchaser or an Affiliate of any Purchaser, or include the name of any Purchaser or an Affiliate of any Purchaser in any press release or filing with the Commission (other than the Registration Statement) or any regulatory agency or Trading Market without the prior written consent of the Purchaser, except to the extent that such disclosure is required by law, request of the Staff of the Commission or Trading Market regulations, in which case the Company shall provide such Purchaser with prior notice of such disclosure.

 

4.3      Integration.  The Company shall not, and shall use its commercially reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares in a manner that would require the registration under the Securities Act of the sale of the Shares to the Purchasers or that would be integrated with the offer or sale of the Shares for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

 

4.4      Non-Public Information.  The Company covenants and agrees that neither it nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel, with any information that the Company believes constitutes material non-public information without the express written consent of such Purchaser, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information.  The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. The foregoing shall not apply to Purchasers who are directors or employees of the Company or who are on the date of this Agreement shareholders of the Company holding 5% or more of its capital stock.

 

4.5      Use of Proceeds.  The Company shall use the net proceeds from the sale of the Shares hereunder for working capital purposes, to purchase fixed assets used in the development or production of the Company’s products or for investment in new technologies related to the Company’s business and not for the satisfaction of any portion of the Company’s debt (other than payment of trade payables in the ordinary course of the Company’s business and prior practices), to redeem any Common Stock or Common Stock Equivalents or to settle any outstanding litigation.

 

  

16

  

 

4.6      Indemnification of Purchasers.   Subject to the provisions of this Section 4.6, the Company will defend, protect, indemnify and hold the Purchasers and their directors, officers, shareholders, members, partners, employees and agents (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation ("Indemnified Liabilities") that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or (b) any action, suit, proceeding or claim (including for these purposes a derivative action brought on behalf of the Company) instituted against the Company, any Purchaser Party, or any other Purchaser in any capacity, or any of them or their respective Affiliates, by any Person who is not an Affiliate of such Purchaser seeking indemnification, with respect to or arising out of the execution, delivery, performance or enforcement of any of the transactions contemplated by this Agreement (unless such action is based upon a breach of such Purchaser’s representations, warranties or covenants under this Agreement or any agreements or understandings such Purchaser may have with any such stockholder or any violations by the Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance).  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 any such Person (the "Indemnified Person") of notice of any demand, claim or circumstance which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to this Section 4.6, such Indemnified Person shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all such Indemnified Liabilities and any and all other fees and expenses related to the proceeding; provided, however, that the failure of any Indemnified Person so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that the Company is actually and materially prejudiced by such failure to notify.  In such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Company and the Indemnified Person have mutually agreed to retention of such counsel; (ii) the Company shall have failed promptly to assume the defense of such proceeding and to employ counsel reasonably satisfactory to the Indemnified Person in such proceeding; or (iii) in the reasonable judgment of counsel to such Indemnified Person, representation of both parties by the same counsel may be inappropriate due to actual or potential differing interests between them.  The Company shall keep the Indemnified Person reasonably 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 proceeding effected without the Company's written consent, which consent shall not be unreasonably withheld, delayed or conditioned.  Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, delayed or conditioned, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such proceeding and in no event shall such settlement include any non-monetary limitation on the actions of the Indemnified Person or any of its Affiliates or any admission fault or liability on behalf of such Indemnified Person.

 

4.7      Trading Market Listing.  In the time and manner required by the Trading Market, the Company shall (a) prepare and file with such Trading Market an additional shares listing application covering all of the Shares and a notification form regarding the change in the number of shares outstanding pertaining thereto; (b) use its reasonable best efforts to take all steps necessary to cause all of the Shares to be approved for listing on the Trading Market as promptly as possible thereafter; (c) if requested by any Purchaser, provide such Purchaser with evidence of such listing and (d) use its reasonable best efforts to maintain the listing of such Shares on the Trading Market.

 

  

17

  

 

4.8      Form D; Blue Sky.  The Company agrees to timely file a Form D with respect to the Shares as required under Regulation D and to provide a copy there of upon written request of any Purchaser.  The Company, on or before the Closing Date, shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Shares for sale to the Purchasers under applicable securities or "Blue Sky" laws of the states of the United States (or to obtain an exemption from such qualification) and shall provide evidence of such actions promptly upon the written request of any Purchaser.

 

4.9      Delivery of Shares After Closing.  The Company shall deliver, or cause to be delivered, the Shares purchased by each Purchaser to such Purchaser within 3 Trading Days of the applicable Closing Date.

 

4.10    Piggy-Back Registrations.  If the Company shall determine to prepare and file with the Commission a Registration Statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act), then the Company shall send to each Purchaser a written notice of such determination and, if within 15 days after the date of such notice, any such Purchaser shall so request in writing, the Company shall include in such Registration Statement all or any part of such Registrable Securities  such Purchaser requests to be registered and sold in such offering.  All fees and expenses incident to the Company's performance of or compliance with its obligations under this Section 4.10 (excluding any underwriting discounts and selling commissions and all legal fees and expenses of legal counsel for any Purchaser) shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement.

 

 

ARTICLE V.

MISCELLANEOUS

 

5.1      Termination.  This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the Company, if the Closing has not been consummated on or before February 28, 2011.  In the event of a termination pursuant to this Section 5.1, the Company shall promptly notify all non-terminating Purchasers.  Upon termination in accordance with this Section 5.1, the Company and the terminating Purchaser(s) shall not have any further obligation or liability (including arising from such termination) to the other, and no Purchaser will have any liability to any other Purchaser under this Agreement as a result thereof.

