STOCK PURCHASE AGREEMENT
dated
as of May 26, 2020
by and
between
ZOOM TELEPHONICS, INC.
and
the
INVESTORS PARTY HERETO
|
1
|
Purchase of Shares
|
1
|
|
2
|
Closing; Delivery of Shares
|
1
|
|
2.1
|
Acceptance;
Closing
|
1
|
|
2.2
|
Form
of Payment; Issuance of Certificate
|
2
|
|
2.3
|
Documents
Received at Closing
|
2
|
|
3
|
Representations and Warranties of the Investors
|
2
|
|
3.1
|
Accredited
Investor
|
2
|
|
3.2
|
Reliance
on Exemptions
|
2
|
|
3.3
|
Residency
|
3
|
|
3.4
|
Investment
|
3
|
|
3.5
|
Governmental
Review
|
3
|
|
3.6
|
No
Registration of Shares
|
3
|
|
3.7
|
Legend
|
3
|
|
3.8
|
Authorization
|
3
|
|
3.9
|
Investor
Sophistication and Ability to Bear Risk of Loss
|
4
|
|
3.10
|
Transfer
or Re-Sale
|
4
|
|
3.11
|
Information
|
4
|
|
3.12
|
Tax
Matters
|
4
|
|
4
|
Representations and Warranties of the Company
|
4
|
|
4.1
|
Organization
and Qualification
|
4
|
|
4.2
|
Authorization
|
5
|
|
4.3
|
Issuance
of Shares
|
5
|
|
4.4
|
No
Conflicts
|
5
|
|
4.5
|
Consents
|
5
|
|
4.6
|
No
General Solicitation
|
5
|
|
4.7
|
No
Integration
|
5
|
|
4.8
|
No
Brokers
|
5
|
|
4.9
|
Equity
Capitalization
|
6
|
|
4.10
|
Indebtedness
|
6
|
|
4.11
|
Absence
of Litigation
|
6
|
|
4.12
|
SEC
Filings
|
7
|
|
4.13
|
Exemption
from Registration; No Disqualification Events
|
7
|
|
4.14
|
Subsidiaries
|
7
|
|
4.15
|
Absence
of Changes
|
8
|
|
4.16
|
Takeover
Protections
|
8
|
|
4.17
|
Real
Property Holding Corporation
|
8
|
|
4.18
|
Compliance
with Laws
|
8
|
|
4.19
|
Related
Party Transactions
|
9
|
|
4.20
|
Intellectual
Property
|
9
|
|
4.21
|
Investment
Company
|
9
|
|
5
|
Registration Rights
|
10
|
|
5.1
|
Registration
|
10
|
|
5.2
|
Limitation
of Registration
|
10
|
|
5.3
|
Indemnification
|
10
|
|
5.4
|
Obligations
of each Investor
|
12
|
|
5.5
|
Expenses
of Registration
|
13
|
|
5.6
|
Reports
Under the Exchange Act
|
13
|
|
5.7
|
Registration
Procedures
|
13
|
|
6
|
Lock Up Agreement
|
15
|
|
7
|
Board Composition
|
17
|
|
8
|
Covenants
|
18
|
|
9
|
Standstill
|
19
|
|
10
|
Use of Proceeds
|
21
|
|
11
|
Benefit of Agreement
|
21
|
|
12
|
Successors and Assigns
|
21
|
|
13
|
Entire Agreement
|
21
|
|
14
|
Amendments, Waivers and Consents
|
21
|
|
15
|
Governing Law
|
22
|
|
16
|
Survival
|
22
|
|
17
|
Interpretation
|
22
|
|
18
|
Confidential Information
|
22
|
|
19
|
Fees and Expenses
|
22
|
STOCK PURCHASE AGREEMENT
THIS
STOCK PURCHASE AGREEMENT (the “Agreement”), dated as of
May 26, 2020, by and between Zoom Telephonics, Inc., a Delaware
corporation (“Zoom” or the
“Company”), and persons
and entities party hereto (the “Investors”).
RECITALS
WHEREAS, Zoom is seeking to raise up to
$5,000,000 through the sale of shares (the “Common Stock
Offering”) of the Company’s Common
Stock, par value $0.01 per share (“Common Stock”), at a per
share purchase price equal to $1.52;
WHEREAS, the Company will provide
certain registration rights to the Investors participating in the
Common Stock Offering as provided herein;
WHEREAS, Zoom has given each Investor
the opportunity to conduct an independent investigation of the
Company and ask pertinent questions regarding an investment in the
Company, and officers of the Company have made themselves available
to each Investor for such purposes;
WHEREAS, each Investor has represented
and warranted that such person or entity is an “accredited
investor” as defined under Rule 501 under the Securities
Act of 1933, as amended (the “Securities Act”), and
delivered to the Company a completed accredited investor
questionnaire in pursuant to which such Investor has furnished
information in support of such representation and warranty, and the
Company has relied on the forgoing in determining to enter into
this Agreement with such Investor; and
WHEREAS, with full consideration of the
risk factors involved in an investment in the Company, each
Investor desires to acquire the shares of Common Stock as provided
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the
foregoing, the representations and warranties, covenants,
conditions, agreements set forth herein, and other good and
valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. PURCHASE
OF SHARES. On the terms and subject to the conditions set
forth in this Agreement, the Company hereby agrees to sell to each
Investor, and each Investor hereby agrees to purchase from the
Company, that number of shares of Common Stock as set forth on the
signature page for such Investor in the form of Annex A hereto.
2. CLOSING;
DELIVERY OF SHARES.
2.1 Acceptance;
Closing. The closing of the purchase and sale of the shares
of Common Stock (the “Closing”) shall occur
promptly following the execution of this Agreement. A given
Investor’s purchase is conditioned upon the Company’s
receipt of that Investor’s purchase price in immediately
available funds from that Investor as set forth on the signature
page for such Investor (the “Purchase Price”) and
approval of the issuance of the shares of Common Stock by the
Company’s Board of Directors. Palm Global Small Cap Master
Fund LP (“Palm”) shall have no
obligation to purchase any shares of Common Stock at the Closing
unless the Company has received written commitments for investment
in the Common Stock Offering at the Closing, and gross proceeds
from the Common Stock Offering, of at least $3,000,000 (including
Palm’s commitment) in the aggregate.
2.2 Form
of Payment; Issuance of Shares. At Closing, each Investor
shall pay the Purchase Price for the shares of Common Stock to be
issued and sold to it by wire transfer of immediately available
funds to the Company, in accordance with the Company’s
written wiring instructions. The Company shall deliver a stock
certificate representing the Common Stock, to each Investor,
against delivery of such Purchase Price, or shall deposit such
shares electronically with DTC through its Deposit Withdrawal Agent
Commission (DWAC) system based on instructions received by the
applicable Investor. The Company shall deliver the Common Stock to
Palm through the DTC’s DWAC system based on Palm’s
instructions.
2.3 Documents
Received at Closing. At or prior to Closing, the Company
shall have delivered to each Investor:
(i) A
certificate of good standing for the Company issued by the
Secretary of State for the State of Delaware dated within five (5)
Business Days prior to the Closing.
(ii) A
certificate of the Secretary of the Company certifying that
attached thereto are true and complete copies of all resolutions
adopted by the Board of Directors of the Company authorizing the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, and that all
such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions
contemplated hereby.
(iii) A
legal opinion of counsel to the Company, in substantially the form
attached hereto as Annex B.
3. REPRESENTATIONS
AND WARRANTIES OF THE INVESTORS. Each investor represents
and warrants to the Company, only with respect to such Investor, as
follows:
3.1 Accredited
Investor. Such Investor is an “accredited
investor” as defined under Rule 501 under the Securities
Act. Such Investor has completed and delivered to the Company an
accredited investor questionnaire in the form attached hereto as
Annex C and
has provided true and accurate responses on such
questionnaire.
