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FORM OF SECURITIES PURCHASE AGREEMENT

Purchase and Sale Agreement

FORM OF SECURITIES PURCHASE AGREEMENT | Document Parties: GTC BIOTHERAPEUTICS INC | GTC Biotherapeutics, Inc You are currently viewing:
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GTC BIOTHERAPEUTICS INC | GTC Biotherapeutics, Inc

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Title: FORM OF SECURITIES PURCHASE AGREEMENT
Governing Law: New York     Date: 2/11/2008
Industry: Biotechnology and Drugs     Law Firm: Palmer Dodge;Edwards Angell     Sector: Healthcare

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Exhibit 10.2

FORM OF SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “ Agreement ”) is dated as of February 7, 2008, between GTC Biotherapeutics, Inc., a Massachusetts corporation (the “ Company ”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “ Purchaser ” and collectively the “ Purchasers ”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “ Securities Act ”), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

ARTICLE I.

DEFINITIONS

1.1 Definitions . In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:

Action ” shall have the meaning ascribed to such term in Section 3.1(j).

Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act. With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.

Beneficial Owner ” means with respect to any securities, any Person or any of such Person’s Affiliates, representatives or associates, directly or indirectly, who (i) “beneficially own” such securities as determined pursuant to Rule 13d-3 under the Exchange Act, (ii) has the right to acquire, vote or dispose of such securities or (iii) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of such securities.

Board of Directors ” means the board of directors of the Company.

Business Day ” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

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Closing ” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

Closing Date ” has the meaning ascribed to such term in Section 2.1.

Closing Price ” means on any particular date (a) the last reported closing bid price per share of Common Stock during regular trading hours on such date on the Trading Market (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (b) if there is no such price on such date, then the closing bid price on the Trading Market on the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)) , or (c) if the Common Stock is not then listed or quoted on a Trading Market and if prices for the Common Stock are then reported in the “pink sheets” published by Pink Sheets LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) if the shares of Common Stock are not then publicly traded the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority of the Shares and any outstanding Warrant Shares, in the aggregate, still held by the Purchasers and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

Commission ” means the Securities and Exchange Commission.

Common Stock ” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed into.

Common Stock Equivalents ” means any securities of the Company or the Subsidiary which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

Company Counsel ” means Edwards Angell Palmer & Dodge LLP, with offices located at 111 Huntington Avenue, Boston, Massachusetts 02199.

Disclosure Schedules ” means the Disclosure Schedules of the Company delivered concurrently herewith.

Discussion Time ” has the meaning ascribed to such term in Section 3.2(g).

DTC ” means The Depositary Trust Company.

DWAC ” has the meaning ascribed to such term in Section 2.3(a).

Evaluation Date ” has the meaning ascribed to such term in Section 3.1(r).

 

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Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Exempt Issuance ” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities issued and outstanding on the date of this Agreement and exercisable or exchangeable for or convertible into shares of Common Stock, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of such securities and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

FDA ” has the meaning ascribed to such term in Section 3.1(ff).

FDCA ” has the meaning ascribed to such term in Section 3.1(ff).

MZRL ” means Morse, Zelnick, Rose & Lander, LLP with offices located at 405 Park Avenue, Suite 1401, New York New York 10022.

GAAP ” shall have the meaning ascribed to such term in Section 3.1(h).

Indebtedness ” shall have the meaning ascribed to such term in Section 3.1(y).

Intellectual Property Rights ” shall have the meaning ascribed to such term in Section 3.1(o).

Liens ” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

Material Adverse Effect ” shall mean (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, or financial condition of the Company and the Subsidiary, taken as a whole; provided, however, that such an effect shall not be deemed to have occurred based on low cash position, continuing losses from operations or notice from the Trading Market of non-compliance with the minimum bid price requirement for continued listing, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document.

 

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Material Permits ” shall have the meaning ascribed to such term in Section 3.1(m).

Per Unit Purchase Price ” equals $0.87.

Person ” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

Pharmaceutical Product ” has the meaning ascribed to such term in Section 3.1(gg).

Placement Agent ” means Rodman & Renshaw, LLC.