 

5.2      Fees and Expenses.  Except as otherwise set forth in this Agreement, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  The Company shall pay all stamp and other taxes and duties levied in connection with the delivery of the Shares.

 

  

18

  

 

5.3      Entire Agreement.  This Agreement, together with the exhibits and schedules hereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.  At the Closing, and without further consideration, the Company and the Purchasers will execute and deliver to the other such further documents as may be reasonably requested in order to giver practical effect to the intentions of the parties under this Agreement.

 

5.4      Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (b) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as set forth on the signature pages attached hereto.

 

5.5      Amendments; Waivers.  No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and each Purchaser or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

 

5.6      Headings.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

5.7       Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser.  Any Purchaser may assign its rights hereunder in whole or in part to any Person to whom such Purchaser assigns or transfers the Shares, provided such transferee shall agree in writing to be bound, with respect to the transferred Shares, by the terms and conditions of this Agreement that apply to the "Purchasers."

 

5.8      No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except each Purchaser Party is an intended third party beneficiary of Section 4.6.

 

  

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5.9      Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of this Agreement), 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 improper or inconvenient venue for such proceeding.  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 via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  The parties hereby waive all rights to a trial by jury.

 

5.10    Survival.  Subject to applicable statute of limitations, the representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery of the Shares.

 

5.11    Execution.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.  Additional Purchasers may be added to this Agreement for each Closing by attaching the Purchaser’s signature page hereto, whereupon this Agreement shall constitute a single agreement executed and delivered between the Company and each of the Purchasers party hereto.

 

5.12    Severability.  If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

 

5.13    Replacement of Shares.  If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested.  The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares.

 

5.14    Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under this Agreement.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

  

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5.15    Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under this Agreement.  Nothing contained herein, and no action taken by any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement.  Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  Each Purchaser has been represented by its own separate legal counsel in their review and negotiation of this Agreement.

 

(Signature Page Follows)

 

 

 

 

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Common Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

	
VISION-SCIENCES, INC.

 

 

	
Address for Notice:

 

Vision-Sciences, Inc.

40 Ramland Rd. South, Suite 1

Orangeburg, NY 10962

	
By: _________________

       Name: Warren Bielke

       Title:    Interim CEO

 

	  
	
With a copy to (which shall not constitute notice):

 

Proskauer Rose LLP

Attn: Paul Rachlin, Esq.

11 Times Square

New York, NY 10036

	  

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR PURCHASERS FOLLOW]

 

 

 

 

 

  

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[PURCHASER SIGNATURE PAGES TO COMMON STOCK PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Common Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

Name of Purchaser:

Signature: _____________

Email Address of Purchaser:

Address for Notice to Purchaser:

Address for Delivery of Shares for Purchaser (if not same as above):

Subscription Amount: $

Shares:

EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]ex10-1.htm

EXHIBIT 10.1

 

 

REDEMPTION AGREEMENT

 

between

 

 

PHOENIX ACQUISITION COMPANY II, L.L.C.

 

 

and

 

 

MERISEL, INC.

 

 

Dated as of January 19, 2011

 

 

  

 

  

TABLE OF CONTENTS

 

	  	
Page

	  	  
	
ARTICLE I

	  	  
	
DEFINITIONS

	  	  
	
SECTION 1.01. Certain Defined Terms

	
1

	  	  
	
ARTICLE II

	  	  
	
PURCHASE AND SALE

	  	  
	
SECTION 2.01. Purchase and Sale of the Securities

	
3

	
SECTION 2.02. Purchase Price

	
3

	
SECTION 2.03. Payment of Purchase Price

	
3

	
SECTION 2.04. Closing

	
4

	  	  
	
ARTICLE III

	  	  
	
REPRESENTATIONS AND WARRANTIES OF PHOENIX

	  	  
	
SECTION 3.01. Organization, Authority and Qualification

	
4

	
SECTION 3.02. No Conflicts; Consents

	
4

	
SECTION 3.03. Securities

	
5

	
SECTION 3.04. Accredited Investor; Investigation

	
5

	  	  
	
ARTICLE IV

	  	  
	
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

	  	  
	
SECTION 4.01. Organization, Authority and Qualification

	
5

	
SECTION 4.02. No Conflicts; Consents

	
6

	
SECTION 4.03. Securities

	
6

	  	  
	
ARTICLE V

	  	  
	
COVENANTS

	  	  
	
SECTION 5.01. Consents and Approvals

	
7

	
SECTION 5.02. Registration Rights

	
7

	
SECTION 5.03. Resale and Transfer of Securities.

	
7

	
SECTION 5.04. Confidentiality

	
8

	
SECTION 5.05. Negotiations

	
8

	
SECTION 5.06. Further Assurances; Reasonable Best Efforts

	
9

 

  

- i -

  

 

	
ARTICLE VI

	  	  
	
CONDITIONS PRECEDENT TO CLOSING

	  	  
	
SECTION 6.01. Conditions Precedent to Obligations of Phoenix

	
9

	
SECTION 6.02. Conditions Precedent to Obligations of the Company

	
10

	  	  
	
ARTICLE VII

	  	  
	
TERMINATION

	  	  
	
SECTION 7.01. Conditions of Termination

	
12

	
SECTION 7.02. Effect of Termination

	
12

	  	  
	
ARTICLE VIII

	  	  
	
INDEMNIFICATION

	  	  
	
SECTION 8.01. Survival

	
13

	  	  
	
ARTICLE IX

	  	  
	
GENERAL PROVISIONS

	  	  
	
