SECURITIES PURCHASE
AGREEMENT (“ Agreement ”) dated as
of _____ __, 2009, between Sino Clean Energy Inc., a
Nevada corporation (the “ Company ”), and each
person or entity listed as a Purchaser on Schedule I
attached to this Agreement (collectively and individually, the
“ Purchaser ”). Capitalized terms
used herein and not otherwise defined shall have the meanings set
forth in the Note.
WITNESSETH:
Whereas, the Company desires to sell and issue
to the Purchasers, and the Purchasers wish to purchase from the
Company, the 10% Senior Secured Convertible Notes in the aggregate
principal amount of up to Twelve Million United States dollars
(“ Dollars ”) ($12,000,000) substantially in the
form attached hereto as Exhibit A (each a “
Note ” and collectively, the “ Notes
”) and warrants (the “ Warrants ”;
together with the Notes, the “ Securities ”) to
purchase shares (“ Warrant Shares ”) of the
Company’s common stock par value $.001 (the “ Common
Stock ”) substantially in the form attached hereto as
Exhibit B , on the terms and conditions set forth
herein;
Now, Therefore, in consideration of the
foregoing premises and the covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
Purchase and Sale of
Note
Section
1.1
Issuance of Note . Upon the following terms and
conditions, the Company shall issue and sell to the Purchaser, and
the Purchaser shall purchase from the Company, the
Notes. Each Note shall be convertible into shares of
Common Stock (the “ Conversion Shares ”) on the
terms and conditions contained in the Notes.
Section
1.2
Purchase Price . The purchase price for
the Securities to be acquired by the Purchasers shall be equal to
100% of the face amount of the Notes being acquired (the “
Purchase Price ”). The parties hereto agree
that for U.S. federal income tax purposes, the issue price of the
Notes shall be not less than 99.25% of their principal
amount.
Section
1.3
The Closing . Subject to the fulfillment or
waiver of the conditions set forth in Article V hereof, the initial
purchase and sale of the Notes shall take place at a closing (the
“ Initial Closing ”), on or about the date
hereof or such other date as the Purchaser and the Company may
agree upon (the “ Initial Closing Date ”);
provided that the Initial Closing Date shall be no later
than July 20, 2009. Following the Initial Closing, there may be
multiple closings (together with the Initial Closing, each, a
“ Closing ”) hereunder on such other date or
dates as the Company and the purchasers purchasing Securities on
such date may agree (together with the Initial Closing Date, each,
a “ Closing Date ”); provided that the final
Closing Date shall be no later than August 15, 2009. On
the Closing Date, the Company shall deliver to the Purchaser the
Securities purchased hereunder, registered in the name of such
Purchaser or its nominee. On or prior to the Closing
Date, the Purchaser shall deliver the Purchase Price (the “
Escrowed Funds ”) by certified check made payable to
the order of “Signature Bank, as Escrow Agent for Sino Clean
Energy Inc.” or by wire transfer of immediately available
funds:
Wire
transfers to the Escrow Agent shall be made as follows:
Re: Signature
Bank as escrow agent for Sino Clean Energy Inc.
In addition,
each party shall deliver all documents, instruments and writings
required to be delivered by such party pursuant to this Agreement
at or prior to the Closing. The Securities will be fully
owned and paid for by the Purchaser as of the Closing
Date. The account with Signature Bank shall be referred
to herein as the “ Escrow Account ”.
Section
1.4
Warrant . In addition to the Note, at the
Closing, the Company will execute and deliver to each Purchaser a
Warrant to purchase a number of shares of Common Stock equal to
fifty percent (50%) of the number of Conversion Shares into which
the Notes are convertible on the Closing Date. Such
warrants shall have a three (3) year term and an exercise price
equal to $0.285 per share (the “ Exercise Price
”).
Section
1.5 As
used herein, “ Trading Day ” shall mean a day on
which there is trading on the OTC Bulletin Board or such other
market or exchange on which the Common Stock is then principally
traded.
