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Exhibit 10.4
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this " Agreement ")
is dated as of December 5, 2006 among Ceragenix Pharmaceuticals,
Inc., a Delaware corporation (the " Company "), and each
purchaser identified on the signature pages hereto (each, including
its successors and assigns, a " Purchaser " and collectively
the " Purchasers ").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of
1933, as amended (the " Securities Act "), and Rule 506
promulgated thereunder, the Company desires to issue and sell to
each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as
more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants
contained in this Agreement, and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the Company and each Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1
Definitions . In addition to the
terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to
such terms in the Debentures (as defined herein), and (b) the
following terms have the meanings set forth in this Section
1.1:
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" Action " shall have the meaning ascribed to such term
in Section 3.1(j).
" Affiliate " means any Person that, directly or
indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144 under the Securities
Act. With respect to a Purchaser, any investment fund or
managed account that is managed on a discretionary basis by the
same investment manager as such Purchaser will be deemed to be an
Affiliate of such Purchaser.
" Business Day " means any day except Saturday, Sunday,
any day which shall be a federal legal holiday in the United States
or any day on which banking institutions in the State of New York
are authorized or required by law or other governmental action to
close.
" Class A Warrants " means those certain Class A Common
Stock Purchase Warrants issued by the Company to the Note Holders
on November 28, 2005.
" Closing " means the closing of the purchase and sale of
the Securities pursuant to Section 2.1.
" Closing Date " means the Trading Day
when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions
precedent to (i) the Purchasers’ obligations to pay the
Subscription Amount and (ii) the Company’s obligations to
deliver the Securities have been satisfied or waived.
" Commission " means the Securities and Exchange
Commission.
" Common Stock " means the common stock of the Company,
par value $0.0001 per share, and any other class of securities into
which such securities may hereafter be reclassified or changed
into.
" Common Stock Equivalents " means any securities of the
Company or the Subsidiaries which would entitle the holder thereof
to acquire at any time Common Stock, including, without limitation,
any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or
exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
" Company Counsel " means McKenna, Long & Aldridge
LLP, with offices located at 1875 Lawrence Street, Suite 200,
Denver, Colorado 80203.
" Conversion Price " shall have the meaning ascribed to
such term in the Debentures.
" Debentures " means, the 9% Secured Convertible
Debentures due, subject to the terms therein, 3 years from their
date of issuance, issued by the Company to the Purchasers
hereunder, in the form of Exhibit A attached hereto.
" Disclosure Schedules " shall have the meaning ascribed
to such term in Section 3.1.
" Effective Date " means the date that the initial
Registration Statement filed by the Company pursuant to the
Registration Rights Agreement is first declared effective by the
Commission.
" Evaluation Date " shall have the meaning ascribed to
such term in Section 3.1(r).
" Exchange Act " means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder.
" Exempt Issuance " means the issuance of (a) shares of
Common Stock or options to employees, officers or directors of the
Company pursuant to any stock or option plan duly adopted for such
purpose by a majority of the non-employee members of the Board of
Directors of the Company or a majority of the members of a
committee of non-employee directors established for the purpose of
administering the Company’s stock and/or option plans
including the Compensation Committee, (b) securities upon the
exercise or exchange of or conversion of any Securities issued
hereunder, (c) securities issued pursuant to acquisitions or
strategic transactions approved by a majority of the
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disinterested directors of the Company, provided
any such issuance shall only be to a Person which is, itself or
through its subsidiaries, an operating company in a business
synergistic with the business of the Company and in which the
Company receives benefits in addition to the investment of funds,
but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an
entity whose primary business is investing in securities and (d)
securities exercisable or exchangeable for or convertible into
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; provided , however , the
term "Exempt Issuance" for purposes of Section 5 of the Debentures
and Section 3 of the Warrants shall not include shares of Common
Stock issued or issuable upon conversion, exchange or exercise of
the Notes, the Class A Warrants or other Common Stock Equivalents
outstanding as of the date hereof in the event there is any
adjustment to the conversion, exercise or exchange price of such
Notes, the Class A Warrants or other Common Stock
Equivalents. For clarity, any such adjustment to the
conversion, exercise or exchange price of the Notes, the Class A
Warrants or other Common Stock Equivalents shall be subject to
Section 5 of the Debentures and Section 3 of the
Warrants.
" FWS " means Feldman Weinstein & Smith LLP with
offices located at 420 Lexington Avenue, Suite 2620, New York, New
York 10170-0002.
