Document:

Unassociated Document

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of July 1, 2011, among Sinobiomed Inc. (d/b/a Sitoa Global Inc.), a Delaware corporation (collectively with its predecessors, the “Company”), and the investors listed on the Schedule of Investors attached hereto as Annex A and identified on the signature pages hereto (each, an “Investor” and collectively, the “Investors”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Investor, and each Investor, severally and not jointly, desires to purchase from the Company certain securities of the Company, as more fully described in this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Investors agree as follows:

 

ARTICLE 1.

DEFINITIONS

 

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

“Action” means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or threatened in writing against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign), stock market, stock exchange or trading facility.

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144.

 

“Business Day” means any day except Saturday, Sunday and any day which is a federal legal holiday or a day on which banking institutions in the State of Delaware or the PRC are authorized or required by law or other governmental action to close.

 

“Buy-In” has the meaning set forth in Section 4.1(c).

 

“Closing” means the closing of the purchase and sale of the Shares pursuant to Article II.

 

“Closing Date” means the Business Day on which all of the conditions set forth in Sections 5.1 and 5.2 hereof are satisfied, or such other date as the parties may agree.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.01 per share, and any securities into which such common stock may hereafter be reclassified.

 

  

  

  

 

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

 

“Company Counsel” means Pillsbury Winthrop Shaw Pittman LLP or such other counsel as the Company may subsequently appoint.

 

“Company Deliverables” has the meaning set forth in Section 2.2(a).

 

“Disclosure Materials” has the meaning set forth in Section 3.1(h).

 

“Effective Date” means the date that the Registration Statement required by Section 2(a) of the Registration Rights Agreement is first declared effective by the Commission.

 

“Evaluation Date” has the meaning set forth in Section 3.1(s).

 

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

 

“GAAP” means U.S. generally accepted accounting principles.

 

“Intellectual Property Rights” has the meaning set forth in Section 3.1(p).

 

“Investment Amount” means, with respect to each Investor, the Investment Amount indicated on such Investor’s signature page to this Agreement.

 

“Investor Deliverables” has the meaning set forth in Section 2.2(b).

 

“Investor Party” has the meaning set forth in Section 4.7.

 

“Lien” means any lien, charge, encumbrance, security interest, right of first refusal or other restrictions of any kind.

 

“Losses” has the meaning set forth in Section 4.7.

 

“Material Adverse Effect” means any of (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material and adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) an adverse impairment to the Company’s ability to perform on a timely basis its obligations under any Transaction Document.

 

“Money Laundering Laws” has the meaning set forth in Section 3.1(ee).

 

 “OFAC” has the meaning set forth in Section 3.1(dd).

 

“Outside Date” means the fourteenth (14th) calendar day following the date of this Agreement; provided, that, if such day should fall on a day that is not a Business Day, the Outside Date shall be deemed the next day that is a Business Day. Notwithstanding the foregoing, the Company may elect to effect the Closing to exclude any Investor who has not delivered its Investment Amount to the Company in accordance with the terms of this Agreement.

 

  

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"Per Share Purchase Price" equals $0.015.

 

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

 

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

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date of this Agreement, among the Company and the Investors, in the form of Exhibit B hereto.

 

“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale by the Investors of the Shares.

 

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

 

“SEC Reports” has the meaning set forth in Section 3.1(h).

 

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

 

“Share Delivery Date” has the meaning set forth in Section 4.1(c).

 

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

 

“Short Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, swaps and similar arrangements (including on a total return basis), and sales and other transactions through non-US broker dealers or foreign regulated brokers.

 

“Subsidiary” means any “significant subsidiary” as defined in Rule 1-02(w) of the Regulation S-X promulgated by the Commission under the Exchange Act.

 

“Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

 

  

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“Trading Market” means whichever of the Delaware Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

 

“Transaction Documents” means this Agreement, the Registration Rights Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

ARTICLE 2.

PURCHASE AND SALE

 

2.1           Closing.  Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall issue and sell to each Investor, and each Investor shall, severally and not jointly, purchase from the Company, the Shares representing such Investor’s Investment Amount.  The Closing shall take place at the offices of Pillsbury Winthrop Shaw Pittman LLP, 2300 N Street, NW, Washington, DC 20037 on the Closing Date or at such other location or time as the parties may agree.

2.2.           Deliveries. (a)    At the Closing, the Company shall deliver or cause to be delivered to each Investor evidence of the delivery of irrevocable instructions from the Company to its transfer agent, regarding the issuance of the number of Shares equal to such Investor’s Investment Amount divided by the Per Share Purchase Price, registered in the name of such Investor (the “Company Deliverables”).

 (b)           Each Investor shall deliver or cause to be delivered to the Company, within one Business Day following the date of this Agreement, its Investment Amount, in United States dollars and in immediately available funds, by wire transfer to an account designated in writing by the Company for such purpose (the “Investor Deliverables”).

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES

 

3.1.           Representations and Warranties of the Company.  The Company hereby makes the following representations and warranties to each Investor:

(a)           Subsidiaries.  The Company has no direct or indirect Subsidiaries other than as specified in the SEC Reports.  The Company owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear of any and all Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights.

(b)           Organization and Qualification.  The Company and each Subsidiary are 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 of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. The Company and each Subsidiary are duly qualified to conduct its respective businesses and are in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.

  

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(c)           Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations thereunder.  The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company in connection therewith.  Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.

 

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

 

(e)           Issuance of the Shares.  The Shares have been duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens.  The Company has reserved from its duly authorized capital stock the shares of Common Stock issuable pursuant to this Agreement in order to issue the Shares.

