Exhibit 10.1
NOTE AND WARRANT PURCHASE
AGREEMENT
THIS NOTE AND WARRANT PURCHASE
AGREEMENT (the “ Agreement ”) is entered into as
of June 18, 2009 , by and among NEXXUS LIGHTING, INC.,
a Delaware corporation and its subsidiaries (collectively, the
“ Company ”), with its principal executive
offices located at 124 Floyd Smith Drive, Suite 300, Charlotte,
North Carolina 28262, and the purchasers (collectively, the “
Purchasers ” and each a “ Purchaser
”) set forth on Schedule 1 hereof, with regard to
the following:
RECITALS
A. The Company and the Purchasers
are executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by the provisions
of Regulation D (“ Regulation D ”), as
promulgated by the United States Securities and Exchange Commission
(the “ SEC ”) under the Securities Act of 1933,
as amended (the “ Securities Act ”).
B. Each Purchaser desires
to purchase, upon the terms and conditions stated in this
Agreement, (a) a secured promissory note of the Company in the
form attached hereto as Exhibit A and in the principal
amount set forth on the Purchaser’s signature page to this
Agreement (the “ Purchaser’s Signature Page
”), each such note being referred to herein as a “
Note ” and all of the notes sold pursuant to this
Agreement are collectively referred to herein as the “
Notes ”, and (b) a Common Stock Purchase Warrant
in the form attached hereto as Exhibit B (individually
and collectively, the “ Warrants ”) to purchase
the number of shares of the Company’s Common Stock, par value
$.001 per share (“ Common Stock ”) set forth on
the Purchaser’s Signature Page to this Agreement. The shares
of Common Stock issuable upon exercise of or otherwise pursuant to
the Warrants are referred to herein as the “ Warrant
Shares .” The Notes, the Warrants and the Warrant Shares
are collectively referred to herein as the “
Securities. ”
C. This Agreement, the Notes, the
Warrants and any other documents or agreements executed in
connection with the transactions contemplated hereunder are
hereinafter referred to as the “ Transaction Documents
.”
AGREEMENTS
NOW, THEREFORE, in consideration of
their respective promises contained herein and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Purchasers hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF NOTES AND
WARRANTS
1.1 Purchase and Sale of Notes
and Warrants . Subject to the terms and conditions of this
Agreement, the issuance, sale and purchase of the Notes
and
Warrants shall be consummated in a “
Closing ” whereby the Company shall sell and the
Purchasers shall purchase “Units” of the Company. Each
“Unit” shall consist of (a) a Note and
(b) Warrants issued with respect to such Note as hereinafter
provided. The purchase price (the “ Purchase Price
”) per Unit shall be equal to the principal amount of the
Note being purchased as part of the Unit. The number of shares of
Common Stock for which the Warrants issued as part of the Unit
shall be exercisable shall equal .075 shares for each $1.00 in
principal amount of the Note contained in such Unit.
On the date of the Closing, subject
to the satisfaction or waiver of the conditions set forth in
ARTICLES VI and VII below, the Company shall issue and sell to
each Purchaser, and each Purchaser severally agrees to purchase
from the Company, a Note in the principal amount set forth on such
Purchaser’s Signature Page and Warrants to purchase the
number of shares of Common Stock set forth on the Purchaser’s
Signature Page. Each Purchaser’s obligation to purchase a
Note and Warrants hereunder is distinct and separate from each
other Purchaser’s obligation to purchase, and no Purchaser
shall be required to purchase hereunder more than the principal
amount of a Note and Warrants to purchase the number of shares of
Common Stock set forth on the Purchaser’s Signature Page. The
obligations of the Company with respect to each Purchaser shall be
separate from the obligations of the Company to each other
Purchaser and shall not be conditioned as to any Purchaser upon the
performance of obligations of any other Purchaser.
