PREFERRED STOCK PURCHASE AGREEMENT

Exhibit 10.1

Execution Version

PREFERRED STOCK PURCHASE AGREEMENT

This Preferred Stock Purchase Agreement (“ Agreement ”) is entered into and effective as of September 24, 2009 (“ Effective Date ”), by and among Advaxis, Inc., a Delaware corporation (“ Company ”), and Optimus Capital Partners, LLC, a Delaware limited liability company, dba Optimus Life Sciences Capital Partners, LLC (including its designees, successors and assigns, “ Investor ”).

RECITALS

A.           The parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue to Investor, and Investor shall purchase from the Company, from time to time as provided herein, up to $5,000,000.00 of Preferred Shares (as defined below); and

B.           The offer and sale of the Securities provided for herein are being made without registration under the Act (as defined below), in reliance upon the provisions of Section 4(2) of the Act, Regulation D promulgated under the Act, and such other exemptions from the registration requirements of the Act as may be available with respect to any or all of the purchases of Securities to be made hereunder.

AGREEMENT

In consideration of the premises, the mutual provisions of this Agreement, and other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, Company and Investor agree as follows:

ARTICLE 1

DEFINITIONS

In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Certificate of Designations, and (b) the following terms have the meanings indicated in this ARTICLE 1:

“ Act ” means the Securities Act of 1933, as amended.

“ Action ” has the meaning set forth in Section 4.1(j).

“ Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Act.  With respect to Investor, without limitation, any Person owning, owned by, or under common ownership with Investor, and any investment fund or managed account that is managed on a discretionary basis by the same investment manager as Investor will  be deemed to be an Affiliate.

“ Agreement ” means this Preferred Stock Purchase Agreement.

“ Automatic Termination ” has the meaning set forth in Section 3.1 .

 

“ Certificate of Designations ” means the certificate to be filed with the Secretary of State of the State of Delaware, in the form attached hereto as Exhibit B .

“ Closing ” means any one of (i) the Commitment Closing and (ii) each Tranche Closing.

“ Commitment Closing ” has the meaning set forth in Section 2.2(a) .

“ Commitment Fee ” means a non-refundable fee of $250,000.00, payable by the Company to Investor, at the Company’s option, either (i) in cash, by wire transfer of immediately available funds to an account designated by Investor, with $125,000.00 due on or before October 28, 2009 and $125,000.00 due on or before the first Tranche Closing Date (and if paid on the first Tranche Closing Date, payable by offset from the first Tranche Amount), or (ii) by issuance and delivery of unregistered shares of Common Stock, issued on or before October 28, 2009 and valued based upon 82% of the VWAP for the Common Stock on the 5 Trading Days immediately preceding such date, which shares must be included in the Registration Statement filed by the Company pursuant to Section 4.1(hh)(i) hereof; provided, however, that if the Company elects to pay the Commitment Fee in shares of Common Stock pursuant to clause (ii) above and, on the earlier of the effective date of the Registration Statement or six months from the issuance date, the VWAP for the Common Stock falls below the payment date VWAP, then all of the shares of Common Stock that were paid as the Commitment Fee shall be repriced at 82% of the VWAP for the 5 Trading Days immediately preceding such repricing date.

“ Common Stock ” means the common stock, par value $0.001 per share, of the Company, and any replacement or substitute thereof, or any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.

“ Company ” means Advaxis, Inc., a Delaware corporation.

“ Company Parties ” and “ Company Party ” have the meanings set forth in Section 5.8(b).

“ Company Termination ” has the meaning set forth in Section 3.2 .

“ Conditions to Commitment Closing ” has the meaning set forth in Section 2.2(b).

“ Delisting Event ” means any time during the term of this Agreement, that the Common Stock is not listed for trading or quoted on a Trading Market, or is suspended or delisted with respect to the trading of shares of Common Stock on a Trading Market.

“ Disclosure Schedules ” means the disclosure schedules of the Company delivered concurrently herewith and attached hereto.

“ DTC ” means The Depository Trust Company, or any successor performing substantially the same function for Company.

 

“ DWAC Shares ” means Warrant Shares issued to Investor or any Affiliate, successor or assign of Investor pursuant to any exercise of the Warrant in electronic form, which Warrant Shares do not require the imprinting of the restrictive legend(s) referred to in Section 5.1 as set forth therein at the time of issuance of such Warrant Shares, and are without restriction on resale at the time of issuance, and delivered by the Company to the specified Deposit/Withdrawal at Custodian (DWAC) account with DTC under its Fast Automated Securities Transfer (FAST) Program or any similar program hereafter adopted by DTC performing substantially the same function, in accordance with irrevocable instructions issued to and countersigned by the Transfer Agent, in the form attached hereto as Exhibit C .

“ Effective Date ” has the meaning set forth in the Preamble.

“ Evaluation Date ” has the meaning set forth in Section 4.1(r).

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ FINRA ” has the meaning set forth in Section 4.1(e).

“ Fundamental Transaction ” means and shall be deemed to have occurred at such time upon any of the following events:

(a)           the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person or Persons, (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the assets of the Company to another Person, other than in the ordinary course of business, (iii) allow another Person to make a tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination) (other than, in the case of clause (i) above, (A) any such transaction pursuant to which holders of Common Stock immediately prior to such transaction (x) continue to hold more than 50% of the outstanding shares of Common Stock or (y) have the ability to elect a majority of the board of directors of the Company or (B) any merger or consolidation which is effected solely to change the jurisdiction of incorporation of the Company, and in the case of clauses (iii) and (iv) above, any transaction which is effected solely to change the jurisdiction of incorporation of the Company); or

(b)           any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate Common Stock, other than persons or groups who exceed such ownership level as of the Effective Date and other than in connection with a transaction which is effected solely to change the jurisdiction of incorporation of the Company.