 

(f)           Capitalization.  The number of shares and type of all authorized, issued and outstanding capital stock of the Company, and all shares of Common Stock reserved for issuance under the Company’s various option and incentive plans, is specified in the reports filed by the Company under the Securities Act and the Exchange Act, collectively referred to herein as the “SEC Reports.”  Except as specified in the SEC Reports, no securities of the Company are entitled to preemptive or similar rights, and no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.  Except as specified in the SEC Reports, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock.  The issue and sale of the Shares will not, immediately or with the passage of time, obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Investors) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities.

 

  

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(g)           Financial Statements.  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 GAAP applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

(h)           Press Releases.  The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading.

 

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

 

(j)           Litigation.  There is no Action which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Shares or (ii) except as specifically disclosed in the SEC Reports, could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any Subsidiary, nor any director or officer thereof (in his or her capacity as such), is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty, except as specifically disclosed in the SEC Reports.  There has not been, and to the knowledge of the Company, there is not pending any investigation by the Commission involving the Company or any current or former director or officer of the Company (in his or her capacity as such).  The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

  

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(k)           Patents and Trademarks.  The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect (collectively, the “Intellectual Property Rights”).  Neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person.  Except as set forth in the SEC Reports, 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.

 

(l)           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.  The Company has no reason to believe that it will not be able to renew its and the Subsidiaries’ existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business on terms consistent with market for the Company’s and such Subsidiaries’ respective lines of business.  

 

(m)           Solvency.  Based on the financial condition of the Company as of the Closing Date (and assuming that the Closing shall have occurred), (i) the Company’s fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to be paid.  The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).

 

(n)           Certain Fees.   No brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement.  The Investors shall have no obligation with respect to any fees or with respect to any claims (other than such fees or commissions owed by an Investor pursuant to written agreements executed by such Investor which fees or commissions shall be the sole responsibility of such Investor) made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement.

 

(o)           Certain Registration Matters. Assuming the accuracy of the Investors’ representations and warranties set forth in Section 3.2(b)-(e), no registration under the Securities Act is required for the offer and sale of the Shares by the Company to the Investors under the Transaction Documents.  The Company is eligible to register its Common Stock for resale by the Investors under Form S-1 promulgated under the Securities Act.

 

(p)           Investment Company.  The Company is not, and is not an Affiliate of, and immediately following the Closing will not have become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

  

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(q)           No Additional Agreements.  The Company does not have any agreement or understanding with any Investor with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.

 

(r)           Foreign Corrupt Practices Act.  Neither the Company nor any Subsidiary, nor to the knowledge of the Company, any agent or other person acting on behalf of any of the Company or any Subsidiary, has, directly or indirectly, (i) used any funds, or will use any proceeds from the sale of the Shares, for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any Person acting on their behalf of which the Company is aware) which is in violation of law, or (iv) has violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.

 

(s)           PFIC.  Neither the Company nor any Subsidiary is or intends to become a “passive foreign investment company” within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

 

(t)           OFAC. Neither the Company nor any Subsidiary nor, to the knowledge of the Company, any director, officer, agent, employee, Affiliate or Person acting on behalf of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of the sale of the Shares, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person or entity, towards any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country sanctioned by OFAC or for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by OFAC.

 

(u)           Money Laundering Laws. The operations of each of the Company and any Subsidiary are and have been conducted at all times in compliance with the money laundering statutes of the United States and the PRC, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any applicable governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company and/or any Subsidiary with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.

 

3.2.           Representations and Warranties of the Investors.  Each Investor hereby, for itself and for no other Investor, represents and warrants to the Company as follows:

(a)           Organization; Authority.  If an entity, such Investor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the applicable Transaction Documents and otherwise to carry out its obligations thereunder. The execution, delivery and performance by such Investor of the transactions contemplated by this Agreement has been duly authorized by all necessary corporate or, if such Investor is not a corporation, such partnership, limited liability company or other applicable like action, on the part of such Investor.  Each of this Agreement and the Registration Rights Agreement has been duly executed by such Investor, and when delivered by such Investor in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Investor, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.

 

  

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(b)           Investment Intent.  Such Investor is acquiring the Shares as principal for its own account for investment purposes only and not with a view to or for distributing or reselling such Shares or any part thereof, without prejudice, however, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Shares in compliance with applicable federal and state securities laws.  Subject to the immediately preceding sentence, nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Shares for any period of time.  Such Investor is acquiring the Shares hereunder in the ordinary course of its business. Such Investor does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Shares.

 

(c)           Investor Status.  At the time such Investor was offered the Shares, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act.  Such Investor is not a registered broker-dealer under Section 15 of the Exchange Act.

 

(d)           General Solicitation.  Such Investor 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.

 

(e)           Access to Information.  Such Investor acknowledges that it has reviewed the Disclosure Materials and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; (ii) access to information about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.  Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or its representatives or counsel shall modify, amend or affect such Investor’s right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company’s representations and warranties contained in the Transaction Documents.

 

(f)           Certain Trading Activities.  Such Investor has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Investor, engaged in any transactions in the securities of the Company (including, without limitations, any Short Sales involving the Company’s securities) since the time that such Investor was first contacted by the Company or Roth Capital Partners, LLC regarding an investment in the Company.  Such Investor covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with it will engage in any transactions in the securities of the Company (including Short Sales) prior to the time that the transactions contemplated by this Agreement are publicly disclosed.

 

(g)           Independent Investment Decision.  Such Investor has independently evaluated the merits and risks of its decision to purchase Shares pursuant to the Transaction Documents, and hereby acknowledges that its purchase of the Shares is consistent with its general investment objectives.  such Investor confirms that it has not relied on the advice of any other Investor’s business and/or legal counsel in making such decision.  The Investor and/or its representatives has such knowledge and experience in financial and business matters that it can represent itself and is capable of evaluating the merits and risks of the purchase of the Shares.  The Investor is not relying on the Company with respect to the tax and other economic considerations of an investment in the Shares, and the Investor has relied on the advice of, or has consulted with, only the Investor's own advisor(s).

