SECURITIES PURCHASE
AGREEMENT
Dated as of June 5,
2008
by and among
GENTA INCORPORATED
and
THE PURCHASERS LISTED ON EXHIBIT
A
SECURITIES PURCHASE
AGREEMENT
This SECURITIES PURCHASE AGREEMENT
dated as of June 5, 2008 (this “ Agreement ”) by and among Genta Incorporated, a
Delaware corporation (the “ Company ”), and each of the purchasers of the senior
secured convertible promissory notes of the Company whose names are
set forth on Exhibit
A attached hereto (each a
“ Purchaser
” and collectively, the
“ Purchasers ”).
The parties hereto agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF
NOTES
1.1 Purchase and Sale of Notes . Upon the following terms and conditions,
the Company shall issue and sell to the Purchasers, and the
Purchasers shall purchase from the Company, 15% senior secured
convertible promissory notes in the aggregate principal amount of
up to $40,000,000, convertible into shares of the Company’s
common stock, par value $0.001 per share (the “
Common Stock
”), in substantially the form
attached hereto as Exhibit
B (the “
Notes ”). The Company and the Purchasers are
executing and delivering this Agreement in accordance with and in
reliance upon the exemption from securities registration afforded
by Section 4(2) of the U.S. Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (the
“ Securities
Act ”), including
Regulation D (“ Regulation D ”), and/or upon such other exemption from
the registration requirements of the Securities Act as may be
available with respect to any or all of the investments to be made
hereunder.
1.2 Purchase Price and Closings
. Subject to the terms and conditions
hereof, the Company agrees to issue and sell to the Purchasers and,
in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of
this Agreement, the Purchasers, severally but not jointly, agree to
purchase the Notes for an aggregate purchase price of up to
$40,000,000 (the “ Purchase Price ”). At each Closing (as defined below), each
Purchaser shall deliver the applicable portion of the Purchase
Price by wire transfer of immediately available funds to the
Company.
(a) The first closing under this Agreement (the
“ First
Closing ”) shall take
place on or before June 6, 2008 (the “ First Closing Date ”). The First Closing shall take place at
the offices of Tang Capital Partners L.P. (the “
Lead Purchaser
”), 4401 Eastgate Mall, First
Floor, San Diego, CA 92121 at 10:00 a.m. Pacific Standard
Time; provided
, that all of the conditions set forth
in Article IV hereof and applicable to the First Closing shall have
been fulfilled or waived in accordance herewith. Subject to the
terms and conditions of this Agreement, at the First Closing the
Purchasers shall purchase and the Company shall issue and deliver
or cause to be delivered to each Purchaser Notes for the principal
amount set forth opposite the name of such Purchaser on
Exhibit A hereto.
(b) At any time and from time to time on or prior to
the first anniversary of the First Closing, each of the Purchasers
shall have the option (the “ Purchase Option ”), in each such Purchaser’s sole
discretion, to purchase additional Notes in the aggregate amount up
to the amount set forth opposite such Purchaser’s name
on Exhibit A
hereto in one or more closings (each
an “ Additional
Closing ”, and along
with the First Closing, each a “ Closing ”). The issuance of such additional Notes at
any Additional Closing, shall be made on the terms and conditions
set forth in this Agreement, and the representations and warranties of the Company
set forth in Article 3 and the representations and warranties of
the Purchasers in Article 4 hereof shall speak as of such
Additional Closing. Any Notes issued pursuant to this
Section 1.2(b) shall be deemed to be “Notes” for
all purposes under this Agreement.