SECTION 9.01. Expenses

	
13

	
SECTION 9.02. Notices

	
13

	
SECTION 9.03. Entire Agreement

	
14

	
SECTION 9.04. Governing Law

	
14

	
SECTION 9.05. Choice of Venue

	
14

	
SECTION 9.06. Successors and Assigns; No Third-Party Beneficiaries

	
15

	
SECTION 9.07. Amendments; Waivers

	
15

	
SECTION 9.08. Severability

	
15

	
SECTION 9.09. Counterparts

	
15

	
SECTION 9.10. Section and Paragraph Headings

	
16

 

  

- ii -

  

EXHIBITS

 

	Exhibit A	-       Certificate of Designation
	Exhibit B	-       Amendment No. 2 to Stock and Note Purchase Agreement
	Exhibit C	-       Registration Rights Agreement

 

SCHEDULES

 

	Schedule 4.02	-       Consent

 

 

  

- iii -

  

 

REDEMPTION AGREEMENT

 

This REDEMPTION AGREEMENT (this “Agreement”), dated as of January 19, 2011, between Phoenix Acquisition Company II, L.L.C., a Delaware limited liability company (“Phoenix”), and Merisel, Inc., a Delaware corporation (the “Company”).

 

RECITALS

 

WHEREAS, Phoenix owns 346,163 shares of the issued and outstanding convertible preferred stock (the “Convertible Preferred Stock”) of the Company;

 

WHEREAS, subject to the terms and conditions set forth herein, the Company desires to authorize and issue 140,000 shares, par value $0.01 per share, of Series A Preferred Stock of the Company (the “Preferred Stock”), pursuant to the terms set forth in that certain Certificate of Designation of Series A Preferred Stock of the Company, substantially in the form attached hereto as Exhibit A (the “Certificate of Designation”); and

 

WHEREAS, subject to the terms and conditions set forth herein, Phoenix desires to have redeemed by the Company, and the Company desires to redeem, all of the Convertible Preferred Stock owned by Phoenix in exchange for $3,500,000.00 in cash and the Preferred Stock.

 

NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Phoenix and the Company hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

SECTION 1.01.  Certain Defined Terms.  For purposes of this Agreement:

 

“Action” means any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority.

 

“Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Amendment No. 2 to Stock and Note Purchase Agreement” means that certain Amendment No. 2, dated on or before the Closing Date (as defined below), to the Stock and Note Purchase Agreement, dated as of September 19, 1997, by and among Phoenix, the Company and Merisel Americas, Inc., a Delaware corporation and wholly owned subsidiary of the Company, substantially in the form attached hereto as Exhibit B.

 

  

 

  

 

“Business Day” means a day other than a Saturday, Sunday or other day on which banks in the State of New York are required or authorized to close.

 

“Cash Redemption Price” has the meaning set forth in Section 2.02.

 

“Certificate of Designation” has the meaning set forth in the Recitals.

 

“Closing” has the meaning set forth in Section 2.04.

 

“Closing Date” has the meaning set forth in Section 2.04.

 

“Common Stock” means the shares of common stock, par value $0.01 per share, of the Company.

 

“Company” has the meaning set forth in the Preamble.

 

“Convertible Preferred Stock” has the meaning set forth in the Recitals.

 

“Equity Redemption Price” has the meaning set forth in Section 2.02.

 

“ERISA” means the Employee Retirement Income Security Act.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Governmental Authority” means any federal, national, supranational, state, provincial, local, or similar government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.

 

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

 

 “Law” means any federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law).

 

“Lien” means any security interest, pledge, hypothecation, mortgage, lien (including environmental and tax liens), violation, charge, lease, license, encumbrance, servient easement, adverse claim, reversion, reverter, preferential arrangement, restrictive covenant, condition or restriction of any kind, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.

 

“Outside Date” has the meaning set forth in Section 7.01(e).

 

“Person” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

 

  

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“Phoenix” has the meaning set forth in the Preamble.

 

“Phoenix Representative” means any Affiliates, directors, managers, officers, employees, agents, attorneys, accountants, consultants, advisors or other representatives of Phoenix.

 

“Preferred Stock” has the meaning set forth in the Recitals.

 

“Redemption Price” has the meaning set forth in Section 2.02.

 

“Registration Rights Agreement” has the meaning set forth in Section 6.01(g).

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Tax” means any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any government or taxing authority, including taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation, or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes; license, registration and documentation fees; and customs’ duties, tariffs, and similar charges.

 

“Transaction Documents” means this Agreement, the exhibits and schedules hereto, the Amendment No. 2 to Stock and Note Purchase Agreement, the Registration Rights Agreement and all other agreements, instruments certificates and other documents to be entered into or delivered by any party in connection with the transactions contemplated to be consummated pursuant to any of the foregoing.

 

ARTICLE II

REDEMPTION AND EXCHANGE

 

SECTION 2.01.  Purchase and Sale of the Securities.  Subject to the terms and conditions set forth in this Agreement, on the Closing Date (as defined below), Phoenix hereby submits for redemption and transfers, assigns and delivers to the Company, and the Company hereby redeems and accepts all right, title and interest to the Convertible Preferred Stock owned by Phoenix, free and clear of all Liens, for the Redemption Price (as defined below).

 

SECTION 2.02.  Redemption Price.  The aggregate redemption price for the Convertible Preferred Stock shall consist of (a) $3,500,000.00 in cash (the “Cash Redemption Price”) and (b) the Preferred Stock (the “Equity Redemption Price” and, together with the Cash Redemption Price, the “Redemption Price”).

 

SECTION 2.03.  Payment of Redemption Price.  On the Closing Date, the Company shall (a) pay the Cash Redemption Price by wire transfer of immediately available funds to the account specified in writing by Phoenix at least one (1) Business Day prior to the Closing Date and (b) deliver duly executed certificates representing the Equity Redemption Price registered in the name of Phoenix.