 

  

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ARTICLE 4.

OTHER AGREEMENTS OF THE PARTIES

 

4.1.           (a)           Resale of Shares.  Shares may only be disposed of in compliance with state and federal securities laws.  In connection with any transfer of the Shares other than pursuant to an effective registration statement, to the Company, to an Affiliate of an Investor or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Shares under the Securities Act.

(b)           Legend.   Certificates evidencing the Shares will contain the following legend, until such time as they are not required under Section 4.1(c):

 

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.  THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

 

The Company acknowledges and agrees that an Investor may from time to time pledge, and/or grant a security interest in some or all of the Shares pursuant to a bona fide margin agreement in connection with a bona fide margin account and, if required under the terms of such agreement or account, such Investor may transfer pledged or secured Shares to the pledgees or secured parties.  Such a pledge or transfer would not be subject to approval or consent of the Company and no legal opinion of legal counsel to the pledgee, secured party or pledgor shall be required in connection with the pledge, but such legal opinion may be required in connection with a subsequent transfer following default by the Investor transferee of the pledge.  No notice shall be required of such pledge.  At the appropriate Investor’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Shares may reasonably request in connection with a pledge or transfer of the Shares including the preparation and filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder.  Except as otherwise provided in Section 4.1(c), any Shares subject to a pledge or security interest as contemplated by this Section 4.1(b) shall continue to bear the legend set forth in this Section 4.1(b) and be subject to the restrictions on transfer set forth in Section 4.1(a).

 

  

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(c)           Rule 144.   Certificates evidencing Shares shall not contain any legend (including the legend set forth in Section 4.1(b)): (i) following a sale or transfer of such Shares pursuant to an effective registration statement (including a Registration Statement), or (ii) following a sale or transfer of such Shares pursuant to Rule 144 (assuming the transferee is not an Affiliate of the Company), or (iii) while such Shares are eligible for sale without volume limitations pursuant to Rule 144.

 

4.2.           Furnishing of Information.  As long as any Investor owns the Shares, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act.  As long as any Investor owns Shares, if the Company is not required to file reports pursuant to such laws, it will prepare and furnish to the Investors and make publicly available in accordance with Rule 144(c) such information as is required for the Investors to sell the Shares under Rule 144. The Company further covenants that it will take such further action as any holder of Shares may reasonably request, all to the extent required from time to time to enable such Person to sell the Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144.

4.3.           Integration.  The Company shall not, and shall use its best 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 Investors, or that would be integrated with the offer or sale of the Shares for purposes of the rules and regulations of any Trading Market in a manner that would require stockholder approval of the sale of the Shares to the Investors.

 

4.4.           Use of Proceeds.  The Company will use the net proceeds from the sale of the Shares hereunder for general corporate purposes, including working capital, for the expansion of current business and for potential acquisitions and not for the satisfaction of any portion of the Company’s debt (other than payment of trade payables and accrued expenses in the ordinary course of the Company’s business and consistent with prior practices), or to redeem any Common Stock or Common Stock Equivalents.

 

ARTICLE 5.

CONDITIONS PRECEDENT TO CLOSING

 

5.1.           Conditions Precedent to the Obligations of the Investors to Purchase Shares.  The obligation of each Investor to acquire Shares at the Closing is subject to the satisfaction or waiver by such Investor, at or before the Closing, of each of the following conditions:

(a)           Representations and Warranties.  The representations and warranties of the Company contained herein shall be true and correct in all material respects as of the date when made and as of the Closing as though made on and as of such date;

 

(b)           Performance.  The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing;

 

  

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(c)           No Injunction.  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents;

 

(d)           Adverse Changes.  Since the date of execution of this Agreement, no event or series of events shall have occurred that reasonably could have or result in a Material Adverse Effect;

 

(e)           No Suspensions of Trading in Common Stock; Listing.  Trading in the Common Stock shall not have been suspended by the Commission or any Trading Market (except for any suspensions of trading of not more than one Trading Day solely to permit dissemination of material information regarding the Company) at any time since the date of execution of this Agreement, and the Common Stock shall have been at all times since such date listed for trading on a Trading Market;

 

(f)           Company Deliverables.  The Company shall have delivered the Company Deliverables in accordance with Section 2.2(a); and

 

(g)           Termination.  This Agreement shall not have been terminated as to such Investor in accordance with Section 6.5.

 

5.2.           Conditions Precedent to the Obligations of the Company to sell Shares.  The obligation of the Company to sell Shares at the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions:

(a)           Representations and Warranties.  The representations and warranties of each Investor contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of such date;

 

(b)           Performance.  Each Investor shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by such Investor at or prior to the Closing;

 

(c)           No Injunction.  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents;

 

(d)           Investors Deliverables.  Each Investor shall have delivered its Investors Deliverables in accordance with Section 2.2(b); and

 

(e)           Termination.  This Agreement shall not have been terminated as to such Investor in accordance with Section 6.5.

 

ARTICLE 6.

MISCELLANEOUS

 

6.1.           Fees and Expenses.  Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of the Transaction Documents.  The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the Shares.

  

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6.2.           Entire Agreement.  The Transaction Documents, together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

6.3.           Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile (provided the sender receives a machine-generated confirmation of successful transmission) at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as follows:

 

If to the Company:

Sinobiomed Inc. (d/b/a Sitoa Global Inc.)

981 Industrial Road, Suite C

San Carlos, CA 94070

Attn: Chief Financial Officer

Facsimile: (650) 472-9233

 

With a copy to:

Blank Rome LLP

Watergate 600 New Hampshire Avenue, NW

Washington, D.C. 20037

Facsimile: 202.572.8441

Attn.: Dawn Bernd-Schulz, Esq.

 

If to an Investor:

To the address set forth under such Investor’s name on the signature pages hereof;

 

or such other address as may be designated in writing hereafter, in the same manner, by such Person.