3.2 Reliance
on Exemptions. Such Investor understands that the shares of
Common Stock are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is
relying upon the truth and accuracy of, and such Investor’s
compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Investor set forth
herein in order to determine the availability of such exemptions
and the eligibility of such Investor to acquire the shares of
Common Stock.
3.3 Residency.
Such Investor is a resident of the jurisdiction set forth on such
Investor’s signature page.
3.4 Investment.
Such Investor is purchasing the shares of Common Stock for such
Investor’s own account for investment and not with a view to
the distribution or sale thereof. Such Investor is not acting as a
nominee or agent for any other person and is not purchasing the
shares of Common Stock for the account of any other person or other
entity. Such Investor is not obligated to transfer the shares of
Common Stock to any other person, nor does such Investor intend to
sell, grant a participation in or otherwise distribute or dispose
of the shares of Common Stock.
3.5 Governmental
Review. Such Investor understands that no United States
federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of
the shares of Common Stock. Such Investor has been given the
opportunity to request and obtain any information necessary to
fully evaluate the investment and has been furnished all
information requested.
3.6 No
Registration of Shares. Such Investor has been advised that
the shares of Common Stock have not been registered under the
Securities Act and may not be sold, transferred or otherwise
disposed of without registration under the Securities Act or an
exemption therefrom.
3.7 Legend.
To the extent applicable, each certificate or other document
evidencing any of the shares of Common Stock shall be endorsed with
the legend in the form set forth below:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS REGISTERED
UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY THAT AN
EXEMPTION THEREFROM IS AVAILABLE.
Such
Investor understands and agrees that stop transfer instructions may
be imposed by the Company or its transfer agent with respect to
such shares of Common Stock.
3.8 Authorization.
Such Investor has full power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Such Investor and constitutes
a valid and legally binding obligation of Such Investor,
enforceable in accordance with its respective 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.
3.9 Investor
Sophistication and Ability to Bear Risk of Loss. Such
Investor acknowledges that such Investor can bear the economic risk
of investment in such securities for the foreseeable future without
producing a material adverse change in such Investor’s
financial condition, has no present need for liquidity in such
investment and can afford a complete loss of such investment. Such
Investor otherwise has such knowledge and experience in financial
or business matters that it is capable of evaluating the merits and
risks of the investment in the shares of Common Stock.
3.10 Transfer
or Re-Sale. Such Investor understands that (i) the sale or
re-sale of the shares of Common Stock has not been and is not being
registered under the Securities Act or any applicable state
securities laws, and the shares of Common Stock may not be
transferred unless (a) such shares are sold pursuant to an
effective registration statement under the Securities Act (a
“Registration
Statement”), or (b) such shares are sold or
transferred pursuant to an exemption from such registration. In the
event shares of Common Stock are sold or transferred pursuant to an
exemption from registration, such Investor shall have delivered to
the Company, at the cost of the Company, an opinion of counsel that
shall be in form, substance and scope customary for opinions of
counsel in comparable transactions to the effect that the shares of
Common Stock to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration. If the conditions
of Rule 144 are satisfied for the shares of Common Stock held by
the Investor, and if requested by such Investor, the Company shall
cause its counsel to issue a legal opinion to the Company’s
transfer agent promptly if required by the Company’s transfer
agent to effect the removal of the restrictive
legends.
3.11 Information.
Such Investor has been and will be, to the extent such Investor
deems necessary, advised by its own tax, legal and accounting
advisors, as applicable, in connection with this Agreement and such
Investor’s investment in the shares of Common Stock. Such
Investor and its advisors, if any, have been furnished with or
provided access to materials relating to the business, finances and
operations of the Company. Such Investor and its advisors, if any,
have been afforded the opportunity to ask questions of the Company
regarding such matters and other matters relating to the investment
in Common Stock as such Investor has desired, and has received
answers to such questions. Notwithstanding any due diligence or
other investigation or review by such Investor or its advisors,
such Investor shall be entitled to rely upon all representations
and warranties made by the Company.
3.12 Tax
Matters. If any Investor is a pension plan, IRA or other
tax-exempt entity, it is aware that it may be subject to federal
income tax on any unrelated business taxable income from its
investment in the Company.
4. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to each Investor that:
4.1 Organization
and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware, with full power and authority (corporate and
other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and
conducted.
4.2 Authorization.
The Company has all requisite corporate power and authority to
enter into and perform this Agreement. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a
valid and legally binding obligation of the Company, enforceable in
accordance with its respective 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.
4.3 Issuance
of Shares. The shares of Common Stock issuable hereunder are
duly authorized and, upon receipt of the Purchase Price therefor,
will be validly issued, fully paid and non-assessable, and free
from all taxes, liens, claims and encumbrances with respect to the
issue thereof (other than those imposed by this Agreement or
federal or state securities laws) and shall not be subject to
preemptive rights or other similar rights of stockholders of the
Company and will not impose personal liability upon the holder
thereof.
4.4 No
Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not (i) conflict
with or result in a violation of any provision of the
Company’s Certificate of Incorporation, as amended, or the
Company’s Bylaws, as amended, or (ii) violate or conflict
with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any
material agreement, indenture or instrument to which the Company or
any of its subsidiaries, is a party, or (iii) result in a violation
of any material law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the
Company or its securities are subject.
4.5 Consents.
Except for a Form D filing with the U.S. Securities and Exchange
Commission (the “SEC”), notice filings
with applicable state securities regulators and the Company’s
obligations pursuant to Section 5, the Company is not required
to obtain any consent, authorization or order of, or make any
filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other person or entity
in order for it to execute, deliver or perform any of its
respective obligations under or contemplated by this
Agreement.
4.6 No
General Solicitation. Neither the Company nor any person or
entity acting on its or their behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of
Regulation D as promulgated by the SEC under the Securities
Act) in connection with the offer or sale of the shares of Common
Stock hereunder.
4.7 No
Integration. To the knowledge of the Company, the issuance
of the shares of Common Stock to the Investors will not be
integrated with any other issuance of the Company’s
securities (past, current or future) for purposes of any
stockholder approval provisions applicable to the Company or its
securities.
4.8 No
Brokers. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions,
transaction fees or similar payments relating to this Agreement or
the transactions contemplated hereby.
4.9 Equity
Capitalization. As of May 14, 2020, the authorized capital
stock of the Company consists of 40,000,000 shares of Common Stock,
of which 21,434,328 shares are issued and outstanding, and
1,164,461 shares are reserved for issuance pursuant to securities
exercisable or exchangeable for, or convertible into, Common Stock,
and 2,000,000 shares of preferred stock (the “Preferred Stock”), of
which no shares are issued and outstanding. No shares of Common
Stock are held in treasury. All of such outstanding shares are duly
authorized and have been, or upon issuance will be, validly issued
and are fully paid and non-assessable. Except for compensatory
equity grants made to the Company’s officers, directors and
consultants consistent with past practice or as provided in the
Stock Purchase Agreement dated as of May 3, 2019 between the
Company and the investors identified therein and except as
disclosed in the reports, schedules, forms, statements and other
documents required to be filed by the Company with the SEC pursuant
to the reporting requirements of the Securities Exchange Act of
1934, as amended (the “Exchange Act”) (all of
the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements, notes and schedules
thereto and documents incorporated by reference therein along with
all statements, filings and exhibits filed pursuant to the
registration requirements of the Securities Act, being hereinafter
referred to as the “SEC Documents”): (i) none
of the Company’s or any of its subsidiary’s capital
stock is subject to preemptive rights or any other similar rights
or any liens or encumbrances suffered or permitted by the Company
or any of its subsidiaries; (ii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital
stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or
any of its subsidiaries is or may become bound to issue additional
capital stock of the Company or any of its subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital
stock of the Company or any of its subsidiaries; (iii) there are no
agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their
securities under the Securities Act; (iv) there are no outstanding
securities or instruments of the Company or any of its subsidiaries
which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which
the Company or any of its subsidiaries is or may become bound to
redeem a security of the Company or any of its subsidiaries; and
(v) there are no securities or instruments containing anti-dilution
or similar provisions that will be triggered by the issuance of the
shares of Common Stock hereunder.