Proceeding ” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

Prospectus ” means the prospectus dated May 2, 2007 contained in the Registration Statement.

Prospectus Supplement ” means the supplement (or supplements) to the Prospectus relating to the placement of the Securities and the plan of distribution thereof complying with Rule 424(b) under the Securities Act and filed with the Commission and delivered by the Company to each Purchaser at the Closing.

Purchaser Party ” shall have the meaning ascribed to such term in Section 4.8.

Registration Statement ” means the registration statement (File No. 333-142564) filed with the Commission on May 2, 2007 and declared effective by the Commission on May 18, 2007, registering the issuance of the Shares, the Warrants and the Warrant Shares by the Company.

Required Approvals ” shall have the meaning ascribed to such term in Section 3.1(e).

Rule 144 ” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

SEC Reports ” shall have the meaning ascribed to such term in Section 3.1(h).

Securities ” means the Shares, the Warrants and the Warrant Shares.

Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

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Shares ” means the shares of Common Stock issued or issuable to each Purchaser pursuant to this Agreement and excludes the Warrant Shares.

Short Sales ” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).

Subscription Amount ” means, as to each Purchaser, the aggregate amount to be paid for Units purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

Subsidiary ” means GTC Holdings Ltd., a Cayman Island entity, and shall, where applicable, include any subsidiary of the Company formed or acquired after the date hereof that is a “significant subsidiary” as determined in accordance with Regulation S-X.

Time of Sale Information ” means the Prospectus, Prospectus Supplements and any “free-writing prospectuses” (as defined by Rule 405 under the Securities Act) filed by the Company and delivered to the Purchaser on or prior to the date of this Agreement.

Trading Day ” means a day on which the New York Stock Exchange is open for trading.

Trading Market ” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading: the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board and any successors to any of such markets or exchanges.

Transaction Documents ” means this Agreement and the Warrants and any other documents or agreements to be delivered to, or entered into with, the Purchasers and executed in connection with the transactions contemplated hereunder.

Transfer Agent ” means American Stock Transfer & Trust Company, the current transfer agent of the Company, with a mailing address of 6201 15 th Avenue, Brooklyn, New York 11219 and a facsimile number of 718-921-8206, and any successor transfer agent of the Company.

Unit ” means a unit consisting of one Share of Common Stock and a common stock purchase warrant to purchase one Warrant Share.

Variable Rate Transaction ” has the meaning ascribed to such term in Section 4.12(b).

Warrants ” means, collectively, the Common Stock purchase warrants, in the form attached as Exhibit A hereto, delivered to the Purchasers at the Closing in accordance with Section 2.3(b) hereof, which Warrants shall be exercisable at any time on or after six months after the date of the Warrants and have a term of exercise equal to seven years.

 

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Warrant Shares ” means the shares of Common Stock issuable upon exercise of the Warrants.

ARTICLE II.

PURCHASE AND SALE

2.1 Closing .

Upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, up to an aggregate of $6,000,000 worth of Units. On the third Trading Day following the date of this Agreement or such other date as the parties shall mutually agree (the “ Closing Date ”), (a) the Company and each Purchaser shall deliver the items set forth in Section 2.4, (b) each Purchaser shall deliver or caused to be delivered to the Company immediately available funds equal to each Purchaser’s Subscription Amount pursuant to Section 2.2 and (c) the Company shall deliver or cause to be delivered to each Purchaser the Shares and a certificate evidencing the Warrants purchased by such Purchaser under the Agreement in accordance with Section 2.3 (the “ Closing ”). The Closing shall occur at the offices of MZRL or such other location as the parties shall mutually agree.

2.2 Delivery of Funds .

On the Closing Date, upon the satisfaction by the Company of the conditions set forth in Section 2.4(b) hereof, each Purchaser shall deliver to the Company by wire transfer immediately available funds equal to the Purchaser’s Subscription Amount to the following account:

 

ABA Routing No.:    121-140-399
Bank:    Silicon Valley Bank
Account No.:    3300345727
Beneficiary Name:    GTC Biotherapeutics, Inc.

