SECURITIES PURCHASE
AGREEMENT
SECURITIES PURCHASE AGREEMENT (this
“AGREEMENT,” “PURCHASE AGREEMENT,” or
“SECURITIES PURCHASE AGREEMENT”), dated as of April
___, 2007, by and among SiriCOMM, Inc. , a Delaware
corporation, (“COMPANY”), and
___________________________________________ (the
“BUYER”).
WHEREAS:
A. The Company and the Buyer are
executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by Rule 506 under
Regulation D (“REGULATION D”) as promulgated by the
United States Securities and Exchange Commission (the
“SEC”) under the Securities Act of 1933, as amended
(the “1933 ACT” or the “Securities
Act”);
B. Buyer and other buyers desire to
purchase and the Company desires to issue and sell, upon the terms
and conditions set forth in this Agreement, (i) secured convertible
debentures (the “Debentures”) of the Company and (ii)
Warrants (as defined in Section 1(b)(iv) in the form described in
this Agreement, to purchase shares of Common Stock of the Company
in a private offering. This offering of the Debentures to the
Buyers shall be in the principal amount of not less than One
Million Dollars (U.S. $1,000,000) nor more than Two Million Dollars
($2,000,000) (the “Offering”);
C. The
terms of the Debentures, including the terms on which the
Debentures may be converted into common stock, $0.001 par value, of
the Company (the “Common Stock”), are set forth in
Debenture, in the form attached hereto as EXHIBIT A
;
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NOW THEREFORE
, the Company and the Buyer hereby
agree as follows:
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1.
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PURCHASE AND SALE OF DEBENTURES AND
WARRANTS.
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(a) CERTAIN
DEFINITIONS. This
Securities Purchase Agreement, the Debenture, the Security
Agreement, the Warrants, and any other agreements delivered
together with this Agreement or in connection herewith shall be
referred to herein as the “Transaction Documents.” The
Company and the Buyer mutually agree to the terms of each of the
Transaction Documents. For purposes hereof:
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“Buyers” means the Buyer, and other
buyers of Debentures pursuant to the Offering.
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“Common Stock
Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire,
directly or indirectly, at any time Common Stock, including without
limitation, any debt, preferred stock, rights, options, warrants or
other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
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“Exempt Issuance” means
the issuance of (a) shares of restricted Common Stock or options to
employees, officers, directors or consultants, provided that such
issuance of shares of Common Stock or options to employees,
officers, directors or consultants either (i) occurs pursuant to
any stock or option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a
majority of the members of a committee of non-employee directors
established for such purpose, or (ii) is authorized by a majority
of the non-employee members of the board of directors of the
Company, and (b) securities upon the exercise, exchange of,
conversion or redemption of, or payment of interest or liquidated
or similar damages on, any Securities issued hereunder and/or other
securities exercisable, exchangeable for, convertible into, or
redeemable for shares of Common Stock issued and outstanding on the
date of this Agreement, provided that such securities have not been
amended since the date of this Agreement to increase the number of
such securities or to decrease the exercise, exchange or conversion
price of such securities (and including any issuances of securities
pursuant to the anti-dilution provisions of any such securities).
The Company shall provide the Buyer with prompt written notice of
any Exempt Issuance.
“Person” shall mean an
individual, a limited liability company, a partnership, a joint
venture, an exempted company, a corporation, a trust, an
unincorporated organization and a government or any department or
agency thereof.
“Payment Shares” shall
mean (i) Default Shares (as defined in the Debenture), (ii)
Interest Payment Shares (as defined in the Debenture) and (iii)
shares issuable upon conversion of Failure Payments and other
Required Cash Payments (as each is defined in the Debenture) into
Common Stock of the Company. The Payment Shares shall be treated as
Common Stock issuable upon conversion of the Debentures for all
purposes hereof and thereof and shall be subject to all of the
limitations and afforded all of the rights of the other shares of
Common Stock issuable hereunder, including without limitation, the
right to be included in the Registration Statement filed pursuant
to the Registration Rights Agreement.
(b) PURCHASE OF DEBENTURES AND WARRANTS. Subject to the
satisfaction or waiver of the terms and conditions of this
Agreement, on the Closing Date (as defined below), the Company
shall issue and sell to Buyer and Buyer agrees to purchase from the
Company the Debenture in a principal amount equal to the
Subscription Amount (as defined in Section 10) and an accompanying
number of Warrants (as described below) to purchase a number of
shares equal to the Warrant Amount (as defined below).