4.10 Indebtedness.
Except as disclosed in the SEC Documents, including but not limited
to the Company’s existing revolving line of credit with
Rosenthal & Rosenthal, Inc., the balance on which may vary on a
daily basis, and a loan in the principal amount of $583,300
incurred by the Company in connection with the Paycheck Protection
Program of the U.S. Small Business Administration, neither the
Company nor any of its subsidiaries has any outstanding
Indebtedness (as defined below). “Indebtedness” of any
person or entity means, without duplication, all indebtedness for
borrowed money and all obligations evidenced by notes, bonds,
debentures or similar instruments.
4.11 Absence
of Litigation. Except as set forth in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation
before any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its
subsidiaries, its Common Stock or any of the Company’s or its
subsidiaries’ officers or directors which individually or in
the aggregate would have a material adverse effect on the
Company.
4.12 SEC
Filings. Except for the Company’s (i) Form 10-K for
the fiscal year ended December 31, 2019, which was filed with
the SEC on April 15, 2020 within the time period prescribed by
the Exchange Act Rule 12b-25, (ii) Form 8-K furnished to the SEC on
May 12, 2020 (with respect to Items 2.02 and 7.01) and (iii) Form
8-K filed with the SEC on May 21, 2020 (with respect to Items 1.02
and 5.02(e)), the Company has timely
filed with or furnished to, as applicable, the SEC all SEC
Documents required to be filed or furnished by it with the SEC
since January 1, 2020 (the “Company SEC
Documents”). True,
correct, and complete copies of all Company SEC Documents are
publicly available in the Electronic Data Gathering, Analysis, and
Retrieval database of the SEC (“EDGAR”).
As of their respective filing dates or, if amended or superseded by
a subsequent filing prior to the date hereof, as of the date of the
last such amendment or superseding filing (and, in the case of
proxy statements, on the dates of the relevant meetings,
respectively), each of the Company SEC Documents complied as to
form in all material respects with the applicable requirements of
the Exchange Act and the rules and regulations of the SEC
thereunder applicable to such Company SEC Documents. None of the
Company SEC Documents, including any financial statements,
schedules, or exhibits included or incorporated by reference
therein at the time they were filed (or, if amended or superseded
by a subsequent filing prior to the date hereof, as of the date of
the last such amendment or superseding filing), contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading. To the knowledge of the Company,
none of the Company SEC Documents is the subject of ongoing SEC
review or outstanding SEC investigation. There are no outstanding
or unresolved comments received from the SEC with respect to any of
the Company SEC Documents.
4.13 Exemption
from Registration; No Disqualification Events. Assuming the
accuracy of the Investors’ representations and warranties set
forth herein, no registration under the Securities Act is required
for the offer and sale of the Common Stock by the Company to the
Investors as contemplated hereby. With respect to the Common Stock
to be offered and sold hereunder in reliance on Rule 506 under
the Securities Act, none of the Company, any of its predecessors,
any director, executive officer, other officer of the Company
participating in the offering hereunder, any beneficial owner of
20% or more of the Company’s outstanding voting equity
securities, calculated on the basis of voting power, nor any
promoter (as that term is defined in Rule 405 under the
Securities Act) connected with the Company in any capacity at the
time of sale (each, an “Issuer Covered Person”
and, together, “Issuer Covered Persons”)
is subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities
Act (a “Disqualification Event”),
except for a Disqualification Event covered by Rule 506(d)(2)
or (d)(3).
4.14 Subsidiaries.
Except for MTRLC LLC (“MTRLC”), the Company does
not have any subsidiaries. The Company owns all of the outstanding
equity interests in MTRLC. Except for
the equity interests in MTRLC, the Company does not own, directly
or indirectly, any capital stock of, or other equity or voting
interests in, any corporation, limited liability company,
partnership or other entity.
4.15 Absence
of Changes. Since January 1, 2020, except in connection
with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, the business
of the Company and its sole subsidiary has been conducted in the
ordinary course of business consistent with past practice and there
has not been or occurred any event,
fact, condition, or change that is, or would reasonably be expected
to become, individually or in the aggregate, materially adverse to
the business, results of operations, condition (financial or
otherwise), or assets of the Company and its subsidiary, taken as a
whole.
4.16 Takeover
Protections. The Company and its Board of Directors have
taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become
applicable to an Investor as a result of such Investor and the
Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a
result of the Company’s issuance of the Common Stock and each
Investor’s ownership of the Common Stock purchased
hereunder.
4.17 Real
Property Holding Corporation. The Company is not and has
never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986,
as amended, and the Company shall so certify upon any
Investor’s request.
4.18 Compliance
with Laws. The Company and its subsidiary have complied, and
are now complying, with all laws applicable to their respective businesses, properties or
assets, including without limitation OFAC, the Money Laundering
Laws and FCPA. Neither the Company nor
any subsidiary nor, to the Company’s knowledge, any director,
officer, agent, employee or affiliate (such term
“affiliate” as used in this Agreement, shall mean any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with the Person, as defined under Rule 405 under the
Securities Act) 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”).
The operations of the Company and its subsidiary are and have been
conducted at all times in compliance with applicable financial
record-keeping and reporting requirements of the Currency and
Foreign Transactions Reporting Act of 1970, as amended, applicable
money laundering statutes and applicable rules and regulations
thereunder (collectively, the “Money Laundering
Laws”), and no action or
proceeding by or before any court or governmental agency, authority
or body or any arbitrator involving the Company or its subsidiary
with respect to the Money Laundering Laws is pending or, to the
knowledge of the Company, threatened. Neither the Company nor its
subsidiary, nor to the knowledge of the Company, any agent or other
person acting on behalf of the Company or its subsidiary, has: (i)
directly or indirectly, used any funds 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 its subsidiary (or made by any person acting on its
behalf of which the Company is aware) which is in violation of law
or (iv) violated in any material respect any provision of
Foreign Corrupt Practices Act of 1977, as amended (the
“FCPA”).
4.19 Related
Party Transactions. Except as disclosed in the Company SEC
Documents and the transactions contemplated by this Agreement,
there are, and since January 1, 2020, there have been, no
contracts, transactions, arrangements, or understandings between
the Company or its subsidiary, on the one hand, and any affiliate
(including any director, officer, or employee) thereof or any
holder of 5% or more of the shares of Common Stock, but not
including any wholly-owned subsidiary of the Company, on the other
hand, that would be required to be disclosed pursuant to Item 404
of Regulation S-K promulgated by the SEC in the
Company’s Form 10-K or proxy statement pertaining to an
annual meeting of stockholders.
4.20 Intellectual
Property. The Company and its subsidiary have, or have
rights to use under license, all patents, patent applications,
trademarks (whether registered or unregistered), trademark
applications, service marks (whether registered or unregistered),
trade names (whether registered or unregistered), trade secrets,
trade dress (whether registered or unregistered), inventions,
know-how, processes, formulas, recipes, methods of manufacture,
data, copyrights, works of authorship, licenses and other
intellectual property rights and similar rights necessary or
required for use in connection with their respective businesses as
described in the Company SEC Documents (collectively, the
“Intellectual
Property Rights”). None of, and neither the Company
nor its subsidiary has received a notice (written or otherwise)
that any of the Intellectual Property Rights has expired,
terminated or been abandoned, or is expected to expire or terminate
or be abandoned, within two (2) years from the date of this
Agreement. Neither the Company nor its subsidiary has received,
since January 1, 2020, a written notice of a claim or
otherwise has any knowledge that the Intellectual Property Rights
violate or infringe upon the rights of any person. To the knowledge
of the Company, all such Intellectual Property Rights are valid and
enforceable, and there is no existing infringement by another
Person of any of the Intellectual Property Rights. The Company and
its subsidiary have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual
properties.