1.3 Conversion Shares . The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders a total of
4,000,000,000 shares of Common Stock to effect the conversion of
the Notes and any interest accrued and outstanding thereon. Within
75 days of the First Closing Date, the Company shall amend its
Certificate (as defined below) to increase the number of authorized
shares of Common Stock (the date of the effectiveness of such
amendment, the “ Amendment Date ”); provided that the foregoing deadline
shall be 120 days if the SEC (as defined below) reviews the
Company’s proxy statement related to the approval of the
amendment. On and after the Amendment Date, the Company shall
reserve (and hereby covenants to continue to reserve), free of
preemptive rights and other similar contractual rights,
a
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number of its authorized but unissued
shares of Common Stock equal to 125% of the aggregate number of
shares of Common Stock issuable upon conversion of or otherwise in
respect of the Notes. Any shares of Common Stock issuable upon
conversion or otherwise in respect of the Notes are herein referred
to as the “ Conversion
Shares ”. The Notes
and the Conversion Shares are sometimes collectively referred to
herein as the “ Securities ”.
ARTICLE 2
REPRESENTATIONS AND
WARRANTIES
2.1 Representations and Warranties of the
Company . The Company
hereby represents and warrants to the Purchasers, as of the date
hereof and as of the First Closing Date and the date of any
Additional Closing (each a “ Closing Date ”) (except as set forth in the Public
Filings (as defined below) or on the Schedule of Exceptions
attached hereto with each numbered Schedule corresponding to the
section number herein), as follows:
(a) Organization, Good Standing and Power
. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power to
own, lease and operate its properties and assets and to conduct its
business as it is now being conducted. The Company does not have
any direct or indirect Subsidiaries (as defined in Section 2.1(g))
or own securities of any kind in any other entity except as set
forth on Schedule
2.1(g) hereto. The Company
and each such Subsidiary (as defined in Section 2.1(g)) is duly
qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification
necessary except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a
Material Adverse Effect. For the purposes of this Agreement,
“ Material Adverse
Effect ” means any
material adverse effect on the business, operations, properties,
prospects, or financial condition of the Company and its
Subsidiaries and/or any condition, circumstance, or situation that
would prohibit or otherwise materially interfere with the ability
of the Company to perform any of its obligations under this
Agreement or any of the Transaction Documents in any material
respect.
(b) Authorization; Enforcement . Each of the Company and its Subsidiaries (as
applicable) has the requisite corporate power and authority to
enter into and perform this Agreement, the Notes, the General
Security Agreement by and among the Company and its Subsidiaries,
on the one hand, and the Agent (as defined in the Security
Agreement), on the other hand, dated as of the date hereof,
substantially in the form of Exhibit C attached hereto (the “
Security Agreement
”), the Intellectual Property
Security Agreement by and among the Company and its Subsidiaries,
on the one hand, and the Agent (as defined in the Security
Agreement), on the other hand, dated as of the date hereof,
substantially in the form of Exhibit D attached hereto (the “
IP Security Agreement
”), the Officer’s
Certificate to be delivered by the Company, dated as of the Closing
Date, substantially in the form of Exhibit E attached hereto (the “
Officer’s
Certificate ”) and
the Irrevocable Transfer Agent Instructions (as defined in Section
3.16 hereof) (collectively, the “ Transaction Documents ”) and to issue and sell the Securities in
accordance with the terms hereof. The execution, delivery and
performance of the Transaction Documents by the Company and each
Subsidiary of the Company party thereto and the consummation by it
of the transactions contemplated thereby have been duly and validly
authorized by all necessary corporate action, and, except as set
forth on Schedule
2.1(b) , no further consent
or authorization of the Company, any Subsidiary or their respective
Boards of Directors or stockholders is required. When executed and
delivered by the Company and each Subsidiary of the Company party
thereto, each of the Transaction Documents shall constitute a valid
and binding obligation of the Company and each Subsidiary, as
applicable, enforceable against the Company and each Subsidiary, as
applicable, in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally
the enforcement of, creditor’s rights and remedies or by
other equitable principles of general application.