 

  

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SECTION 2.04.  Closing.  Subject to the terms and conditions set forth in this Agreement, the closing of the redemption of the Convertible Preferred Stock and exchange of the Convertible Preferred Stock and Preferred Stock (the “Closing”) shall take place at the offices of Herrick, Feinstein LLP, 2 Park Avenue, New York, NY 10016 as promptly as practicable (and in any case within four (4) Business Days) after the date of the satisfaction or written waiver of the last of the conditions to the Closing set forth in Article VI (other than those conditions which, by their nature, are to be satisfied on or after the Closing Date), or at such other location and on such other date as may be mutually agreed by the parties hereto.  The date on which the Closing shall occur is sometimes referred to herein as the “Closing Date.”

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PHOENIX

 

Phoenix hereby represents and warrants to the Company as follows:

 

SECTION 3.01.  Organization, Authority and Qualification.  Phoenix is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all necessary requisite limited liability company power and authority to enter into this Agreement and the other Transaction Documents to which it is a party, and to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  Phoenix is duly licensed or qualified to do business and is in good standing in each jurisdiction which the operation of its business makes such licensing or qualification necessary, except to the extent that any failure to be so licensed or qualified would not adversely affect the ability of Phoenix to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement and the Transaction Documents.  The execution and delivery of this Agreement and the other Transaction Documents by Phoenix, the performance by Phoenix of its obligations hereunder and thereunder and the consummation by Phoenix of the transactions contemplated hereby and thereby have been duly authorized by all requisite limited liability company action on the part of Phoenix and its members.  This Agreement has been duly executed and delivered by Phoenix, and, assuming due authorization, execution and delivery by the Company, this Agreement constitutes legal, valid and binding obligations of Phoenix, enforceable against Phoenix in accordance with their respective terms.

 

SECTION 3.02.  No Conflicts; Consents.  The execution, delivery and performance by Phoenix of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby will not: (a) violate, conflict with or result in the breach of any provision of the certificate of formation or operating agreement (or similar organizational documents) of Phoenix, (b) conflict with or violate any Law or Governmental Order applicable to Phoenix, (c) require any consent, approval, exemption, authorization or other action by, or filing with or notification to, any Governmental Entity or any other Person, or (d) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of, any Lien on any of the Convertible Preferred Stock pursuant to any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which Phoenix is a party or by which any of the Convertible Preferred Stock is bound or affected, except to the extent that such conflicts, breaches, defaults or other matters would not adversely affect the ability of Phoenix to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement.

 

  

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SECTION 3.03.  Securities.  There are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the Convertible Preferred Stock which obligate Phoenix to sell any of the Convertible Preferred Stock.  Phoenix is the record and beneficial owner of the Convertible Preferred Stock, and Phoenix owns the Convertible Preferred Stock free and clear of all Liens.  There are no voting trusts, stockholder or member agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of the Convertible Preferred Stock.

 

SECTION 3.04.  Accredited Investor; Investigation.  Phoenix (a) is an “accredited investor” as such term is defined in Rule 501 promulgated under the Securities Act, (b) is acquiring the Preferred Stock for investment and for Phoenix’s own account and not with a view to, or for resale in connection with, any distribution, except pursuant to registration under the Securities Act or an exemption from such registration available under the Securities Act, and in compliance with foreign securities laws, as applicable, (c) understands that the Preferred Stock has not been registered under the Securities Act or under any securities or blue sky laws and, as a result, are subject to substantial restrictions on transfer, (d) has had the opportunity to ask questions of, and to receive answers from, appropriate officers and employees of the Company with respect to the terms and conditions of the transactions contemplated hereby and with respect to the Company and the Preferred Stock and (e) has had access to such financial and other information as requested in order for the undersigned to make an informed decision as to an investment in the Company, and has had the opportunity to obtain any additional information required to verify any of such information to which the undersigned has had access.  The representations of Phoenix in this Section 3.04 are made solely to ensure that the transfer of the Preferred Stock from the Company to Phoenix complies with applicable securities laws.

 

SECTION 3.05.  Brokers.  Phoenix is not liable for any investment banking fee, finder’s fee, brokerage payment or other like payment in connection with the origination, negotiation or consummation of the transactions contemplated herein or pursuant to any other Transaction Document that will be the obligation of the Company, and Phoenix is not a party to any agreement which might give rise to a valid claim against the Company for any such fee, commission or similar payment.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby represents and warrants to Phoenix as follows:

 

  

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SECTION 4.01.  Organization, Authority and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all necessary corporate power and authority to enter into this Agreement and the other Transaction Documents to which it is a party, and to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The Company is duly licensed or qualified to do business and is in good standing in each jurisdiction which the operation of its business makes such licensing or qualification necessary, except to the extent that any failure to be so licensed or qualified would not adversely affect the ability of the Company to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement and the Transaction Documents.  The execution and delivery of this Agreement and the other Transaction Documents by the Company, the performance by the Company of its obligations hereunder and thereunder and the consummation by the Company of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of the Company.  This Agreement has been duly executed and delivered by the Company, and assuming due authorization, execution and delivery by Phoenix, this Agreement constitutes legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms.

 

SECTION 4.02.  No Conflicts; Consents.  Except as set forth on Schedule 4.02, the execution, delivery and performance by the Company of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby will not: (a) violate, conflict with or result in the breach of any provision of the certificate of incorporation or by-laws (or similar organizational documents) of the Company, (b) conflict with or violate any Law or Governmental Order applicable to the Company, (c) require any consent, approval, exemption, authorization or other action by, or filing with or notification to, any Governmental Entity or any other Person, or (d) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Company is a party, which would adversely affect the ability of the Company to carry out its obligations under, and to consummate the transaction contemplated by, this Agreement.