ARTICLE II
Representations and
Warranties
Section
2.1
Representations and Warranties of the Company
. The Company hereby makes the following representations
and warranties to the Purchasers as of the date hereof and the
Closing Date:
(a) Organization and Qualification;
Material Adverse Effect. The Company is a
corporation duly incorporated and existing in good standing under
the laws of the State of Nevada and has the requisite corporate
power to own its properties and to carry on its business as now
being conducted. Except where specifically indicated to
the contrary, all references in this Agreement to subsidiaries
shall be deemed to refer to all direct and indirect subsidiaries of
the Company. Each Subsidiary has been duly incorporated
and is in good standing under the laws of its jurisdiction of
incorporation. The Company and each Subsidiary is duly
qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would
not have a Material Adverse Effect. “ Material
Adverse Effect ” means any adverse effect on the
business, operations, properties, prospects or financial condition
of the Company and its subsidiaries, and which is (either alone or
together with all other adverse effects) material to the Company
and its Subsidiaries, if any, taken as a whole, and any material
adverse effect on the transactions contemplated under the
Transaction Documents (as defined below). “
Subsidiary ” or “ Subsidiaries ”
means any one of, or collectively, Hangson Limited, a British
Virgin Islands company, Shaanxi Suo’ang Biological Science
and Technology Co., Ltd., a PRC limited liability company, and
Shaanxi Suo’ang New Energy Enterprise Company Limited, a PRC
limited liability company.
(b) Authorization; Enforcement.
(i) The Company has all requisite corporate
power and authority to enter into and perform its obligations under
the Transaction Documents and to issue the Notes and Warrants in
accordance with the terms hereof, (ii) the execution and delivery
of the Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby, including
the issuance of the Notes and Warrants, have been duly authorized
by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors (or any
committee or subcommittee thereof) or stockholders is required,
(iii) the Transaction Documents have been duly executed and
delivered by the Company, (iv) the Transaction Documents constitute
valid and binding obligations of the Company enforceable against
the Company, except (A) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the
enforcement of creditors’ rights and remedies or by other
equitable principles of general application, and (B) to the extent
the indemnification provisions contained in this Agreement may be
limited by applicable federal or state securities laws and (v) the
Notes and the Warrants, and the Conversion Shares and Warrant
Shares issuable upon the conversion and/or exercise thereof, have
been duly authorized and, upon issuance thereof and payment
therefor in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, free and clear of
any and all liens, claims and encumbrances.
(c) Capitalization. As
of the date hereof, the authorized capital stock of the Company
consists of 200,000,000 shares of Common Stock, of which as of the
date hereof, 97,181,416 shares are issued and
outstanding and 15,499,101 shares are issuable and reserved for
issuance pursuant to the Company’s stock option plans and
certain outstanding contracts, or securities exercisable or
exchangeable for, or convertible into, shares of Common
Stock. All of such outstanding shares have been, or upon
issuance will be, validly issued, fully paid and
nonassessable. As of the date hereof, except as
disclosed in Schedule 2.1(c) , (i) no shares of the
Company’s capital stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or
permitted by the Company, (ii) there are no outstanding debt
securities, (iii) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any
of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or
may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company or any of its
Subsidiaries, (iv) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the Securities
Act of 1933, as amended (“ Securities Act ” or
“ 1933 Act ”) (except for Section 6.2 of this
Agreement), (v) there are no outstanding securities of the Company
or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings
or arrangements by which the Company or any of its Subsidiaries is
or may become bound to redeem a security of the Company or any of
its Subsidiaries, and (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be
triggered by the issuance or exercise of the Notes or Warrants as
described in this Agreement. The Company has furnished
to the Purchasers true and correct copies of the Company’s
Certificate of Incorporation, as amended and as in effect on the
date hereof (the “ Certificate of Incorporation
”), and the Company’s By-laws, as in effect on the date
hereof (the “ By-laws ”), and the terms of all
securities convertible or exchangeable into or exercisable for
Common Stock and the material rights of the holders thereof in
respect thereto. Schedule 2.1(c) also lists all
outstanding debt of the Company with sufficient detail acceptable
to Purchaser.