" GAAP " shall have the meaning ascribed to such term in
Section 3.1(h).
" Indebtedness " shall have the meaning ascribed to such
term in Section 3.1(bb).
" Intellectual Property Rights " shall have the meaning
ascribed to such term in Section 3.1(o).
" Intercreditor Agreement " means that certain
Intercreditor Agreement in the Form of Exhibit H attached
hereto, dated as of the date hereof between the Purchasers and Note
Holders.
" Legend Removal Date " shall have the meaning ascribed
to such term in Section 4.1(c).
" Liens " means a lien, charge, security interest,
encumbrance, right of first refusal, preemptive right or other
restriction.
" Material Adverse Effect " shall have the meaning
assigned to such term in Section 3.1(b).
" Material Permits " shall have the meaning ascribed to
such term in Section 3.1(m).
" Maximum Rate " shall have the meaning ascribed to such
term in Section 5.17.
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" Note Holders " means Longview Equity
Fund, LP, Longview Fund, LP, Alpha Capital Aktiengesellschaft and
Iroquois Capital.
" Notes " means those secured convertible notes issued by
the Company to the Note Holders on November 28, 2005 in the
original aggregate principal amount of $3,200,000.
" Participation Maximum " shall have the meaning ascribed
to such term in Section 4.13.
" Permitted Lien " shall have the meaning set forth in
the Debentures.
" 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.
" Pre-Notice " shall have the meaning ascribed to such
term in Section 4.13.
" Proceeding " means an action, claim, suit,
investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether
commenced or threatened.
" Purchaser Party " shall have the meaning ascribed to
such term in Section 4.11.
" Registration Rights Agreement " means the Registration
Rights Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of Exhibit B attached hereto.
" Registration Statement " means a registration statement
meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Underlying Shares by each
Purchaser as provided for in the Registration Rights Agreement.
" Required Approvals " shall have the meaning ascribed to
such term in Section 3.1(e).
" Required Minimum " means, as of any date, the maximum
aggregate number of shares of Common Stock then issued or
potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon exercise
or conversion in full of all Warrants and Debentures (including
Underlying Shares issuable as payment of interest), ignoring any
conversion or exercise limits set forth therein, and assuming that
the Conversion Price is at all times on and after the date of
determination 75% of the then Conversion Price on the Trading Day
immediately prior to the date of determination.
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" Rule 144 " means Rule 144 promulgated by
the Commission pursuant to the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same
effect as such Rule.
" SEC Reports " shall have the meaning ascribed to such
term in Section 3.1(h).
" Securities " means the Debentures, the Warrants, the
Warrant Shares and the Underlying Shares.
" Securities Act " means the Securities Act of 1933, as
amended, and the rules and regulations promulgated hereunder.
" Security Agreement " means the Amended and Restated
Security Agreement, dated the date hereof, among the Company, its
Subsidiaries, the Note Holders and the Purchasers, in the form of
Exhibit E attached hereto.
" Security Documents " shall mean the Security Agreement,
the Subsidiary Guarantees and any other documents and filing
required thereunder in order to grant the Purchasers a security
interest in the assets of the Company and the Subsidiaries as
provided in the Security Agreement, including all UCC-1 filing
receipts Collateral. The Purchasers and the Note Holders have
agreed to hold their respective security interests pari
passu , pursuant to the terms of the Intercreditor
Agreement.
" Series A Stockholders " means those holders of the
Company’s Series A Convertible Preferred Stock.
" Short Sales " means all "short sales" as defined in
Rule 200 of Regulation SHO under the Exchange Act (but shall not be
deemed to include the location and/or reservation of borrowable
shares of Common Stock).
" Subscription Amount " means, as to each Purchaser, the
aggregate amount to be paid for Debentures and Warrants purchased
hereunder as specified below such Purchaser’s name on the
signature page of this Agreement and next to the heading
"Subscription Amount", in United States dollars and in immediately
available funds.
" Subsequent Financing " shall have the meaning ascribed
to such term in Section 4.13.
" Subsequent Financing Notice " shall have the meaning
ascribed to such term in Section 4.13.
" Subsidiary " means any subsidiary of the Company as set
forth on Schedule 3.1(a) .
" Subsidiary Guarantee " means the Subsidiary Guarantee,
dated the date hereof, by each Subsidiary in favor of the
Purchasers, in the form of Exhibit F attached hereto.