(i) Form of Debenture
. The Debenture shall be
in the form annexed hereto as EXHIBIT “A
.”
(ii) Form Of Payment
. On or before the
Closing Date (as defined below), (i) Buyer shall pay the purchase
price for the Debenture and the Warrants to be issued and sold to
it at the Closing (as defined below) (the “PURCHASE
PRICE”) by wire transfer of immediately available funds to
the Company, in accordance with the Company’s written wiring
instructions, against delivery of duly executed certificates
representing the Debenture (“Debenture Certificate”)
having an aggregate initial principal amount (the “Original
Principal Amount”) equal to the Purchase Price and the number
of Warrants equal to the Warrant Amount, and (ii)
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the Company shall deliver such
Debenture Certificates and Warrants duly executed on behalf of the
Company, to such Buyer, against delivery of such Purchase
Price.
(iii) Closing Date . Subject to the satisfaction or
waiver of the terms and conditions of this Agreement, the
“Closing” shall occur when subscriber funds
representing the aggregate Original Principal Amount of the
Debenture being purchased by the Buyer are transmitted by wire
transfer of immediately available funds by the Buyer to the
Company, assuming that the Transaction Documents are signed by both
parties prior to or within three (3) business days following such
transmission. The date of the Closing shall be referred to herein
as the “Closing Date.” Unless otherwise mutually agreed
by the parties, the Closing shall occur not later than April 15,
2007. The Closing contemplated by this Agreement shall occur on the
applicable Closing Date at the offices of the Buyer, or at such
other location as may be agreed to by the parties.
(iv) Warrants
. The Debenture shall be
accompanied by a number of Warrants (the “WARRANTS”)
equal to three (3) Warrants for each $1.00 of the Debenture being
purchased by the Buyer. The Warrants shall be in the form of the
Warrant annexed hereto as EXHIBIT “C-1.
”
The Warrants shall contain Exercise
Price adjustment provisions that are consistent with the adjustment
provisions afforded to the Conversion Price of the Debenture in the
Debenture and shall have a five (5) year term.
“MARKET PRICE,” for any
security as of any date, shall have the meaning ascribed to it in
the applicable security.
(v) Closing Deliveries . On the Closing Date, the
Company will deliver certificates representing the applicable
Debenture and Warrants to the Buyer and the Buyer will deliver the
Purchase Price to the Company. On the Closing Date, the Company
will deliver a certificate (“Closing Certificate”)
signed by its chief executive officer or chief financial officer
(i) representing the truth and accuracy of all the representations
and warranties made by the Company contained in this Agreement, as
of the applicable Closing Date, as if such representations and
warranties were made and given on all such dates, (ii) adopting the
covenants and conditions set forth in this Agreement in relation to
the applicable Debenture and Warrants, and (iii) certifying that an
Event of Default has not occurred.
2. BUYER’S REPRESENTATIONS
AND WARRANTIES. Buyer
represents and warrants to the Company solely as to such Buyer
that:
(a) INVESTMENT
PURPOSE. As of the date
hereof, the Buyer is purchasing the Debenture and the shares of
Common Stock issuable upon conversion of the Debenture or otherwise
pursuant to the Debenture and the other Transaction Documents
(including, without limitation, the Payment Shares) (such shares of
Common Stock being collectively referred to herein as the
“CONVERSION SHARES”) and the Warrants and the shares of
Common Stock issuable upon exercise thereof (the “WARRANT
SHARES” and, collectively with the Debenture, Warrants and
Conversion Shares, the “SECURITIES”) for its own
account and not
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with a present view towards the
public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the 1933 Act;
PROVIDED, HOWEVER, that by making the representations herein, the
Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act and
applicable state securities laws.
(b) ACCREDITED INVESTOR
STATUS. The Buyer is an
“accredited investor” as that term is defined in Rule
501(a) of Regulation D (an “ACCREDITED
INVESTOR”).
(c) RELIANCE ON
EXEMPTIONS. The Buyer
understands that the Securities are being offered and sold to it in
reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the
Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the
Securities.
(d) INFORMATION.
The Buyer 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 Buyer or its advisors. The Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company.
Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer’s right to rely on the
Company’s representations and warranties contained in Section
3 below. The Buyer understands that its investment in the
Securities involves a significant degree of risk.
(e) GOVERNMENTAL
REVIEW. The Buyer
understands that no United States federal or state agency or any
other government or governmental agency has passed upon or made any
recommendation or endorsement of the Securities.