 

6.4.           Amendments; Waivers; No Additional Consideration.  No provision of this Agreement may be waived or amended except in a written instrument signed by the Company and the Investors holding a majority of the Shares.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.  No consideration shall be offered or paid to any Investor to amend or consent to a waiver or modification of any provision of any Transaction Document unless the same consideration is also offered to all Investors who then hold Shares.  Without the written consent or the affirmative vote of each Investor affected thereby, an amendment or waiver under this Section 6.4 may not waive or amend any Transaction Document the effect of which would be to permit the Company to (1) name any Investor as an underwriter in a Registration Statement without such Investor’s specific written consent thereto, or (2) not include any Registrable Securities (as defined in the Registration Rights Agreement) of an Investor in a Registration Statement due to their refusal to be named as an underwriter therein.

  

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6.5.           Termination.  This Agreement may be terminated prior to Closing:

(a)           by written agreement of the Investors and the Company, a copy of which shall be provided to the Escrow Agent; and

 

(b)           by the Company or an Investor (as to itself but no other Investor) upon written notice to the other and to the Escrow Agent, if the Closing shall not have taken place by 6:30 p.m. Eastern time on the Outside Date; provided, that the right to terminate this Agreement under this Section 6.5(b) shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such time.

 

In the event of a termination pursuant to this Section, the Company shall promptly notify all non-terminating Investors. Upon a termination in accordance with this Section 6.5, the Company and the terminating Investor(s) shall not have any further obligation or liability (including as arising from such termination) to the other and no Investor will have any liability to any other Investor under the Transaction Documents as a result therefrom.

 

6.6.           Construction.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.  This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any of the Transaction Documents.

6.7.           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investors. Any Investor may assign any or all of its rights under this Agreement to any Person to whom such Investor assigns or transfers any Shares, provided such transferee agrees in writing to be bound, with respect to the transferred Shares, by the provisions hereof that apply to the “Investors.”

6.8.           No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.7 (as to each Investor Party).

  

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6.9.           Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without giving effect to choice of laws principles or conflict of laws provisions thereof.  The parties hereby irrevocably consent and submit to the jurisdiction of the state and federal courts located in the State of New York for all purposes, including the enforcement of a judgment of an arbitration award resulting from any arbitration pursuant hereto.  Investor hereby waives, and agrees not to assert against the Company, or any successor assignee thereof, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, (i) any claim that the Investor is not personally subject to the jurisdiction of the above-named courts or to an arbitration proceeding hereunder, and (ii) to the extent permitted by applicable law, any claim that such arbitration proceeding or proceeding relating to the enforcement of an arbitration award is in an inconvenient forum or that the venue of any such proceeding is improper or that this Agreement may not be enforced in or by arbitration or that judgment upon an arbitration award may not be entered in any such courts.

 

6.10.           Survival.  The representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery of the Shares, until the second anniversary of the date hereof.

6.11.           Counterparts.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

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

6.13.           Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Investor exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Investor may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

6.14.           Replacement of 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.  If a replacement certificate or instrument evidencing any Shares is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.

 

  

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

6.16.           Payment Set Aside.  To the extent that the Company makes a payment or payments to any Investor pursuant to any Transaction Document or an Investor enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

6.17.           Independent Nature of Investors’ Obligations and Rights.  The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document.  The decision of each Investor to purchase Shares pursuant to the Transaction Documents has been made by such Investor independently of any other Investor.  Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no Investor will be acting as agent of such Investor in connection with monitoring its investment in the Shares or enforcing its rights under the Transaction Documents.  Each Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose.  The Company acknowledges that each of the Investors has been provided with the same Transaction Documents for the purpose of closing a transaction with multiple Investors and not because it was required or requested to do so by any Investor.

  

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6.18.           Limitation of Liability.  Notwithstanding anything herein to the contrary, the Company acknowledges and agrees that the liability of an Investor arising directly or indirectly, under any Transaction Document of any and every nature whatsoever shall be satisfied solely out of the assets of such Investor, and that no trustee, officer, other investment vehicle or any other Affiliate of such Investor or any investor, shareholder or holder of shares of beneficial interest of such a Investor shall be personally liable for any liabilities of such Investor.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOLLOW]

 

  

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Annex A – Schedule of Investors

 

	 
  Name and Address of Investor

 

 

	 	 
Number of Shares

of STOA Stock

 

	 	 	 
Aggregate Purchase

Price

 

	 
	 
Porter Family Revocable Trust

c/o Sinobiomed Inc. (d/b/a Sitoa Global Inc.)

981 Industrial Road, Suite C

San Carlos, CA 94070

 

	 	 	6,666,667	 	 	$	100,000	 
	 
TOTALS

	 	 	6,666,667	 	 	$	100,000	 

 

  

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

 

	 	

SINOBIOMED INC. (D/B/A SITOA GLOBAL INC.)

	 
	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ Cal Lai	 
	 	

Name:  Cal Lai

	 
	 	Title: President and Chief Executive OfficerTitle 	 
	 	 	 	 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR INVESTORS FOLLOW]

 

  

Company Signature Page

Securities Purchase Agreement

  

 

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

 

	 	  
	 	
NAME OF INVESTOR

	 	  
	 	  
	 	
By:

	
/s/ William Porter

	 	
Name:

	 
William Porter

	 	
Title:

 

	 
Trustee

	 	
Investment Amount: $

	 
100,000

	 	  	  
	 	
Tax ID No.:

	  
	 	  	  
	 	
ADDRESS FOR NOTICE

	 	
c/o:

	 
See Annex A

	 	
Street:

	  
	 	
City/State/Zip:

	  
	 	
Attention:

	  
	 	
Tel:

	  
	 	
Fax:

	  
	 	  	  