 

SECTION 4.03.  Securities.  Upon the issuance, sale and delivery as contemplated by this Agreement, the Preferred Stock will be duly authorized, validly issued, fully paid and non-assessable shares of preferred stock of the Company, entitled to the rights described in the Certificate of Designation.

 

SECTION 4.04.  Capitalization.  After giving effect to the transactions contemplated by this Agreement and the Transaction Documents, the authorized capital stock of the Company will consist of 30,000,000 authorized shares of Common Stock and 1,000,000 authorized shares of preferred stock, 360,000 of which preferred stock will be designated as Preferred Stock and 140,000 of which will be issued and outstanding as of the Closing Date.  As of the date hereof, 8,453,671 shares of Common Stock are issued and 7,214,784 shares of Common Stock are outstanding.  Except for options issued under the Company's stock option plans, (x) the Company has no outstanding securities convertible into or exchangeable for any shares of capital stock, (y) the Company has no outstanding rights or options for the purchase of, or agreements providing for the issue (contingent or otherwise) of, or calls, commitments or claims of any character relating to, any capital stock of the Company or any stock or securities convertible into or exchangeable for such capital stock and (z) the Company is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of capital stock or any convertible securities, rights or options of the type described in the foregoing clause (x) or (y).

 

  

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SECTION 4.05.  Brokers.  The Company is not liable for any investment banking fee, finder’s fee, brokerage payment or other like payment in connection with the origination, negotiation or consummation of the transactions contemplated herein or pursuant to any other Transaction Document that will be the obligation of Phoenix, and the Company is not a party to any agreement which might give rise to a valid claim against Phoenix for any such fee, commission or similar payment.

 

ARTICLE V

COVENANTS

 

SECTION 5.01.  Consents and Approvals.  The Company shall, at its own expense, use all commercially reasonable efforts to obtain, prior to the Closing, the consent set forth on Schedule 4.02.

 

SECTION 5.02.  Registration Rights.  Except as provided by the Registration Rights Agreement, the Company will not, as of the Closing Date, be under any obligation to register any of the Preferred Stock under the Securities Act.

 

SECTION 5.03.  Resale and Transfer of Securities.

 

(a)           Phoenix agrees that it will not sell or otherwise transfer the Preferred Stock except pursuant to an effective registration statement under the Securities Act or in a transaction which, in the opinion of counsel reasonably satisfactory to the Company, qualifies as an exempt transaction under the Securities Act and the rules and regulations promulgated thereunder.

 

(b)           For the period beginning on the Closing Date and ending on the second anniversary of the Closing Date, Phoenix shall not, and shall cause the Phoenix Representatives not to, commence any tender offer in respect of the outstanding shares of Common Stock for less than $1.25 per share.  If Phoenix or any Phoenix Representative enters into any agreement with any third party for the purchase and sale or other transfer of the Common Stock held by Phoenix or the Preferred Stock, Phoenix agrees that as a condition precedent to such transfer, such third party shall enter into a written agreement with the Company pursuant to which such third party shall agree to the terms of this Section 5.03(b); provided, however, if such third party acquires the Common Stock held by Phoenix or the Preferred Stock pursuant to either (i) a distribution thereof by Phoenix to its limited partners or (ii) a public offering, then such third party shall not be required to comply with the terms of this Section 5.03(b); and provided further that under no circumstances shall Phoenix have any obligation to enforce this Section 5.03(b) with respect to such third party or any liability as a result of any failure by any such third party to comply with this Section 5.03(b).  Any sale or transfer by Phoenix or any Phoenix Representative in violation of this Section 5.03(b) shall be null and void, and the Company shall have the right to instruct its transfer agent or any similar trust company, bank or financial institution maintaining the records of the Company’s stockholders to not transfer any shares of Common Stock or Preferred Stock subject to such invalid sale or transfer.

 

  

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(c)           Following the Closing, if Phoenix or any Phoenix Representative enters into any agreement with any third party for the purchase and sale or other transfer of the Preferred Stock, Phoenix and the Phoenix Representatives agree that, as a condition precedent to such transfer, such third party shall enter into an agreement with the Company pursuant to which such third party shall agree to waive any rights pursuant to Section 6(f) of the Certificate of Designation with respect to any transfer by Phoenix or any Phoenix Representative of the Common Stock held by Phoenix.

 

SECTION 5.04.  Operating Company.  The Company agrees that it shall take all actions necessary to maintain its status as an operating company and shall not cause any of its assets or those of its subsidiaries to be deemed “Plan Assets” (as such term is defined by ERISA) with respect to the Company.

 

SECTION 5.05.  Information Rights.  The Company agrees that, so long as at least twenty percent (20%) of the shares of Preferred Stock issued by the Company on the Closing Date is outstanding, the Company will:

 

(a)           Annual Reports.  Furnish to each holder of shares of Series A Preferred Stock, as soon as practicable and in any event within ninety (90) days after the end of each fiscal year of the Company or such later date permitted under the Exchange Act or any other applicable securities laws, rules and regulations, an audited consolidated balance sheet as of the end of such fiscal year, an audited consolidated statement of income, and an audited consolidated statement of cash flows of the Company and its subsidiaries for such year, all prepared in accordance with generally accepted accounting principles consistently applied (except as noted therein); and

 

(b)           Quarterly Reports.  Furnish to each such holder, as soon as practicable and in any event within forty-five (45) days of the last day of the applicable quarter-end or such later date permitted under the Exchange Act or any other applicable securities laws, rules and regulations, quarterly unaudited financial statements of each of the first three (3) fiscal quarters of the Company, including an unaudited balance sheet and an unaudited statement of income, all prepared in accordance with generally accepted accounting principles consistently applied (except as noted therein).