1.2. Closing Fee . The
Purchaser acknowledges that the Company has engaged Great American
Investors, Inc. as the exclusive placement agent (the “
Placement Agent ”) in connection with the offering of
the Units (the “ Offering ”) and, as
consideration for its services, has agreed to pay to the Placement
Agent at the Closing a commission equal to three and one-half
percent (3.5%) of the gross proceeds received by the Company
from the sale of Units in the Offering to the Purchasers (exclusive
of certain Purchasers as set forth in the Engagement Agreement (as
defined in Section 6.1(viii) below) between the Company and
the Placement Agent). At the election of the Company, the
commission shall be paid by issuing to the Placement Agent and/or
its designees at the Closing cash or shares of the Company’s
common stock having a market value equal to the aggregate amount of
the commission, or any combination of the foregoing. The market
value of such shares of common stock shall be determined by
reference to the consolidated closing bid price of the
Company’s common stock immediately preceding the entering
into of this Agreement as determined in accordance with applicable
NASDAQ rules. At or before the Closing, the Company will also
reimburse the Placement Agent for all expenses incurred by such
Placement Agent in connection with the Offering, subject to any
limitations set forth in any agreements between the Company and the
Placement Agent. The Company hereby agrees to indemnify and hold
harmless the Placement Agent and its officers, directors,
employees, agents and shareholders, individually and collectively
(“ Placement Agent Indemnified Person(s) ”) from
and against any and all claims, liabilities, losses, damages, costs
and reasonable expenses incurred by any Placement Agent Indemnified
Person (including reasonable fees and disbursements of counsel)
which are related to or arising out of: (i) any untrue
statement of any material fact made by the Company; or
(ii) any omission of material fact necessary to make any
statement not misleading,
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made by the Company. The Company will not
however, be responsible for any claims, liabilities, losses,
damages, or expenses, which resulted directly or indirectly from
the Placement Agent’s gross negligence or willful
misconduct.
1.3 Closing Date . Subject to
the satisfaction (or waiver) of the conditions set forth in
ARTICLES VI and VII below, the date and time of the issuance,
sale and purchase of the Notes and Warrants pursuant to this
Agreement shall be on or before 4:00 p.m. Charlotte, North
Carolina time, on June 18, 2009.
ARTICLE II
PURCHASER’S REPRESENTATIONS
AND WARRANTIES
Each Purchaser represents and
warrants to the Company, as of the date hereof and as of the
Closing, severally and not jointly, with respect to itself and its
purchase hereunder and not with respect to any other Purchaser or
the purchase hereunder by any other Purchaser, that the following
statements are true and correct:
2.1 Investment Purpose .
Purchaser is purchasing the Notes and the Warrants for
Purchaser’s own account for investment only and not with a
view toward or in connection with the public sale or distribution
thereof. Purchaser will not, directly or indirectly, offer, sell,
pledge or otherwise transfer its Note, Warrants or Warrant Shares
or any interest therein, except pursuant to transactions that are
exempt from the registration requirements of the Securities Act
and/or sales registered under the Securities Act. Purchaser
understands that Purchaser must bear the economic risk of this
investment indefinitely, unless the Securities are registered
pursuant to the Securities Act and any applicable state securities
laws or an exemption from such registration is available, and that
the Company has no present intention of registering any such
Securities.
2.2 Accredited Investor
Status . Purchaser is an “accredited investor” as
that term is defined in Rule 501(a) of Regulation
D.
2.3 Reliance on Exemptions .
Purchaser understands that the Securities are being offered and
sold to Purchaser 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 Purchaser’s compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of Purchaser set forth herein in order to determine
the availability of such exemptions and the eligibility of
Purchaser to acquire the Securities.
2.4 Information . The Company
has made available to the Purchaser the documents publicly filed by
the Company with the SEC (such documents collectively, the “
SEC Documents ”). Purchaser has been afforded the
opportunity to ask questions of the Company, was permitted to meet
with the Company’s officers and has received what the
Purchaser believes to be complete and satisfactory answers to any
such inquiries. Except for the SEC Documents and the answers
received by Purchaser as a
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result of inquiries made by Purchaser to Company
officers, and except as otherwise provided in this Agreement, the
Purchaser is not relying upon any information, representations or
warranties of the Company or any other party. Neither such
inquiries nor any other due diligence investigation conducted by
Purchaser or any of its representations shall modify, amend or
affect Purchaser’s right to rely on the Company’s
representations and warranties contained in ARTICLE III.