(f) TRANSFER OR
RE-SALE. The Buyer
understands that (i) the sale or re-sale of the Securities has not
been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be
transferred or resold unless (a) the Securities are sold pursuant
to an effective registration statement under the 1933 Act, (b) the
Buyer shall have delivered to the Company an opinion of counsel
(which opinion shall be in form, substance and scope reasonably
satisfactory to counsel to the Company) to the effect that the
Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration, (c) the Securities
are sold or transferred to an “affiliate” (as defined
in Rule 144 promulgated under the 1933 Act (or a successor rule)
(“RULE 144”) of the Buyer who agrees to sell or
otherwise transfer the Securities only in accordance with this
Section 2(f) and who is an Accredited Investor, or (d) the
Securities are sold pursuant to Rule 144 or Rule 144(k); and (ii)
any sale of such Securities made in reliance on Rule 144 or Rule
144(k) may be made only in accordance with the terms of said Rule.
Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in
connection with a BONA FIDE margin account or other lending
arrangement.
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(g) ORGANIZATION; AUTHORIZATION;
ENFORCEMENT. Buyer is a
_______________ Company duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is
organized. Buyer has all requisite power and authority to enter
into and perform this Agreement and the Security Agreement and to
consummate the transactions contemplated hereby and thereby in
accordance with the terms hereof and thereof. The execution and
delivery of this Agreement has been duly and validly authorized and
no further consent or authorization of Buyer, its manager or
members is required. This Agreement has been duly executed and
delivered on behalf of the Buyer, and this Agreement constitutes,
and upon execution of the Security Agreement, such agreement will
constitute, the legal, valid and binding agreements of the Buyer
enforceable in accordance with their terms.
(h) KNOWLEDGE AND
EXPERIENCE . Buyer has
such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of the
investment in the Securities.
(i) CERTAIN TRADING
ACTIVITIES. As of the
Closing Date the Buyer and its Affiliates have not entered into or
effected any “short sales” (as such term is defined in
Rule 3b-3 of the 1934 Act) of the Common Stock or hedging
transaction which established a net short position with respect to
the Common Stock. For the purposes of this Agreement, an “
Affiliate ” of any person or entity means any other
person or entity directly or indirectly controlling, controlled by
or under direct or indirect common control with such person or
entity. Affiliate includes each subsidiary of the
Company.
3. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY. The
Company represents and warrants to Buyer that, except as set forth
on the Company’s disclosure schedules or any update thereto
prior to the Closing Date:
(a) ORGANIZATION AND
QUALIFICATION. The
Company and each of its Subsidiaries (as defined below), if any, is
a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated,
with full power and authority (corporate and other) to own, lease,
use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted. SCHEDULE
3(A) sets forth a list of all of the Subsidiaries of the Company
and the jurisdiction in which each is incorporated. The Company and
each of its Subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in
which its ownership or use of property or the nature of the
business conducted by it makes such qualification necessary except
where the failure to be so qualified or in good standing would not
have a Material Adverse Effect. “MATERIAL ADVERSE
EFFECT” means any material adverse effect on (i) the
Securities, (ii) the business, operations, assets, financial
condition or prospects of the Company and its Subsidiaries, if any,
taken as a whole, (iii) on the transactions contemplated hereby or
by the agreements or instruments to be entered into in connection
herewith or (iv) the authority or the ability of the Company to
perform its obligation under this Agreement, the Security
Agreement, the Debenture or the Warrants.
“SUBSIDIARIES” means any corporation or other
organization, whether incorporated or unincorporated, in which the
Company owns, directly or indirectly, any equity or other ownership
interest.
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(b) AUTHORIZATION;
ENFORCEMENT. (i) The
Company has all requisite corporate power and authority to enter
into and perform this Agreement, the Security Agreement, the
Debenture and the Warrants and to consummate the transactions
contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) except as
otherwise set forth in SCHEDULE 3(B), the execution and delivery of
this Agreement, the Security Agreement, the Debenture and the
Warrants by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without
limitation, the issuance of the Debenture and the Warrants and the
issuance and reservation for issuance of the Conversion Shares
issuable upon conversion of or otherwise pursuant to the Debenture
and the Warrant Shares issuable upon exercise of or otherwise
pursuant to the Warrants) have been duly authorized by the
Company’s Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its
stockholders is required, (iii) this Agreement has been duly
executed and delivered by the Company, and (iv) this Agreement
constitutes, and upon execution and delivery by the Company of the
Security Agreement, the Debenture and the Warrants, each of such
agreements and instruments will constitute, a legal, valid and
binding obligation of the Company enforceable against the Company
in accordance with its terms.
