EXHIBIT 99.1
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (the "Agreement") is made as of this ___
day of December 2003, by and between TAG-IT PACIFIC, INC., a Delaware
corporation (the "Company"), and the investor identified on the signature page
to this Agreement (the "Investor").
W I T N E S S E T H:
WHEREAS, the Investor desires to subscribe for, purchase and acquire
from the Company and the Company desires to sell and issue to the Investor the
number of shares (the "Shares") of the Company's Series D Convertible Preferred
Stock, $0.001 par value per share (the "Preferred Stock"), set forth on the
signature page of this Agreement, upon the terms and conditions and subject to
the provisions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual premises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. PURCHASE AND SALE OF THE SHARES. Subject to the terms and
conditions of this Agreement, the Investor subscribes for and agrees to purchase
and acquire from the Company and the Company agrees to sell and issue to the
Investor the Shares, in the manner set forth in SECTION 2 hereof, at the
purchase price set forth on the signature page of this Agreement.
2. TERMS OF PURCHASE AND SALE OF THE SHARES. The closing of the
transactions contemplated hereby (the "Closing") shall take place on or before
the fifth full business day after the Notice Date (as such term is defined in
the Placement Agent Agreement dated as of December 10, 2003 (the "Placement
Agent Agreement"), between the Company and Xxxxxxx Xxxxxx Xxxxxx Inc. (the
"Placement Agent")), at the offices of the Placement Agent, or at such other
time and place as the Company and the Placement Agent may agree upon.
Contemporaneously with the delivery of this Agreement, the Investor shall
deliver to Sterling Bank (the "Escrow Agent") the Purchase Price by wire
transfer of immediately available funds pursuant to wire transfer instructions
given to the Investor by the Company. At the Closing, the Escrow Agent shall
deliver to the Company the Purchase Price by wire transfer of immediately
available funds pursuant to wire transfer instructions given to the Escrow Agent
by the Company, and the Company shall deliver to the Investor a certificate,
registered in the name of the Investor, representing the Shares. Notwithstanding
the foregoing, the obligations of the Company and the Investor hereunder are
subject to the Company's receipt of aggregate subscriptions for a minimum of
$21,825,000 in aggregate proceeds for shares of Common Stock on or prior to
December 17, 2003 (or such earlier closing date as may be agreed by the Company
and the Placement Agent), which date may be extended by the Company and the
Placement Agent pursuant to the terms of the Placement Agent Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In order to
induce the Investor to enter into this Agreement, the Company represents and
warrants to the Investor the following:
(a) AUTHORITY. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Delaware, and has all requisite right, power, and authority to
execute, deliver and perform this Agreement other than, with respect to
the issuance of the shares (the "Conversion Shares") of Common Stock,
$0.001 par value per share ("Common Stock") of the Company issuable
upon conversion of the Shares, the approval by the Company's
stockholders of the issuance of the Conversion Shares upon the
conversion of the Shares, as required under Section 713 of the Amex
Company Guide of the American Stock Exchange ("Amex Approval").
(b) SUBSIDIARIES. The Company has no direct or indirect
Subsidiaries other than those listed in Schedule 3(a). Except as
disclosed in Schedule 3(a), 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.
(c) ENFORCEABILITY. The execution, delivery, and
performance of this Agreement by the Company have been duly authorized
by all requisite corporate action. This Agreement has been duly
executed and delivered by the Company, and, upon its execution by the
Investor, shall constitute the legal, valid, and binding obligation of
the Company, enforceable in accordance with its terms, except to the
extent that its enforceability is limited by bankruptcy, insolvency,
reorganization, or other laws relating to or affecting the enforcement
of creditors' rights generally and by general principles of equity.
(d) NO VIOLATIONS. The execution, delivery, and
performance of this Agreement by the Company do not and will not
violate or conflict with any provision of the Company's Certificate of
Incorporation or Bylaws and do not and will not, with or without the
passage of time or the giving of notice, result in the breach of, or
constitute a default, cause the acceleration of performance, or require
any consent under (except such consents as have been obtained as of the
date hereof), or result in the creation of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to, any
material instrument or agreement to which the Company is a party or by
which the Company or its properties are bound, except such consents as
have been obtained as of the date hereof.