(c) Capitalization . The authorized capital stock and the issued and
outstanding shares of capital stock of the Company as of the
Closing Date is set forth on Schedule 2.1(c) hereto. All of the outstanding shares of the
Common Stock and any other outstanding security of the Company have
been duly and validly authorized. Except as set forth in this
Agreement, the Public Filings (as defined in Section 2.1(f)) or as
set forth on Schedule
2.1(c) hereto, no shares of
Common Stock or any other security of the Company are entitled to
preemptive rights or registration rights and 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, any shares of
capital
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stock of the Company. Furthermore,
except as set forth in this Agreement and as set forth on
Schedule 2.1(c)
hereto, there are no equity plans,
contracts, commitments, understandings, or arrangements by which
the Company is or may become bound to issue additional shares of
the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except for
customary transfer restrictions contained in agreements entered
into by the Company in order to sell restricted securities or as
provided on Schedule
2.1(c) hereto, the Company
is not a party to or bound by any agreement or understanding
granting registration or anti-dilution rights to any person with
respect to any of its equity or debt securities. Except as set
forth on Schedule
2.1(c) , the Company is not
a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of
the capital stock of the Company. The Company has not made any
representations regarding equity incentives to any officer,
employee, director or consultant that are not disclosed in the
Public Filings.
(d) Issuance of Securities . The amendment of the Certificate to increase the
authorized shares of Common Stock in connection with this Agreement
requires the approval of a majority of the outstanding shares of
Common Stock. The Notes to be issued at each Closing have been duly
authorized by all necessary corporate action and, when paid for or
issued in accordance with the terms hereof, the Notes shall be
validly issued and outstanding, free and clear of all liens,
encumbrances and rights of refusal of any kind. When the Conversion
Shares are issued in accordance with the terms of this Agreement
and as set forth in the Notes, such shares will be duly authorized
by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, free and clear of all
liens, encumbrances and rights of refusal of any kind and the
holders shall be entitled to all rights accorded to a holder of
Common Stock.
(e) No Conflicts . The execution, delivery and performance of the
Transaction Documents by the Company and its Subsidiaries (as
applicable), the performance by the Company of its obligations
under the Notes and the consummation by the Company and its
Subsidiaries of the transactions contemplated hereby and thereby,
and the issuance of the Securities as contemplated hereby, do not
and will not (i) violate or conflict with any provision of the
Company’s Certificate of Incorporation (the “
Certificate ”) or Bylaws (the “
Bylaws ”), each as amended to date, or any
Subsidiary’s comparable charter documents, subject to the
filing of an amendment to the Certificate to increase the
authorized shares, (ii) conflict with, or constitute a default (or
an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries’ respective properties or assets are bound,
(iii) result in a violation of any federal, state, local or foreign
statute, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to
the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries are bound or
affected, or (iv) create or impose a lien, mortgage, security
interest, charge or encumbrance of any nature on any property or
asset of the Company or its Subsidiaries under any agreement or any
commitment to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound
or by which any of their respective properties or assets are bound,
except, in the case of clause (ii), for such conflicts, defaults,
terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a
Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is required under federal, state, foreign or local
law, rule or regulation to obtain any consent, authorization or
order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform
any of its obligations under the Transaction Documents or issue and
sell the Securities in accordance with the terms hereof (other than
the filing of a Form D pursuant to Regulation D and counterpart
filings under applicable state securities laws, rules or
regulations). The business of the Company and its Subsidiaries is
not being conducted in violation of any laws, ordinances or
regulations of any governmental entity.
(f) Commission Documents, Financial
Statements . The Common
Stock of the Company is registered pursuant to Section 12(b) or
12(g) of the Securities Exchange Act of 1934, as amended (the
“ Exchange
Act ”), and the
Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the Securities
Exchange Commission (“ SEC ”) pursuant to the reporting requirements of
the Exchange Act (all of the foregoing including filings
incorporated by reference therein being referred to herein as the
“ Commission
Documents ”). At the
times of their respective filings, the Form 10-Q for the fiscal
quarter ended March 31, 2008 (the “ Form 10-Q ”) and the Form 10-K for the fiscal year
ended December 31, 2007 (the “ Form 10-K ”, and together with the Form 10-Q and any
other report, schedule, form, statement or other document filed by
the
4
Company with the SEC pursuant to the
reporting requirements of the Exchange Act subsequent to the filing
of the Form 10-K and prior to the date of this Agreement, the
“ Public
Filings ”) complied
in all material respects with the requirements of the Exchange Act
and the rules and regulations of the SEC promulgated thereunder and
other federal, state and local laws, rules and regulations
applicable to such documents, and the Form 10-Q and Form 10-K did
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. As of their respective
dates, the financial statements of the Company included in the
Commission Documents complied as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC or other applicable rules and regulations
with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles
(“ GAAP
”) applied on a consistent basis
during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii)
in the case of unaudited interim statements, to the extent they may
not include footnotes or may be condensed or summary statements),
and fairly present in all material respects the financial position
of the Company and its Subsidiaries as of the dates thereof and the
results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end
audit adjustments).