4.21 Investment
Company. The Company is not, and is not an affiliate of, and
immediately after receipt of payment for the shares of Common Stock
hereunder, will not be, an “investment company” within
the meaning of the Investment Company Act of 1940, as
amended.
5. REGISTRATION
RIGHTS.
5.1 Registration.
No later than thirty (30) days after the date of this Agreement
(the “Closing
Date”), the Company shall prepare and file with the
SEC a Registration Statement covering the resale of all of the
shares of Common Stock sold in the Common Stock Offering (the
“Registrable
Securities”) for an offering to be made on a
continuous basis pursuant to Rule 415 of the Securities Act.
For purposes of this Agreement, any substitute or replacement
registration statement shall mean the Registration Statement. The
Registration Statement filed hereunder shall be on Form S-1 or such
other form as is available to register for resale the Registrable
Securities as a secondary offering. The Company shall use its
commercially reasonable efforts to cause such Registration
Statement to be declared effective under the Securities Act not
later than 180 days after the Closing Date. The Company shall use
its commercially reasonable efforts to keep such Registration
Statement continuously effective under the Securities Act until the
earliest of: (i) such time as all Registrable Securities covered by
such Registration Statement have been sold thereunder or pursuant
to Rule 144, (ii) such time after the expiration of the Lock
Up Period and all Registrable Securities covered by such
Registration Statement may be sold without volume or manner-of-sale
restrictions pursuant to Rule 144 and without the requirement
for the Company to be in compliance with the current public
information requirement under Rule 144, or (iii) the five (5)
year anniversary of the Closing Date (such period, the
“Effectiveness
Period”). The Company shall promptly notify each
Investor of the effectiveness of a Registration Statement. In the
event that, following the five (5) year anniversary of the Closing
Date, the Investors hold at least the lesser of (x) an aggregate of
$500,000 of Registrable Securities and (y) 500,000 shares of Common
Stock (subject to adjustment for any
stock splits, stock dividends, recapitalizations and similar
events), Palm may, provided that Palm remains an affiliate
of the Company, request that the Company file a replacement
Registration Statement for any such remaining Registrable
Securities on the terms set forth in this Section 5, which the
Company shall file within thirty (30) days after such request and
use its commercially reasonable to cause to become effective as
promptly as practicable after such filing, provided further that
the Effectiveness Period for any such replacement Registration
Statement shall not extend beyond the two (2) year anniversary of
the date when such Registration Statement becomes
effective.
5.2 Limitation
of Registration. Notwithstanding the registration
obligations set forth in Section 5.1, if the SEC informs the
Company that all of the Registrable Securities cannot, as a result
of the application of Rule 415, be registered for resale as a
secondary offering on a single registration statement, the Company
agrees to promptly inform each Investor thereof and use its
commercially reasonable efforts to file amendments to the
Registration Statement as required by the SEC, covering the maximum
number of Registrable Securities permitted to be registered by the
SEC, on Form S-1 or such other form as is available to register for
resale the Registrable Securities as a secondary
offering.
5.3 Indemnification.
(i) Indemnification
by the Company. The Company will indemnify and hold harmless
each Investor and its officers, directors, members, stockholders,
partners, employees, successors and assigns, against any losses,
obligations, claims, damages, liabilities, contingencies,
judgments, fines, penalties, charges, costs (including, without
limitation, court costs, reasonable attorneys’ fees and costs
of defense and investigation), amounts paid in settlement or
expenses, joint or several (collectively, “Claims”) reasonably
incurred in investigating, preparing or defending any action,
claim, suit, inquiry, proceeding, investigation or appeal taken
from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or the SEC, whether
pending or threatened, whether or not an indemnified party is or
may be a party thereto, to which any of them may become subject
insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are
based upon: (1) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act or any state securities
law, or any rule or regulation thereunder, in connection with the
performance of its obligations under this Agreement; (2) any breach
or violation of this Agreement by the Company; or (3) any
untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, any preliminary prospectus
or final prospectus contained therein, or any amendment or
supplement thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading; and will reimburse
such Investor, and each such officer, director or member and each
such controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any
such Claim or action; provided, however, that the Company will not
be liable in any such case if and to the extent that any such loss,
Claim, damage or liability arises out of or is based upon (A) in
the case of a Claim under Section 5 of the Securities Act,
allegations that such Investor was not an “accredited
investor” as defined under Rule 501 under the Securities Act,
a breach of representation or warranty made by such Investor in or
pursuant to this Agreement or (B) an untrue statement or alleged
untrue statement or omission or alleged omission so made in
conformity with information furnished by the Investors or any such
controlling person in writing specifically for use in such
Registration Statement or prospectus.
(ii) Indemnification
by Investor. Each Investor, severally and not jointly,
indemnify and hold harmless, to the fullest extent permitted by
law, the Company, its directors, officers, employees, stockholders,
partner, representatives and each person who controls the Company
(within the meaning of the Securities Act) against any Claims
resulting from any untrue statement of a material fact or any
omission of a material fact required to be stated in the
Registration Statement or prospectus or preliminary prospectus or
amendment or supplement thereto or necessary to make the statements
therein not misleading, to the extent, but only to the extent that
such untrue statement or omission is contained in any information
furnished in writing by such Investor to the Company specifically
for inclusion in such Registration Statement or prospectus or
amendment or supplement thereto. In no event shall the aggregate
liability under this Section 5.3 of any such Investor be
greater in amount than the dollar amount of the proceeds (net of
all underwriting fees, commissions and selling expenses, all
expenses paid by such Investor in connection with any claim
relating to this Section 5.3 and the amount of any damages
such Investor has otherwise been required to pay by reason of such
untrue statement or omission) received by such Investor upon the
sale of the Registrable Securities included in the Registration
Statement giving rise to such indemnification
obligation.
(iii) Conduct
of Indemnification Proceedings. Any person entitled to
indemnification hereunder shall (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks
indemnification and (ii) permit such indemnifying party to assume
the defense of such claim with counsel reasonably satisfactory to
the indemnified party; provided that any person entitled to
indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the
fees and expenses of such counsel shall be at the expense of such
person unless (A) the indemnifying party has agreed to pay such
fees or expenses, or (B) the indemnifying party shall have failed
to assume the defense of such claim or employ counsel reasonably
satisfactory to such person or (C) in the reasonable judgment of
any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the
indemnifying party with respect to such claims (in which case, if
the person notifies the indemnifying party in writing that such
person elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right
to assume the defense of such claim on behalf of such person); and
provided, further, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying
party of its obligations hereunder, except to the extent that such
failure to give notice shall materially adversely affect the
indemnifying party in the defense of any such claim or litigation.
It is understood that the indemnifying party shall not, in
connection with any proceeding in the same jurisdiction, be liable
for fees or expenses of more than one separate firm of attorneys at
any time for all such indemnified parties. No indemnifying party
will, except with the consent of the indemnified party, which
consent shall not be unreasonably withheld or delayed, consent to
entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant
or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation.
(iv) Contribution.