(e) CAPITALIZATION. The authorized capital stock of the
Company consists of: 30,000,000 shares of Common Stock, of which
11,513,909 were issued and outstanding as of December 5, 2003, and
3,000,000 shares of preferred stock, of which 759,494 shares of Series
C Convertible Redeemable Preferred Stock were issued and outstanding as
of December 5, 2003. As of December 5, 2003, the Company has
outstanding options and warrants to purchase 2,681,067 shares of Common
Stock. Upon issuance in accordance with the terms of this Agreement
against payment of the Purchase Price therefore, the Shares will be
duly and validly issued, fully paid, and nonassessable with no personal
liability attaching to the ownership thereof and free and clear of all
liens imposed by or through the Company, and, assuming the accuracy of
the representations and warranties of the Investor and all other
purchasers of shares of Preferred Stock in the offering contemplated by
the Placement Agent Agreement, will be issued in accordance with a
valid exemption from the registration or qualification provisions of
the Securities Act of 1933, as amended (the "Securities Act"), and any
applicable state securities laws (the "State Acts"). The Conversion
Shares have been duly authorized, and upon issuance of the Conversion
Shares upon proper conversion of the Shares,
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in accordance with the terms thereof, the Conversion Shares will be
validly issued, fully paid, and non-assessable.
(f) EXCHANGE ACT FILING. During the twelve (12) calendar
months immediately preceding the date of this Agreement, all reports
and statements required to be filed by the Company with the Securities
and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder, have been timely filed. Such filings, together with all
documents incorporated by reference therein, are referred to as
"Exchange Act Documents." Each Exchange Act Document, as amended,
conformed in all material respects to the requirements of the Exchange
Act and the rules and regulations thereunder, and no Exchange Act
Document, as amended, at the time each such document was filed,
included any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading.
(f) COMPANY FINANCIAL STATEMENTS. The audited financial
statements, together with the related notes of the Company at December
31, 2002 and December 31, 2001, and for the years then ended, included
in the Company's Annual Report of Form 10-K for the year ended December
31, 2002, and the unaudited financial statements of the Company at
September 30, 2003, and for the nine months then ended, (collectively,
the "Company Financial Statements") included in the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2003,
respectively, fairly present in all material respects, on the basis
stated therein and on the date thereof, the financial position of the
Company at the respective dates therein specified and its results of
operations and cash flows for the periods then ended (provided that the
unaudited financial statements are subject to normal year-end audit
adjustments and lack footnotes and other presentation items). Such
statements and related notes have been prepared in accordance with
generally accepted accounting principles in the United States applied
on a consistent basis except as expressly noted therein.
(g) NO MATERIAL LIABILITIES. Except for liabilities or
obligations not individually in excess of $1,000,000, and as set forth
on Schedule 3(g), since September 30, 2003, the Company has not
incurred any material liabilities or obligations, direct or contingent,
except in the ordinary course of business and except for liabilities or
obligations reflected or reserved against on the Company's balance
sheet as of September 30, 2003, and there has not been any change, or
to the knowledge of the Company, development or effect (individually or
in the aggregate) that is or is reasonably likely to be, materially
adverse to the condition (financial or otherwise), business, prospects,
or results of operations of the Company and the Subsidiaries considered
as a whole (a "Material Adverse Effect") or any change in the capital
or material increase in the long-term debt of the Company, nor has the
Company declared, paid, or made any dividend or distribution of any
kind on its capital stock.
(h) NO DISPUTES AGAINST COMPANY. Except as disclosed in
the Exchange Act Documents or set forth set forth on Schedule 3(h),
there is no material pending or, to the knowledge of the Company,
threatened (a) action, suit, claim, proceeding, or investigation
against the Company, at law or in equity, or before or by any Federal,
state, municipal, or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, (b) arbitration
proceeding against the Company, (c) governmental inquiry
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against the Company, or (d) any action or suit by or on behalf of the
Company pending or threatened against others.