 

SECTION 5.06.  Confidentiality.  Following the Closing, Phoenix shall, and shall cause any Phoenix Representative to, maintain in confidence any confidential information, in whatever format, concerning the Company, and such confidential information shall not be disclosed or used by Phoenix or any Phoenix Representative without the Company’s prior written consent; provided, however, that no such restriction shall apply to information which is or becomes generally available to the public other than as a result of a disclosure by Phoenix or a Phoenix Representative; provided further, however, if Phoenix or a Phoenix Representative becomes legally compelled to disclose any such information as referred to in this Section 5.06, Phoenix or such Phoenix Representative shall, to the extent not prohibited by applicable Law, provide the Company with prompt written notice before such disclosure to enable the Company either to seek, at its expense, a protective order or other appropriate remedy preventing or prohibiting such disclosure or to waive compliance with the provisions of this Section 5.06 or both.

 

  

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SECTION 5.07.  Negotiations.  From and after the date hereof and until the earlier to occur of the Closing Date and the termination of this Agreement pursuant to Article VII hereof, Phoenix shall not, and shall not permit any Phoenix Representatives to, directly or indirectly, encourage, solicit, engage in discussions or negotiations with, or provide any information to, any Person or group (other than the Company and its directors, officers, employees, consultants, advisors, accountants, counsel, representatives and agents) concerning any sale or other transfer of the Convertible Preferred Stock.  Phoenix shall, and shall cause the Phoenix Representatives to, immediately cease and cause to be terminated all existing discussions, conversations, negotiations and other communications with any Person conducted heretofore with respect to any such sale.  Phoenix shall promptly, and in any event within one (1) day, communicate to the Company the fact that an inquiry or communication concerning any such transaction which Phoenix, its Affiliates or any other Person acting on behalf of Phoenix or its Affiliates may receive or of which Phoenix may become aware, including the identity of the Person making such proposal, offer, inquiry or contact and the material terms and conditions thereof.

 

SECTION 5.08.  Further Assurances; Reasonable Best Efforts.  From time to time after the Closing Date, at the other party’s reasonable request, each of the parties hereto shall, and shall use commercially reasonable efforts to cause its representatives to, execute and deliver such other documents and instruments of conveyance and transfer and take such other actions as may be reasonably required or desirable to carry out the provisions hereof and the transactions contemplated hereby.  Each such party shall use its reasonable best efforts to fulfill or obtain the fulfillment of the conditions to the Closing as promptly as practicable.

 

ARTICLE VI

CONDITIONS PRECEDENT TO CLOSING

 

SECTION 6.01.  Conditions Precedent to Obligations of Phoenix.  The obligations of Phoenix to effect the Closing is subject to the fulfillment or written waiver, at or prior to the Closing Date, of each of the following conditions precedent:

 

(a)           Representations and Warranties of the Company.  The representations and warranties of the Company contained in this Agreement shall have been true and correct when made and shall be true and correct as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of such date (except for any such representations and warranties that, by their terms, speak only as of a specific date or dates, in which case such representations and warranties shall be true and correct on and as such specified date or dates), and Phoenix shall have received a certificate to that effect dated as of the Closing Date and signed by an officer of the Company.

 

(b)           Performance of the Obligations of the Company.  The Company shall have performed in all material respects all obligations required under this Agreement to be performed by it on or before the Closing Date, and Phoenix shall have received a certificate dated the Closing Date and signed by a duly authorized representative of the Company to that effect.

 

  

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(c)           No Injunction or Action.  No order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been enacted, entered, promulgated or enforced by any court or other Governmental Authority which prohibits or prevents the consummation of the transactions contemplated by this Agreement which has not been vacated, dismissed or withdrawn prior to the Closing Date.

 

(d)           Consents and Approvals.  At or prior to the Closing, the Company shall deliver to Phoenix the written consent required on Schedule 4.02, which consent shall be in full force and effect on the Closing Date.

 

(e)           Certificate of Designation.  The Company shall have filed the Certificate of Designation with the Secretary of State of the State of Delaware, substantially in the form attached hereto as Exhibit A.

 

(f)           Amendment No. 2 to Stock and Note Purchase Agreement.  The Company shall have executed the Amendment No. 2 to Stock and Note Purchase Agreement, substantially in the form attached hereto as Exhibit B.

 

(g)           Registration Rights Agreement.  The Company shall have executed the Registration Rights Agreement, substantially in the form attached hereto as Exhibit C (the “Registration Rights Agreement”).

 

(h)           Company Closing Deliverables.  The Company shall have delivered to Phoenix:

 

(i)            on the Closing Date, a wire transfer of the Cash Redemption Price, as contemplated by Section 2.02;

 

(ii)           on the Closing Date, all instruments necessary to effect the transfer of the Equity Redemption Price, as contemplated by Section 2.02;

 

(iii)          a certificate of the resolutions of the Board of Directors of the Company, approving and authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents, and the consummation of the transactions contemplated hereby and thereby;

 

(iv)          a certificate of the Secretary or Assistant Secretary of the Company, as to the incumbency of the officers executing this Agreement, and the genuineness of their signatures; and

 

(v)           original signature pages to this Agreement and each other Transaction Document to which it is a party.