Purchaser understands that Purchaser’s investment in the
Securities involves a high degree of risk, including, without
limitation, the risks and uncertainties disclosed in the SEC
Documents.
2.5 Governmental Review .
Purchaser 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
Securities.
2.6 Transfer or Resale .
Purchaser understands that (i) the Securities have not been
and are not being registered under the Securities Act or any state
securities laws, and may not be offered, sold, pledged or otherwise
transferred unless subsequently registered thereunder or an
exemption from such registration is available (which exemption the
Company expressly agrees may be established as contemplated in
clauses (b) and (c) of Section 5.1 hereof);
(ii) any sale of such Securities made in reliance on Rule 144
under the Securities Act (or a successor rule) (“
Rule 144 ”) may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such Securities without registration
under the Securities Act under circumstances in which the seller
may be deemed to be an underwriter (as that term is defined in the
Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of the SEC
thereunder in order for such resale to be allowed and
(iii) the Company is under no obligation to register such
Securities under the Securities Act or any state securities laws or
to comply with the terms and conditions of any exemption
thereunder.
2.7 Legends . Purchaser
understands that, subject to ARTICLE V hereof, the
certificates for the Note and Warrants, and, if the Warrants are
exercised, the certificates for the Warrant Shares, until such
time, if any, as the Warrant Shares have been registered under the
Securities Act, or may be sold by Purchaser pursuant to Rule 144
(subject to and in accordance with the procedures specified in
ARTICLE V hereof), will bear a restrictive legend (the “
Legend ”), which will include language in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE
SECURITIES LAWS OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE
LAWS.
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2.8 Authorization;
Enforcement . This Agreement has been duly and validly
authorized, executed and delivered on behalf of Purchaser and is a
valid and binding agreement of Purchaser enforceable in accordance
with its terms, except to the extent that such validity or
enforceability may be subject to or affected by any bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of,
creditors’ rights or remedies of creditors generally, or by
other equitable principles of general application.
2.9 Residency . Purchaser is
a resident of the jurisdiction set forth under Purchaser’s
name on the signature page hereto executed by Purchaser.
2.10 Short Sales and
Confidentiality Prior To the Date Hereof . Other than the
transaction contemplated hereunder, such Purchaser has not directly
or indirectly, nor has any Person acting on behalf of or pursuant
to any understanding with such Purchaser, executed any disposition,
including short sales, in the securities of the Company during
the period commencing from the time that such Purchaser first
received a term sheet (written or oral) from the Company or any
other person setting forth the material terms of the transactions
contemplated hereunder until the date hereof. Other than to other
parties to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this
transaction).
2.11 No General Solicitation
. Purchaser is not purchasing the Securities as a result of any
advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or
any other general solicitation or general advertisement.
2.12 Pre-existing
Relationship . Purchaser has a pre-existing relationship with
the Company. Purchaser is not purchasing the Securities as a result
of or in connection with any registered public offering by the
Company.
2.13 No Assurance of Return on
Investment . Purchaser realizes that the purchase of the
Securities is a highly speculative investment. Purchaser is able,
without impairing Purchaser’s financial condition, to bear
the economic risk of the purchase of the Securities pursuant to the
terms of this Agreement, to hold the Securities for an indefinite
period of time and to suffer a complete loss of Purchaser’s
investment. Prior to executing this Agreement, Purchaser has
reviewed carefully a copy of this Agreement and each schedule and
exhibit hereto. Purchaser has such knowledge and experience in
financial and business matters that the Purchaser is capable of
evaluating the merits and risks of the purchase of Securities
pursuant to the terms of this Agreement and protecting the
Purchaser’s interests in connection therewith. THERE IS NO
ASSURANCE THAT PURCHASER WILL RECOVER OR REALIZE ANY RETURN ON
PURCHASER’S INVESTMENT IN THE SECURITIES OR THAT PURCHASER
WILL NOT LOSE PURCHASER’S ENTIRE INVESTMENT IN THE COMPANY.