(d) Issuance and Ownership of
Securities . Upon issuance in accordance with this
Agreement and the terms of the Notes and the Warrants, the
Conversion Shares and the Warrant Shares and the common shares
underlying the Warrants issued to [Placement Agent] as
placement agent, will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with
respect to the issue thereof. The Company owns all
outstanding shares of Hangson Limited, and Hangson Limited has a
20% interest in Shaanxi Suo’ang New Energy Enterprise Company
Limited, free and clear of any liens and other encumbrances except
as set forth in Schedule 2.1(d), and there are no outstanding
options, warrants or other rights to purchase equity of any
Subsidiary other than as set forth on Schedule 2.1(d)
.
(e) No Conflicts
. Except as disclosed in Schedule 2.1(e) , the
execution, delivery and performance of the Transaction Documents by
the Company and the consummation by the Company of the transactions
contemplated hereby and thereby and issuance of the Notes and
Warrants, and the Conversion Shares and Warrant Shares underlying
any of the foregoing will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations,
preferences and rights of any outstanding series of preferred stock
of the Company or the By-laws; (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of
its Subsidiaries is a party, or (iii) to the Company’s
knowledge result in a violation of any law, rule, regulation,
order, judgment or decree (including United States federal and
state securities laws and regulations and the rules and regulations
of the OTC Bulletin Board or other principal securities exchange or
trading market on which the Common Stock is traded or listed
(“ Principal Market ”)) applicable to the
Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or
affected, except in the case of clause (ii), such conflicts that
would not have a Material Adverse Effect.
(f) SEC Documents
. Since the filing of its Annual Report on Form 10-K for
the fiscal year ended December 31, 2008, the Company has filed all
reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended
(the “ 1934 Act ”) (all of the foregoing filed
prior to the Closing Date and all exhibits included therein and
financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as
the “ SEC Documents ”). To the
Company’s knowledge, as of their respective dates, the SEC
Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents and none of
the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. There are no
outstanding comment letters from the SEC relating to any of the SEC
Documents.
(g) Absence of Litigation
. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened
against or affecting the Company, the Common Stock or any of the
Company’s Subsidiaries or any of the Company’s or the
Company’s Subsidiaries’ officers or directors in their
capacities as such, (i) except as set forth in SEC Documents which
were filed at least two business days before the date hereof and
(ii) except as set forth in Schedule 2.1(g ).
(h) 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 the Purchaser to be integrated with prior offerings
by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions, including, without limitation,
under the rules and regulations of the Principal Market or other
Approved Market, nor will the Company or any of its Subsidiaries
take any action or steps that would cause the offering of the
Securities to be integrated with other offerings.
(i) Employee Relations
. Neither the Company nor any of its Subsidiaries is
involved in any labor dispute nor, to the knowledge of the Company
or any of its Subsidiaries, is any such dispute threatened, the
effect of which would be reasonably likely to result in a Material
Adverse Effect. Neither the Company nor any of its
Subsidiaries is a party to a collective bargaining
agreement.
(j) Intellectual Property Rights
. The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to
conduct their respective businesses as now
conducted. The Company and its Subsidiaries do not have
any knowledge of any infringement by the Company or its
Subsidiaries of trademarks, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service
marks, service mark registrations, trade secret or other similar
rights of others, or of any such development of similar or
identical trade secrets or technical information by others and,
except as set forth on Schedule 2.1(j) , there is no claim,
action or proceeding being made or brought against, or to the
Company’s knowledge, being threatened against, the Company or
its Subsidiaries regarding trademarks, trade name rights, patents,
patent rights, inventions, copyrights, licenses, service names,
service marks, service mark registrations, trade secrets or other
infringement.