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" Trading Day " means a day on which the
Common Stock is listed or quoted for trading on a Trading Market
and, if the Common Stock is not then listed or quoted for trading
on a Trading Market, "Trading Day" shall mean a Business
Day.
" Trading Market " means the following markets or
exchanges on which the Common Stock is listed or quoted for trading
on the date in question: the American Stock Exchange, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the New York Stock Exchange or the OTC Bulletin Board.
" Transaction Documents " means this Agreement, the
Debentures, the Warrants, the Registration Rights Agreement, the
Security Agreement, the Subsidiary Guarantee, all exhibits and
schedules hereto and thereto and any other documents or agreements
executed in connection with the transactions contemplated
hereunder.
" Transfer Agent " means Corporate Stock Transfer, with a
mailing address of 3200 Cherry Creek Drive South, Suite 430,
Denver, Colorado 80209, and a facsimile number of (303) 777-3094,
and any successor transfer agent of the Company.
" Underlying Shares " means the shares of Common Stock
issued and issuable upon conversion or redemption of the Debentures
and upon exercise of the Warrants and issued and issuable in lieu
of the cash payment of interest on the Debentures in accordance
with the terms of the Debentures.
" Variable Rate Transaction " shall have the meaning
ascribed to such term in Section 4.14(b).
" VWAP " means, for any date, the price determined by the
first of the following clauses that applies: (a) if the Common
Stock is then listed or quoted on a Trading Market, the daily
volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg L.P.
(based on a Trading Day from 9:30 a.m. New York City time to 4:02
p.m. New York City time); (b) if the OTC Bulletin Board is
not a Trading Market, the volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
OTC Bulletin Board; (c) if the Common Stock is not then listed or
quoted on the OTC Bulletin Board and if prices for the Common Stock
are then reported in the "Pink Sheets" published by Pink Sheets,
LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share
of the Common Stock so reported; or (d) in all other cases,
the fair market value of a share of Common Stock as determined by
an independent appraiser selected in good faith by the Holder and
reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.
" Warrants " means collectively the Common Stock purchase
warrants delivered to the Purchasers at the Closing in accordance
with Section 2.2(a) hereof, which Warrants shall be exercisable
immediately and have a term of exercise equal to 5 years, in the
form of Exhibit C attached hereto.
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ARTICLE II.
PURCHASE AND SALE
2.1
Closing . On the Closing Date, upon
the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and
each Purchaser, severally and not jointly, agrees to purchase, an
aggregate of up to $5,000,000 in principal amount of the
Debentures. Each Purchaser shall deliver to the Company, via
wire transfer or a certified check, immediately available funds
equal to its Subscription Amount and the Company shall deliver to
each Purchaser its respective Debenture and a Warrant, as
determined pursuant to Section 2.2(a), and the Company and each
Purchaser shall deliver the other items set forth in Section 2.2
deliverable at the Closing. Upon satisfaction of the
conditions set forth in Sections 2.2 and 2.3, the Closing shall
occur at the offices of FWS or such other location as the parties
shall mutually agree.
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(a)
On the Closing Date, the Company shall deliver or
cause to be delivered to each Purchaser the following:
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(ii)
a legal opinion of Company Counsel, in the form of
Exhibit D attached hereto;
(iii)
a Debenture with a principal amount equal to such
Purchaser’s Subscription Amount, registered in the name of
such Purchaser;
(iv)
a Warrant registered in the name of such Purchaser
to purchase up to a number of shares of Common Stock equal to 50%
of such Purchaser’s Subscription Amount divided by $2.15107,
with an exercise price equal to $2.37, subject to adjustment
therein;
(v)
the Security Agreement, duly executed by the Company
and each Subsidiary, along with all of the Security Documents,
including the Subsidiary Guarantees, duly executed by the parties
thereto; and
(vi)
the Registration Rights Agreement duly executed by
the Company.
(b)
On the Closing Date, each Purchaser shall deliver or
cause to be delivered to the Company the following:
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account as specified in writing by the
Company;
(iii)
the Security Agreement duly executed by such
Purchaser; and
(iv)
the Registration Rights Agreement duly executed by
such Purchaser.
2.3
Closing Conditions .
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(a)
The obligations of the Company hereunder in
connection with the Closing are subject to the following conditions
being met:
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(i)
the accuracy in all material respects when made and
on the Closing Date of the representations and warranties of the
Purchasers contained herein;
(ii)
all obligations, covenants and agreements of the
Purchasers required to be performed at or prior to the Closing Date
shall have been performed; and
(iii)
the delivery by the Purchasers of the items set
forth in Section 2.2(b) of this Agreement.