THERE IS NO ASSURANCE THAT THE COMPANY WILL ACHIEVE PROFITABILITY.
PURCHASER HAS READ THE RISK FACTORS CONTAINED IN THE
COMPANY’S SEC DOCUMENTS AND OTHER
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MATERIAL PROVIDED OR MADE AVAILABLE BY THE
COMPANY CAREFULLY AND CONSULTED WITH HIS OWN ATTORNEY OR BUSINESS
ADVISOR PRIOR TO MAKING ANY INVESTMENT DECISION. PURCHASER CAN
AFFORD THE RISK OF LOSS OF PURCHASER’S ENTIRE INVESTMENT IN
THE COMPANY.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
The Company represents and warrants
to each Purchaser as of the date hereof and as of the Closing that
the following statements are true and correct, except as set forth
on the disclosure schedules indicated below and attached hereto
(the “ Company Disclosure Schedules ”) and
except as disclosed in the SEC Documents.
3.1 Organization and
Qualification . Schedule 3.1 attached hereto sets forth the
name, jurisdiction of incorporation and percentage of voting
securities owned by Nexxus Lighting, Inc. of all of the
subsidiaries of Nexxus Lighting, Inc. Nexxus Lighting, Inc. is a
corporation duly organized and existing in good standing under the
laws of the state of Delaware and has the requisite corporate power
to own its properties and to carry on its business as now being
conducted. Nexxus Lighting, Inc. is duly qualified as a foreign
corporation to do business and is in good standing in every
jurisdiction where the failure so to qualify or be in good standing
could reasonably be expected to have a Material Adverse Effect.
“ Material Adverse Effect ” means any effect
which, individually or in the aggregate with all other effects,
reasonably would be expected to be materially adverse to the
business, operations, properties, financial condition, operating
results or prospects of the Company taken as a whole, or on the
transactions contemplated hereby.
3.2 Authorization;
Enforcement . (a) The Company has the requisite corporate
power and authority to enter into and perform under the Transaction
Documents, and to issue, sell and perform its obligations with
respect to the Securities in accordance with the terms hereof and
thereof and in accordance with the terms and conditions of the
Securities; (b) the execution, delivery and performance of the
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Notes and the Warrants, and
the reservation for issuance of the Warrant Shares) have been duly
authorized by all necessary corporate action and, other than the
consent of holders of a majority of the outstanding shares of the
Company’s Series A preferred stock, $.001 par value per share
(the “ Preferred Stock ”), no further consent or
authorization of the Company, its board of directors, or its
stockholders or any other Person is required with respect to any of
the transactions contemplated hereby or thereby; (c) this
Agreement, the Notes and the Warrants have been duly executed and
delivered by the Company; and (d) this Agreement constitutes,
and when issued pursuant to the terms of this Agreement, the Notes
and the Warrants will constitute, legal, valid and binding
obligations of the Company enforceable against the Company in
accordance with their respective terms, except (i) to the
extent that such validity or enforceability may be subject to or
affected
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by any bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally the enforcement of, creditors’ rights or remedies
of creditors generally, or by other equitable principles of general
application, and (ii) as rights to indemnity and contribution
under this Agreement may be limited by federal or state securities
laws. “ Person ” means any individual, sole
proprietorship, partnership, limited liability company, joint
venture, trust, unincorporated association, corporation, entity or
government (whether federal, state, county, city or otherwise,
including, without limitation, any instrumentality, division,
agency or department thereof).