(g) Subsidiaries . Schedule
2.1(g) hereto sets forth
each Subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each
person’s ownership of the outstanding stock or other
interests of such Subsidiary. For the purposes of this Agreement,
“ Subsidiary ” shall mean any corporation or other entity
of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently)
for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by the
Company and/or any of its other Subsidiaries. All of the
outstanding shares of capital stock of each Subsidiary have been
duly authorized and validly issued, and are fully paid and
nonassessable. Except as set forth on Schedule 2.1(g) hereto, there are no outstanding preemptive,
conversion or other rights, options, warrants or agreements granted
or issued by or binding upon any Subsidiary for the purchase or
acquisition of any shares of capital stock of any Subsidiary or any
other securities convertible into, exchangeable for or evidencing
the rights to subscribe for any shares of such capital stock.
Neither the Company nor any Subsidiary is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of the capital stock of any Subsidiary or any
convertible securities, rights, warrants or options of the type
described in the preceding sentence except as set forth on
Schedule 2.1(g)
hereto. Neither the Company nor any
Subsidiary is party to, nor has any knowledge of, any agreement
restricting the voting or transfer of any shares of the capital
stock of any Subsidiary. None of the Subsidiaries owns any assets
or conduct any operations.
(h) No Material Adverse Change . Since December 31, 2007, the Company has not
experienced or suffered any Material Adverse Effect, except as
disclosed on Schedule
2.1(h) hereto.
(i) No Undisclosed Liabilities . Except as disclosed on Schedule 2.1(i) hereto, neither the Company nor any of its
Subsidiaries has incurred any liabilities, obligations, claims or
losses (whether liquidated or unliquidated, secured or unsecured,
absolute, accrued, contingent or otherwise) other than those
incurred in the ordinary course of the Company’s or its
Subsidiaries’ respective businesses or which, individually or
in the aggregate, are not reasonably likely to have a Material
Adverse Effect.
(j) No Undisclosed Events or Circumstances
. Since December 31, 2007, except as
disclosed on Schedule
2.1(j) hereto, no event or
circumstance has occurred or exists with respect to the Company or
its Subsidiaries or their respective businesses, properties,
prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly
announced or disclosed.
(k) Indebtedness . Schedule
2.1(k) hereto sets forth as
of the applicable Closing Date all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for
which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, “Indebtedness” shall
include, without limitation, (a) any liabilities for borrowed money
or other amounts owed, (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others,
whether or not the same are or should be reflected in the
Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business; and (c) the present value of any lease payments in excess
of $10,000 due under leases required to be capitalized in
accordance with GAAP. Neither the Company nor any Subsidiary is in
default with respect to any Indebtedness.
5
(l) Title to Assets . Each of the Company and the Subsidiaries has
good and valid title to all of its real and personal property
reflected in the Public Filings, free and clear of any mortgages,
pledges, charges, liens, security interests or other encumbrances,
except for those indicated on Schedule 2.1(l) hereto or such that, individually or in the
aggregate, do not cause a Material Adverse Effect. Any leases of
the Company and each of its Subsidiaries are valid and subsisting
and in full force and effect.