(b)
The respective obligations of the Purchasers
hereunder in connection with the Closing are subject to the
following conditions being met:
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(i)
the accuracy in all material respects when made and
on the Closing Date of the representations and warranties of the
Company contained herein;
(ii)
all obligations, covenants and agreements of the
Company required to be performed at or prior to the Closing Date
shall have been performed;
(iii)
the delivery by the Company of the items set forth
in Section 2.2(a) of this Agreement;
(iv)
there shall have been no Material Adverse Effect
with respect to the Company since the date hereof;
(v)
the Note Holders shall have executed and delivered
the Security Agreement; and
(vi)
from the date hereof to the Closing Date, trading in
the Common Stock shall not have been suspended by the Commission or
the Company’s principal Trading Market (except for any
suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the Closing), and, at
any time prior to the Closing Date, trading in securities generally
as reported by Bloomberg L.P. shall not have been suspended or
limited, or minimum prices shall not have been established on
securities whose trades are
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reported by such service, or on any Trading
Market, nor shall a banking moratorium have been declared either by
the United States or New York State authorities nor shall there
have occurred any material outbreak or escalation of hostilities or
other national or international calamity of such magnitude in its
effect on, or any material adverse change in, any financial market
which, in each case, in the reasonable judgment of each Purchaser,
makes it impracticable or inadvisable to purchase the Debentures at
the Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1
Representations and Warranties of the
Company . Except as set forth under the corresponding
section of the disclosure schedules delivered to the Purchasers
concurrently herewith (the " Disclosure Schedules "), which
Disclosure Schedules shall be deemed a part hereof and to qualify
any representation or warranty otherwise made herein to the extent
of such disclosure, the Company hereby makes the following
representations and warranties to each Purchaser:
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(a)
Subsidiaries . All of the direct and
indirect subsidiaries of the Company are set forth on Schedule
3.1(a) . The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and
clear of any Liens, other than Permitted Liens, and all of the
issued and outstanding shares of capital stock of each Subsidiary
are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities. If the Company has no subsidiaries, all other
references to the Subsidiaries or any of them in the Transaction
Documents shall be disregarded.
(b)
Organization and Qualification . The
Company and each of the Subsidiaries is an entity duly incorporated
or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and
use its properties and assets and to carry on its business as
currently conducted. Neither the Company nor any Subsidiary
is in violation or default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, could not have or reasonably be expected to result in
(i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse
effect on the results of operations, assets, business, prospects or
condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect
on the Company’s ability to perform in any material respect
on a timely basis its obligations under any Transaction Document
(any of (i), (ii) or (iii), a " Material Adverse Effect ") and
no Proceeding has been instituted in any such jurisdiction
revoking,
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limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or
qualification.
(c)
Authorization; Enforcement . The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by each of the
Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each
of the Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Company
and no further action is required by the Company, its board of
directors or its stockholders in connection therewith other than in
connection with the Required Approvals. Each Transaction
Document has been (or upon delivery will have been) duly executed
by the Company and, when delivered in accordance with the terms
hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(d)
No Conflicts . The execution,
delivery and performance of the Transaction Documents by the
Company and the consummation by the Company of the other
transactions contemplated hereby and thereby do not and will not:
(i) conflict with or violate any provision of the Company’s
or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under,
result in the creation of any Lien, except for Permitted Liens,
upon any of the properties or assets of the Company or any
Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) subject to the Required
Approvals, conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset
of the Company or a Subsidiary is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to result in a Material Adverse
Effect.
(e)
Filings, Consents and Approvals .
Except as listed on Schedule 3.1(e) , 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)
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filings required pursuant to Section 4.6, (ii)
the filing with the Commission of the Registration Statement, (iii)
the notice and/or application(s) to each applicable Trading Market
for the issuance and sale of the Securities and the listing of the
Underlying Shares for trading thereon in the time and manner
required thereby and (iv) the filing of Form D with the Commission
and such filings as are required to be made under applicable state
securities laws (collectively, the " Required Approvals
").
(f)
Issuance of the Securities . The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The
Underlying Shares, when issued in accordance with the terms of the
Transaction Documents, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the
Company. The Company has reserved from its duly authorized
capital stock a number of shares of Common Stock for issuance of
the Underlying Shares at least equal to the Required Minimum on the
date hereof.