3.3 Capitalization . The
capitalization of the Company as of June 1, 2009 including the
authorized capital stock, the number of shares issued and
outstanding, the number of shares reserved for issuance pursuant to
the Company’s stock option plans, the number of shares
reserved for issuance pursuant to securities (other than the
Warrants) exercisable for, or convertible into or exchangeable for,
shares of any class of the Company’s Common Stock and the
number of shares to be reserved for issuance upon exercise of the
Warrants is set forth on Schedule 3.3 hereof. All of
such outstanding shares of capital stock have been, or upon
issuance will be, validly issued, fully paid and nonassessable. No
shares of capital stock of the Company (including Common Stock and
the Warrant Shares) are subject to preemptive rights or any other
similar rights of the stockholders of the Company or any liens or
encumbrances enforceable against the Company. Except as disclosed
in Schedule 3.3 hereof, as of the date of this
Agreement, (i) there are no outstanding options, warrants,
scrip, rights to subscribe for, calls or commitments of any
character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of
capital stock of the Company, or contracts, commitments,
understandings or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the
Company and (ii) issuance of the Securities will not trigger
anti-dilution rights for any other outstanding or authorized
securities of the Company. The Company has made available to each
Purchaser true and correct copies of the Company’s
Certificate of Incorporation, as amended and in effect on the date
hereof (“ Certificate of Incorporation ”), and
the Company’s By-laws, as amended and in effect on the date
hereof (the “ By-laws ”). The Company has set
forth on Schedule 3.3 hereof all instruments and
agreements (other than the Certificate of Incorporation and
By-laws) governing securities convertible into or exercisable or
exchangeable for any class of its Common Stock (and the Company
shall provide to each Purchaser copies thereof upon the request of
such Purchaser).
3.4 No Conflicts . Subject to
receiving the consent of the holders of a majority of the
outstanding shares of Preferred Stock, the execution, delivery and
performance of the Transaction Documents by the Company, and the
consummation by the Company of the transactions contemplated hereby
and thereby (including, without limitation, the issuance and
reservation for issuance, as applicable, of the Securities) do not
and will not (a) result in a violation of the Certificate of
Incorporation or By-laws or (b) 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, indenture or instrument to which the Company is a party,
or result in a violation of any law, rule, regulation, order,
judgment or decree (including U.S. federal and state securities
laws) applicable to the
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Company or by which any property or asset of the
Company is bound or affected (except for such possible conflicts,
defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have
a Material Adverse Effect). The Company is not in violation of its
Certificate of Incorporation or other organizational documents. The
Company is not in default (and no event has occurred which has not
been waived which, with notice or lapse of time or both, could
reasonably be expected to put the Company in default) under, nor
has there occurred any event giving others (with notice or lapse of
time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which
the Company is a party, except for possible violations, defaults or
rights as would not, individually or in the aggregate, have a
Material Adverse Effect. The business of the Company is not being
conducted, and shall not be conducted so long as a Purchaser owns
any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity, except for possible
violations the sanctions for which either individually or in the
aggregate would not have a Material Adverse Effect. Except
(A) for the filing of a Form D with the SEC,
(B) such other documents as may be required in compliance with
the state securities or Blue Sky laws of applicable jurisdictions
and (C) such documents as may be required to be filed in
compliance with the rules and regulations of the Financial Industry
Regulatory Authority (“ FINRA ”) and The NASDAQ
Stock Market (“ NASDAQ ”), the Company is not
required to obtain any consent, authorization or order of, or make
any filing or registration with, any court or governmental agency
or any regulatory or self-regulatory agency in order for it to
execute, deliver or perform any of its obligations under this
Agreement or to perform its obligations in accordance with the
terms hereof or thereof.