If for any reason the indemnification provided for in the preceding
paragraphs (i) and (ii) is unavailable to an indemnified party or
insufficient to hold it harmless, other than as expressly specified
therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such Claim
in such proportion as is appropriate to reflect the relative fault
of the indemnified party and the indemnifying party, as well as any
other relevant equitable considerations. No person guilty of
fraudulent misrepresentation within the meaning of
Section 11(f) of the Securities Act shall be entitled to
contribution from any person not guilty of such fraudulent
misrepresentation. In no event shall the aggregate liability under
this Section 5.3(iv) of the holder of Registrable Securities
be greater in amount than the dollar amount of the proceeds (net of
all underwriting fees, commissions and selling expenses, all
expenses paid by such holder in connection with any claim relating
to this Section 5.3 and the amount of any damages such holder
has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission) received
by it upon the sale of the Registrable Securities giving rise to
such contribution obligation.
5.4 Obligations
of each Investor. It shall be a condition precedent to the
obligations of the Company to register the shares of Common Stock
purchased pursuant to this Agreement with respect to any Investor
that such Investor furnish to the Company such information
regarding the Investor, the shares of Common Stock purchased
pursuant to this Agreement and the intended method of disposition
of the shares of Common Stock purchased pursuant to this Agreement
as shall be reasonably required to effect the registration of the
shares of Common Stock purchased pursuant to this Agreement and
shall execute such documents and agreements in connection with such
registration as the Company may reasonably request. Each Investor
shall cooperate as reasonably requested by the Company in
connection with the preparation of the Registration Statement with
respect to such registration, and for so long as the Company is
obligated to file and keep effective such Registration Statement,
shall provide to the Company, in writing, for use in the
Registration Statement, all such information regarding the Investor
and its plan of distribution of the Registrable Securities included
in such registration as may be reasonably necessary to enable the
Company to prepare such Registration Statement, to maintain the
currency and effectiveness thereof and otherwise to comply with all
applicable requirements of law in connection therewith. At least
ten (10) Business Days (as hereinafter defined) prior to the first
anticipated filing date of the Registration Statement, the Company
shall notify each Investor of the information the Company requires
from such Investor (the “Requested Information”)
to have the shares of Common Stock purchased pursuant to this
Agreement included in the Registration Statement. If within one (1)
Business Day of the filing date the Company has not received the
Requested Information from any Investor, then the Company may file
the Registration Statement without including the shares of Common
Stock purchased pursuant to this Agreement by such Investor. Each
Investor shall furnish to the Company or the underwriter, as
applicable, such information regarding such Investor and the
distribution proposed by it as the Company may reasonably request
in connection with any registration or offering referred to in this
Section 5. For the purposes of this Agreement, the term
“Business
Day” means any day other than a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in the
Commonwealth of Massachusetts.
5.5 Expenses
of Registration. In connection with any and all
registrations pursuant to this Agreement, all expenses other than
underwriting discounts and commissions incurred in connection with
registration, filings or qualifications, including, without
limitation, all registration, listing, filing and qualification
fees, printing and accounting fees and costs, the fees and
disbursements of counsel for the Company, and the fees and
disbursements, not to exceed $15,000 of Palm’s counsel, shall
be borne by the Company.
5.6 Reports
Under the Exchange Act. With a view to making available
to the Investors the benefits of Rule 144 promulgated under
the Securities Act or any other similar rule or regulation of the
SEC that may at any time permit the security holders to sell
securities of the Company to the public without registration
(“Rule 144”)
(including any public information requirements and any restrictions
or limitations applicable to affiliates), the Company shall at all
times:
(i) make
and keep public information available, as those terms are
understood and defined in Rule 144; and
(ii) file
with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange
Act.
5.7 Registration
Procedures. In connection with the Company’s
registration obligations hereunder, the Company agrees to the
following:
(i) Not
less than five (5) trading days prior to the filing of each
Registration Statement and not less than one (1) trading day prior
to the filing of any related prospectus or any amendment or
supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference),
the Company shall (A) furnish to each Investor copies of all
such documents proposed to be filed, which documents (other than
those incorporated or deemed to be incorporated by reference) will
be subject to the review and comments of such Investors, and (B)
cause its officers and directors, counsel and independent
registered public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to
each Investor, to conduct a reasonable investigation within the
meaning of the Securities Act.
(ii) The
Company shall not file a Registration Statement or any such
prospectus or any amendments or supplements thereto to which the
holders of a majority of the Registrable Securities shall
reasonably object in good faith, provided that, the Company is
notified of such objection in writing no later than five (5)
trading days after the Investors have been so furnished copies of a
Registration Statement or one (1) trading day after the Investors
have been so furnished copies of any related prospectus or
amendments or supplements thereto.
(iii) The
Company shall (A) prepare and file with the SEC such amendments,
including post-effective amendments, to a Registration Statement
and the prospectus used in connection therewith as may be necessary
to keep a Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and
prepare and file with the SEC such additional Registration
Statements in order to register for resale under the Securities Act
all of the Registrable Securities, (B) cause the related prospectus
to be amended or supplemented by any required prospectus supplement
(subject to the terms of this Agreement), and, as so supplemented
or amended, to be filed pursuant to Rule 424, (C) respond as
promptly as reasonably possible to any comments received from the
SEC with respect to a Registration Statement or any amendment
thereto, and (D) comply in all material respects with the
applicable provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities
covered by a Registration Statement during the applicable period in
accordance (subject to the terms of this Agreement) with the
intended methods of disposition by the Investors thereof set forth
in such Registration Statement as so amended or in such Prospectus
as so supplemented.
(iv) If
during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 100% of the number of shares of
Common Stock then registered in a Registration Statement, then the
Company shall file as soon as reasonably practicable, but in any
case prior to the applicable Filing Date, an additional
Registration Statement covering the resale by the Holders of not
less than the number of such Registrable Securities.
(v) The
Company shall notify the holders of Registrable Securities to be
sold (which notice shall, pursuant to clauses (C) through (F)
hereof, be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made) as promptly
as reasonably possible (and, in the case of (A)(1) below, not less
than one (1) trading day prior to such filing) and (if requested by
any such person) confirm such notice in writing no later than one
(1) trading day following the day (A) (1) when a prospectus or any
prospectus supplement or post-effective amendment to a Registration
Statement is proposed to be filed, (2) when the SEC notifies the
Company whether there will be a “review” of such
Registration Statement and whenever the SEC comments in writing on
such Registration Statement, and (3) with respect to a Registration
Statement or any post-effective amendment, when the same has become
effective, (B) of any request by the SEC or any other federal or
state governmental authority for amendments or supplements to a
Registration Statement or prospectus or for additional information,
(C) of the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the
effectiveness of a Registration Statement covering any or all of
the Registrable Securities or the initiation of any proceedings for
that purpose, (D) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, (E) of the occurrence of any event or
passage of time that makes the financial statements included in a
Registration Statement ineligible for inclusion therein or any
statement made in a Registration Statement or prospectus or any
document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any
revisions to a Registration Statement, prospectus or other
documents so that, in the case of a Registration Statement or the
prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit 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, and (F) of the occurrence or existence of any
pending corporate development with respect to the Company that the
Company believes may be material and that, in the determination of
the Company, makes it not in the best interest of the Company to
allow continued availability of a Registration Statement or
prospectus, provided, however, in no event shall any such notice
contain any information which would constitute material, non-public
information regarding the Company or any of its subsidiaries. The
Company shall provide SEC comments to the Investors for review and
comment promptly upon receipt.
(vi) The
Company shall use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order stopping or
suspending the effectiveness of a Registration Statement, or (ii)
any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable time.
(vii) Subject
to the terms of this Agreement, the Company hereby consents to the
use of such prospectus and each amendment or supplement thereto by
each of the selling Investors in connection with the offering and
sale of the Registrable Securities covered by such prospectus and
any amendment or supplement thereto, except after the giving of any
notice pursuant to Section 5.7(v).
