NOTE AND WARRANT PURCHASE
AGREEMENT
Dated as of July 21, 2004
by and among
EFOODSAFETY.COM, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
Page
ARTICLE I
Purchase and Sale of Notes and
Warrants.......................................................1
Section 1.1
Purchase and Sale of Notes and
Warrants.............................................1
Section 1.2
Purchase Price and
Closing..........................................................1
Section 1.3
Conversion Shares / Warrant
Shares..................................................2
ARTICLE II
Representations and
Warranties................................................................2
Section 2.1
Representations and Warranties of the
Company.......................................2
Section 2.2
Representations and Warranties of the
Purchasers...................................12
ARTICLE III
Covenants....................................................................................15
Section 3.1
Securities
Compliance..............................................................15
Section 3.2
Registration and
Listing...........................................................15
Section 3.3
Inspection
Rights..................................................................15
Section 3.4
Compliance with
Laws...............................................................15
Section 3.5
Keeping of Records and Books of
Account............................................15
Section 3.6
Reporting
Requirements.............................................................16
Section 3.7
Other
Agreements...................................................................16
Section 3.8
Subsequent Financings; Right of First
Refusal......................................16
Section 3.9
Use of
Proceeds....................................................................17
Section 3.10
Reporting
Status...................................................................18
Section 3.11
Disclosure of
Transaction..........................................................18
Section 3.12
Disclosure of Material
Information.................................................18
Section 3.13
Pledge of
Securities...............................................................18
Section 3.14
Registration
Statements............................................................18
Section 3.15
Amendments.........................................................................19
Section 3.16
Distributions......................................................................19
Section 3.17
Reservation of
Shares..............................................................19
Section 3.18
Transfer Agent
Instructions........................................................19
Section 3.19
Disposition of
Assets..............................................................20
ARTICLE IV
Conditions...................................................................................20
Section 4.1
Conditions Precedent to the Obligation of the Company to Close and
to Sell the
Securities.............................................................20
Section 4.2
Conditions Precedent to the Obligation of the Purchasers to Close
and to Purchase the
Securities.....................................................20
ARTICLE V
Certificate
Legend...........................................................................22
Section 5.1
Legend.............................................................................22
ARTICLE VI
Indemnification..............................................................................23
Section 6.1
General
Indemnity..................................................................23
Section 6.2
Indemnification
Procedure..........................................................24
ARTICLE VII
Miscellaneous................................................................................25
Section 7.1
Fees and
Expenses..................................................................25
Section 7.2
Specific Performance; Consent to Jurisdiction;
Venue...............................25
TABLE OF CONTENTS
(continued)
Page
Section 7.3
Entire Agreement;
Amendment........................................................26
Section 7.4
Notices............................................................................26
Section 7.5
Waivers............................................................................27
Section 7.6
Headings...........................................................................27
Section 7.7
Successors and
Assigns.............................................................27
Section 7.8
No Third Party
Beneficiaries.......................................................27
Section 7.9
Governing
Law......................................................................27
Section 7.10
Survival...........................................................................27
Section 7.11
Counterparts.......................................................................27
Section 7.12
Publicity..........................................................................28
Section 7.13
Severability.......................................................................28
Section 7.14
Further
Assurances.................................................................28
NOTE AND WARRANT PURCHASE AGREEMENT
This
NOTE AND WARRANT PURCHASE AGREEMENT dated as of July 21, 2004 (this
“ Agreement ”) by and between EFoodSafety.com,
Inc., a Nevada corporation (the “ Company ”),
and each of the purchasers of the 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 I
PURCHASE AND SALE OF NOTES AND
WARRANTS
Section 1.1....... Purchase
and Sale of Notes and Warrants.
(a)
Upon the following terms and conditions, the Company shall issue
and sell to the Purchasers, and the Purchasers shall purchase from
the Company, convertible promissory notes in the aggregate
principal amount of up to Two Million Five Hundred Thousand Dollars
($2,500,000.00) bearing interest at the rate of six percent (6%)
per annum, convertible into shares of the Company’s common
stock, par value $.0001 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.