3.5 Consents . Subject to
receiving the consent of the holders of a majority of the
outstanding shares of Preferred Stock, the execution, delivery and
performance by the Company of the Transaction Documents and the
offer, issuance and sale of the Securities require no consent of,
action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than (i) filings
that have been made pursuant to applicable state securities laws,
(ii) post-sale filings pursuant to applicable state and
federal securities laws, (iii) filings with FINRA and NASDAQ
and (iv) any consent, action or filing that either
individually or in the aggregate would not have a Material Adverse
Effect. Subject to the accuracy of the representations and
warranties of each Purchaser set forth in ARTICLE II hereof, the
Company has taken all action necessary to exempt the issuance and
sale of the (i) Notes, (ii) Warrants and
(iii) Warrant Shares, from the provisions of any stockholder
rights plan or other “poison pill” arrangement, any
anti-takeover, business combination or control share law or statute
binding on the Company or to which the Company or any of its assets
and properties may be subject and any provision of the
Company’s Certificate of Incorporation or By-laws that is or
could reasonably be expected to become applicable to the Purchasers
as a result of the transactions contemplated hereby, including
without limitation, the issuance of the Securities and the
ownership, disposition or voting of the Securities by the
Purchasers or the exercise of any right granted to the Purchasers
pursuant to this Agreement or the other Transaction
Documents.
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3.6 SEC Documents; Financial
Statements . Since January 1, 2008, the Company has timely
filed the SEC Documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the “ Exchange Act ”).
As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the
rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, 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. None of the statements made in any such SEC
Documents which is required to be updated or amended under
applicable law has not been so updated or amended. The financial
statements of the Company included in the SEC Documents have been
prepared in accordance with U.S. generally accepted accounting
principles, consistently applied, and the rules and regulations of
the SEC 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 do not include footnotes or are condensed or
summary statements) and present accurately and completely the
financial position of the Company as of the dates thereof and the
results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end
audit adjustments). Except as set forth in a manner clearly evident
to a sophisticated institutional investor in the financial
statements or the notes thereto of the Company included in the SEC
Documents, the Company has no liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of
business consistent with past practice subsequent to the date of
such financial statements and (ii) obligations under contracts
and commitments incurred in the ordinary course of business
consistent with past practice and not required under generally
accepted accounting principles to be reflected in such financial
statements. To the extent required by the rules of the SEC
applicable thereto, the SEC Documents contain a complete and
accurate list of all material undischarged written or oral
contracts, agreements, leases or other instruments to which the
Company is a party or by which the Company is bound or to which any
of the properties or assets of the Company is subject (each a
“ Contract ”). None of the Company or, to the
Company’s Knowledge, any of the other parties thereto, is in
breach or violation of any Contract, which breach or violation
would have a Material Adverse Effect. No event, occurrence or
condition exists which, with the lapse of time, the giving of
notice, or both, could become a default by the Company which could
reasonably be expected to have a Material Adverse Effect. For
purposes of this Agreement, the “ Company’s
Knowledge ” means the actual knowledge of the executive
officers (as defined in Rule 405 under the Securities Act) of the
Company, after due inquiry.
3.7 Absence of Certain
Changes . Since December 31, 2008, there has been no
material adverse change and no material adverse development in the
business, properties, operations, financial condition, results of
operations or prospects of the Company, not clearly evident to a
sophisticated institutional investor from the SEC Documents,
including, without limitation:
(i) any change in the assets,
liabilities, financial condition or operating results of the
Company from that reflected in the financial statements included in
the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2008, except for changes in the ordinary
course of business which have not and could not reasonably be
expected to have a Material Adverse Effect, individually or in the
aggregate;
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(ii) any declaration or payment of
any dividend, or any authorization or payment of any distribution,
on any of the capital stock of the Company, or any redemption or
repurchase of any securities of the Company;
(iii) any material damage,
destruction or loss, whether or not covered by insurance to any
assets or properties of the Company;
(iv) any waiver, not in the ordinary
course of business, by the Company of a material right or of a
material debt owed to it;
(v) any satisfaction or discharge of
any lien, claim or encumbrance or payment of any obligation by the
Company, except in the ordinary course of business and which is not
material to the assets, properties, financial condition, operating
results or business of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(vi) any change or amendment to the
Company’s Certificate of Incorporation or By-laws, or
material change to any material contract or arrangement by which
the Company is bound or to which any of its assets or properties is
subject;
(vii) any material labor
difficulties or labor union organizing activities with respect to
employees of the Company;
(viii) any material transaction
entered into by the Company other than in the ordinary course of
business;
(ix) the loss of the services of any
key employee, or material change in the composition or duties of
the senior management of the Company;
(x) the loss or threatened loss of
any customer which has had or could reasonably be expected to have
a Material Adverse Effect; or
(xi) any other event or condition of
any character that has had or could reasonably be expected to have
a Material Adverse Effect.