(viii)
If requested by an Investor, the Company shall cooperate with such
Investor to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, and to enable
such Registrable Securities to be in such denominations and
registered in such names as any such Investor may
request.
(ix) The
Company may require each selling Investor to furnish to the Company
a certified statement as to the number of shares of Common Stock
beneficially owned by such Investor and, if required by the SEC,
the natural persons thereof that have voting and dispositive
control over the shares and the status of Investor as, or
affiliation of Investor with, a broker-dealer.
6. LOCK
UP AGREEMENT.
6.1. Except
as stated in Section 6.2 below, during the period commencing on the
date hereof and ending on the six (6) month anniversary of the date
hereof (such period, the “Lock Up Period”), each
Investor acknowledges and agrees that it will not (1) offer, sell,
contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, pledge, hypothecate, grant any
option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, the shares of Common Stock
purchased by such Investor pursuant to this Agreement; or (2) enter
into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of
the shares of Common Stock purchased by such Investor pursuant to
this Agreement, whether any such transaction described in clause
(1) or (2) above is to be settled by delivery of the shares of
Common Stock, in cash or otherwise. Except as stated in Section 6.2
below, during the Lock Up Period, each Investor further agrees not
to enter into any Private Transaction (as defined below) involving
the shares of Common Stock purchased pursuant to this Agreement
unless the proposed transferee agrees to be bound by all the
provisions in this Section 6 prior to any such Private
Transaction. Any waiver or termination by the Company of the
requirements of this Section 6 shall apply to all Investors,
pro rata, based on the number of shares of Common Stock purchased
by such Investor in the Common Stock Offering. “Private
Transaction” means any privately negotiated sale of shares of
Common Stock by an Investor that is not effected pursuant to a
Registration Statement.
6.2. Notwithstanding
anything to the contrary contained herein, the lock-up restrictions
contained in this Section 6 shall not apply in the following
circumstances:
(i) The
transfer of the shares of Common Stock purchased pursuant to this
Agreement to any Permitted Transferee; provided, however, that such
Permitted Transferee agrees in writing to be subject to the
restrictions of this Section 6. “Permitted Transferee”
means (i) an affiliate (within the meaning of Rule 12b-2 under
the Exchange Act) of an Investor, (ii) any executor, administrator
or testamentary trustee of an Investor’s estate if such
Investor dies, (iii) any person or entity receiving the shares of
Common Stock purchased pursuant to this Agreement by an Investor by
will, intestacy laws or the laws of descent or survivorship, (iv)
any trust (including without limitation an inter vivos trust),
partnership or limited liability company for the direct or indirect
benefit of any Investor and/or the immediate family of such
Investor for estate planning purposes of which there are no
principal beneficiaries other than an Investor or one or more
family members of such Investor, or (v) any corporation,
partnership, limited liability company or similar entity controlled
by such Investor and of which there are no principal beneficiaries
or owners other than such Investor or one or more family members of
such Investor.
(ii) Any
Private Transaction of at least 100,000 shares of Common Stock
(subject to adjustment for any stock
splits, stock dividends, recapitalizations and similar
events) by any Investor or of shares of Common Stock for a
gross purchase price of at least $100,000 to a single entity or to
a broker for at most two entities.
(iii) Sales
made by Investors during any period when the last reported sale
price of the Common Stock on the applicable trading market is at
least $4.00 (subject to adjustment for
any stock splits, stock dividends, recapitalizations and similar
events).
(iv) Subject
to compliance with Section 9 in the case of any transaction
which has not been approved by the Company’s Board of
Directors, sales made by Investors in connection with any third
party tender offer, merger or similar transaction effected by third
party that results or is intended to result (in any one or series
of transactions) in a change in control of the Company, issuer
tender offer, liquidation, or in the event the Common Stock is no
longer registered pursuant to Section 12 of the Securities
Exchange Act.
6.3. The
Company agrees that any other selling stockholders whose securities
are registered on the Registration Statement shall agree to lock-up
restrictions that are consistent in all respects with the
restrictions contained in this Section 6 with respect to all
shares of Common Stock held by such stockholders (other than Common
Stock that are subject to a registration statement that is in
effect on the date hereof or as to which the Company previously
granted registration rights which remain in effect).
7. BOARD
COMPOSITION.
7.1 As
soon as is reasonably practicable following the Closing, the
Company’s Board of Directors shall appoint each of
Mr. Joshua Horowitz and Mr. David Allen (together, the
“Board
Designees”) to the Board of Directors and, prior to
the Closing, shall cause vacancies on the Board of Directors to be
created for such purpose, to the extent
necessary; provided, however, that (x) the appointment of
Mr. Horowitz shall not be required to be maintained upon Palm
ceasing to own at least five percent (5%) of the outstanding shares
of Common Stock of the Company (as calculated for purposes of
Section 13(d) of the Exchange Act) and (y) the Company shall have
no obligation to maintain the appointment of Mr. Allen for any
set period of time. In the event that Mr. Horowitz is
unwilling or unable to serve as member of the Board of Directors,
then the Company shall appoint a replacement Board Designee that is
designated by Palm (Mr. Horowitz or such replacement Board Designee
designated by Palm, the “Palm Designee”), subject
to the approval of a majority of the Board of Directors of the
Company, provided that (x) the appointment of such designee shall
not be required to be made or maintained at any time Palm ceases to
own at least five percent (5%) of the outstanding shares of Common
Stock of the Company (as calculated for purposes of Section 13(d)
of the Exchange Act) and (y) such designee is suitable to serve as
a director under applicable legal, regulatory and stock market
requirements. Palm shall have the right to designate the Palm
Designee for five (5) years after the date of this Agreement;
provided that the appointment of such designee shall not be
required to be made or maintained at any time Palm ceases to own at
least five percent (5%) of the outstanding shares of Common Stock
of the Company (as calculated for purposes of Section 13(d) of the
Exchange Act).
(i) Within
one Business Day of the appointment of the Board Designees (or
their replacements) to the Company’s Board of Directors, the
Company shall notify the carrier of its directors’ and
officers’ liability insurance of the appointment of the Board
Designees (or their replacements) and cause the names of such Board
Designees (or their replacements) to be added to such insurance
policy.
(ii) For
so long as the Company is required to have a Palm Designee on the
Board of Directors, Palm may designate at least one Board Designee
to each committee of its Board of Directors, whether now existing
or formed at any time in the future, to the extent approved by an
affirmative vote of a majority of the Board of Directors of the
Company and as otherwise permitted by applicable SEC and stock
market requirements.
(iii) For
so long as the Company is required to have a Palm Designee on the
Board of Directors, the Company shall take all actions necessary to
cause any Palm Designee whose term is expiring to be included in
the slate of nominees recommended by the Board of Directors of the
Company to the Company’s stockholders for election as a
director at each meeting of the Company’s stockholders called
for the purpose of electing directors (and/or in connection with
any election by written consent), and shall use its reasonable best
efforts to (i) solicit proxies in favor of the election of such
nominee, (ii) make, or cause to be made, with the SEC and other
governmental agencies, all filings, registrations or similar
actions that are required to achieve such result, and (iii) as long
as Palm has the rights described under this Section 7, not nominate
or recommend the election of any other candidates against or in
replacement of such Palm Designee.
(iv) Each
Board Designee shall serve until his or her successor is designated
or his or her earlier death, disability, resignation or removal,
and any vacancy or newly created directorship in the position of
the Palm Designee may be filled only by the Board Designee
designated by Palm.