	 	
DELIVERY INSTRUCTIONS

	 	
    (if different from above)

	 	
c/o:

	  
	 	
Street:

	  
	 	
City/State/Zip:

	  
	 	
Attention:

	  
	 	
Tel:

	  

 

  

Investor Signature Page

Securities Purchase AgreementUnassociated Document

Exhibit 10.1

PROMISSORY NOTE

 

This PROMISSORY NOTE (this “Note”), dated as of July 1, 2011 (the “Closing Date”), is entered into between DEALERTRACK HOLDINGS, INC., a Delaware corporation (the “Company”), DEALERTRACK AAX, INC., a Delaware corporation (the “Buyer”), and ECARLIST, LLC, a Texas limited liability company (the “Seller”).  The parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

 

Section 1.1                      Defined Terms.  As used in this Note, the following terms have the following meanings:

 

“Applicable Rate” means Closing Date LIBOR plus 2.50%; provided, that the Applicable Rate shall be reduced to 1.00% (a) from July 1, 2012 if the Key Employee Condition is met prior to such date or (b) from the First Maturity Date if the Key Employee Condition is met prior to such date but after July 1, 2012.

 

“Asset Purchase Agreement” means that certain Asset Purchase Agreement dated as of May 24, 2011, by and among the DealerTrack AAX, Inc., the Seller, the members of the Seller signatory thereto, and Chris Camillo, as representative.

 

“Cause” means (i) the Key Employee’s commission of an act of fraud or embezzlement upon the Company or any of its Affiliates; (ii) the Key Employee’s commission of any willful act intended to injure the reputation, business, or any business relationship of the Company or any of its Affiliates; (iii) the Key Employee is found by a court of competent jurisdiction to have committed a felony; (iv) the refusal or failure of the Key Employee to perform Key Employee’s duties with the Company in a competent and professional manner that is not cured by the Key Employee within ten (10) business days after a written demand therefor is delivered to the Key Employee by the Company which specifically identifies the manner in which the Board of the Company believes that the Key Employee has not substantially performed the Key Employee’s duties; provided, further, however, that if the Company, in good faith, determines that the refusal or failure by the Key Employee is egregious in nature or is not susceptible of cure, then no cure period shall be required hereunder, or (v) the refusal or failure of the Key Employee to comply with any of his material obligations under any agreement between the Key Employee and the Company (including, without limitation, any employment agreement, proprietary inventions agreement, employee handbook, or similar agreement) or any Company policy) that is not cured by the Key Employee within ten (10) business days after a written demand therefor is delivered to the Key Employee by the Company which specifically identifies the manner in which the Company believes the Key Employee has materially breached such agreement; provided, further, however, that if the Company, in good faith, determines that the refusal or failure by the Key Employee is egregious in nature or is not susceptible of cure, then no cure period shall be required hereunder.  Notwithstanding the foregoing, (x) absences required to participate in or otherwise attend to legal proceedings in connection with the obligation of a Key Employee (in his capacity as a Member) or the Seller to defend and indemnify the Buyer, or (y) Chris Camillo’s occasional absences to promote his book to be published in the fall of 2011 by St. Martin’s press shall not be regarded as “Cause” so long as reasonable advance notice thereof is provided to the Company by such Key Employee or Camillo, respectively; provided, that such Key Employee or Camillo, respectively, shall use reasonable efforts to schedule such activities to minimally interfere with his duties as an employee of the Company and its Affiliates.

 

“Closing Date” shall have the meaning set forth in the introductory paragraph of this Note.

 

“Closing Date LIBOR” means 0.185%.

 

“Company” shall have the meaning set forth in the introductory paragraph of this Note.

  

1

  

“Disability” means that the Key Employee qualifies to receive long-term disability payments under the Company’s long-term disability insurance program, as it may be amended from time to time.

 

“Dollars and $” means Dollars in lawful currency of the United States of America.

 

“Extended Maturity Date” means July 1, 2017.

 

“First Maturity Date” means July 1, 2013.

 

“Interest Payment Date” means each anniversary of the Closing Date until the Maturity Date.

 

“Key Employee Condition” means the occurrence of either (a) at any time prior to the First Maturity Date, Len Critcher or Jordan Mclain ceasing to be employed by the Company (other than as a result of a Qualifying Termination), or (b) at any time prior to October 1, 2012, Chris Camillo ceasing to be employed by the Company (other than as a result of a Qualifying Termination).

 

“Maturity Date” means the First Maturity Date or, if the Key Employee Condition is met, the Extended Maturity Date.

 

“Note Amount” means $11,587,500; provided, that such amount shall be reduced on a dollar-for-dollar basis by (i) the adjustments related to the Final Transferred Working Capital and the Final Transferred Deducted Deferred Revenue, if applicable, pursuant to Section 2.4 of the Asset Purchase Agreement; (ii) the amount of any Buyer Damages owed by the Seller to the Buyer pursuant to Article 10 of the Asset Purchase Agreement, to the extent such Buyer Damages are not satisfied by (x) being paid directly by the Seller or any of the Members to the Buyer or (y) offset against the Contingent Payments; and (iii) with respect to any reduction pursuant to clauses (i) and (ii), any interest that has accrued or been paid by the Company or the Buyer with respect to the portion of such principal that has been reduced between the Closing Date and the date of such reduction (in the case of clauses (i) and (ii), such reduction of the Note Amount is to be treated as an adjustment to the purchase price (as determined for tax purposes) for the Purchased Assets).

 

“Obligations” means all obligations of the Company and the Buyer from time to time owed to the Seller under this Note in respect of the Note Amount or interest thereon.

 

“Proceeding” shall have the meaning set forth in Section 5.1(c) of this Note.