 

“ Funding Default ” means a failure by Investor to accept a Tranche Notice delivered by the Company, provided such Tranche Notice was delivered in accordance with the terms and conditions of this Agreement (including the timely and full satisfaction of the conditions to the obligation of Investor to accept a Tranche Notice set forth in Section 2.3(c) of this Agreement), and to acquire and pay for the Preferred Shares in accordance therewith upon delivery of such Preferred Shares to the Investor in accordance with the terms of this Agreement (and the timely delivery by the Company of the other Required Tranche Deliveries required to be delivered by it and the timely and full satisfaction by the Company of all other conditions for the Tranche Closing required to be satisfied by it as set forth in Sections 2.3(d) and (e) of this Agreement).

“ GAAP ” means United States generally accepted accounting principles applied on a consistent basis during the periods involved.

“ Indebtedness ” means (a) any liabilities for borrowed money or amounts owed in excess of $100,000 (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 $100,000 due under leases required to be capitalized in accordance with GAAP.

“ Intellectual Property Rights ” has the meaning set forth in Section 4.1(o).

“ Investor ” means Optimus Capital Partners, LLC, a Delaware limited liability company, dba Optimus Life Sciences Capital Partners, LLC (including its designees, successors and assigns).

“ Investor Parties ” and “ Investor Party ” have the meanings set forth in Section 5.8.

“ Liens ” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction (excluding restrictions on transfer of securities under applicable U.S. federal or state securities or “blue sky” laws).

“ Lock-Up Agreements ” means an agreement in the form attached as Exhibit D , executed by each of the Company’s executive officers, directors and beneficial owners of 10% or more of the Common Stock, precluding each such Person from participating in any sale of the Common Stock from the Tranche Notice Date through the Tranche Closing Date.

“ Losses ” has the meaning set forth in Section 5.8.

“ Luce Forward ” has the meaning set forth in Section 5.1(a).

 

“ Material Adverse Effect ” means a material adverse effect on (i) the legality, validity or enforceability of any Transaction Document, (ii) the results of operations, assets, business or financial condition of the Company, or (iii) the Company’s ability to perform in any material respect its obligations under any Transaction Document; provided , however , that none of the following, individually or in the aggregate, shall be taken into account in determining whether a Material Adverse Effect has occurred: (a) changes in conditions in the U.S. or global capital, credit or financial markets generally, including changes in the availability of capital or currency exchange rates; (b) changes generally affecting the biotechnology or pharmaceutical industries; (c) any deterioration in the results of operations, assets, business or financial condition of the Company substantially resulting from (1) circumstances, conditions or risks (including, without limitation, the section entitled “Risk Factors” contained in the Company’s Form 10-KSB for its fiscal year ended October 31, 2008) existing as of the Effective Date that are set forth in any of the SEC Reports or (2) any of the matters set forth in the Disclosure Schedule (as the same may be updated pursuant to Section 2.3(c)(ii)); (d) any effect of the announcement of this Agreement or the consummation of the transactions contemplated by this Agreement on the Company’s relationships, contractual or otherwise, with customers, suppliers, vendors, bank lenders, strategic venture partners or employees; and (e) any decrease in the market price of the Common Stock (but excluding herefrom any condition, occurrence, state of facts or event underlying such decrease to the extent that such condition, occurrence, state of facts or event otherwise would constitute a Material Adverse Effect).

“ Material Agreement ” includes any material loan agreement, financing agreement, equity investment agreement or securities instrument to which Company is a party, any material agreement or instrument to which Company and Investor or any Affiliate of Investor is a party, and any other material agreement listed, or required to be listed, on any of Company’s reports filed or required to be filed with the SEC, including without limitation Forms 10-K, 10-Q or 8-K.

“ Material Permits ” has the meaning set forth in Section 4.1(m).

“ Maximum Placement ” means $5,000,000.00.

“ Maximum Tranche Amount ” means, subject to any other applicable limitations set forth in this Agreement, the Maximum Placement less the amount of any previously noticed and funded Tranches.

“ Officer’s Closing Certificate ” means a certificate in customary form reasonably acceptable to the Investor, executed by an authorized officer of the Company.

“ Opinion ” means an opinion from Company’s independent legal counsel, in the form attached as Exhibit E , to be delivered in connection with the Commitment Closing and any Tranche Closing.

“ 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.

“ Preferred Shares ” means shares of Series A Preferred Stock of the Company provided for in the Certificate of Designations, to be issued to Investor pursuant to this Agreement.

“ Prospectus ” includes each prospectus (within the meaning of the Act) related to the sale or offering of any Warrant Shares, including without limitation any prospectus contained within the Registration Statement.

 

“ Registration Statement ” means a valid, current and effective registration statement registering for resale the Warrant Shares, and except where the context otherwise requires, means the registration statement, as amended, including (i) all documents filed as a part thereof, and (ii) any information contained in a prospectus filed with the SEC in connection with such registration statement, to the extent such information is deemed under the Act to be part of the registration statement.

“ Regulation D ” means Regulation D promulgated under the Act.

“ Required Tranche Deliveries ” has the meaning set forth in Section 2.3(d).

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

“ Rule 144 Eligible ” means eligible for immediate resale under Rule 144 without limitation on the amount of securities sold under Rule 144(e) and without  requiring discharge by payment in full of any promissory notes given to Company prior to the sale of the securities under Rule 144(d)(2)(iii).