2.3 Delivery of Shares and Warrants .

(a) Shares . On or prior to the Closing Date, the Purchaser shall direct the broker-dealer at which the account or accounts to be credited with the Shares being purchased by such Purchaser are maintained (which broker/dealer shall be a DTC participant) to set up a Deposit/Withdrawal at Custodian (“ DWAC ”) instructing the Transfer Agent to credit such account or accounts by means of an electronic book-entry delivery on the Closing Date with such number of Shares equal to the Purchaser’s Subscription Amount divided by the Per Unit Purchase Price.

Immediately upon receipt by the Company of immediately available funds from each Purchaser equal to such Purchaser’s Subscription Amount, the Company shall direct the Transfer Agent to credit such Purchaser’s account or accounts with the Shares pursuant to the information contained in the DWAC.

 

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(b) Warrants . Immediately upon receipt by the Company of immediately available funds from each Purchaser equal to such Purchaser’s Subscription Amount, the Company shall also deliver or cause to be delivered to such Purchaser (or to MZRL on behalf of the Purchaser) an original certificate evidencing the Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 100% of such Purchaser’s Subscription Amount divided by the Per Unit Purchase Price, with an exercise price equal to $0.87, subject to adjustment as set forth in the form attached as Exhibit A hereto.

2.4 Closing Conditions and Deliverables .

(a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

(i) the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein;

(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed; and

(iii) the delivery to the Company by or on behalf of each Purchaser, on or prior to the Closing Date, of the following items:

(A) this Agreement duly executed by such Purchaser; and

(B) such Purchaser’s Subscription Amount by wire transfer to the account as specified in writing by the Company.

(b) The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:

(i) the accuracy in all material respects on the Closing Date of the representations and warranties of the Company contained herein;

(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

(iii) the delivery by the Company, on or prior to the Closing Date, of the following items:

(A) this Agreement duly executed by the Company;

(B) a legal opinion of Company Counsel, substantially in the form of Exhibit B attached hereto;

 

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(C) a copy of the irrevocable instructions to the Transfer Agent to deliver via DWAC Shares equal to such Purchaser’s Subscription Amount divided by the Per Unit Purchase Price, registered in the name of such Purchaser;

(D) a copy of the certificate issued by the Company evidencing the Warrant registered in the Purchaser’s name; and

(E) the Prospectus and Prospectus Supplement (which may be delivered in accordance with Rule 172 under the Securities Act).

(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and

(v) from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing), and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of each Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.

Each Purchaser’s obligations are expressly not conditioned on the purchase of Securities by any or all of the other Purchasers.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company . Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedule, the Company hereby makes the following representations and warranties to each Purchaser:

(a) Subsidiaries . The Subsidiary is the Company’s only “significant subsidiary” as determined in accordance with Regulation S-X. Except as described in the SEC Reports, the Company owns, directly or indirectly, all of the capital stock or other equity interests of the Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of the Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

 

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(b) Organization and Qualification . The Company and the Subsidiary are each entities duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of their incorporation or organization (as applicable), with the requisite power and authority to own and use their properties and assets and to carry on their business as currently conducted. Neither the Company nor the Subsidiary is in violation or default of any of the provisions of their respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiary is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not reasonably be expected to result in a Material Adverse Effect and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(c) Authorization; Enforcement . The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection therewith other than in connection with the Required Approvals. Each Transaction Document to which the Company is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law or public policy relating thereto.

(d) No Conflicts . The execution, delivery and performance of the Transaction Documents by the Company, the issuance and sale of the Securities and the consummation by the Company of the other transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or the Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or the Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or the Subsidiary is a party or by which any property or asset of the Company or the Subsidiary is bound or affected, or (iii) subject to

 

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the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not reasonably be expected to result in a Material Adverse Effect.

(e) Filings, Consents and Approvals . The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Prospectus Supplement, (iii) application(s) to each applicable Trading Market for the listing of the Shares and Warrant Shares for trading thereon in the time and manner required thereby and (iv) such filings as are required to be made under applicable Federal and state securities laws (collectively, the “ Required Approvals ”).