(c) CAPITALIZATION.
As
of the date hereof, the authorized capital stock of the Company is
as set forth on SCHEDULE 3(C). The authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock, of which
approximately 25,237,991 shares are outstanding as of the date
hereof and 500,000 shares of preferred stock, par value $.01 per
share, of which 213,417 are outstanding as of the date hereof.
There are no outstanding securities which are convertible into
shares of Common Stock, whether such conversion is currently
exercisable or exercisable only upon some future date or the
occurrence of some event in the future, except as disclosed on
SCHEDULE 3(C). If any such securities are listed on the SCHEDULE
3(C), the number or amount of each such outstanding convertible
security and the conversion terms are set forth in said SCHEDULE
(3C). All of such outstanding shares of capital stock set forth in
SCHEDULE 3(C) are, or upon issuance will be, duly authorized,
validly issued, fully paid and nonassessable.
No shares of capital stock of the
Company are subject to preemptive rights or any other similar
rights of the stockholders of the Company or any liens or
encumbrances imposed through the actions or failure to act of the
Company. Except as disclosed in SCHEDULE 3(C), as of the effective
date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe for, puts, calls, rights of
first refusal, agreements, understandings, claims or other
commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any
shares of capital stock of the Company or any of its Subsidiaries,
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, (ii) there are no
agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of its or
their securities under the 1933 Act (except the Registration Rights
Agreement) and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders) that will be
triggered by the issuance of the Debenture, the Warrants, the
Conversion Shares or Warrant Shares. The Company has furnished to
the Buyer true and correct copies of the
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Company’s Articles of
Incorporation as in effect on the date hereof (“ARTICLES OF
INCORPORATION”), the Company’s By-laws, as in effect on
the date hereof (the “BY-LAWS”), and the terms of all
securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect
thereto. In the event that the date of execution of this Agreement
is not the Closing Date, the Company shall provide the Buyer with a
written update of this representation signed by the Company’s
President and Chief Executive or Chief Financial Officer on behalf
of the Company as of the Closing Date. The issuance and sale of the
Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Buyers) and
will not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange or reset price under any
of such securities. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is
required for the issuance and sale of the Securities. 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.
(d) ISSUANCE OF
SHARES. Upon issuance
upon conversion of the Debenture and upon exercise of the Warrants
in accordance with their respective terms, and receipt of the
exercise price therefor, the Conversion Shares and Warrant Shares,
along with any Payment Shares or any other shares issued pursuant
to the terms of the Transaction Documents, will be validly issued,
fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances and shall not be subject to preemptive
rights or other similar rights of stockholders of the Company and
will not impose personal liability upon the holder
thereof.
(e) ACKNOWLEDGMENT OF
DILUTION. The Company
understands and acknowledges the potentially dilutive effect to the
Common Stock upon the issuance of the Conversion Shares upon
conversion of or otherwise pursuant to the Debenture or upon
issuance of the Warrant Shares upon exercise of or otherwise
pursuant to the Warrants. The Company’s directors and
executive officers have studied and fully understand the nature of
the Securities being sold hereunder. The Company further
acknowledges that its obligation to issue Conversion Shares upon
conversion of or otherwise pursuant to the Debenture and to issue
Warrant Shares upon exercise of or otherwise pursuant to the
Warrants in accordance with this Agreement, the Debenture and the
Warrants is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of
other stockholders of the Company. Taking the foregoing into
account, the Company’s Board of Directors has determined, in
its good faith business judgment, that the issuance of the
Securities hereunder and under the Debenture and the Warrants and
the consummation of the transactions contemplated hereby and
thereby are in the best interest of the Company and its
stockholders.
(f) NO CONFLICTS.