“ SEC ” means the United States Securities and Exchange Commission.

“ SEC Reports ” includes all reports required to be filed by the Company under the Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the Effective Date (or such shorter period as the Company was required by law to file such material).

“ Securities ” includes the Warrants, Warrant Shares and Preferred Shares issuable pursuant to this Agreement.

“ Subsidiary ” means any Person the Company owns or controls, or in which the Company, directly or indirectly, owns a majority of the capital stock or similar interest that would be disclosable pursuant to Regulation S-K, Item 601(b)(21).

“ Termination Date ” means the earlier of (i) the date that is three years after the Effective Date, or (ii) the Tranche Closing Date on which the sum of the aggregate Tranche Purchase Price for all Tranche Shares equals the Maximum Placement.

“ Termination Notice ” has the meaning as set forth in Section 3.2 .

“ Trading Day ” means any day on which the Common Stock is traded on the Trading Market; provided that it shall not include any day on which the Common Stock is (a) scheduled to trade for less than 5 hours, or (b) suspended from trading.

“ Trading Market ” means the OTC Bulletin Board, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market, the NYSE Amex, or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.

“ Tranche ” has the meaning set forth in Section 2.3(a) .

 

“ Tranche Amount ” means the amount of any individual put purchase, as specified by the Company, and shall not exceed the Maximum Tranche Amount.

“ Tranche Closing ” has the meaning set forth in Section 2.3(e) .

“ Tranche Closing Date ” has the meaning set forth in Section 2.3(e) .

“ Tranche Notice ” has the meaning set forth in Section 2.3(b) .

“ Tranche Notice Date ” has the meaning set forth in Section 2.3(b) .

“ Tranche Purchase Price ” has the meaning set forth in Section 2.3(b) , and shall be specified in writing by the Company.

“ Tranche Share Price ” means $10,000.00 per Preferred Share. Company may not put fractional Preferred Shares.

“ Tranche Shares ” means the Preferred Shares that are purchased by Investor pursuant to a Tranche.

“ Transaction Documents ” include this Agreement and the Exhibits hereto and thereto.

“ Transfer Agent ” means Securities Transfer Corporation, or any successor transfer agent for the Common Stock.

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

“ Warrant ” means the warrant issuable under this Agreement, in the form attached hereto as Exhibit A , to purchase 33,750,000 shares of Common Stock, at an initial exercise price of $0.20 per share, subject to adjustment after the Commitment Closing as provided therein.

ARTICLE 2

PURCHASE AND SALE

2.1            Agreement to Purchase .  Subject to the terms and conditions herein and the satisfaction of the conditions to Closing set forth in this ARTICLE 2:

(a)            Investor hereby agrees to purchase such amounts of Preferred Shares as the Company may, in its sole and absolute discretion, from time to time elect to issue and sell to Investor according to one or more Tranches pursuant to Section 2.3 below; and

(b)            The Company agrees to pay the Commitment Fee and issue the Warrant to Investor in accordance with the terms of this Agreement.

2.2           Investment Commitment .

(a)             Investment Commitment . The closing of this Agreement (the “ Commitment Closing ”) shall be deemed to occur when this Agreement has been duly executed by both Investor and the Company, and the other Conditions to the Commitment Closing set forth in Section 2.2(b) have been met.

 

(b)             Conditions to Investment Commitment . As a condition precedent to the Commitment Closing, all of the following (the “ Conditions to Commitment Closing ”) shall have been satisfied prior to or concurrently with the parties’ execution and delivery of this Agreement:

 (i)            the following documents shall have been delivered to Investor:  (A) this Agreement, executed by the Company; (B) a Secretary’s Certificate as to (x) the resolutions of the Company’s board of directors authorizing this Agreement and the Transaction Documents, and the transactions contemplated hereby and thereby, (y) a copy of the Company’s current Certificate of Incorporation, and (z) a copy of the Company’s current Bylaws; (C) the Certificate of Designations executed by the Company and accepted by the Secretary of State of Delaware; (D) the Opinion; and (E) a copy of the press release announcing the transactions contemplated by this Agreement and Current Report on Form 8-K of the Company describing the transactions contemplated by, and attaching a complete copy of, the Transaction Documents;

 (ii)            other than for losses incurred in the ordinary course of business, there shall have been no Material Adverse Effect since the date of the last SEC Report filed by the Company;

 (iii)            the representations and warranties of the Company in this Agreement shall be true and correct in all material respects and the Company shall have delivered an Officer’s Closing Certificate to such effect to Investor, signed by an officer of the Company; and

 (iv)            the representations and warranties of Investor in this Agreement shall be true and correct in all material respects.

(c)             Delivery of the Warrant .  Simultaneously with the Commitment Closing, the Company shall deliver the Warrant to the Investor.

(d)             Investor’s Obligation to Purchase . Subject to the prior satisfaction of all conditions set forth in this Agreement, following the Investor’s receipt of a validly delivered Tranche Notice, the Investor shall be required to purchase from the Company a number of Tranche Shares equal to the permitted Tranche Share Amount, in the manner described below.

2.3           Tranches to Investor .

(a)             Procedure to Elect a Tranche . Subject to the Maximum Tranche Amount, the Maximum Placement and the other conditions and limitations set forth in this Agreement, at any time beginning on the Effective Date, the Company may, in its sole and absolute discretion, elect to exercise one or more tranches of puts (each a “ Tranche ”) according to the following procedure, provided that each subsequent Tranche Notice Date (defined below) after the first Tranche Notice Date shall be no sooner than five (5) Trading Days following the preceding Tranche Notice Date.