(m) Actions Pending . There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other
proceeding pending or, to the knowledge of the Company, threatened
against the Company or any Subsidiary which questions the validity
of this Agreement or any of the other Transaction Documents or any
of the transactions contemplated hereby or thereby or any action
taken or to be taken pursuant hereto or thereto. Except as set
forth in the Public Filings or on Schedule 2.1(m) hereto, there is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding
or other proceeding pending or, to the knowledge of the Company,
threatened against or involving the Company, any Subsidiary or any
of their respective properties or assets, which individually or in
the aggregate, would reasonably be expected, if adversely
determined, to have a Material Adverse Effect. There are no
outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against
the Company or any Subsidiary or any officers or directors of the
Company or Subsidiary in their capacities as such, which
individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
(n) Compliance with Law . The Company and its Subsidiaries have been and
are presently conducting their respective businesses in accordance
with all applicable federal, state and local governmental laws,
rules, regulations and ordinances, except such that, individually
or in the aggregate, the noncompliance therewith could not
reasonably be expected to have a Material Adverse Effect. The
Company and each of its Subsidiaries have all franchises, permits,
licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of its
business as now being conducted by it unless the failure to possess
such franchises, permits, licenses, consents and other governmental
or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material
Adverse Effect.
(o) Taxes .
The Company and each of the Subsidiaries has accurately prepared
and filed all federal, state and other tax returns required by law
to be filed by it, has paid or made provisions for the payment of
all taxes shown to be due and all additional assessments, and
adequate provisions have been and are reflected in the financial
statements of the Company and the Subsidiaries for all current
taxes and other charges to which the Company or any Subsidiary is
subject and which are not currently due and payable. Except as
disclosed on Schedule
2.1(o) hereto or in the
Public Filings, to the best of the Company’s knowledge, none
of the federal income tax returns of the Company or any Subsidiary
have been audited by the Internal Revenue Service. Except as
disclosed on Schedule
2.1(o) hereto or in the
Public Filings, the Company has no knowledge of any additional
assessments, adjustments or contingent tax liability (whether
federal or state) of any nature whatsoever, whether pending or
threatened against the Company or any Subsidiary for any period,
nor of any basis for any such assessment, adjustment or
contingency.
(p) Certain Fees . Except as set forth on Schedule 2.1(p) hereto, the Company has not employed any broker or
finder or incurred any liability for any brokerage or investment
banking fees, commissions, finders’ structuring fees,
financial advisory fees or other similar fees in connection with
the Transaction Documents.
(q) Disclosure . Except for the information concerning the
transactions contemplated by this Agreement, the Company confirms
that neither it nor any other person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any
information that constitutes or might constitute material,
nonpublic information. To the best of the Company’s
knowledge, neither this Agreement or the Schedules hereto nor any
other documents, certificates or instruments furnished to the
Purchasers by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made herein
or therein, in the light of the circumstances under which they were
made herein or therein, not misleading.
6
(r) Operation of Business . Except as set forth on Schedule 2.1(r) hereto, the Company and each of the Subsidiaries
owns or possesses the rights to all patents, trademarks, domain
names (whether or not registered) and any patentable improvements
or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade
names, copyrights, licenses and authorizations which are necessary
for the conduct of its business as now conducted without any
conflict with the rights of others.
(s) Environmental Compliance . The Company and each of its Subsidiaries have
obtained all material approvals, authorization, certificates,
consents, licenses, orders and permits or other similar
authorizations of all governmental authorities, or from any other
person, that are required under any Environmental Laws.
“Environmental Laws” shall mean all applicable laws
relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing,
permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous
substances, chemical substances, pollutants, contaminants or toxic
substances, materials or wastes, whether solid, liquid or gaseous
in nature, into the air, surface water, groundwater or land, or
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic
substances, material or wastes, whether solid, liquid or gaseous in
nature. The Company has all necessary governmental approvals
required under all Environmental Laws as necessary for the
Company’s business or the business of any of its
subsidiaries. To the best of the Company’s knowledge, the
Company and each of its subsidiaries are also in compliance with
all other limitations, restrictions, conditions, standards,
requirements, schedules and timetables required or imposed under
all Environmental Laws. Except for such instances as would not
individually or in the aggregate have a Material Adverse Effect,
there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting
the Company or its Subsidiaries that violate or may violate any
Environmental Law after each Closing Date or that may give rise to
any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or
investigation (i) under any Environmental Law, or (ii) based on or
related to the manufacture, processing, distribution, use,
treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous
substance.