(b)
Upon the following terms and conditions, the Purchasers shall be
issued (i) Series A Warrants, in substantially the form attached
hereto as Exhibit C (the “Series A Warrants”), to
purchase the number of shares of Common Stock equal to fifty
percent (50%) of the number of shares of Common Stock issuable upon
conversion of the Notes purchased pursuant to the terms hereof,
such amount to be set forth opposite such Purchaser’s name on
Exhibit A attached hereto, and (ii) Series B Warrants, in
substantially the form attached hereto as Exhibit D (the
“Series B Warrants” and together with the Series A
Warrants, the “Warrants”), to purchase the number of
shares of Common Stock equal to fifty percent (50%) of the number
of shares of Common Stock issuable upon conversion of the Notes
purchased pursuant to the terms hereof, such amount to be set forth
opposite such Purchaser’s name on Exhibit A attached hereto.
The Warrants shall have an exercise price equal to Warrant Price
(as defined in the respective Warrant) and shall be exercisable as
stated therein.
Section 1.2....... Purchase
Price and Closing . 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
and Warrants
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for an aggregate purchase price
of Two Million Five Hundred Thousand Dollars
($2,500,000.00) (the “ Purchase
Price ”). The Notes and Warrants shall be sold and funded
in two separate closings (each, a “ Closing ”).
The initial closing under this Agreement (the “ Initial
Closing ”) shall take place no later than July 21, 2004
(the “ Initial Closing Date ”) and shall be
funded in the amount of Two Million Dollars ($2,000,000.00). The
second closing under this Agreement (the “ Second
Closing ”) shall take place no later than August 9, 2004
(the “ Second Closing Date ”) and shall be
funded in the amount of Five Hundred Thousand Dollars
($500,000.00). Each Closing under this Agreement shall take place
at the offices of Jenkens & Gilchrist Parker Chapin LLP, The
Chrysler Building, 405 Lexington Avenue, New York, New York 10174
or at such other place as the Purchasers and the Company may agree
upon (each, a “ Closing Date ”); provided
, that all of the conditions set forth in Article IV hereof and
applicable to the Closing shall have been fulfilled or waived in
accordance herewith. Subject to the terms and conditions of this
Agreement, at the applicable Closing, the Company shall deliver or
cause to be delivered to each Purchaser (x) its Note for the
principal amount set forth opposite the name of such Purchaser on
Exhibit A hereto and (y) a Series A Warrant and Series B
Warrant to purchase such number of shares of Common Stock as is set
forth opposite the name of such Purchaser on Exhibit A
attached hereto. At the applicable Closing, each Purchaser shall
deliver its Purchase Price by wire transfer to an account
designated by the Company.
Section 1.3....... Conversion
Shares / Warrant 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
number of its authorized but unissued shares of Common Stock equal
to the aggregate number of shares of Common Stock to effect the
conversion of the Notes and any interest accrued and outstanding
thereon and exercise of the Warrants. Any shares of Common Stock
issuable upon conversion of the Notes and any interest accrued and
outstanding thereon and exercise of the Warrants (and such shares
when issued) are herein referred to as the “Conversion
Shares ” and the “ Warrant Shares ,”
respectively. The Notes, the Warrants, the Conversion Shares and
the Warrant Shares are sometimes collectively referred to herein as
the “ Securities ”.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 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 each Closing Date (except as set forth 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 Nevada 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 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. Except
as set forth on Schedule 2.1(a) hereto, the Company and each such
Subsidiary (as defined in Section 2.1(g)) is duly qualified as a
foreign corporation to do
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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 effect on the business (including a
material change in management), results of operations, prospects,
properties, assets or condition (financial or otherwise) of the
Company that is material and adverse to the Company and its
subsidiaries, taken as a whole, and/or any condition, circumstance,
factor or situation (including, without limitation, an
investigation by the Securities and Exchange Commission (the
“ Commission ”)) that would prohibit or
otherwise materially interfere with the ability of the Company from
entering into and performing any of its obligations under the
Transaction Documents (as defined below) in any material
respect.
(b)
Authorization; Enforcement . The Company has the
requisite corporate power and authority to enter into and perform
this Agreement, the Notes, the Warrants, the Registration Rights
Agreement by and among the Company and the Purchasers, dated as of
the date hereof, substantially in the form of Exhibit E attached
hereto (the “Registration Rights Agreement”) and the
Irrevocable Transfer Agent Instructions (as defined in Section 3.18
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 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, its Board of Directors or stockholders is required.