 

(b)             Delivery of Tranche Notice . The Company shall deliver an irrevocable written notice (the “ Tranche Notice ”) the form of which is attached hereto as Exhibit F (the date of such Tranche Notice being the “ Tranche Notice Date ”), to Investor stating that the Company shall exercise a Tranche and stating the number of Preferred Shares which the Company will sell to Investor at the Tranche Share Price, and the aggregate purchase price for such Tranche (the “ Tranche Purchase Price ”).  A Tranche Notice may be delivered by the Company to Investor before 5:00 p.m., New York City time, on any Trading Day via facsimile or electronic mail, with confirming copy by overnight carrier.  A Tranche Notice delivered after such time or on a non-Trading Day shall be deemed delivered on the following Trading Day.  The Company may not give a Tranche Notice unless the Tranche Closing for the prior Tranche has occurred.

(c)             Conditions Precedent to a Tranche Notice .  The right of the Company to deliver a Tranche Notice and the obligation of the Investor to accept a Tranche Notice and to acquire and pay for the Preferred Shares are subject to the satisfaction (or where legally permissible, the waiver), on the Tranche Notice Date, of each of the conditions set forth below. Other than the conditions set forth in clause (iii) below, which are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion (if legally permissible), and the conditions set forth in clause (viii) below, which are for the Company’s and the Investor’s benefit and may be waived by both the Company and the Investor in their discretion (if legally permissible) by mutual written agreement, the remaining conditions set forth in this Section 2.3(c) are for the Investor’s sole benefit and may be waived by the Investor at any time in its sole discretion (if legally permissible).

 (i)            the Common Stock shall be listed for trading or quoted on the Trading Market, and to the Company’s knowledge there is no notice of any suspension or delisting with respect to the trading or quotation of the shares of Common Stock on the Trading Market;

 (ii)            the representations and warranties of the Company set forth in this Agreement shall be true and correct in all material respects as if made on such date, except for representations and warranties that are expressly made as of a particular date in which case, such representations and warranties shall be true and correct as of such particular date (provided, however, that any information disclosed by the Company in a filing with the SEC after the Effective Date but prior to the date of the Tranche Notice shall be deemed to update the Disclosure Schedules automatically and without any further action on the part of the Company), the Company shall have performed, satisfied and complied in all material respects with all covenants and agreements required by this Agreement to be performed, satisfied or complied with by the Company at or prior to such date, and the Company shall deliver an Officer’s Closing Certificate to such effect to Investor, signed by an officer of the Company;

 (iii)            the representations and warranties of the Investor set forth in this Agreement shall be true and correct in all material respects as if made on such date, except for representations and warranties that are expressly made as of a particular date in which case, such representations and warranties shall be true and correct as of such particular date, and the Investor shall have performed, satisfied and complied in all material respects with all covenants and agreements required by this Agreement to be performed, satisfied or complied with by the Investor at or prior to such date;

 

(iv)            other than losses incurred in the ordinary course of business, there shall have been no Material Adverse Effect since the Commitment Closing;

(v)             all Warrant Shares shall have been timely delivered pursuant to any Exercise Notice properly delivered to the Company under the terms of the Warrant prior to the applicable Tranche Notice Date;

(vi)            to the extent required under the terms of the Warrant and Section 5.1 of this Agreement, all previously-issued Warrant Shares are DWAC Shares in electronic form without restriction on resale;

(vii)           the Company is not, and will not be as a result of the applicable Tranche, in default of any Material Agreement (it being hereby acknowledged and agreed that for purposes of this paragraph (vii), the trigger of any antidilution, price-reset or similar provisions in any outstanding warrants or other derivative securities of the Company as a result of the applicable Tranche shall not be deemed a default of any Material Agreement);

(viii)         there is not then in effect any law, rule or regulation prohibiting the transactions contemplated by any of the Transaction Documents, or requiring any consent or approval which shall not have been obtained, nor is there any pending proceeding or investigation which may have the effect of prohibiting or adversely affecting any of the transactions contemplated by this Agreement; no statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or adopted by any court or governmental authority of competent jurisdiction that prohibits the transactions contemplated by this Agreement, and no actions, suits or proceedings shall be in progress or pending by any person (other than Investor or any Affiliate of Investor) that seek to enjoin or prohibit the transactions contemplated by this Agreement (it being hereby acknowledged and agreed that for purposes of this paragraph (viii), no proceeding shall be deemed pending unless one of the parties hereto has received written notification thereof prior to the applicable Tranche Notice Date);

(ix)            the Company is in compliance with all reporting requirements under the Exchange Act in order to maintain listing on its then current Trading Market;

(x)             either (A) the Company has a current, valid and effective Registration Statement covering the lawful resale of all Warrant Shares then issued or issuable upon exercise of the Warrant, or (B) all of such Warrant Shares are Rule 144 Eligible (assuming cashless exercise of the Warrant);

(xi)            Company has a sufficient number of duly authorized shares of Common Stock reserved for issuance in such amount as may be required to issue all Warrant Shares issuable upon exercise of the Warrant based on the then current anticipated exercise price(s) of the Warrant;

(xii)          the Company has provided notice of its delivery of the Tranche Notice to all signatories of a Lock-Up Agreement as required under the Lock-Up Agreement; and

 

 (xiii)         the aggregate number of Warrant Shares issuable upon exercise of the Warrant based on the then-current anticipated exercise price(s) of the Warrant, aggregated with all other shares of Common Stock deemed beneficially owned by the Investor and its Affiliates would not result in the Investor beneficially owning more than 9.99% of the Common Stock outstanding on the Tranche Notice Date, as determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.