 

SECTION 6.02.  Conditions Precedent to Obligations of the Company.  The obligations of Company to effect the Closing is subject to the fulfillment or written waiver, at or prior to the Closing Date, of each of the following conditions precedent:

 

  

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(a)           Representations and Warranties of Phoenix.  The representations and warranties of Phoenix contained in this Agreement shall have been true and correct when made and shall be true and correct as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of such date (except for any such representations and warranties that, by their terms, speak only as of a specific date or dates, in which case such representations and warranties shall be true and correct on and as of such specified date or dates), and the Company shall have received a certificate to that effect dated the Closing Date and signed by an officer of Phoenix.

 

(b)           Performance of the Obligations of Phoenix.  Phoenix shall have performed in all material respects all obligations required under this Agreement to be performed by it on or before the Closing Date, and the Company shall have received a certificate dated the Closing Date and signed by a duly authorized representative of Phoenix to that effect.

 

(c)           No Injunction or Action.  No order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been enacted, entered, promulgated or enforced by any court or other Governmental Authority which prohibits or prevents the consummation of the transactions contemplated by this Agreement which has not been vacated, dismissed or withdrawn prior to the Closing Date.

 

(d)           Consents and Approvals.  At or prior to the Closing, the Company shall have obtained the written consent required on Schedule 4.02, which consent shall be in full force and effect on the Closing Date.

 

(e)           Amendment No. 2 to Stock and Note Purchase Agreement.  Phoenix shall have executed the Amendment No. 2 to Stock and Note Purchase Agreement, substantially in the form attached hereto as Exhibit B.

 

(f)           Registration Rights Agreement.  Phoenix shall have executed the Registration Rights Agreement, substantially in the form attached hereto as Exhibit C (the “Registration Rights Agreement”).

 

(g)           Phoenix Closing Deliverables.  Phoenix shall have delivered to the Company:

 

(i)           on the Closing Date, all instruments necessary to effect the transfer of the Convertible Preferred Stock, as contemplated by Sections 2.01 and 2.02;

 

(ii)          a certificate of the resolutions of the Board of Managers of Phoenix, approving and authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents, and the consummation of the transactions contemplated hereby and thereby;

 

(iii)         a certificate of the Secretary or Assistant Secretary of Phoenix, as to the incumbency of the officers executing this Agreement, and the genuineness of their signatures; and

 

  

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(iv)         original signature pages to this Agreement and each other Transaction Document to which it is a party.

 

ARTICLE VII

TERMINATION

 

SECTION 7.01.  Termination.  Notwithstanding anything to the contrary contained herein, this Agreement may be terminated at any time prior to the Closing Date:

 

(a)           by the mutual written agreement of Phoenix and the Company;

 

(b)           by the Company if Phoenix has breached any representation, warranty, covenant or agreement contained in this Agreement, such that the conditions set forth in Section 6.02(a) or Section 6.02(b), as the case may be, would not be satisfied as of any date following the date hereof; provided, however, that the Company may not terminate this Agreement pursuant to this Section 7.01(b) unless any such breach has not been cured within five (5) Business Days after written notice by the Company to Phoenix informing Phoenix of such breach, it being understood and agreed that no cure period shall be required for a breach which by its nature cannot be cured; provided further, that the Company may not terminate this Agreement pursuant to this Section 7.01(b) if it is then in material breach of the terms of this Agreement;

 

(c)           by Phoenix if the Company has breached any representation, warranty, covenant or agreement contained in this Agreement, such that the conditions set forth in Section 6.01(a) or Section 6.01(b), as the case may be, would not be satisfied as of any date following the date hereof; provided, however, that Phoenix may not terminate this Agreement pursuant to this Section 7.01(c) unless any such breach has not been cured within five (5) Business Days after written notice by Phoenix to the Company informing the Company of such breach, it being understood and agreed that no cure period shall be required for a breach which by its nature cannot be cured; provided further, that Phoenix may not terminate this Agreement pursuant to this Section 7.01(c) if it is then in material breach of the terms of this Agreement;

 

(d)           by the Company or Phoenix if (i) there shall be a final, non-appealable order of a foreign, federal or state court in effect preventing consummation of the transactions contemplated hereby; or (ii) there shall be any final action taken, or any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the transactions contemplated hereby, by any Governmental Authority which would make consummation of the transactions contemplated hereby illegal; and

 

(e)           by the Company or Phoenix if the Closing shall not have occurred on or before January 31, 2011 (the “Outside Date”); provided, however, that if the Closing shall not have occurred on or before the Outside Date as a result of the Company’s or Phoenix’s failure to fulfill any material obligation under this Agreement, which failure has been both intentional and the cause of, or resulted in, the failure of the Closing to be consummated on or before such date, then the consent of the other party shall be required to terminate this Agreement on or following the Outside Date.

 

  

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SECTION 7.02.  Effect of Termination.  In the event of the termination of this Agreement pursuant to Section 7.01 hereof, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of any party hereto or, to the extent applicable, their respective officers, directors, stockholders, members or Affiliates, except (a) to the extent that such termination results from the material and intentional breach by a party hereto of any of its representations, warranties, covenants or agreements set forth in this Agreement, it being understood and agreed that no termination of this Agreement pursuant to this Article VII shall relieve any party of liability for a material and intentional breach of any provision of this Agreement occurring before such termination, (b) the terms set forth in this Section 7.02 and in Article IX shall survive any such termination of this Agreement and (c) the parties shall be entitled to temporary and permanent injunctive relief without the necessity of proving actual damages and to enforce specifically any provision of this Agreement.