(t) Books and Records; Internal Accounting
Controls . The records and
documents of the Company and its Subsidiaries accurately reflect in
all material respects the information relating to the business of
the Company and the Subsidiaries, the location and collection of
their assets, and the nature of all transactions giving rise to the
obligations or accounts receivable of the Company or any
Subsidiary. The Company is in material compliance with all
provisions of the Sarbanes-Oxley Act of 2002 which are applicable
to it as of the applicable Closing Date. The Company and its
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 GAAP 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-15(e)
and 15d-15(e)) for the Company and designed such disclosure
controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the SEC’s rules and
forms. The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the
Exchange Act (such date, the “ Evaluation Date ”). The Company presented in its most
recently filed periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of
the disclosure controls and procedures based on their evaluations
as of the Evaluation Date. Since the Evaluation Date, there have
been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act)
that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial
reporting.
(u) Material Agreements . Except as disclosed in the Public Filings or as
set forth on Schedule
2.1(u) hereto, or as would
not be reasonably likely to have a Material Adverse Effect, (i) the
Company and each of its Subsidiaries have performed all obligations
required to be performed by them to date under any written or oral
contract, instrument, agreement, commitment, obligation, plan or
arrangement, filed or required to be filed with the SEC (the
“ Material
Agreements ”), (ii)
neither the Company nor any of its Subsidiaries has received any
notice of default under any Material Agreement and, (iii) to the
best of the Company’s knowledge, neither the Company nor any
of its Subsidiaries is in default under any Material Agreement now
in effect.
7
(v) Transactions with Affiliates
. Except as set forth on
Schedule 2.1(v)
hereto or in the Public Filings and
otherwise contemplated by this Agreement, there are no loans,
leases, agreements, contracts, royalty agreements, management
contracts or arrangements or other continuing transactions between
(a) the Company, any Subsidiary or any of their respective
customers or suppliers on the one hand, and (b) on the other hand,
any officer, employee, consultant or director of the Company, or
any of its Subsidiaries, or any person owning at least 5% of the
outstanding capital stock of the Company or any Subsidiary or any
member of the immediate family of such officer, employee,
consultant, director or stockholder or any corporation or other
entity controlled by such officer, employee, consultant, director
or stockholder, or a member of the immediate family of such
officer, employee, consultant, director or stockholder which, in
each case, is required to be disclosed in the Commission Documents
or in the Company’s most recently filed definitive proxy
statement on Schedule 14A, that is not so disclosed in the
Commission Documents or in such proxy statement.
(w) Securities Act of 1933 . The Company has complied and will comply with
all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Securities hereunder. Neither
the Company nor anyone acting on its behalf, directly or
indirectly, has or will sell, offer to sell or solicit offers to
buy any of the Securities or similar securities to, or solicit
offers with respect thereto from, or enter into any negotiations
relating thereto with, any person, or has taken or will take any
action so as to bring the issuance and sale of any of the
Securities under the registration provisions of the Securities Act
and applicable state securities laws, and neither the Company nor
any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the
Securities Act) in connection with the offer or sale of any of the
Securities.
(x) Employees . Neither the Company nor any Subsidiary has any
collective bargaining arrangements or agreements covering any of
its employees, except as set forth on Schedule 2.1(x) hereto. Except as set forth on
Schedule 2.1(x)
hereto or in the Public Filings,
neither the Company nor any Subsidiary has any employment contract,
agreement regarding proprietary information, non-competition
agreement, non-solicitation agreement, confidentiality agreement,
or any other similar contract or restrictive covenant, relating to
the right of any officer, employee or consultant to be employed or
engaged by the Company or such Subsidiary required to be disclosed
in the Commission Documents that is not so disclosed. No officer,
consultant or key employee of the Company or any Subsidiary whose
termination, either individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect, has terminated
or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or
any Subsidiary.