(k) Compliance with Law . The
business of the Company and its Subsidiaries has been and is
presently being conducted so as to comply with all applicable
material foreign, federal, state and local governmental laws,
rules, regulations and ordinances.
(l) Environmental Laws
. The Company and its Subsidiaries (i) are to the
Company’s knowledge in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
(“ Environmental Laws ”), (ii) have received all
permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where such
noncompliance or failure to receive permits, licenses or approvals
referred to in clauses (i), (ii) or (iii) above could have,
individually or in the aggregate, a Material Adverse
Effect.
(m) Disclosure. No representation or
warranty by the Company in this Agreement, nor in any certificate,
schedule, document, exhibit or other instrument delivered or to be
delivered pursuant to this Agreement or otherwise in connection
with the transactions contemplated by the Transaction Documents,
contains or will contain any untrue statement of material fact or
omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading or necessary
to in order fully and fairly to provide the information required to
be provided in any such certificate, schedule, document, exhibit or
other instrument. To the knowledge of the Company and
its Subsidiaries at the time of the execution of this Agreement,
there is no information concerning the Company and its Subsidiaries
or their respective businesses which has not heretofore been
disclosed to the Purchasers (or disclosed in the Company’s
filings made with the SEC under the 1934 Act) that would have a
Material Adverse Effect.
(n) Title . The Company
and its Subsidiaries have good and marketable title in fee simple
to all real property and good and marketable title to all personal
property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in
Schedule 2.1(n) or such as do not materially and adversely
affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company or any
of its Subsidiaries. Any real property and facilities
held under lease by the Company or any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use
made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(o) Insurance . The
Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and
its Subsidiaries are engaged.
(p) Permits. The
Company and each of the Company’s Subsidiaries owns, holds,
possesses, or lawfully uses in its business all material approvals,
authorizations, certifications, franchises, licenses, permits, and
similar authorities (“ Permits ”) that are
necessary for the conduct of their business as currently conducted
or the ownership and use of their assets or properties, in
compliance with all Laws. All of such material Permits
are listed on Schedule 2.1(p), and true, complete and correct
copies of each Permit listed on Schedule 2.1(p) have been provided
to the Purchasers. Neither the Company nor any of the
Company’s Subsidiaries is in default under, or has received
any notice of any claim of default in respect of, any such
Permits. To the Company’s knowledge, after due
inquiry, all such Permits are renewable by their respective terms
in the ordinary course of business without the need to comply with
any special qualification procedures or to pay any amounts other
than routine filing fees.
(q) Foreign Corrupt Practices Act
. To the Company’s knowledge, neither the Company,
nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary has, in the course of
acting for, or on behalf of, the Company, directly or indirectly
used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity; directly or indirectly made any direct or indirect
unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended, or any similar treaties of the United States; or directly
or indirectly made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic
government or party official or employee.
(r) Tax Status . The
Company and each of its Subsidiaries has made or filed all United
States federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is
subject and all such returns, reports and declarations are true,
correct and accurate in all material respects. The
Company has paid all taxes and other governmental assessments and
charges, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith, for which
adequate reserves have been established, in accordance with
generally accepted accounting principles (“ GAAP
”).
(s) Issuance of Conversion Shares
and/or Warrant Shares. The Conversion Shares and
Warrant Shares are duly authorized and reserved for issuance and,
upon conversion of the Notes and/or exercise of the Warrants, as
applicable, in accordance with the terms thereof, such Conversion
Shares and/or Warrant Shares will be validly issued, fully paid and
non-assessable, free and clear of any and all liens, claims and
encumbrances, and entitled to be traded on the Principal Market or
a U.S. national securities exchange (collectively with the
Principal Market, the “ Approved Markets
” ), and the holders of such Conversion Shares and/or
Warrant Shares shall be entitled to all rights and preferences
accorded to a holder of Common Stock. As of the date of
this Agreement, the outstanding shares of Common Stock are
currently quoted on the Principal Market.