 

“Qualifying Termination” means the termination of a Key Employee’s employment with the Company and its Subsidiaries as a result of any of the following reasons: (i) the Key Employee’s death; (ii) the Key Employee’s Disability; (iii) the Key Employee’s termination of employment by the Company or a Subsidiary without Cause; and (iv) the incapacitation of a Key Employee’s family member causing the Key Employee to resign, following which the Key Employee does not seek employment or does not accept employment elsewhere prior to the First Maturity Date.  For purposes of clause (iv), the incapacitation shall refer to the serious illness or injury to a spouse, parent or child of a Key Employee that requires extended care; provided, that no illness or injury existing on the date hereof shall be deemed an incapacitation of a Key Employee’s family member.  The Company’s Chief Executive Officer shall have the authority to designate any termination not falling into subparagraphs (i) through (iv) as a Qualifying Termination, which shall be in writing, and which designation (or refusal to designate) shall be at his or her sole discretion.

 

“Seller” shall have the meaning set forth in the introductory paragraph of this Note.

 

“Senior Debt” means all indebtedness of the Company and any subsidiary of the Company arising under or in respect of the Senior Loan Documents, including, without limitation, with respect to principal, interest, fees and expenses thereunder.

 

“Senior Debt Notice” shall have the meaning set forth in Section 5.1(b) of this Note.

  

2

  

“Senior Lender” means any and each holder of Senior Debt.

 

“Senior Loan Agreement” means the credit agreement, dated as of April 20, 2011, by and among the Company and DealerTrack Canada, Inc., as borrowers, J.P. Morgan Chase Bank, N.A., as administrative agent, and the lenders and other parties from time to time party thereto, as amended, supplemented, restated or otherwise modified from time to time, and any agreement, indenture or document (i) extending the maturity of all or any part of the debt under such agreement or any replacement or successor agreement, or (ii) refinancing, replacing or otherwise restructuring all or any part of the debt under such agreement or any replacement or successor agreement, whether by the same or any other agent, lender or group of lenders, and whether or not the principal amount thereof is increased or decreased.

 

“Senior Loan Documents” means the Senior Loan Agreement and every other agreement and instrument at any time executed and delivered by the Company or any subsidiary of the Company to Senior Lender in connection therewith.

 

“Standstill Period” shall have the meaning set forth in Section 5.1(b) of this Note.

 

“Subsidiary” means, with respect to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Note shall refer to a Subsidiary or Subsidiaries of the Company.

 

Section 1.2                      Other Definitional Provisions.

 

(a)           Capitalized terms used but not otherwise defined herein have the meanings set forth in the Asset Purchase Agreement.

 

(b)           As used herein and in any certificate or other document made or delivered pursuant hereto, accounting terms not defined in Section 1.1, and accounting terms partly defined in Section 1.1 to the extent not defined, shall have the respective meanings given to them under GAAP.

 

(c)           The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Note shall refer to this Note as a whole and not to any particular provision of this Note, and section, subsection, schedule and exhibit references are to this Note unless otherwise specified.

 

(d)           So long as the Company does not have any subsidiaries, references to a subsidiary or subsidiaries in this Note shall be deemed to be deleted.

 

ARTICLE 2

 

THE OBLIGATIONS

 

Section 2.1                      Note Amount.  The Company and the Buyer, jointly and severally, promise to pay the Note Amount to the Seller on the Maturity Date.

 

Section 2.2                      Interest Rates and Payment Dates.

 

(a)           Payment of Interest.  The Company and the Buyer, jointly and severally, promise to pay interest with respect to the Obligations to the Seller in arrears on each Interest Payment Date.

 

(b)           Interest Rate.  The Obligations shall bear interest on the unpaid principal amount thereof at a rate per annum equal to the Applicable Rate.  Interest shall be calculated on the basis of a 365/366 day year for the actual days elapsed.

  

3

  

ARTICLE 3

 

GENERAL PROVISIONS CONCERNING THE OBLIGATIONS

 

Section 3.1                      Payments; Set-off.  The Company and the Buyer shall make each payment of principal, interest and fees hereunder, without setoff or counterclaim, not later than 2:00 P.M., New York time, on the day when due in lawful money of the United States of America to the account of the Seller designated by it from time to time in immediately available funds.  The Company and the Buyer may, at their sole option at any time, prepay the Obligations, in whole or in part, without penalty or premium.

 

Section 3.2                      Payment on Non-Business Days.  Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, such payment may be made on the next succeeding Business Day, and with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

 

ARTICLE 4

 

DEFAULT

 

Section 4.1                      Events of Default.  If:

 

(a)           the Company shall fail to pay when due any payment of principal or interest on this Note, and such failure shall continue for a period of ten (10) Business Days following notice thereof from the Seller to the Company and the Buyer (for the avoidance of doubt, in no event shall any claimed offset against, or reduction in, the amounts owing under this Note by the Company or the Buyer pursuant to the provisions of the Asset Purchase Agreement be considered a failure to pay);

 

(b)           if the Company or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or the Company or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; (ii) there shall be commenced against the Company or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed or undischarged for a period of sixty (60) days;

 

then, in each case, the Seller may, by notice to the Company, declare the Obligations hereunder, with accrued interest thereon, and all other obligations under this Note, to be due and payable forthwith, whereupon the same shall immediately become due and payable.  Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived.

 

ARTICLE 5

 

SUBORDINATION

 

Section 5.1                      Subordination.  Except as may otherwise be provided in Section 5.2 hereof:

 

(a)           The Obligations are, and shall remain, subordinate and junior in right of payment to the Senior Debt, notwithstanding (i) any sale, exchange, release or other action with any property at any time pledged or mortgaged to secure the Senior Debt, (ii) any release of anyone liable in any manner for the payment or collection of any Senior Debt or (iii) any exercise or refrain from exercising any rights against the Company or any of its subsidiaries party to a Senior Loan Document.