 

ARTICLE VIII

 

GENERAL PROVISIONS

 

SECTION 8.01.  Survival.  All of the representations and warranties set forth in Articles III and IV of this Agreement shall survive the Closing and remain in full force and effect indefinitely.  All covenants and agreements contained in this Agreement which are to be performed post-Closing will survive the Closing in accordance with their terms.

 

SECTION 8.02.  Expenses.  Except as otherwise specified in this Agreement, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses, whether or not the Closing occurs.

 

SECTION 8.03.  Notices.  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier service, by facsimile or registered or certified mail (postage prepaid, return receipt requested) to the respective parties hereto at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 8.03):

 

(a)           if to Phoenix:

 

Phoenix Acquisition Company II, L.L.C.

c/o Stonington Partners, Inc.

600 Madison Avenue

16th Floor

New York, NY  10022

Facsimile No:  (212) 339-8585

Attention: Bradley J. Hoecker

 

with a copy to (which copy shall not constitute notice):

 

  

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Shearman & Sterling LLP

599 Lexington Avenue

New York, NY  10022-6069

Facsimile No:  (212) 848-7179

Attention:  Clare O’Brien

 

(b)           if to the Company:

 

Merisel, Inc.

127 West 30th Street

5th Floor

New York, NY 10001

Attention:  Donald R. Uzzi and Victor L. Cisario

E-mail: donald.uzzi@merisel.com and victor.cisario@merisel.com

 

with a copy to (which copy shall not constitute notice):

 

Herrick, Feinstein LLP

2 Park Avenue

New York, NY 10016

Facsimile No: (973) 274-6420

Attention: Edward B. Stevenson, Esq.

 

SECTION 8.04.  Specific Performance.  The parties hereto agree that irreparable damage would occur in the event that the provisions contained in this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions, without the posting of any bond, to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at law or in equity.

 

SECTION 8.05.  Entire Agreement.  This Agreement, together with the schedules and exhibits hereto, and the other Transaction Documents contains the sole and entire agreements between the parties with respect to the subject matter hereof and thereof and supersede all prior and contemporaneous discussions, understanding, negotiations, and agreements (whether written or oral) among the parties with respect to the subject matter of this Agreement and the other Transaction Documents.

 

SECTION 8.06.  Governing Law.  This Agreement shall be governed under the laws of the State of New York, without regard to the conflicts of law provisions thereof.

 

SECTION 8.07.  Choice of Venue.  Each of the parties hereto irrevocably submits to the jurisdiction of the state and federal courts located in the State of New York, Southern District of New York or the New York State Supreme Court for the County of New York for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby.  Each of the parties hereto irrevocably and unconditionally waives trial by jury and irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in any state or federal court located in the State of New York and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. The parties hereto hereby agree that the non-prevailing party in any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby shall pay for any and all costs, including attorney’s fees, incurred by the prevailing party in connection with any such action, suit or proceeding.

 

  

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SECTION 8.08.  Successors and Assigns; No Third-Party Beneficiaries.  Neither this Agreement, the Transaction Documents nor the rights and obligations hereunder or thereunder may be assigned, subcontracted or otherwise delegated or transferred without the prior written consent of each other party hereto or thereto, as applicable.  All of the terms, covenants, representations, warranties and conditions of this Agreement will be binding upon, and inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns (and in the case of indemnities, for the benefit of all persons indemnified).  Nothing herein expressed or implied is intended or will be construed to confer upon or to give any Person that is not a party hereto any rights, claims or remedies under or by reason of this Agreement or the other Transaction Documents, except for parties expressly entitled to the protection of any indemnification provision of this Agreement.

 

SECTION 8.09.  Amendments; Waivers.  This Agreement may be amended, modified or superseded, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed by parties hereto.  No waiver of any provision of this Agreement shall be valid unless in writing and signed by the party against whom enforcement is sought.  The failure of any party at any time or times to require performance of any provisions hereof will in no manner affect the right at a later time to enforce the same.  No waiver by any party of any condition, or of any breach of any term, covenant, representation or warranty contained in this Agreement, in any one or more instances, will be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other term, covenant, representation or warranty.

 

SECTION 8.10.  Severability.  If any provision of this Agreement shall become illegal, invalid, unenforceable or against public policy for any reason, or shall be held by any court of competent jurisdiction to be illegal, invalid, unenforceable or against public policy, then such provision shall be severed from this Agreement and the remaining provisions of this Agreement shall not be affected thereby and shall remain in full force and effect.  In lieu of each provision that becomes or is held to be illegal, invalid, unenforceable or against public policy, there shall be automatically added to this Agreement a provision as similar in substance to the objectionable provision as may be possible and still be legal, valid, enforceable and in compliance with public policy.

 

SECTION 8.11.  Counterparts.  This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.

 

  

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SECTION 8.12.  Section and Paragraph Headings.  The section and paragraph headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

  

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

	 	

PHOENIX ACQUISITION COMPANY II, L.L.C.

	 
	 	 	 	 
	 	
By: 

	

Stonington Capital Appreciation 1994 Fund, L.P. as a member

	 
	 	 	 	 
	 	 	By:	
Stonington Partners, L.P., its general partner

	 
	 	 	 	 	 
	 	 	By:	Stonington Partners, Inc. II, its general partner	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Bradley J. Hoecker	 
	 	 	Name: Bradley J. Hoecker	 
	 	 	Title: Partner	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	MERISEL, INC.	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Donald R. Uzzi	 
	 	 	Name: Donald R. Uzzi	 
	 	 	Title:   Chairman of the Board, Chief Executive Officer and President	 

 

 

 

 

 

[Signature Page to Redemption Agreement]

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