3.8 Absence of Litigation .
Except as disclosed in Schedule 3.8 hereof or as
disclosed in the Company’s SEC Documents filed by it with the
SEC, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, or
self-regulatory organization or body pending or, to the
Company’s Knowledge, threatened against or affecting the
Company or any of its directors or officers in their capacities as
such which could reasonably be expected to
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have a Material Adverse Effect. There are no
facts known to the Company which, if known by a potential claimant
or governmental authority, could reasonably be expected to give
rise to a claim or proceeding which, if asserted or conducted with
results unfavorable to the Company could reasonably be expected to
have a Material Adverse Effect.
3.9 Tax Matters . Except as
set forth on Schedule 3.9 attached hereto, the Company has
timely prepared and filed all tax returns required to have been
filed by the Company with all appropriate governmental agencies and
timely paid all taxes shown thereon or otherwise owed by it. The
charges, accruals and reserves on the books of the Company in
respect of taxes for all fiscal periods are adequate in all
material respects, and there are no material unpaid assessments
against the Company nor, to the Company’s Knowledge, any
basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or
local taxing authority except for any assessment which is not
material to the Company. All taxes and other assessments and levies
that the Company is required to withhold or to collect for payment
have been duly withheld and collected and paid to the proper
governmental entity or third party when due. There are no tax liens
or claims pending or, to the Company’s Knowledge, threatened
against the Company or any of its assets or property. There are no
outstanding tax sharing agreements or other such arrangements
between the Company and any other corporation or entity.
3.10 Transactions with
Affiliates . Except as disclosed in the SEC Documents, none of
the officers or directors of the Company and, to the
Company’s Knowledge, none of the employees of the Company is
presently a party to any transaction with the Company (other than
as holders of stock options and/or warrants, and for services as
employees, officers, consultants and directors), including any
contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the
Company’s Knowledge, any entity in which any officer,
director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
3.11 Internal Controls . The
Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with
management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles (“ 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
difference. The Company maintains and will continue to maintain a
standard system of accounting established and administered in
accordance with GAAP and the applicable requirements of the
Exchange Act. The Company’s officers certified to the
Company’s internal controls as of the filing of the
Company’s Form 10-Q for the quarter ended March 31, 2009
and since that date, there have been no significant changes in the
Company’s internal controls (as such term is defined in
Section
11
307(b) of Regulation S-K) or, to the
Company’s Knowledge, any other facts that would significantly
affect the Company’s internal controls. The Company is
required to certify its internal controls under Section 404 of
the Sarbanes-Oxley Act of 2002 and has complied with such
requirements in its Annual Report on Form 10-K for the fiscal year
ended December 31, 2008.
3.12 Disclosure . No
information relating to or concerning the Company set forth in this
Agreement contains an untrue statement of a material fact. No
information relating to or concerning the Company set forth in any
of the SEC Documents contains a statement of material fact that was
untrue as of the date such SEC Document was filed with the SEC. The
Company has not omitted to state a material fact necessary in order
to make the statements made herein or therein, in light of the
circumstances under which they were made, not misleading. Except
for the execution and performance of this Agreement, no material
fact (within the meaning of the federal securities laws of the
United States and of applicable state securities laws) exists with
respect to the Company which has not been publicly
disclosed.
3.13 Acknowledgment Regarding
Purchaser’s Purchase of the Securities . The Company
acknowledges and agrees that each Purchaser is not acting as a
financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement or the transactions
contemplated hereby, that this Agreement and the transaction
contemplated hereby, and the relationship between each Purchaser
and the Company, are “arms-length,” and that any
statement made by a Purchaser (except as set forth in
ARTICLE II), or any of its representatives or agents, in
connection with this Agreement and the transactions contemplated
hereby is not advice or a recommendation, is merely
incidental