(d)             Deliveries at Tranche Closing . The Closing of any Tranche and the parties’ obligations hereunder shall additionally be conditioned upon the delivery of each of the following (the “ Required Tranche Deliveries ”), except as otherwise indicated, on or before the applicable Tranche Closing Date:

 (i)             a number of Preferred Shares equal to the Tranche Purchase Price divided by the Tranche Share Price shall have been delivered to Investor or an account specified by Investor for the Tranche Shares;

 (ii)            the Tranche Purchase Price shall have been paid by the Investor to the Company by wire transfer of immediately available funds to an account designated by the Company prior to the applicable Tranche Closing Date;

 (iii)            Investor shall have received that portion of the Commitment Fee, if any, that is payable as set forth in the definition of Commitment Fee set forth in Article I hereof;

 (iv)            the following executed documents shall have been delivered to Investor: the Opinion and the Officer’s Closing Certificate;

 (v)             with respect to the first Tranche Closing only, the Lock-Up Agreements shall have been delivered to Investor;

 (vi)            a “Use of Proceeds” certificate, signed by an officer of the Company, and setting forth how the Tranche Purchase Price will be applied by the Company, shall have been delivered to Investor;

 (vii)           all Warrant Shares shall have been timely delivered to Investor in accordance with any Exercise Notice properly delivered to Company under the terms of the Warrant prior to the applicable Tranche Closing Date;

 (viii)         all documents, instruments and other writings required to be delivered by the parties on or before the Tranche Closing Date pursuant to any provision of this Agreement in order to implement and effect the transactions contemplated herein; and

 (ix)            payment of a $5,000.00 non-refundable administrative fee to Investor’s counsel, by offset against the Tranche Amount, or wire transfer of immediately available funds.

 

 (e)             Mechanics of Tranche Closing .  Each of the Company and Investor shall deliver all Required Tranche Deliveries required to be delivered by either of them pursuant to Section 2.3(d) of this Agreement, as applicable, at or prior to each Tranche Closing. Subject to such delivery and the satisfaction (or where legally permissible, the waiver) of the conditions set forth in Section 2.3(d) as of the Tranche Closing Date, the closing of the purchase by Investor of Preferred Shares shall occur by 5:00 p.m., New York City time, on the date which is 10 Trading Days following the Tranche Notice Date (each a “ Tranche Closing Date ”) at the offices of Investor; provided , however , that if any Warrant Shares are not timely delivered in accordance with Section 1.1 of the Warrant, with respect to any portion of the Warrant exercised before the Tranche Closing Date, then the Tranche Closing Date shall be extended one Trading Day for each Trading Day that such delivery is not made; and provided , further , that if any Warrant Shares are not DWAC Shares upon delivery, then the Tranche Closing Date shall be extended one Trading Day for each Trading Day that the Warrant Shares are not DWAC Shares.  On or before each Tranche Closing Date, Investor shall pay to the Company the Tranche Purchase Price to be paid for such Tranche Shares by wire transfer of immediately available funds to an account designated by the Company prior to the applicable Tranche Closing Date.  The closing (each a “ Tranche Closing ”) for each Tranche shall occur on the date that all Required Tranche Deliveries, as applicable, have been delivered to the applicable party pursuant to Section 2.3(d) of this Agreement.

 (f)             Limitation on Obligations to Purchase and Sell .  Notwithstanding anything herein to the contrary, in the event the average closing price of the Common Stock during the nine (9) Trading Days following the Tranche Notice Date falls below 75.0% of the closing bid price of the Common Stock on the Trading Day immediately prior to the Tranche Notice Date:  (i) Investor may, at its option, and without penalty, decline to purchase the applicable Tranche Shares on the Tranche Closing Date; or (ii) Company may, at its option, and without penalty, terminate the Tranche Notice and decline to sell the applicable Tranche Shares on the Tranche Closing Date.

2.4             Maximum Placement .  Investor shall not be obligated to purchase any additional Tranche Shares once the aggregate Tranche Purchase Price paid by Investor equals the Maximum Placement.

ARTICLE 3

TERMINATION

3.1             Automatic Termination .  This Agreement shall terminate automatically (each, an “ Automatic Termination ”) upon the occurrence of any of the following:

 (a)            if, at any time after the Effective Date, either the Company or the Investor, or any director or executive officer of the Company or the Investor, has engaged in a transaction or conduct related to the Company or the Investor, as applicable, that has resulted in (i) a SEC enforcement action, or (ii) a civil judgment or criminal conviction for fraud or misrepresentation, or for any other offense that, if prosecuted criminally, would constitute a felony under applicable law;

 (b)            on any date after a Delisting Event that lasts for an aggregate of 20 Trading Days during any calendar year;

 

  (c)            if at any time the Company has filed for and/or is subject to any bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors instituted by or against the Company or any subsidiary of the Company;

  (d)            upon the occurrence of a Fundamental Transaction;

  (e)            so long as any Preferred Shares are outstanding, the Company (i) creates or publicly announces its intention to create a class of Common Stock or series of preferred stock senior to the Series A Preferred Stock with respect to liquidation rights (other than a series of preferred stock that the Company intends to cause to be listed for trading or quoted on any Trading Market other than the OTC Bulletin Board) or (ii) substantially alters or publicly announces its intention to substantially alter the capital structure of the Company in a manner that materially adversely effects the rights or preferences of the Series A Preferred Stock (other than in connection with the creation of a series of preferred stock that the Company intends to cause to be listed for trading or quoted on any Trading Market other than the OTC Bulletin Board), in each case without the prior approval of the holders or a majority of the Preferred Shares then outstanding; and

  (f)            on the Termination Date.

