STOCK PURCHASE AGREEMENT

 

 

5.          Understandings of the Purchaser.  The Purchaser hereby represents and warrants to, and covenants with, the Company that the Purchaser is aware and understands that:

 

(a)             There are substantial risks incident to the purchase of the Shares.  An investment in the Shares is inherently speculative in nature, and the Purchaser may suffer a complete loss of the Purchaser’s investment, and the tax consequences to the Purchaser of an investment in the Shares will depend upon the Purchaser’s circumstances.

 

(b)             The Shares have not been registered under the Securities Act of 1933, as amended (the “Federal Securities Act”), any state’s securities act (collectively, the “State Securities Acts”) or any other laws of any other securities commission or regulatory authority (the “Other Securities Laws”), and are being offered for sale pursuant to applicable exemptions from registration.  No federal or state agency or regulatory authority or any other securities commission or regulatory authority has made any finding or determination as to the fairness of the offering of the Shares for public investment, or any recommendation or endorsement of the Shares.

 

(c)             The Purchaser may not sell, transfer or assign the Shares, or any portion thereof, without registration under the Federal Securities Act, the State Securities Acts or Other Securities Laws or qualification or perfection of an applicable exemption therefrom.

 

6.         Representations, Warranties and Covenants of the Purchaser.  The Purchaser hereby represents and warrants to, and covenants with, the Company as follows:

 

(a)             Immediately prior to consummation of this Agreement, the Purchaser, together with all of its affiliates which are required to be aggregated for Commission (as defined below) reporting purposes, beneficially owns 3,804,124 shares of the Company’s common stock or any class of stock or other securities of the Company.

 

(b)             The Purchaser is a trust validly existing under the laws of the state of formation.

 

(c)             The Purchaser has full power to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.

 

(d)             The execution and delivery of this Agreement, the performance of Purchaser’s obligations hereunder and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary proceedings on the part of Purchaser.

 

 

applicable exemptions from registration under the Federal Securities Act, the State Securities Acts and Other Securities Laws.

 

(l)             The Purchaser hereby expressly represents that it (i) is an “Accredited Investor” within the meaning of Regulation D promulgated pursuant to the Federal Securities Act and (ii) has adequate means of providing for the Purchaser’s current financial needs, including possible future financial contingencies.  The Purchaser is able to bear the economic risks of this investment and, consequently, without limiting the generality of the foregoing, is able to hold the Purchaser’s Shares for an indefinite period of time and has a sufficient net worth to sustain a loss of Purchaser’s entire investment in the Shares.

 

(m)             The Purchaser has such knowledge and experience in financial and business matters that the Purchaser is capable of evaluating the merits and risks of an investment in the Shares.  With the assistance of the undersigned’s own professional advisors, to the extent that the undersigned has deemed appropriate, the undersigned has made its own legal, tax, accounting and financial evaluation of the merits and risks of an investment in the Shares and the consequences of this Agreement. The undersigned has considered the suitability of the Shares as an investment in light of its own circumstances and financial condition and the undersigned is able to bear the risks associated with an investment in the Shares and its authority to invest in the Shares.

 

(n)              The Purchaser understands that the Shares are “restricted securities” under applicable federal securities laws and that the Federal Securities Act and the rules of the U.S. Securities and Exchange Commission (the “Commission”) provide in substance that the undersigned may dispose of the Shares only pursuant to an effective registration statement under the Federal Securities Act or an exemption therefrom, and the undersigned understands that, except as otherwise agreed between the Company and the Purchaser pursuant to the Registration Rights Agreement,  the Company has no obligation or intention to register any of the Shares, or to take action so as to permit sales pursuant to the Federal Securities Act (including Rule 144 (ad defined below) thereunder). Accordingly, the undersigned understands that under the Commission’s rules, the undersigned may dispose of the Shares principally only in “private placements” which are exempt from registration under the Federal Securities Act, in which event the transferee will acquire “restricted securities” subject to the same limitations as in the hands of the undersigned.

 

(o)             The Purchaser agrees:  (i) it will not sell, assign, pledge, give, transfer or otherwise dispose of the Shares or any interest therein, or make any offer or attempt to do any of the foregoing, except pursuant to a registration of the Shares under the Federal Securities Act, all applicable State Securities Acts and Other Securities Laws, or in a transaction which is exempt from the registration provisions of the Federal Securities Act, all applicable State Securities Acts and Other Securities Laws; (ii) that the certificates representing the Shares will bear a legend making reference to the foregoing restrictions; and (iii) that the Company and its affiliates shall not be required to give effect to any purported transfer of such Shares (if any) except upon compliance with the foregoing restrictions.