(i) APPROVALS. Other than (A) the Amex Approval with
respect to the issuance of the Conversion Shares and (B) the filing of
the Certificate of Designation of Preferences, Rights and Limitations
of the Series D Preferred Stock, which the Company undertakes to file
with the Delaware Secretary of State prior to the Closing, (i) the
execution, delivery, and performance by the Company of this Agreement
and the Registration Rights Agreement (as hereinafter defined), (ii)
the offer and sale of the Shares, and (iii) the issuance of the
Conversion Shares upon due conversion of the Shares require no consent
of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than those consents that
have been obtained and filings that have been made pursuant to
applicable state securities laws and post-sale filings pursuant to
applicable state and federal securities laws, which the Company
undertakes to file within the applicable time period.
(j) COMPLIANCE. Except as set forth on Schedule 3(j),
neither the Company nor any Subsidiary (i) is in default under or in
violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement, or any other
agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court,
arbitrator, or governmental body, or (iii) is or has been in violation
of any statute, rule, or regulation of any governmental authority,
including without limitation all foreign, federal, state, and local
laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor
matters, except in each case as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect. The Company is in compliance with the applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the
rules and regulations thereunder, except where such noncompliance could
not have or reasonably be expected to result in a Material Adverse
Effect.
(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 Exchange Act Documents 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
Exchange Act Documents, 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, except where such infringement could not have or reasonably be
expected to result in a Material Adverse Effect.
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(l) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as
set forth in the Exchange Act Documents, none of the officers or
directors of the Company and, to the knowledge of the Company, none of
the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as
employees, officers, and directors), including any contract, agreement,
or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director, or such
employee or, to the knowledge of the Company, any entity in which any
officer, director, or any such employee has a substantial interest or
is an officer, director, trustee, or partner.
(m) INTERNAL ACCOUNTING CONTROLS. The Company and the
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences. The Company has established disclosure controls and
procedures (as defined in Exchange Act rules 13a-14 and 15d-14) for the
Company and designed such disclosure controls and procedures to ensure
that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within
those entities, particularly during the period in which the Company's
Form 10-K or 10-Q, as the case may be, is being prepared. The Company's
certifying officers have evaluated the effectiveness of the Company's
controls and procedures as of a date within 90 days prior to the filing
date of the Form 10-Q for the Company's most recently ended fiscal
quarter (such date, the "Evaluation Date"). The Company presented in
its most recently filed Form 10-K or Form 10-Q the conclusions of the
certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in
the Company's internal controls (as such term is defined in Item 307(b)
of Regulation S-K under the Exchange Act) or, to the Company's
knowledge, in other factors that could significantly affect the
Company's internal controls.
(n) 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
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debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).
(o) CERTAIN FEES. Except as may be due to the Placement
Agent from the Company, 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 Investor shall have no obligation with respect to any
Placement Agent fees or with respect to any claims (other than such
fees or commissions owed by an Investor pursuant to written agreements
executed by the 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.
(p) CERTAIN REGISTRATION MATTERS. Assuming the accuracy
of the Investor's representations and warranties set forth in Section
4, no registration under the Securities Act is required for the offer
and sale of the Shares by the Company to the Investor hereunder.
(r) LISTING AND MAINTENANCE REQUIREMENTS. Except as
specified in the Exchange Act Documents, the Company has not, in the
two years preceding the date hereof, received notice from any stock
exchange or automated dealer quotation system to the effect that the
Company is not in compliance with the listing or maintenance
requirements thereof. The Company is, and has no reason to believe that
it will not in the foreseeable future continue to be, in compliance
with the listing and maintenance requirements for continued listing of
the Common Stock on the American Stock Exchange.
(s) INVESTMENT COMPANY. The Company is not, and is not an
"affiliate" of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(t) NO ADDITIONAL AGREEMENTS. The Company does not have
any agreement or understanding with any Investor with respect to the
transactions contemplated by this Agreement and the Registration Rights
Agreement on terms that differ from those set forth in this Agreement
and the Registration Rights Agreement.