(y) Absence of Certain Developments
. Except as set forth in the Public
Filings or provided on Schedule 2.1(y) hereto or as otherwise contemplated by this
Agreement, since December 31, 2007, neither the Company nor any
Subsidiary has:
(i) issued any stock, bonds or other corporate
securities or any right, options or warrants with respect
thereto;
(ii) borrowed any amount in excess of $10,000 or
incurred or become subject to any other liabilities in excess of
$10,000 (absolute or contingent) except current liabilities
incurred in the ordinary course of business which are comparable in
nature and amount to the current liabilities incurred in the
ordinary course of business during the comparable portion of its
prior fiscal year, as adjusted to reflect the current nature and
volume of the business of the Company and its
Subsidiaries;
(iii) discharged or satisfied any lien or encumbrance in
excess of $10,000 or paid any obligation or liability (absolute or
contingent) in excess of $10,000, other than current liabilities
paid in the ordinary course of business;
(iv) declared or made any payment or distribution of
cash or other property to stockholders with respect to its stock,
or purchased or redeemed, or made any agreements so to purchase or
redeem, any shares of its capital stock, in each case in excess of
$5,000 individually or $10,000 in the aggregate;
8
(v) sold, assigned or transferred any other tangible
assets, or canceled any debts or claims, in each case in excess of
$10,000, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other
intangible assets or intellectual property rights in excess of
$10,000, or disclosed any proprietary confidential information to
any person except to customers in the ordinary course of business
or to the Purchasers or their representatives;
(vii) suffered any material losses or waived any rights
of material value, whether or not in the ordinary course of
business, or suffered the loss of any material amount of
prospective business;
(viii) made any changes in employee compensation except
in the ordinary course of business and consistent with past
practices;
(ix) made capital expenditures or commitments therefor
that aggregate in excess of $10,000;
(x) entered into any material transaction, whether or
not in the ordinary course of business;
(xi) made charitable contributions or pledges in excess
of $5,000;
(xii) suffered any material damage, destruction or
casualty loss, whether or not covered by insurance;
(xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their
employment; or
(xiv) entered into an agreement, written or otherwise,
to take any of the foregoing actions.
(z) Investment Company Act Status
. The Company is not, and as a result
of and immediately upon each Closing will not be, an
“investment company” or a company
“controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended.
(aa) Independent Nature of Purchasers
. The Company acknowledges that the
obligations of each Purchaser under the Transaction Documents are
several and not joint with the obligations of any other Purchaser,
and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under the
Transaction Documents. The Company acknowledges that the decision
of each Purchaser to purchase Securities pursuant to this Agreement
has been made by such Purchaser independently of any other purchase
and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets,
properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of its
Subsidiaries which may have made or given by any other Purchaser or
by any agent or employee of any other Purchaser, and no Purchaser
or any of its agents or employees shall have any liability to any
Purchaser (or any other person) relating to or arising from any
such information, materials, statements or opinions. The Company
acknowledges that nothing contained herein, or in any Transaction
Document, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. The
Company acknowledges that for reasons of administrative convenience
only, the Transaction Documents have been prepared by counsel for
one of the Purchasers and such counsel does not represent all of
the Purchasers but only such Purchaser and the other Purchasers
have retained their own individual counsel with respect to the
transactions contemplated hereby. The Company acknowledges that it
has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.
The Company acknowledges that such procedure with respect to the
Transaction Documents in
9
no way creates a presumption that the
Purchasers are in any way acting in concert or as a group with
respect to the Transaction Documents or the transactions
contemplated hereby or thereby. The Company acknowledges that each
Purchaser 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 to be joined as an
additional party in any proceeding for such purpose.
(bb) No Integrated Offering . Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would cause
the offering of the Securities pursuant to this Agreement to be
integrated with prior offerings by the Company for purposes of the
Securities Act which would prevent the Company from selling the
Securities pursuant to Regulation D and Rule 506 thereof under the
Securities Act, or any applicable exchange-related
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