  

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(b)           Upon (i) the occurrence and during the continuance of any Event of Default (as defined in any Senior Loan Document) pursuant to Section 8(a), (f)(i) or (f)(ii) of the Senior Loan Agreement or (ii) the delivery by Senior Lender of written notice (a “Senior Debt Notice”) to the Seller that any other Event of Default (as defined in any Senior Loan Document) has occurred and during the continuance of such Event of Default, until the Senior Debt has been indefeasibly paid in full in cash in accordance with the terms of the Senior Loan Documents, (A) the Senior Lender shall be entitled to receive payment in full in cash of all amounts due or to become due in respect of the Senior Debt before any payment is made on account of or applied in respect of the Obligations and (B) the Seller shall not take any of the following actions with respect to the Obligations:  (I) demand, sue for, take or receive from or on behalf of the Company or the Buyer, by set-off or in any other manner, the whole or any part of any moneys which may now or hereafter be owing by the Company or the Buyer with respect to the Obligations, (II) initiate or participate with others in any suit, action or proceeding against the Company or the Buyer to (x) enforce payment of or to collect the whole or any part of the Obligations or (y) commence judicial enforcement of any of the rights and remedies under this Note or applicable law with respect to the Obligations or this Note or (III) accelerate any Obligations; provided that, notwithstanding the foregoing, the Seller may: (1) file a claim or statement of interest with respect to the Obligations; (2) file any necessary responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleading made by any person objecting to or otherwise seeking the disallowance of the claims of the Seller; (3) file any pleadings, objections, motions or agreements which assert rights or interests available to unsecured creditors of the Company or the Buyer arising under any Proceeding or applicable non-bankruptcy law, in each case not inconsistent with the terms of this Article V; and (4) vote on any plan of reorganization, file any proof of claim, make other filings and make any arguments and motions that are, in each case, in accordance with the terms of this Article V, with respect to the Obligations; provided further that, notwithstanding the foregoing clause (4), the Seller hereby irrevocably authorizes, empowers and appoints the Senior Lender as its agent and attorney-in-fact to (i) execute, verify, deliver and file any proof of claim with respect to the Obligations in connection with such Proceeding upon the failure of the Seller to do so prior to thirty (30) days before the expiration of the time to file any proof of claim, and (ii) vote the Seller’s claim on any plan of reorganization in any such Proceeding upon the failure of the Seller to do so prior to five (5) business days before the expiration of the time to vote any such claim.  Seller shall execute and deliver such other and further instruments and documents and take such further actions as the Senior Lender reasonably may request for the purposes of obtaining or preserving the full benefits of this Article V and of the rights and powers herein granted.  Notwithstanding the foregoing clause (B), the Seller may exercise its rights and remedies under this Note or applicable law after the passage of a period of 180 days (the “Standstill Period”) from the earlier of (A) the later of (x) the date on which the Seller declares the existence of any Event of Default under this Note and demands the repayment of all the principal amount of any Obligations and (y) the date on which the Senior Lender receives notice in writing from the Seller of such declarations of an Event of Default under this Note and the Seller’s intention to exercise such rights and remedies and (B) the date of delivery of a Senior Debt Notice; provided, however, that, notwithstanding the foregoing, in no event shall the Seller exercise or continue to exercise any such rights or remedies if, notwithstanding the expiration of the Standstill Period, (i) the Senior Lender shall have commenced and be diligently pursuing the exercise of any of its rights and remedies (prompt notice of such exercise to be given to the Seller) or is diligently attempting to vacate any stay or prohibition against such exercise or (ii) any Event of Default (as defined in any Senior Loan Document) pursuant to Section 8(a), (f)(i) or (f)(ii) of the Senior Loan Agreement shall have occurred and be continuing.

 

(c)           Upon any dissolution, winding-up, total or partial liquidation, reorganization, composition, arrangement, or adjustment of Company or Buyer or its securities (whether voluntary or involuntary, or in bankruptcy, insolvency, reorganization, liquidation or receivership proceedings, or upon an assignment for the benefit of creditors, or any other marshalling of the assets and liabilities of Company or Buyer or otherwise) (any such action, a “Proceeding”) until the Senior Debt has been indefeasibly paid in full in cash in accordance with the terms of the Senior Loan Documents, the Senior Lender shall be entitled to receive any payment or distribution of the assets of Company or Buyer, whether in cash, property or securities, from any source whatsoever, to creditors before any payment is made on account of or applied in respect of the Obligations.

 

(d)           If, notwithstanding the foregoing, upon (i) the occurrence and during the continuance of any Event of Default (as defined in any Senior Loan Document) pursuant to Section 8(a), (f)(i) or (f)(ii) of the Senior Loan Agreement or (ii) the delivery by Senior Lender of written notice to the Seller that any other Event of Default (as defined in any Senior Loan Document) has occurred and during the continuance of such Event of Default, any payment or distribution of the assets of Company or Buyer of any kind or character, whether in cash, property or securities, shall be received by Seller in respect of the Obligations before all Senior Debt is indefeasibly paid in full in cash in accordance with the terms of the Senior Loan Documents, such payment or distribution shall be held in trust for the Senior Lender and shall forthwith be paid over to the Senior Lender for application to the payment of the Senior Debt until all Senior Debt has been indefeasibly paid in full in cash in accordance with the terms of the Senior Loan Documents.  If the Seller pays or distributes any assets of Company or Buyer to the Senior Lender under this Article V, the Seller will be subrogated to the rights of the Senior Lender with respect to the value of such payment or distribution; provided that the Seller waives such right of subrogation until the Senior Debt is indefeasibly paid in full in cash in accordance with the terms of the Senior Loan Documents.  Such payment or distribution of Seller to the Senior Lender will not reduce the Obligations.

  

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Section 5.2                      Permitted Payments and Enforcement Proceedings.