(u) DISCLOSURE. Except as set forth in the Schedules to
this Agreement, the Company confirms that neither it nor any person
acting on its behalf has provided the Investor or its agents or counsel
with any information that the Company believes would constitute
material, non-public information following the announcement of the
Closing. The Company understands and confirms that the Investor will
rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All disclosure provided to
the Investor regarding the Company, its business and the transactions
contemplated hereby, furnished by or on behalf of the Company
(including the Company's representations and warranties set forth in
this Agreement) are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
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4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. In order to
induce the Company to enter into this Agreement, the Investor represents and
warrants to the Company the following:
(a) AUTHORITY. If a corporation, partnership, limited
partnership, limited liability company, or other form of entity, the
Investor is duly organized or formed, as the case may be, validly
existing, and in good standing under the laws of its jurisdiction of
organization or formation, as the case may be. The Investor has all
requisite individual or entity right, power, and authority to execute,
deliver, and perform this Agreement.
(b) ENFORCEABILITY. The execution, delivery, and
performance of this Agreement by the Investor have been duly authorized
by all requisite partnership or corporate action, as the case may be.
This Agreement has been duly executed and delivered by the Investor,
and, upon its execution by the Company, shall constitute the legal,
valid, and binding obligation of the Investor, enforceable in
accordance with its terms, except to the extent that its enforceability
is limited by bankruptcy, insolvency, reorganization, moratorium, or
other laws relating to or affecting the enforcement of creditors'
rights generally and by general principles of equity.
(c) NO VIOLATIONS. The execution, delivery, and
performance of this Agreement by the Investor do not and will not, with
or without the passage of time or the giving of notice, result in the
breach of, or constitute a default, cause the acceleration of
performance, or require any consent under, or result in the creation of
any lien, charge or encumbrance upon any property or assets of the
Investor pursuant to, any material instrument or agreement to which the
Investor is a party or by which the Investor or its properties may be
bound or affected, and, do not or will not violate or conflict with any
provision of the articles of incorporation or bylaws, partnership
agreement, operating agreement, trust agreement, or similar
organizational or governing document of the Investor, as applicable.
(d) KNOWLEDGE OF INVESTMENT AND ITS RISKS. The Investor
has knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of Investor's investment in
the Shares. The Investor understands that an investment in the Company
represents a high degree of risk and there is no assurance that the
Company's business or operations will be successful. The Investor has
considered carefully the risks attendant to an investment in the
Company, and that, as a consequence of such risks, the Investor could
lose Investor's entire investment in the Company.
(e) INVESTMENT INTENT. The Investor hereby represents and
warrants that (i) the Shares are being acquired for investment for the
Investor's own account, and not as a nominee or agent and not with a
view to the resale or distribution of all or any part of the Shares,
and the Investor has no present intention of selling, granting any
participation in, or otherwise distributing any of the Shares within
the meaning of the Securities Act, (ii) the Shares are being acquired
in the ordinary course of the Investor's business, and (iii) the
Investor does not have any contracts, understandings, agreements, or
arrangements, directly or indirectly, with any person and/or entity to
distribute, sell, transfer, or grant participations to such person
and/or entity with respect to, any of the Shares. The 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.
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(f) INVESTOR STATUS. The Investor is an "Accredited
Investor" as that term is defined by Rule 501 of Regulation D
promulgated under the Securities Act and the information provided by
the Investor in the Investor's Questionnaire, a copy of which is
attached hereto as Exhibit A, is truthful, accurate, and complete. The
Investor is not registered as a broker-dealer under Section 15 of the
Exchange Act.
(g) DISCLOSURE. The Investor has reviewed information
provided by the Company in connection with the decision to purchase the
Shares, consisting of the Company's publicly available filings with the
SEC and the information contained therein. The Company has provided the
Investor with all the information that the Investor has requested in
connection with the decision to purchase the Shares. The Investor
further represents that the Investor has had an opportunity to ask
questions and receive answers from the Company regarding the business,
properties, prospects, and financial condition of the Company. All such
questions have been answered to the full satisfaction of the Investor.
Neither such inquiries nor any other investigation conducted by or on
behalf of the Investor or its representatives or counsel shall modify,
amend, or affect the Investor's right to rely on the truth, accuracy,
and completeness of the disclosure materials and the Company's
representations and warranties contained herein.