(t) Absence of Undisclosed
Liabilities . The Company and its Subsidiaries have
no obligations or liabilities of any nature (matured, fixed or
contingent) other than (i) those adequately provided for in the
Company’s financial statements referenced in Section 2.1(u)
and (ii) those obligations incurred in the ordinary course of
business in amounts consistent with prior periods which have not
had and will not have a Material Adverse Effect on the
Company.
(u) Financial
Statements. Except as set forth in Schedule
2.1(u) , the financial statements of the Company included in
the Forms 10-K and the Forms 10-Q of the Company have been prepared
from the books and records of the Company, in accordance with GAAP,
and fairly present in all material respects the financial condition
of the Company, as at their respective dates, and the results of
its operations and cash flows for the periods covered
thereby.
(v) Employee Benefit Plans;
ERISA.
(i)
Schedule 2.1(v) sets forth a true, correct and complete list
of all employee benefit plans, programs, policies and arrangements,
whether written or unwritten (the “ Company Plans
”), that the Company, any Subsidiary or any other corporation
or business which is now or at the relevant time was a member of a
controlled group of companies or trades or businesses including the
Company or any Subsidiary, within the meaning of section 414 of the
Internal Revenue Code of 1986, as amended (the “ Code
”), maintain or have maintained on behalf of current or
former members, partners, principals, directors, officers,
managers, employees, consultants or other personnel.
(ii) There
has been no prohibited transaction within the meaning of Section
406 of the Employee Retirement Income Security Act of 1974, as
amended (“ ERISA ”), or Section 4975 of the
Code, with respect to any of the Company Plans; (ii) none of the
Company Plans is or was subject to Section 412 of the Code or
Section 302 or Title IV of ERISA; and (iv) each of the Company
Plans has been operated and administered in all material respects
in accordance with all applicable laws, including
ERISA. There are no actions, suits or claims pending or
threatened (other than routine claims for benefits), whether by
participants, the Internal Revenue Service, the Department of Labor
or otherwise, with respect to any Company Plan and no facts exist
under which any such actions, suits or claims are likely to be
brought or under which the Company or any Subsidiary could incur
any liability with respect to a Company Plan other than
in the ordinary course. None of the Company Plans is or
was a multiemployer plan within the meaning of Section 3(37) of
ERISA.
(iii) Neither
the Company nor any Subsidiary has announced, proposed or agreed to
any change in benefits under any Company Plan or the establishment
of any new Company Plan. There have been no changes in
the operation or interpretation of any Company Plan since the most
recent annual report, which would have any material effect on the
cost of operating, maintaining or providing benefits under such
Company Plan.
(iv) Neither
the Company nor any Subsidiary has incurred any liability for the
misclassification of employees as leased employees or independent
contractors.
(v) Except
as provided for in this Agreement and in the Transaction Documents,
the consummation of the transactions contemplated by this
Agreement, either alone or in combination with another event, will
not (i) result in any individual becoming entitled to any increase
in the amount of compensation or benefits or any additional payment
from the Company or any Subsidiary (including, without limitation,
severance, golden parachute or bonus payments or otherwise), or
(ii) accelerate the vesting or timing of payment of any benefits or
compensation payable in respect of any individual.
(w) Restrictions on Business
Activities . There is no judgment, order, decree,
writ or injunction binding upon the Company or any Subsidiary or,
to the knowledge of the Company or any Subsidiary, threatened that
has or could prohibit or impair the conduct of their respective
businesses as currently conducted or any business practice of the
Company or any Subsidiary, including the acquisition of property,
the provision of services, the hiring of employees or the
solicitation of clients, in each case either individually or in the
aggregate.
(x) Contracts.