3.2             Company Termination .  The Company may at any time in its sole discretion terminate (a “ Company Termination ”) this Agreement by providing 30 days’ advanced written notice (“ Termination Notice ”) to Investor.

3.3             Other Termination .  The Investor may terminate this Agreement by providing three days’ advanced written notice to the Company, if the Company is in breach or default of any Material Agreement which would reasonably be expected to have a Material Adverse Effect, and such breach or default is not cured within 20 Trading Days after notice of such breach or default is delivered to the Company. The Company or the Investor may terminate this Agreement by providing three days’ advanced written notice to the other, if the other party is in material breach or default of this Agreement or any Transaction Document, and such material breach or default is not cured within 10 Trading Days after notice of such material breach or default is delivered to the breaching party. This Agreement may be terminated at any time by the mutual written consent of both the Company and the Investor, effective as of the date of such mutual written consent unless otherwise provided in such written consent.

3.4             Effect of Termination .  In the event of termination by the Company or the Investor pursuant to Section 3.2 or 3.3, as applicable, written notice thereof shall forthwith be given to the other party as provided in Section 6.2 and the transactions contemplated by this Agreement shall be terminated without further action by either party. If this Agreement is terminated as provided in Section 3.1, 3.2 or 3.3 herein, this Agreement shall become void and of no further force and effect, except as provided in Section 6.8 hereof. Nothing in this Section 3.4 shall be deemed to release the Company or the Investor from any liability for any breach or default under this Agreement or any of the other Transaction Documents occurring prior to such termination, or to impair the rights of the Company and the Investor to compel specific performance by the other party of its obligations under this Agreement arising prior to such termination, or to impair rights of indemnification under this Agreement or any other Transaction Document. The termination of this Agreement will have no effect on any Preferred Shares, Warrant (except as provided therein in the event of a Funding Default) or Warrant Shares previously issued or delivered, or on any rights of any holder thereof. Notwithstanding any other provision, all fees paid to Investor or its counsel are non-refundable.

 

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

4.1             Representations and Warranties of the Company .  Except as set forth under the corresponding section of the Disclosure Schedules (as the same may be updated pursuant to Section 2.3(c)(ii)), which shall be deemed a part hereof, or as set forth in the SEC Reports, the Company hereby represents and warrants to, and as applicable covenants with, Investor as follows:

 (a)             No Subsidiaries .  The Company does not own, directly or indirectly, any capital stock or other equity interests in any Subsidiary.

 (b)             Organization and Qualification .  The Company is an entity duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  The Company is not in violation or default of any of the provisions of its certificate of incorporation or bylaws as currently in effect, except where such violation or default would not, individually or in the aggregate, constitute a Material Adverse Effect. The Company is duly qualified to conduct business and is in good standing as a foreign corporation 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 have or 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, except as would not have or reasonably be expected to result in a Material Adverse Effect.

 (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 or thereunder.  The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby or thereby have been duly authorized by all necessary corporate action on the part of the Company and no further consent or authorization of the Company or its board of directors or stockholders is required.  Each of the Transaction Documents has been, or upon delivery will be, duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies.

 

(d)             No Conflicts .  Assuming each of the filings, consents and approvals referred to in Section 4.1(e) are obtained, given or made on a timely basis, as applicable, 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 thereby do not and will not (i) conflict with or violate any provision of the Company’s certificate of incorporation or bylaws as currently in effect, 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 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 debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected, or (iii) 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 is subject (including U.S. federal and state securities laws and regulations), or by which any property or asset of the Company is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not have or 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) the filing of the Certificate of Designations, (ii) such as may be required under the Act (including, without limitation, the filing of a Form D with the SEC and any Registration Statement required to be filed pursuant to this Agreement) or the Exchange Act (including, without limitation, the filing of a Current Report on Form 8-K of the Company describing the transactions contemplated by, and attaching a complete copy of, the Transaction Documents), (iii) such as may be required under applicable state securities or “blue sky” laws, (iv) such as may be required under the rules and regulations of the Trading Market or the Financial Industry Regulatory Authority (the “ FINRA ”) and (v) such consents, waivers, authorizations, order, notices, filings or registrations, the failure of which to obtain, give or make would not, individually or in the aggregate, result in a Material Adverse Effect; provided , that, for purposes of the representation made in this Section 4.1(e) , the Company is assuming and relying upon the accuracy of the representations and warranties of the Investor contained in Sections 4.2(d) through and including 4.2(m) , and the full performance of and compliance with the covenants and agreements of the Investor contained in Section 5.1 of this Agreement.

(f)             Issuance of the Securities .  Subject to Section 5.13 , the Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, and subject to, and in reliance on, the representations, warranties, covenants and agreements made herein by the Investor, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens.  The Company has reserved from its duly authorized capital stock a number of shares of Common Stock and Preferred Stock for issuance of the Securities at least equal to the number of Securities which could be issued pursuant to the terms of this Agreement based on the then-current anticipated exercise price(s) of the Warrant.