 

(a)           Subject to the provisions of this Article V, the Company and the Buyer shall be entitled to make, and Seller shall be entitled to receive and retain, scheduled payments of principal of and interest on the Obligations under and in accordance with the terms of this Note.

 

(b)           Subject to the provisions of Section 5.1(b) hereof, Seller may ask for, demand, sue for, and take from Company, by set-off or in any other manner, any money which may be due and owing by Company under this Note.

 

Section 5.3                      Other Senior Lender Rights.

 

(a)           The nonexercise by the Senior Lender of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.

 

(b)           The provisions of this Note shall not be deemed to impose on the Senior Lender any duties or responsibilities to Seller, or any fiduciary relationship with Seller.

 

(c)           The subordination provisions set forth in this Article V and the amendment provisions set forth in Section 6.1 hereof are intended for the benefit of the Senior Lender, as and to the extent applicable in accordance with their terms, and shall be enforceable by the Senior Lender as if the Senior Lender were a party to this Note.  Seller hereby waives notice of or proof of reliance by the Senior Lender upon the provisions hereof.

 

ARTICLE 6

 

MISCELLANEOUS

 

Section 6.1                      Amendment.  No amendment or waiver of any provision of this Note nor consent to any departure by the Company or the Buyer therefrom, shall in any event be effective unless the same shall be in writing and signed by the Seller, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that, until the Senior Debt has been indefeasibly paid in full in cash in accordance with the terms of the Senior Loan Documents, any amendment or waiver relating to the subordination provisions of Article V hereof or any other amendment or waiver adversely affecting the rights of the Senior Lender shall not be effective without the prior written consent Senior Lender in its sole discretion.

 

Section 6.2                      Notices.  Except as otherwise set forth in this Note, all notices and other communications provided for hereunder shall be provided in the manner set forth in Section 13.3 of the Asset Purchase Agreement.

 

Section 6.3                      No Waiver; Remedies.  No failure on the part of the Seller to exercise, and no delay in exercising, any right under this Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Note preclude any other or further exercise thereof or the exercise of any other right.  The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

 

Section 6.4                      Conflict.  Failure by the Company and the Buyer to make any payment of the Obligations (or any portion thereof) shall not limit, impair or affect any obligations of the Seller or any of its Affiliates under any other agreements or covenants to which the Seller or any of its Affiliates are or may become a party including, without limitation, the Asset Purchase Agreement and any other Transaction Document, non-compete or similar agreement or covenant, it being understood and agreed that such other agreements and covenants are independent of any provision hereof (except as otherwise expressly provided in this Note or other Transaction Document) and the existence of any claim or cause of action hereunder shall not constitute a defense to the enforcement by the Company, the Buyer or any of their respective Affiliates of such other agreements and covenants.

  

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Section 6.5                      Assignments.  The Seller may not sell, assign or transfer any of its rights or obligations under this Note (or the Note itself) unless (x) the Company and the Buyer shall have provided its prior written consent to such sale, assignment or transfer and (y) such sale, assignment or transfer shall be in compliance with all applicable federal and state securities laws.

 

Section 6.6                      Taxes.  On or prior to any payments made hereunder, the Seller shall provide the Company and the Buyer with a properly completed Internal Revenue Service Form W-9 claiming a complete exemption from U.S. federal income tax withholding.  Each assignee or participant shall provide the Company and the Buyer, on or prior to the date it is entitled to receive payments in respect of this Note, with an applicable Internal Revenue Service Form W-9 or W-8, claiming a complete exemption from U.S. federal income tax withholding; provided, however, that no assignee or participant shall be required to provide such form to the extent it is not legally able to do so.  Notwithstanding any provision of this Note to the contrary, the Company and the Buyer shall be entitled to deduct and withhold from any amounts payable pursuant to this Note, such amounts as it is required by federal, foreign, state or local tax law to deduct and withhold.  To the extent any amounts are deducted or withheld, such amounts shall be treated for all purposes of this Note as having been made to the person in respect of whom such deduction and withholding were made.

 

Section 6.7                      Effectiveness; Governing Law; Waiver of Jury Trial; Jurisdiction.  This Note shall become effective when it shall have been executed by the Company, the Buyer and the Seller and thereafter shall be binding upon and inure to the benefit of the Company, the Buyer, the Seller and their respective successors and assigns, except that the Company and the Buyer shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Seller.  This Note shall be governed by and construed in accordance with the Laws of the State of New York, irrespective of the principal place of business, residence or domicile of the parties hereto, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the Law of any jurisdiction other than the State of New York.  The provisions of Section 13.2 (“Waiver of Jury Trial”) and Section 13.7 (“Jurisdiction and Venue”) of the Asset Purchase Agreement are hereby expressly incorporated by reference herein.

 

Section 6.8                      Entire Agreement.  This Note, together with the Asset Purchase Agreement and the other Transaction Documents, embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof.

 

Section 6.9                      Separability of Provisions; Headings.  In case any one or more of the provisions contained in this Note should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.  Section headings in this Note are included for convenience of reference only and shall not be given any substantive effect.

 

Section 6.10                    Execution in Counterparts.  This Note may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page to this Note by facsimile or scanned pages shall be effective as delivery of a manually executed counterpart to this Note.

 

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

	  	
COMPANY:

	 	 
	  	
DEALERTRACK HOLDINGS, INC.

	 	 	 
	  	  	  
	  	
By:

	  
	  	  	
Name:

	  	  	
Title:

	 	 	 
	  	  	  
	  	
BUYER:

	 	 
	  	
DEALERTRACK AAX, INC.

	 	 	 
	  	  	  
	  	
By:

	  
	  	  	
Name:

	  	  	
Title:

	 	 	 
	  	  	  
	  	
SELLER:

	 	 
	  	
ECARLIST, LLC

	 	 	 
	  	  	  
	  	
By:

	  
	  	  	
Name:

	  	  	
Title:

  

8

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