(h) NO REGISTRATION. The Investor understands that
Investor may be required to bear the economic risk of Investor's
investment in the Company for an indefinite period of time. The
Investor further understands that (i) neither the offering nor the sale
of the Shares has been registered under the Securities Act or any
applicable State Acts in reliance upon exemptions from the registration
requirements of such laws, (ii) the Shares and the Conversion Shares
must be held by he, she or it indefinitely unless the sale or transfer
thereof is subsequently registered under the Securities Act and any
applicable State Acts, or an exemption from such registration
requirements is available, (iii) except as set forth in the
Registration Rights Agreement between the Company and the Investor, the
Company is under no obligation to register any of the Shares or the
Conversion Shares on the Investor's behalf or to assist the Investor in
complying with any exemption from registration, and (iv) the Company
will rely upon the representations and warranties made by the Investor
in this Subscription Agreement in order to establish such exemptions
from the registration requirements of the Securities Act and any
applicable State Acts.
(i) TRANSFER RESTRICTIONS. The Investor will not transfer
any of the Shares or the Conversion Shares unless such transfer is
registered or exempt from registration under the Securities Act and
such State Acts, and, if requested by the Company in the case of an
exempt transaction, the Investor has furnished an opinion of counsel
reasonably satisfactory to the Company that such transfer is so exempt.
The Investor understands and agrees that (i) the certificates
evidencing the Shares and the Conversion Shares will bear appropriate
legends indicating such transfer restrictions placed upon the Shares
and the Conversion Shares, (ii) the Company shall have no obligation to
honor transfers of any of the Shares or the Conversion Shares in
violation of such transfer restrictions, and (iii) the Company shall be
entitled to instruct any transfer agent or agents for the securities of
the Company to refuse to honor such transfers.
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(j) PRINCIPAL ADDRESS. The Investor's principal
residence, if an individual, or principal executive office, if an
entity, is set forth on the signature page of this Subscription
Agreement.
5. INDEPENDENT NATURE OF INVESTOR'S OBLIGATIONS AND RIGHTS. The
obligations of the Investor under this Agreement, the Registration Rights
Agreement, and any other documents delivered in connection herewith and
therewith (collectively, the "Transaction Documents") are several and not joint
with the obligations of any other purchaser of Shares, and the Investor shall
not be responsible in any way for the performance of the obligations of any
other purchaser of Shares under any Transaction Document. The decision of the
Investor to purchase Shares pursuant to the Transaction Documents has been made
by the Investor independently of any other purchaser of Shares. Nothing
contained herein or in any Transaction Document, and no action taken by any
purchaser of Shares pursuant thereto, shall be deemed to constitute such
purchasers as a partnership, an association, a joint venture, or any other kind
of entity, or create a presumption that the purchasers of Shares are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Document. The Investor acknowledges
that no other purchaser of Shares has acted as agent for the Investor in
connection with making its investment hereunder and that no other purchaser of
Shares will be acting as agent of the Investor in connection with monitoring its
investment in the Shares or enforcing its rights under the Transaction
Documents. The 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 purchaser of Shares to be joined as an additional party
in any proceeding for such purpose.
6. PROSPECTUS DELIVERY REQUIREMENT. The Investor hereby covenants
with the Company not to make any sale of the Shares or the Conversion Shares
without complying with the provisions hereof and of the Registration Rights
Agreement, and without effectively causing the prospectus delivery requirement
under the Securities Act to be satisfied (unless the Investor is selling such
Shares or the Conversion Shares in a transaction not subject to the prospectus
delivery requirement).
7. SHAREHOLDER APPROVAL. (a) Unless previously prepared and
filed, simultaneously with the Closing, the Company agrees that it shall prepare
and file with the SEC a preliminary proxy statement (as amended and
supplemented, the "Proxy Statement") in connection with the meeting of its
stockholders (the "Stockholders Meeting"). At the Stockholders Meeting the
Company will seek to obtain stockholder approval ("Stockholder Approval") of the
issuance of the Conversion Shares. The Company shall use its reasonable efforts
to respond to written comments of the SEC and its staff, and, to the extent
permitted by law, to cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after responding to all such comments to
the satisfaction of the SEC staff. The Investor shall cooperate with the Company
is preparation of the Proxy Statement or any amendment or supplement thereto and
shall furnish the Company with all information required to be included therein
with respect to the Investor, this subscription, and this offering.