 

 

including but not limited to: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio; or (ii) any seminar or meeting whose attendees were invited by any general solicitation or general advertising.

 

 

7.          Representations, Warranties and Covenants of the Company.  The Company hereby represents and warrants to and covenants with the Purchaser as follows:

 

(a)             The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as presently conducted and as presently proposed to be conducted and to enter into and carry out the provisions of this Agreement and the Registration Rights Agreement (as defined in the Transaction SPA).

 

(b)             All corporate action on the part of the Company, its officers, directors and shareholders necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder, and the authorization, issuance (or reservation for issuance), sale and delivery of the Shares being sold hereunder has been taken, and this Agreement constitutes the valid and legally binding obligation of the Company, enforceable 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.  Except for the NASDAQ Notice, no consent approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, or local governmental authority on the part of the Company is required in connection with the offer, sale, or issuance of the Shares or the consummation of any other transaction contemplated hereby.

 

(c)             The execution, delivery and performance by the Company of this Agreement, and the consummation of the transactions contemplated thereby, do not and will not conflict with, or result in, a breach or violation of or default under any applicable law or any agreement or instrument to which the Company is a party.

 

(d)             The Shares being purchased by the Purchaser hereunder, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable, and will be free of all liens and restrictions on transfer other than restrictions on transfer under this Agreement and under the Federal Securities Act, State Securities Acts and any Other Securities Laws.

 

(e)             As of August 8, 2014, the authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, 19,457,794 of which were issued and outstanding as of August 8, 2014.  All issued and outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable. Other than as provided in the SEC

 

Reports (as defined below), there are no outstanding rights, options, warrants, preemptive rights, rights of first refusal or similar rights for the purchase or acquisition from the Company of any securities of the Company nor are there any commitments to issue or execute any such rights, options, warrants, preemptive rights or rights of first refusal.  There are no outstanding rights or obligations of the Company to repurchase or redeem any of its securities. All outstanding securities have been issued in compliance with state and federal securities laws.

 

(f)             SEC Reports.  The Company has filed all reports, schedules, forms, statements and other documents (“SEC Reports”) required to be filed by the Company under the  Securities Act of 1933, as amended (“Securities Act”) and the Securities Exchange Act of 1933, as amended (“Securities Act” of 1934, as amended (“Exchange Act”) on a timely basis, except for certain beneficial ownership forms which were filed but may not have been timely and an amendment to the Company’s most recent Form10-K which will be filed to include certain disclosures which were also included in the Company’s proxy statement.  The Company’s SEC Reports complied in all material respects with the requirements of the Exchange Act as of their respective dates (except that the Company will be filing an amendment to reflect the disclosures in the preceding sentence) and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.  Except as disclosed in the SEC Reports, since the last day of the fiscal year of the most recent audited financial statements included in the SEC Reports, there has been no occurrence or event which would reasonably be expected to have a material adverse effect on the financial condition, results of operations, properties or business of the Company.

 

(g)            Financial Statements.  The Company’s audited income statement, balance sheet, and statement of cash flows for the year ended December 30, 2013, included in the Company Annual Report on Form 10-K filed on April 14, 2014 (collectively, the “Financial Statements”) have been prepared in accordance with generally accepted accounting principles consistent with methods used in prior periods, and present fairly the financial condition and operating results of the Company as of the dates and for the periods indicated, subject to normal year-end audit adjustments and except that the unaudited statements included in the Financial Statements may not contain footnotes as would be required by generally accepted accounting principles. Except as disclosed in the Financial Statements, the Company is not a guarantor or indemnitor of any indebtedness of any other person or entity.  The Company maintains a standard system of accounting established and administered in accordance with generally accepted accounting principles.

 

(h)            Shell Company.  The Company is not, and has never been, a “shell company,” as described in paragraphs (i)(1)(i) and (ii) of Rule 144 promulgated under the Securities Act (“Rule 144”).

 

 

 

(d)             This Stock Purchase Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein and therein, and supersedes and cancels all prior agreements, negotiations, correspondence, undertakings and communications of the parties, oral or written, regarding such subject matter.

 

(e)             This Agreement may not be modified or amended except by an instrument or instruments in writing signed by the party against whom enforcement of any such modification or amendment is sought.  Either party hereto may, only by an instrument in writing, waive compliance by the other party hereto with any term or provision of this Agreement on the part of such party hereto to be performed or complied with.  The waiver by any party hereto of a breach of any term or provision of this Agreement shall not be construed as a waiver of any subsequent breach.

 

 

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IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of the parties as of the day first written above.

 

 

 

 

 

 

 

 

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