 

(g)             Capitalization .  The authorized capital stock of the Company as of July 31, 2009 and the number of shares of Common Stock issued and outstanding as of August 31, 2009 is as described in the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended July 31, 2009.  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.  As of the Effective Date, except as a result of the purchase and sale of the Securities and for stock options issued by the Company to its employees, directors and consultants, 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 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 any Subsidiary is or may become bound to issue additional shares of Common Stock or securities convertible into or exercisable for shares of Common Stock. 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 U.S. 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.  As of the Effective Date, 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 .  Except as set forth in Schedule 4.1(h) of the Disclosure Schedules, the Company has filed all required SEC Reports for the two years preceding the Effective Date (or such shorter period as the Company was required by law to file such material) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder, as applicable, 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 light of the circumstances under which they were made, not misleading.  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 SEC with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with 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 .  Since the date of the latest audited financial statements included within the SEC Reports, except as disclosed in the SEC Reports, (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 SEC, (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 equity incentive plans.  The Company does not have pending before the SEC any request for confidential treatment of information.

 

(j)             Litigation .  There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its 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 decision, have or reasonably be expected to result in a Material Adverse Effect.  Neither the Company, nor to the knowledge of the Company any director or officer of the Company, is or has been during the past five years the subject of any Action involving a claim of violation of or liability under U.S. federal or state securities laws or a claim of breach of fiduciary duty.  During the past five years, there has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company or any current or former director or officer of the Company in their capacity as a director or officer of the Company.  During the past five years, the SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the Exchange Act or the Act.

(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.

(l)             Compliance .  The Company (i) is not in default under or in violation of (and, to the Company’s knowledge, 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 under), nor has the Company received written 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 similar 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 applicable to the Company, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority applicable to the Company, including without limitation all foreign, federal, state and local laws applicable to its business, except in each of the cases referenced in clauses (i), (ii) and (iii) above as would not have a Material Adverse Effect.

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

 

(n)             Title to Assets .  The Company and the Subsidiaries 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 Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, 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 Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance.

(o)             Patents and Trademarks .  The Company has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have would have a Material Adverse Effect (collectively, the “ Intellectual Property Rights ”).  The Company has not received a written notice that the Intellectual Property Rights used by the Company violates or infringes upon the rights of any Person. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights of the Company.

(p)             Insurance .  The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company is engaged.  The Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

(q)             Transactions With Affiliates and Employees .  Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers 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 knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $120,000 other than (i) for payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) for other employee benefits, including stock option agreements under any equity incentive plan of the Company.

 

(r)             Sarbanes-Oxley; Internal Accounting Controls .  The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002, which are applicable to it as of the date of the Commitment Closing.  The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company, including its Subsidiaries, is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s most recently filed periodic report under the Exchange Act, as the case may be, is being prepared.  The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures as of the date prior to the filing date of the most recently filed periodic report under the Exchange Act (such date, the “ Evaluation Date ”).  The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no significant changes in the Company’s internal controls (as such term is defined in Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company’s knowledge, in other factors that could materially affect the Company’s internal controls.

(s)             Certain Fees .  Except for the payment of the Commitment Fee, the issuance of the Warrant and the other payments to be made pursuant to the Transaction Documents, no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement.  Except as a result of any agreements or arrangements made by the Investor or its representatives or Affiliates, to the Company’s knowledge, Investor shall have no obligation with respect to any such fees or commissions of a type contemplated in this Section 4.1(s) that may be due in connection with the transactions contemplated by this Agreement.

(t)             Private Placement . Assuming the accuracy of Investor representations and warranties set forth in Section 4.2 , no registration under the Act is required for the offer and sale of the Securities by the Company to Investor as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the OTC Bulletin Board.

(u)             Investment Company . The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.  The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act.

(v)             Registration Rights .  No Person has any right to cause the Company to effect the registration under the Act of any securities of the Company.

 

(w)             Listing and Maintenance Requirements .  The Common Stock is registered pursuant to Section 12 of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor, to the Company’s knowledge, is the SEC contemplating terminating such registration.  The Company has not, in the 12 months preceding the Effective Date, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

(x)             Application of Takeover Protections .  The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti takeover provision under the Company’s Certificate of Incorporation or the laws of its state of incorporation that is or could become applicable to Investor as a result of Investor and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation the Company’s issuance of the Securities and Investor’s ownership of the Securities.

(y)             Disclosure .  Except with respect to (i) the transactions contemplated by the Transaction Documents, (ii) the information contained in the Disclosure Schedules and (iii) the information that will be publicly disclosed by the Company pursuant to Section 2.2(b)(i)E and Section 5.4 , the Company confirms that neither the Company nor any other Person acting on its behalf has provided Investor or its agents or counsel with any information that constitutes material, non-public information that, according to applicable law, rule or regulation, should have been disclosed publicly by the Company prior to the Effective Date but which has not been so publicly disclosed. The Company understands and confirms that Investor will rely on the foregoing representations and covenants in effecting transactions in securities of the Company.  All disclosure provided to Investor regarding the Company, its business and the transactions contemplated hereby, furnished by or on behalf of the Company with respect to the representations and warranties made herein are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(z)             No Integrated Offering . Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the Act.

 

(aa)             Financial Condition .  Based on the financial condition of the Company as of the date of the Commitment Closing: (i) the fair saleable market value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof; and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to be paid.  The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances, which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the date of the Commitment Closing.  The Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended July 31, 2009 sets forth as of July 31, 2009 all outstanding secured and unsecured Indebtedness of the Company, or for which the Company has commitments.  The Company is not in default with respect to any Indebtedness.

(bb)             Tax Status .  The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.  The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, statue or local tax.  None of the Company’s tax returns is presently being audited by any taxing authority.