(v) At
all times while the Board Designee is serving as a member of the
Board of Directors of the Company, and following any such Board
Designee’s death, disability, resignation or removal, such
Board Designee shall be entitled to all rights to compensation as a
member of the Board of Directors of the Committee or any committee
thereof and indemnification and exculpation as are then made
available to any other member of the Board of Directors of the
Company. Any equity awards granted to the Palm Designee shall
become immediately fully vested upon the Palm Designee’s
termination of service as a director of the Company if the Palm
Designee is willing to serve on the Board of Directors of the
Company, but is not nominated to stand for re-election by the Board
of Directors of the Company. The Company or any successor to the
Company shall maintain, at its own expense, directors’ and
officers’ liability insurance providing coverage to the Board
Designees on terms that are no less favorable than the coverage
provided to other directors of the Company.
(vi) For
so long as the Company is required to have a Palm Designee on the
Board of Directors, without prior written approval of Palm, the
size of the Company’s Board of Directors, including the Board
Designees, shall not exceed nine (9) total directors.
8. COVENANTS.
8.1. Participation
Right. During the Lock Up Period, if the Company proposes to
issue Common Stock or common stock equivalents for cash
consideration of $500,000 or greater, in one or more transactions
other than an underwritten public offering made pursuant to a
Registration Statement, with the primary purpose of raising capital
(each, a “Subsequent
Financing”), Palm shall have the right to participate
in up to two (2) such Subsequent Financings in an amount necessary
to maintain Palm’s pro-rata ownership of the Company
(calculated on a fully-diluted basis) on the same terms, conditions
and price provided for in such Subsequent Financing (the
“Participation
Rights”). The Company will provide Palm written notice
(the “Subsequent
Financing Notice”) detailing the terms of the
Subsequent Financing at least ten (10) trading days prior to the
closing of a Subsequent Financing. Palm will have the option to
participate in each Subsequent Financing for a period commencing on
the date the Subsequent Financing Notice is received by Palm and
ending on the date that is five (5) trading days prior to the
closing of a Subsequent Financing. Without first complying with the
foregoing provisions, the Company may conduct a Subsequent
Financing as long as the Company, within five (5) Business Days
following the closing of such Subsequent Financing, offers to sell
an additional amount of Common Stock or common stock equivalents to
Palm on the same terms and conditions as issued to those
participants in the Subsequent Financing, in an amount and manner
which provides Palm with the same purchase price (subject to
adjustment for any stock splits, stock dividends, recapitalizations
and similar events) and rights as were provided to other Investors
in such Subsequent Financing, and after giving effect to such sale
to Palm, results in Palm having the same pro rata holding of Common
Stock or common stock equivalents of the Company held by Palm
immediately prior to such Subsequent Financing. The Company and
Palm agree that if Palm elects to participate in the Subsequent
Financing, the transaction documents related to the Subsequent
Financing shall not include any term or provision whereby Palm
shall be required to agree to any restrictions on trading as to any
of the securities purchased under this Agreement other than
customary “market stand-off” provisions.
Notwithstanding anything to the contrary in this Section 8.1 and
unless otherwise agreed to by Palm, the Company shall either
confirm in writing to Palm that the transaction with respect to the
Subsequent Financing has been abandoned or shall publicly disclose
its intention to issue the securities in the Subsequent Financing,
in either case in such a manner such that Palm will not be in
possession of any material, non-public information, by the
fifteenth (15th) trading day
following delivery of the Subsequent Financing Notice. If by such
fifteenth (15th) trading day, no
public disclosure regarding a transaction with respect to the
Subsequent Financing has been made, and no notice regarding the
abandonment of such transaction has been received by Palm, such
transaction shall be deemed to have been abandoned and Palm shall
not be deemed to be in possession of any material, non-public
information with respect to the Company or any of its
subsidiaries.
8.2. Restrictions
on Dividend, Repurchase and Preferred Stock. Without the
consent of Palm, the Company shall not:
(i) for
a period of eighteen (18) months following the Closing, pay
dividends on the Common Stock or repurchase Common Stock except (A)
Common Stock of employees where the Company has a repurchase right
and (B) other repurchases of Common Stock from resigning,
terminated or retiring employees in an amount not to exceed,
individually or in the aggregate, $100,000; or
(ii) for
a period of six (6) months following the Closing, authorize the
issuance of any series of Preferred Stock or convertible notes
having rights, preferences or privileges senior to the Common
Stock.
8.3 Listing
and Maintenance Requirements. The Company agrees to use its
commercially reasonable efforts to list its shares on the New York
Stock Exchange, the Nasdaq Stock Market or another securities
exchange approved by Palm, provided that under no circumstances
shall the Company be required to conduct a reverse split in order
to effect such a listing, and shall have no obligation to list on
any exchange until it otherwise meets all applicable quantitative
standards with respect to such exchange. Until the earlier of (a)
the five (5) year anniversary of the date hereof and (y) such time
as Palm no longer holds any of the securities purchased under this
Agreement, the Company shall continue to file reports with the SEC
to the extent required pursuant to Sections 13 or 15(d) of the
Exchange Act, and if at any time the Company is not required to
file such SEC reports, upon the request of Palm, to make publicly
available other information to the extent it is necessary to permit
publication by brokers and dealers of quotations for the Common
Stock in accordance with Rule 15c2-11 under the Exchange
Act.
9. STANDSTILL.
Unless approved in advance in writing by the Company’s Board
of Directors, Palm or any affiliate of such individual or Palm, or
in Section 8.1 with regard to the Participation Rights, Palm agrees
that for a period ending not later than the earliest to occur of
(x) five (5) years after the date of this Agreement and (y) two (2)
years after the Palm Designee no longer serves on the Board of
Directors of the Company, neither Palm nor any of its affiliates
shall directly or indirectly agree, or advise, assist, encourage,
provide information or provide financing to others, or permit its
affiliates to agree, or to advise, assist, encourage, provide
information or provide financing to others, to, individually or
collectively, directly or indirectly:
(i) make
any public announcement, proposal, or offer (including any
“solicitation” of “proxies” as such terms
are defined or used in Regulation 14A under the Exchange Act)
with respect to (including, for the avoidance of doubt, indirectly
by means of communication with the press or media): (A) any
business combination, merger, tender offer, exchange offer, or
similar transaction involving the Company or any of its
subsidiaries, (B) any restructuring, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of
its subsidiaries, (C) any acquisition (either beneficially or of
record) of any of the Company’s loans, debt securities,
equity securities, equity-linked securities or assets, or rights or
options to acquire interests in any of the Company’s loans,
debt securities, equity securities, or assets, (D) any proposal to
seek representation on the Board of Directors of the Company or
otherwise seek to control or influence the management, Board of
Directors, or policies of the Company, (E) any request or proposal
to waive, terminate, or amend the provisions of this Section 9, or
(F) any proposal, arrangement, or other statement that is
inconsistent with the terms of this Agreement, including this
Section 9;
(ii) make,
or in any way participate in, directly or indirectly, any
“solicitation” of “proxies” to vote (as
such terms are used in the Regulation 14A under the Exchange
Act) or initiate, propose or otherwise solicit stockholders of the
Company or its subsidiaries for the approval of any stockholder
proposals, in each case with respect to the Company or any of its
subsidiaries; provided, however, that the foregoing shall not apply
to any individual who is a director of the Company acting in his or
her capacity as a director of the Company with respect to matters
approved by a majority of the Board of Directors of the
Company;
(iii) call
any special meeting of stockholders of the Company or make any
request under Section 220 of the Delaware General Corporation
Law or other applicable law regarding the inspection of books or
record or other materials (including stock lists) of the Company or
any of its subsidiaries;
(iv) form,
join, in any way participate in, or encourage the formation of, a
group (within the meaning of Section 13(d)(3) of the Exchange Act)
with respect to any voting securities of the Company or any of its
subsidiaries that engages in any of the activities listed in
clauses (i) through (ii) or clauses (v) through (x) of this Section
9;
(v) deposit
any securities of the Company or any of its subsidiaries into a
voting trust, or subject any securities of the Company or any of
its subsidiaries to any agreement, arrangement or understanding
with respect to the voting of such securities, or other agreement,
arrangement or understanding having similar effect;
(vi) instigate,
encourage, or assist any third party (including forming a
“group” with any such third party) to do, or enter into
any discussions or agreements with any third party with respect to,
any of the actions set forth in clause (i) above;
(vii) take
any action that would reasonably be expected to require the Company
or any of its affiliates to make a public announcement regarding
any of the actions set forth in clause (i) above;
(viii)
acquire (or propose or agree to acquire), either beneficially or of
record, by purchase or otherwise, any loans, debt securities,
equity securities, equity-linked securities or assets of the
Company or any of its subsidiaries, or rights or options to acquire
interests in any of the Company’s loans, debt securities,
equity securities, or assets;
(ix) enter
into any discussions or arrangements with any third party with
respect to any of the foregoing; or
(x) request
the Company or any of its subsidiaries (or any directors, officers,
employees or agents of the Company or any of its subsidiaries),
directly or indirectly, to amend, waive or modify any provision of
this Section 9 in a manner that would require public
disclosure of such request;
provided,
however, that (I) neither clause (i)(D) above nor clause (vi) above
shall prohibit any designation to the Company’s Board of
Directors of a successor Board Designee for Mr. Horowitz or another
Palm Designee to the extent permitted by Section 7, and (II)
neither clause (i)(C) above nor clause (vii) above shall apply to
(X) a stock split, reverse stock split or stock reclassification by
the Company affecting Common Stock of the Company generally that
has been approved by a majority (excluding from such calculation
the Board Designees) of the Board of Directors of the Company, or
(Y) a stock dividend or other pro rata distribution by the Company
to holders of its Common Stock;
and
provided further, that, so long as a Board Designee remains on the
Company’s Board of Directors, none of the foregoing shall
prohibit any actions taken by the Board Designees in the exercise
of their fiduciary duties as members of the Company’s Board
of Directors.