(b) Without limiting the generality of the foregoing, the
Investor shall correct as promptly as practicable any information provided by it
to be used specifically in the Proxy Statement, if required by applicable law,
that shall have become false or misleading in any material respect. The Company
shall take all reasonable steps necessary to file with the SEC and have declared
effective or cleared by the SEC any amendment or supplement to the Proxy
Statement so as to correct the same and cause the Proxy Statement as so
corrected to be disseminated to the stockholders of the Company, in each case to
the extent required by applicable law.
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(c) As a condition to Closing the Placement Agent shall
have entered into a Voting Agreement with beneficial owners of at least a
majority of the issued and outstanding shares of Common Stock and Series C
Preferred Stock of the Company pursuant to which such owners agree to vote such
shares at the Stockholders Meeting in favor of the proposal set forth in
paragraph (a) above.
(d) The Company represents and warrants to the Investor
that the vote of a majority of the outstanding shares of Common Stock (including
holders of Series C Preferred Stock of the Company voting with the holders of
Common Stock, as a single class) of the Company represented and entitled to vote
at the Stockholders Meeting will be required to approve the issuance of the
Conversion Shares.
8. INDEMNIFICATION OF INVESTOR. In addition to the indemnity
provided in the Registration Rights Agreement, the Company will indemnify and
hold the Investor and its directors, officers, shareholders, partners, employees
and agents (each, an "Investor Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs, and
reasonable attorneys' fees and costs of investigation (collectively, "Losses")
that any such Investor Party may suffer or incur as a result of or relating to
any misrepresentation, breach, or inaccuracy of any representation, warranty,
covenant, or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation, and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.
9. NON-PUBLIC INFORMATION. Subsequent to the Closing, the Company
covenants and agrees that neither it nor any other person acting on its behalf
will provide Investor or its agents or counsel with any information that the
Company believes constitutes material non-public information, unless prior
thereto Investor shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and
confirms that Investor shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
10. FURTHER ASSURANCES. The parties hereto will, upon reasonable
request, execute and deliver all such further assignments, endorsements and
other documents as may be necessary in order to perfect the purchase by the
Investor of the Shares.
11. ENTIRE AGREEMENT; NO ORAL MODIFICATION. This Agreement
contains the entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
with respect thereto and may not be amended or modified except in a writing
signed by both of the parties hereto.
12. BINDING EFFECT; BENEFITS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
successors and assigns; however, nothing in this Agreement, expressed or
implied, is intended to confer on any other person other than the parties
hereto, or their respective heirs, successors or assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
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14. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the United States of
America and the State of Delaware, both substantive and remedial. Any judicial
proceeding brought against either of the parties to this agreement or any
dispute arising out of this Agreement or any matter related hereto shall be
brought in the courts of the State of Texas, Xxxxxx County, or in the United
States District Court for the Southern District of Texas and, by its execution
and delivery of this agreement, each party to this Agreement accepts the
jurisdiction of such courts.
15. PREVAILING PARTIES. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the prevailing party shall be entitled to receive
and the nonprevailing party shall pay upon demand reasonable attorneys' fees in
addition to any other remedy.
16. NOTICES. All communication hereunder shall be in writing and,
if sent to you shall be mailed, delivered, telegraphed or sent by facsimile or
electronic mail, and confirmed to an Investor at the address set forth on the
signature page of this Agreement, or if sent to the Company, shall be mailed,
delivered, telegraphed or sent by facsimile or electronic mail and confirmed to
the Company at 00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxx, Xxxxxxxxxx,
Attention: Xxxxx Xxxx, Chief Executive Office, telephone number (000) 000-0000.
17. HEADINGS. The section headings herein are included for
convenience only and are not to be deemed a part of this Agreement.
[SIGNATURE ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
TAG-IT PACIFIC, INC., a Delaware corporation
By:
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Name: Xxxxx Xxxx
Its: Chief Executive Officer
INVESTOR
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By:
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Print Name and Title
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Principal Residence or Executive Office
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IRS Tax Identification No.
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Telephone Number
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Fax Number
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E-mail Address
X $44.00 =
------------------ ----------------- ----------------
Number of Shares Price per Share Purchase Price