Schedule 2.1(x) sets forth all oral or written contracts,
agreements, indentures, notes, bonds, loans, instruments, leases,
commitments, or other arrangements or commitments (collectively,
“ Contracts ”) to which the Company or any of
its Subsidiaries is a party or by which it is bound with a value in
excess of $75,000, in each case, of any of the following types
(collectively, the “ Material Contracts
”): (i) Contracts with any current or former
officer or director of the Company or any of the Company’s
Subsidiaries or any other employment, non-competition, severance,
consulting, or similar agreement; (ii) Contracts with any labor
union or association representing any employee of the Company or
any of the Company’s Subsidiaries; (iii) Contracts for the
sale of any of the assets of the Company or any of the
Company’s Subsidiaries other than in the ordinary course of
business or for the grant to any person of any preferential rights
to purchase any of their assets; (iv) joint venture agreements; (v)
Contracts containing covenants of the Company or any of the
Company’s Subsidiaries not to compete in any line of business
or with any person in any geographical area; (vi) Contracts
relating to the acquisition by the Company or any of the
Company’s Subsidiaries of any operating business or the
capital stock of any other Person; (vii) Contracts relating to
indebtedness; or (viii) Contracts granting any registration or
similar right in respect of securities of the Company or any of the
Company’s Subsidiaries. There have been made
available to the Purchasers true and complete copies of all of the
Material Contracts and there are no other contracts material to the
business of the Company or any of its
Subsidiaries. Except as set forth on Schedule
2.1(x) , all of the Material Contracts and all other Contracts
of the Company and the Company’s Subsidiaries are in full
force and effect and are the legal, valid, and binding obligations
of the Company and/or the Company’s Subsidiaries, enforceable
against them in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, and similar
laws affecting creditors’ rights and remedies generally and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law
or in equity). Except as set forth on Schedule
2.1(x) , neither the Company nor any of the Company’s
Subsidiaries is in default in any material respect under any
Material Contract or any other Contract of the Company and its
Subsidiaries, nor, to the Company’s knowledge, after due
inquiry, is any other party to any such Contract in default
thereunder in any material respect.
Section
2.2
Representations and Warranties of the Purchaser
. The Purchaser hereby makes the following
representations and warranties to the Company as of the date hereof
and the Closing Date:
(a) Accredited Investor Status;
Sophisticated Purchaser . The Purchaser is an
“accredited investor” as that term is defined in Rule
501(a) of Regulation D under the 1933 Act. The Purchaser
has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of the
purchase of the Note, the Warrant, the Conversion Shares and the
Warrant Shares. The Purchaser is not registered as a
broker or dealer under Section 15(a) of the 1934 Act, affiliated
with any broker or dealer registered under Section 15(a) of the
1934 Act, or a member of the Financial Industry Regulatory
Authority, Inc. (FINRA).
(b) Information . The
Purchaser and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the
Company which have been requested and materials relating to the
offer and sale of the Note, the Warrant, the Conversion Shares and
the Warrant Shares which have been requested by the
Purchaser. The Purchaser and its advisors, if any, have
been afforded the opportunity to ask questions of the
Company. In determining whether to enter into this
Agreement and purchase the Securities, the Purchaser has relied
solely on the written information supplied by Company employees in
response to any written due diligence information request provided
by Purchaser to the Company, and the Purchaser has not received nor
relied upon any oral representation or warranty relating to the
Company, this Agreement, the Securities, or any of the transactions
or relationships contemplated thereby. The Purchaser
understands that its purchase of the Securities and Conversion
Shares, and if applicable, the Warrant Shares involves a high
degree of risk. The Purchaser 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 Note and the Warrant and, if applicable the
Conversion Shares and the Warrant Shares.
(c) No Governmental Review
. The Purchaser understands that no United States
federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of
the Note, the Warrant, the Conversion Shares and Warrant Shares or
the fairness or suitability of the investment in the Note, the
Warrant, the Conversion Shares and Warrant Shares nor have such
authorities passed upon or endorsed the merits thereof.