When executed and delivered by the Company, each of the Transaction
Documents shall constitute a valid and binding obligation of the
Company enforceable against the Company 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 of the Company
as of July 12, 2004 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 and 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, call or commitments of any character
whatsoever relating to, or securities or rights convertible into,
any shares of capital 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 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.
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(d)
Issuance of Securities . The Notes and the
Warrants 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 and
Warrant Shares are issued and paid for in accordance with the terms
of this Agreement and as set forth in the Notes and Warrants, 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, the
performance by the Company of its obligations under the Notes and
the consummation by the Company 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 Articles of Incorporation
(the “Articles”) or Bylaws (the “Bylaws”),
each as amended to date, or any Subsidiary’s comparable
charter documents, (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, or
(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, except, in all cases, for such conflicts, defaults,
terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a
Material Adverse Effect (other than violations pursuant to clauses
(i) or (iii) (with respect to federal and state securities laws)).
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 any filings, consents
and approvals which may be required to be made by the Company under
applicable state and federal securities laws, rules or regulations
or any registration provisions provided in the Registration Rights
Agreement).
(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 Commission
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-QSB for the fiscal quarters ended January 31, 2004, October
31, 2003 and July 31, 2003 (collectively, the “Form
10-QSB”) and the Form 10-KSB for the fiscal year ended April
30, 2003 (the “Form 10-KSB”) complied in all material
respects with the requirements of the Exchange Act and the rules
and regulations of the Commission promulgated thereunder and other
federal, state and local laws, rules and
4
regulations applicable to such
documents, and the Form 10-QSB and Form 10-KSB 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 Commission 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. 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.
(h)
No Material Adverse Change . Since
January 31, 2004, 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, since January
31, 2004, 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.
5
(j)
No Undisclosed Events or
Circumstances . Since January 31, 2004, 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 date hereof 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 mean (a) any
liabilities for borrowed money or amounts owed in excess of
$300,000 (other than trade accounts payable incurred in the
ordinary course of business), (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 $25,000 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.
(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 Commission Documents, 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. All said 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 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 business of the
Company and the Subsidiaries has been and is presently being
conducted in accordance with all applicable federal, state and
local governmental laws, rules, regulations and ordinances, except
as set forth in the Commission Documents or on Schedule 2.1(n)
hereto or 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
6
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,
none of the federal income tax returns of the Company or any
Subsidiary have been audited by the Internal Revenue Service. 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 . 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.
(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
7
of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, material
or wastes, whether solid, liquid or gaseous in nature. To the best
of the Company’s knowledge, 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 the 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 and each of its Subsidiaries maintain a system of internal
accounting controls sufficient, in the judgment of the
Company’s board of directors, to provide reasonable assurance
that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate actions are taken
with respect to any differences.
(u)
Material Agreements . Except for the Transaction
Documents (with respect to clause (i) only), as disclosed in the
Commission Documents 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 Commission (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.
(v)
Transactions with Affiliates . Except as set
forth on Schedule 2.1(v) hereto and in the Commission
Documents, 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
8
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 . Based in
material part upon the representations herein of the Purchasers,
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, 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. Since January 31,
2004, 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 provided on Schedule 2.1(y) hereto, since January
31, 2004, neither the Company nor any Subsidiary has:
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(i)
issued any stock, bonds or other corporate securities or any right,
options or warrants with respect thereto;
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(ii)
borrowed any amount in excess of $300,000 or incurred or become
subject to any other liabilities in excess of $100,000 (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;
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(iii)
discharged or satisfied any lien or encumbrance in excess of
$250,000 or paid any obligation or liability (absolute or
contingent) in excess of $250,000, other than current liabilities
paid in the ordinary course of business;
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(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 $50,000
individually or $100,000 in the aggregate;
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(v)
sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, in each case in excess of $250,000,
except in the ordinary course of business;
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(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 $250,000, 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;
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(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;
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(viii)
made any changes in employee compensation except in the ordinary
course of business and consistent with past practices;
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(ix)
made capital expenditures or commitments therefor that aggregate in
excess of $500,000;
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(x)
entered into any material transaction, whether or not in the
ordinary course of business;
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(xi)
made charitable contributions or pledges in excess of
$25,000;
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