10. USE
OF PROCEEDS. The Purchase Price received by the Company
pursuant hereto may be used for working capital and other general
corporate purposes, which may include, among other things, working
capital, product development, acquisitions, capital expenditures,
and other business
opportunities.
11. BENEFIT
OF AGREEMENT. This Agreement shall inure to the benefit of
and be binding upon each of the parties hereto, and their heirs,
beneficiaries, successors, assignees and legal representatives, as
may be applicable.
12. SUCCESSORS
AND ASSIGNS. Except as otherwise expressly provided herein,
this Agreement shall bind and inure to the benefit of the Company
and each Investor and their respective successors and assigns.
Notwithstanding the foregoing, the registration rights provided in
Section 5 are personal to the Investors and the Board Designee
rights provided in Section 7 and the provisions of
Section 8 are personal to Palm
(including a transferee who is an affiliate of Palm), and in
each case are not transferable without the prior consent of the
Company (other than by Palm to affiliates of Palm). Any transfer of
such rights without the consent of the Company shall be
void.
13. ENTIRE
AGREEMENT. This Agreement is the complete and entire
understanding between the parties as to the transactions
contemplated hereby, and supersedes all prior agreements with
respect thereto. This Agreement may be executed in any number of
counterparts and may not be altered or amended other than by
written agreement signed by all the parties hereto.
14. AMENDMENTS,
WAIVERS AND CONSENTS. Any provision in this Agreement to the
contrary notwithstanding, amendments to, changes in or additions to
this Agreement may be made, and compliance with any covenant or
provision set forth herein may be omitted or waived, if the Company
shall consent thereto and shall obtain consent thereto in writing
from Investors purchasing at least a majority of the shares of
Common Stock sold in the Common Stock Offering.
15. GOVERNING
LAW. This Agreement shall be governed by the internal laws
of the State of Delaware. The parties (a) agree that any legal
suit, action or proceeding arising out of or relating to this
Agreement shall be instituted exclusively in the State of Delaware,
(b) waive any objection which such party may have now or hereafter
to the venue of any such suit, action or proceeding, and (c)
irrevocably consents to the jurisdiction of the State of Delaware
in any such suit, action or proceeding. The parties further agree
to accept and acknowledge service of any and all process which may
be served in any such suit, action or proceeding in the State of
Delaware. THE PARTIES HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT
CONTEMPLATED HEREBY.
16. SURVIVAL.
The representations, warranties, covenants and agreements made
herein shall survive any investigation made by any Investor and for
a period of eighteen (18) months following the Closing, provided
that all covenants and agreements of the parties contained herein
shall survive the Closing indefinitely or for the period of time
explicitly specified therein.
17. INTERPRETATION.
This Agreement shall be construed without regard to any presumption
or rule requiring construction or interpretation against the party
drafting an instrument or causing any instrument to be
drafted.
18. CONFIDENTIAL
INFORMATION. The information contained in this Agreement is
confidential and proprietary to the Company and is being submitted
to prospective investors in the Company solely for such
investors’ confidential use with the express understanding
that, without the prior express written permission of the Company,
such persons will not release this Agreement, discuss the
information contained herein or use this Agreement for any purpose
other than evaluating a potential investment in the Company through
the purchase of shares of Common Stock. A prospective investor, by
accepting delivery of this Agreement, agrees to promptly return to
the Company this Agreement and any other documents or information
furnished by the Company if (a) the prospective investor elects not
to purchase the shares of Common Stock offered hereby, (b) the
prospective investor’s proposed purchase of Common Stock is
not accepted by the Company, or (c) the offering of the shares of
Common Stock is terminated or withdrawn.
19. FEES
AND EXPENSES. Each
party will bear its own costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement, except
the Company shall bear the reasonable documented legal fees and
expenses, including filings under Section 16 of the Exchange Act
and Schedule 13D filings, of Palm up to $40,000 (not including the
fees and expenses set forth in Section 5.5).
[Signature
page follows]
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the date provided
below.
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ZOOM TELEPHONICS, INC.
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By:
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/s/
Jacquelyn Barry Hamilton
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Name:
Jacquelyn Barry Hamilton
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Title:
Chief Financial Officer
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INVESTORS:
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The
Investors executing the Signature Page in the form attached hereto
as Annex A and delivering the same to the Company or its
agents shall be deemed to have executed this Agreement and agreed
to the terms hereof.
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[Signature page to Stock Purchase Agreement]
Annex A
Investor Counterpart Signature Page
The
undersigned, desiring to: (i) enter into this Stock Purchase
Agreement dated as of May , 2020 (the
“Agreement”),
with the undersigned, the other Investors (as defined therein)
party thereto, and Zoom Telephonics, Inc., a Delaware corporation
(the “Company”),
in or substantially in the form furnished to the undersigned and
(ii) purchase the shares of Common Stock as set forth below, hereby
agrees to purchase such shares of Common Stock from the Company as
of the Closing Date and further agrees to, and hereby does, join
the Stock Purchase Agreement as a party thereto, with all the
rights and privileges appertaining thereto, and to be bound in all
respects by the terms and conditions thereof. The undersigned
specifically acknowledges having read the representations and
warranties of the Investors in the Agreement and hereby represents
and warrants that the statements contained therein are complete and
accurate with respect to the undersigned as an Investor (as defined
in the Agreement).
Investor:
[Entity
Name]
By:
Name:
Title:
[Individual
Name]
Address:
Telephone
No.:
Facsimile
No.:
Email:
FEIN/SSN:
The
Investor hereby elects to purchase shares of Common Stock
(to be completed by
Investor) at a purchase price of $1.52 per share of Common
Stock under the Agreement at a total Purchase Price for such
Investor of $ (to be completed by
Investor).