(d) Legends . The Company shall
issue the Note and the Warrants and, if applicable, certificates
for the Conversion Shares and the Warrant Shares, to the Purchaser
without any legend except as described in Article VI
below. The Purchaser covenants that, in connection with
any transfer of Conversion Shares or Warrant Shares by the
Purchaser pursuant to the registration statement contemplated by
Section 6.2 hereof, it will comply with the applicable prospectus
delivery requirements of the 1933 Act, provided that copies of a
current prospectus relating to such effective registration
statement are or have been supplied to the Purchaser.
(e) Authorization; Enforcement
. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Purchaser and is a valid
and binding agreement of the Purchaser enforceable against the
Purchaser in accordance with their terms, subject as to
enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and
remedies. The Purchaser has the requisite corporate
power and authority to enter into and perform its obligations under
this Agreement and each other agreement entered into by the parties
hereto in connection with the transactions contemplated by this
Agreement.
(f) No Conflicts . The
execution, delivery and performance of this Agreement by the
Purchaser and the consummation by the Purchaser of the transactions
contemplated hereby will not (i) result in a violation of the
certificate of incorporation, by-laws or other documents of
organization of the Purchaser, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both
would become a default) under, or give others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Purchaser is bound,
or (iii) result in a violation of any law, rule, regulation or
decree applicable to the Purchaser.
(g) Investment Representation.
The Purchaser is purchasing the Securities for its own
account for investment and not with a view to distribution or
sale in violation of the 1933 Act or any state
securities laws or rules and regulations promulgated
thereunder. The Purchaser has been advised and
understands that neither the Note, nor the Warrant, nor the
Conversion Shares or Warrant Shares issuable upon conversion or
exercise thereof have been registered under the 1933 Act or under
the “blue sky” laws of any jurisdiction and may be
resold only if registered pursuant to the provisions of the 1933
Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption
is required by law. The Purchaser has been advised and
understands that the Company, in issuing the Note and the Warrant,
is relying upon, among other things, the representations and
warranties of the Purchaser contained in this Section 2.2 in
concluding that such issuance is a “private offering”
and is exempt from the registration provisions of the 1933
Act.
(h) Rule 144. The
Purchaser understands that there is no public trading market for
the Notes or Warrants, that none is expected to develop, and that
the Notes and Warrant must be held indefinitely unless and until
such Notes and Warrants, or if applicable, the Conversion Shares or
Warrant Shares received upon conversion or exercise thereof are
registered under the 1933 Act or an exemption from registration is
available. The Purchaser has been advised or is aware of
the provisions of Rule 144 promulgated under the 1933 Act,
including the limitations on the availability thereof.
(i) Brokers. Except
with respect to the fees owed to [Placement Agent] under the
PAA, the Purchaser has taken no action which would give rise to any
claim by any person for brokerage commissions, finder’s fees
or similar payments by the Company or the Purchaser relating to
this Agreement or the transactions contemplated hereby.
(j) Reliance by the Company.
The Purchaser understands that the Note and the Warrant
are being offered and sold in reliance on a transactional exemption
from the registration requirements of Federal and state securities
laws and that the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and
understandings of the Purchaser set forth herein in order to
determine the applicability of such exemptions and the suitability
of the Purchaser to acquire the Note and the Warrant, and the
Conversion Shares and Warrant Shares issuable upon conversion or
exercise thereof.
ARTICLE III
Covenants
Section
3.1
Registration and Listing; Effective Registration
. Until such time as the Notes are no longer outstanding
and the Warrants have expired, the Company will cause the Common
Stock to continue at all times to be registered under Sections
12(b) or (g) of the 1934 Act, will comply in all material
respects with its reporting and filing obligations under the
1934 Act, and will not take any action or file any document
(whether or not permitted by the 1934 Act or the rules
thereunder) to terminate or suspend such reporting and filing
obligations. Until such time as the Note and Warrant are
no longer outs
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