The execution, delivery and
performance of each of the Transaction Documents by the Company and
the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and
reservation for issuance of the Conversion Shares and Warrant
Shares) will not (i) except as otherwise set forth in SCHEDULE
3(F), conflict with or result in a violation of any provision of
the Certificate of Incorporation or By-laws, (ii) trigger any
resets of conversion or exercise prices in other outstanding
convertible securities, warrants or options of the Company, (iii)
trigger the
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issuance of securities by the
Company to any third party, (iv) violate or conflict with, or
result in a breach of any provision of, 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, patent, patent license or instrument to which the
Company or any of its Subsidiaries is a party, or (v) result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the
Company or its securities are subject) 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 clauses (i), (iv) and (v) above, for such conflicts,
defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have
a Material Adverse Effect). Neither the Company nor any of its
Subsidiaries is in violation of its Certificate of Incorporation,
By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has
occurred which with notice or lapse of time or both could put the
Company or any of its Subsidiaries in default) under, and neither
the Company nor any of its Subsidiaries has taken any action or
failed to take any action that would 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 by which any property or assets of
the Company or any of its Subsidiaries is bound or affected, except
for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of the
Company and its Subsidiaries, if any, are not being conducted, and
shall not be conducted so long as a Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any
governmental entity the violation of which would have a Material
Adverse Effect. Except as disclosed in SCHEDULE 3(F) or as
specifically contemplated by this Agreement or as required under
the 1933 Act and any applicable state securities laws, the Company
is not required to obtain any consent, authorization or order of,
or make any filing or registration with, any court, governmental
agency, regulatory agency, self regulatory organization or stock
market or any third party in order for it to execute, deliver or
perform any of its obligations under this Agreement, the
Registration Rights Agreement, the Debenture or the Warrants in
accordance with the terms hereof or thereof or to issue and sell
the Debenture and Warrants in accordance with the terms hereof and
to issue the Conversion Shares upon conversion of or otherwise
pursuant to the Debenture and the Warrant Shares upon exercise of
or otherwise pursuant to the Warrants. Except as disclosed in
SCHEDULE 3(F), all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior
to the date hereof. The Company is not in violation of the listing
requirements of the Principal Market (as defined herein) and does
not reasonably anticipate that the Common Stock will be delisted by
the Principal Market in the foreseeable future. The Company and its
Subsidiaries are unaware of any facts or circumstances which might
give rise to any of the foregoing.
(g) SEC DOCUMENTS; FINANCIAL
STATEMENTS. Except as set
forth on SCHEDULE 3(G), since at least September 30, 2006 the
Company has timely 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 date hereof and since at least
December 31,
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2005, and all exhibits included
therein and financial statements and schedules thereto and
documents (other than exhibits to such documents) incorporated by
reference therein, being hereinafter referred to herein as the
“SEC DOCUMENTS”). For purposes of this agreement,
“timely filed” shall mean that the applicable document
was filed (i) by its original due date under the 1934 Act, or, if a
request for an extension was timely filed, (ii) by such extended
due date. The Company has delivered to Buyer true and complete
copies of the SEC Documents, except for such exhibits and
incorporated documents. 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. None of the statements
made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements
as have been amended or updated in subsequent filings prior to the
date hereof). As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as
to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared
in accordance with United States generally accepted accounting
principles, consistently applied, during the periods involved
(except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or
may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for
the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set
forth in the financial statements of the Company included in the
SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to the date of the Company’s
most recent 10-QSB or 10-KSB and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be
reflected in such financial statements, which, individually or in
the aggregate, are not material to the financial condition or
operating results of the Company.
(h) ABSENCE OF CERTAIN
CHANGES. Except for
losses incurred in the ordinary course of business that have been
publicly disclosed prior to the date hereof or as set forth on
SCHEDULE 3(H) hereof, since the date of the Company’s most
recent 10-QSB or 10-KSB, there has been no material adverse change
and no material adverse development in the assets, liabilities,
business, properties, operations, financial condition, results of
operations or prospects of the Company or any of its Subsidiaries.
For purposes of this Section 3(h), the terms “material
adverse change” and “material adverse
development” shall exclude continuing losses that are
consistent with the Company’s historical losses.
(i) ABSENCE OF
LITIGATION. Except as
disclosed in SCHEDULE 3(I), to the knowledge of the Company or any
of its subsidiaries, there is no action, suit, claim, 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
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Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries, or their officers
or directors in their capacity as such. SCHEDULE 3(I) contains a
complete list and summary description of any known pending or
threatened proceeding against or affecting the Company or any of
its Subsidiaries, without regard to whether it, if adversely
decided, would have a Material Adverse Effect. The Company and its
Subsidiaries are unaware of any facts or circumstances which might
give rise to any of the foregoing.
(j) PATENTS, COPYRIGHTS,
ETC. The Company owns all
right and title to the patents on SCHEDULE 3(J) hereof (the
“PATENTS”), free and clear of any liens or
encumbrances. The Company has not granted any licenses or rights to
use any of the Patents to any third party.