(f) Issuance of the Securities; Registration . The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company, other than restrictions on transfer provided for in the Transaction Documents. The Warrant Shares, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company, other than restrictions on transfer provided for in the Transaction Documents. On the Closing Date, the Shares will be listed and freely tradable, and the Warrants Shares will authorized for listing, on the Trading Market. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement and the Warrants. The Company has prepared and filed the Registration Statement in conformity with the requirements of the Securities Act, which became effective on May 18, 2007, including the Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement. The Registration Statement is effective under the Securities Act and the Company has not received any notice, or has any knowledge, of (i) the issuance of any stop order by the Commission preventing or suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Prospectus by the Commission or (ii) the institution, or threat thereof, by the Commission of any proceedings for that purpose. The Company, if required by the rules and regulations of the Commission, proposes to file the Prospectus Supplement, with the Commission pursuant to Rule 424(b). At the time the Registration Statement and any amendments thereto became effective, at the date of this Agreement and at the Closing Date, the Registration Statement and any amendments thereto conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and the Prospectus, the Prospectus Supplement and the free-writing prospectuses, if any, and any amendments or

 

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supplements thereto, each as of its respective date, conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(g) Capitalization . The capitalization of the Company as of December 30, 2007 (the last day of its most recently completed fiscal year) is set forth in Schedule 3.1(g) hereto. Except (i) as a result of the purchase and sale of the Securities, (ii) as described in Schedule 3.1(g) or (iii) pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion or exercise of securities exercisable, exchangeable or convertible into Common Stock under any of the Company’s equity incentive plans (the “ Common Stock Equivalents ”), there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or the Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. Except as described in Schedule 3.1(g) hereto, no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents, which right has not been waived with respect to the transactions contemplated by the Transaction Documents. Except as described in Schedule 3.1(g) hereto, the issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. Except as described in, or incorporated into, the Registration Statement, there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

(h) SEC Reports; Financial Statements . The Company has complied in all material respects with requirements to file all reports, schedules, forms, statements and other documents required to be filed by the Company under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for one year preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “ SEC Reports ”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC

 

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Reports prior to the expiration of any such extension. As of their respective filing dates, the SEC Reports complied in all material respects with the requirements of the Exchange Act and none of the SEC Reports, when filed, 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 the light of the circumstances under which they were made, not misleading, except to the extent corrected by subsequently filed documents with the Commission. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“ GAAP ”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for 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, immaterial, year-end audit adjustments.

(i) Material Changes; Undisclosed Events, Liabilities or Developments . Since the date of the latest audited financial statements included within the SEC Reports, except as disclosed in the SEC Reports or described in, or incorporated by reference into, the Registration Statement, (i) there has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement, no event, liability or development has occurred or exists with respect to the Company or the Subsidiary or their respective business, properties, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made that has not been publicly disclosed prior to the date of this Agreement or described in, or incorporated by reference into, the Prospectus Supplement.

(j) Litigation . Except as described in Schedule 3.1(j) hereto, there is no Proceeding against or affecting the Company, the Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “ Action ”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) would, if there were an unfavorable

 

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decision, reasonably be expected to result in a Material Adverse Effect. Neither the Company nor the Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.

(k) Labor Relations . No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which would reasonably be expected to result in a Material Adverse Effect. None of the Company’s or the Subsidiary’ employees is a member of a union that relates to such employee’s relationship with the Company or the Subsidiary, and neither the Company nor the Subsidiary is a party to a collective bargaining agreement, and the Company and the Subsidiary believe that their relationships with their employees are good. To the Company’s knowledge, (i) no executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and (ii) the continued employment of each such executive officer does not subject the Company or the Subsidiary to any liability with respect to any of the foregoing matters. The Company and the Subsidiary are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(l) Compliance . Neither the Company nor the Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or the Subsidiary under), nor has the Company or the Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except in each case as would not reasonably be expected to result in a Material Adverse Effect.

(m) Regulatory Permits . The Company and the Subsidiary possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities required to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits would not reasonably be expected to result in a Material Adverse Effect (“ Material Permits ”), and neither the Company nor the Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

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(n) Title to Assets . Except as described in, or incorporated by reference into, the Registration Statement, the Company and the Subsidiary have good and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiary and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiary, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiary and Liens for the payment of federal, state or other taxes, the payment of which is neither del


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