(cc)             No General Solicitation or Advertising .  Except for the Registration Statement to be filed as contemplated by this Agreement, neither the Company nor, to the knowledge of the Company, any of its directors or officers (i) has conducted or will conduct any general solicitation (as that term is used in Rule 502(c) of Regulation D) or general advertising with respect to the sale of the Securities, or (ii) made any offers or sales of any security or solicited any offers to buy any security under any circumstances that would require registration of the Securities under the Act or made any “directed selling efforts” as defined in  rule 902 of Regulation S.

(dd)             Foreign Corrupt Practices .  Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any corrupt funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is  in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

(ee)             Acknowledgment Regarding Investor’s Purchase of Securities .  The Company acknowledges and agrees that Investor is acting solely in the capacity of arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby.  The Company further acknowledges that Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by Investor or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to Investor’s purchase of the Securities.  The Company further represents to Investor that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

(ff)             Accountants .  The Company’s accountants are set forth in the SEC Reports.  To the Company’s knowledge, such accountants are an independent registered public accounting firm as required by the Act.

(gg)           No Disagreements with Accountants and Lawyers .  There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the accountants and lawyers formerly or presently employed by the Company, and the Company is current with respect to any fees owed to its accountants.

(hh)           Registration Statements and Prospectuses .

  (i)            Company will use its commercially reasonable efforts to file within 30 calendar days after the Effective Date (or as soon as possible thereafter), cause to become effective as soon as possible thereafter, and remain effective until the earlier of (A) the first date on which all Warrant Shares covered thereby have been sold or are Rule 144 Eligible (assuming cashless exercise of the Warrant by the holder thereof at all times after such first date) or (B) in the event that no Tranche Closing ever occurs, the Termination Date, a Registration Statement covering the public resale by the Investor of all Common Shares issued in payment of the Commitment Fee and all Warrant Shares.  Such Registration Statement, on the date it is filed with the SEC and on the date it becomes effective, and, as amended or supplemented, at the time of any Tranche Notice Date, Tranche Closing Date, or issuance of any Warrant Shares, will comply as to form, in all material respects, with the requirements of the Act.

  (ii)            Such Registration Statement, as of its effective date, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that this representation and warranty does not apply to statements in or omissions from the Registration Statement made in reliance upon and in conformity with information relating to the Investor furnished to the Company in writing by or on behalf of the Investor expressly for use therein, which to the Company’s knowledge are not false or misleading.

  (iii)            The Prospectus, on the date it is filed with the SEC and as of its date, and, at the time of any Tranche Notice Date, Tranche Closing Date, or issuance of any Warrant Shares, and at all times during which a prospectus is required by the Act to be delivered in connection with any sale of Warrant Shares covered thereby, will comply as to form, in all material respects, with the requirements of the Act.

 

  (iv)            The Prospectus and any amendment or supplement thereto, as of its date, will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation and warranty does not apply to statements in or omissions from the Prospectus or any amendment or supplement thereto made in reliance upon and in conformity with information relating to the Investor furnished to the Company in writing by or on behalf of the Investor expressly for use therein, which to the Company’s knowledge are not false or misleading.

  (v)            The Registration Statement, as of its effective date, will meet the requirements of subsections (a)(1)(i) and/or (a)(1)(iii) of Rule 415 under the Act or any other applicable subsections thereof.

4.2             Representations and Warranties of Investor . Investor hereby represents and warrants to, and as applicable covenants with, the Company as follows:

 (a)             Organization; Authority .  Investor is an entity duly formed, validly existing and in good standing under the laws of the State of Delaware, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Investor has the requisite company power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder.  The execution and delivery of this Agreement by Investor and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary company action on the part of Investor and no further consent or authorization of Investor or its members is required.  Each Transaction Document to which it is a party has been (or will be) duly executed by Investor, and when delivered by Investor in accordance with the terms hereof, will constitute the valid and legally binding obligation of Investor, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies.

 (b)             No Conflicts .  The execution, delivery and performance of this Agreement by Investor do not and will not conflict with or violate any provision of Investor’s certificate of formation or operating agreement (or similar organizational documents) as currently in effect.

 (c)             Investor Status .  At the time Investor was offered the Securities, it was, and it is: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Act.

 (d)             Experience of Investor .  Investor, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.  Investor is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(e)             Information . The Investor and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Investor. The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company; provided, however, that neither such inquiries nor any other due diligence investigations conducted by Investor or its representatives shall modify, amend or affect Investor’s right to rely on the Company’s representations and warranties contained in Section 4.1 . The Investor has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities. The Investor understands that it (and not the Company) shall be responsible for its own tax liabilities that may arise as a result of this investment or the transactions contemplated by this Agreement.

(f)             General Solicitation .  Investor 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.

(g)             No Public Sale or Distribution .  Investor is acquiring the Securities for its own account, and not as a nominee or agent.  Investor is acquiring the Preferred Shares and the Warrant for investment purposes, and not with a view towards, or for resale in connection with, the public sale or distribution of any part thereof, except pursuant to transactions registered under the Act or exempt from such registration; provided , however , that the disposition of its property shall at all times be within its control.  Investor does not presently have any contract, agreement, undertaking, arrangement or understanding, directly or indirectly, with any non-Affiliate of Investor to sell, transfer, pledge, assign or otherwise distribute any of the Securities.

(h)             Acknowledgement of Private Placement .  Investor understands that the offer and sale of the Securities provided for herein is being made without registration under the Act, in reliance upon the provisions of Section 4(2) of the Act, Regulation D promulgated under the Act, and such