All of the Company’s material
patents, patent applications, patent rights, inventions, know-how,
trade secrets, trademarks, trademark applications, service marks,
service names, trade names and copyrights (“INTELLECTUAL
PROPERTY”) are set forth in SCHEDULE 3(J) hereof. The Company
and each of its Subsidiaries owns or possesses the requisite
licenses or rights to use all Intellectual Property necessary to
enable it to conduct its business as now operated, including but
not limited to the intellectual property set forth in SCHEDULE 3(J)
hereof (and, except as otherwise set forth in SCHEDULE 3(J) hereof,
to the best of the Company’s knowledge, as presently
contemplated to be operated in the future), except for such
licenses or rights the failure of which to own or possess would
not, individually or in the aggregate, have a Material Adverse
Effect; there is no claim or action by any person pertaining to, or
proceeding pending, or to the Company’s knowledge threatened,
which challenges the right of the Company or of a Subsidiary with
respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and, except as otherwise set
forth in SCHEDULE 3(J) hereof, to the best of the Company’s
knowledge, as presently contemplated to be operated in the future),
except for actions or claims which, if adversely decided, would not
have a Material Adverse Effect; to the best of the Company’s
knowledge, the Company’s or its Subsidiaries’ current
and intended products, services and processes do not infringe on
any Intellectual Property or other rights held by any person, and
the Company is unaware of any facts or circumstances which might
give rise to any of the foregoing. The Company and each of its
Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of their Intellectual Property.
The Company has Existing Liens on its Intellectual Property as
detailed in SCHEDULE 3(J) hereof.
(k) NO MATERIALLY ADVERSE
CONTRACTS, ETC. Neither
the Company nor any of its Subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree,
order, rule or regulation which in the judgment of the
Company’s officers has or is reasonably likely in the future
to have a Material Adverse Effect. Neither the Company nor any of
its Subsidiaries is a party to any contract or agreement which in
the judgment of the Company’s officers has or is reasonably
likely to have a Material Adverse Effect.
(l) TAX STATUS.
Except as set forth on SCHEDULE
3(L), 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
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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, state or local
tax. Except as set forth on SCHEDULE 3(L), none of the
Company’s tax returns is presently being audited by any
taxing authority.
(m) CERTAIN
TRANSACTIONS. Except as
set forth on SCHEDULE 3(M) and except for arm’s length
transactions pursuant to which the Company or any of its
Subsidiaries makes payments in the ordinary course of business upon
terms no less favorable than the Company or any of its Subsidiaries
could obtain from third parties and other than the grant of stock
options disclosed on SCHEDULE 3(C), none of the officers,
directors, or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (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 corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
(n) DISCLOSURE.
To the best of the Company’s
knowledge, all information relating to or concerning the Company or
any of its Subsidiaries set forth in this Agreement and provided to
the Buyer pursuant to Section 2(d) hereof and otherwise in
connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has
occurred or exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which has not been publicly
announced or disclosed but under applicable law, rule or
regulation, requires public disclosure or announcement by the
Company (assuming for this purpose that the Company’s reports
filed under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933
Act).
(o) ACKNOWLEDGMENT REGARDING
BUYER’S PURCHASE OF SECURITIES. The Company acknowledges and agrees that the
Buyer 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 Buyer 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 that any statement made by
Buyer or any of its respective representatives or agents in
connection with this Agreement and the transactions contemplated
hereby is not advice or a recommendation and is merely incidental
to the Buyer’s
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purchase of the Securities and has
not been relied upon by the Company, its officers or directors in
any way. The Company further represents to Buyer that the
Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives.
(p) 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 require registration under the 1933 Act of
the issuance of the Securities to the Buyer. The issuance of the
Securities to the Buyer will not be integrated with any other
issuance of the Company’s securities (past, current or
future) for purposes of any stockholder approval provisions
applicable to the Company or its securities.
(q)
NO BROKERS. Other than as set forth on SCHEDULE 3(Q), the
Company has taken no action which would give rise to any claim by
any person for brokerage commissions, finder’s fees or
similar payments relating to this Agreement or the transactions
contemplated hereby. The Company shall indemnify and hold harmless
each of Buyer, its employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all
claims, losses, damages, costs (including the costs of preparation
and attorney’s fees) and expenses suffered in respect of any
such claimed or existing fees.
(r)
PERMITS; COMPLIANCE. The Company and each of its
Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary
t