(g)
Capitalization . The capitalization
of the Company is as set forth on Schedule 3.1(g) . The
Company has not issued any capital stock since its most recently
filed periodic report under the Exchange Act, other than pursuant
to the exercise of employee stock options under the Company’s
stock option plans, the issuance of shares of Common Stock to
employees pursuant to the Company’s employee stock purchase
plan and pursuant to the conversion or exercise of Common Stock
Equivalents outstanding as of the date of the most recently filed
periodic report under the Exchange Act. 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. Except as set
forth on Schedule 3.1(g) or as a result of the purchase and
sale of the Securities, there are no outstanding options, warrants,
script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares
of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock or Common
Stock Equivalents. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws,
and none of such outstanding shares was issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities. Except as disclosed in Schedule 3.1(g) , 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.
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(h)
SEC Reports; Financial Statements .
Except as listed on Schedule 3.1(h), Company has filed all reports,
schedules, forms, statements and other documents required to be
filed by the Company under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two
years preceding the date hereof (or such shorter period as the
Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively
referred to herein as the " SEC Reports ") on a timely basis or
has received a valid extension of such time of filing and has filed
any such SEC 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
Securities Act and the Exchange Act, 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 the 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 Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in
accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods
involved (" GAAP "), except as may be otherwise specified in
such financial statements or the notes thereto and except that
unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries
as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit
adjustments.
(i)
Material Changes . Since the date of
the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in a subsequent SEC
Report filed prior to the date hereof, (i) there has been no event,
occurrence or development that has had or that could 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 disclosed in filings made
with the Commission, (iii) the Company has not altered its method
of accounting, (iv) except as set forth on Schedule 3.1(i), the
Company has not declared or made any dividend or distribution of
cash or other property to its stockholders or purchased, redeemed
or made any agreements to purchase or redeem any shares of its
capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant
to existing Company stock option plans. The Company does not have
pending before the Commission any request for confidential
treatment of information. Except for the issuance of the
Securities contemplated by this Agreement or as set forth on
Schedule 3.1(i) , no event, liability or development has occurred
or exists with respect to the Company or its Subsidiaries or their
respective business, properties, operations or financial condition,
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
that has not been
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publicly disclosed at least one Trading Day prior
to the date that this representation is made.
(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, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an " Action ") which
(i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any
Action involving a claim of violation of or liability under federal
or state securities laws or a claim of breach of fiduciary
duty. There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by
the Commission involving the Company or any current or former
director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness
of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities 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 could
reasonably be expected to result in a Material Adverse
Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates
to such employee’s relationship with the Company, and neither
the Company or any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. No
executive officer, to the knowledge of the Company, is, or is now
expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information
agreement or non-competition agreement, or any other contract or
agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(l)
Compliance . Neither the Company nor
any Subsidiary (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or
any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it
is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it
or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of
any court, arbitrator or governmental body, or (iii) is or has
been
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in violation of any statute, rule or regulation
of any governmental authority, including without limitation all
foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment, except in each case
as could not have or reasonably be expected to result in 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 could not have or reasonably be
expected to result in a Material Adverse Effect (" Material
Permits "), and neither the Company nor any Subsidiary has received
any 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 Permitted Liens or 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 with which the Company and the Subsidiaries are
in compliance.
(o)
Patents and Trademarks . The Company
and the Subsidiaries have, or have rights to use, all patents,
patent applications, trademarks, trademark applications, service
marks, trade names, trade secrets, inventions, copyrights, licenses
and other intellectual property rights and similar rights necessary
or material for use in connection with their respective businesses
as described in the SEC Reports and which the failure to so have
could have a Material Adverse Effect (collectively, the "
Intellectual Property Rights "). Neither the Company nor any
Subsidiary has received a notice (written or otherwise) that the
Intellectual Property Rights used by the Company or any Subsidiary
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. The Company and
its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expect to have a Material
Adverse Effect.
(p)
Insurance . The Company and the
Subsidiaries are 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
and the Subsidiaries are engaged, including, but not limited to,
directors and officers insurance coverage at
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least equal to the aggregate Subscription
Amount. Neither the Company nor any Subsidiary has any 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 $60,000 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 stock option 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 Closing Date. 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 information required to be
disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules
and forms. The Company’s certifying officers have
evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the period covered by the
Company’s 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 changes in the Company’s
internal control over financial reporting (as such term is defined
in the Exchange Act) that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control
over financial reporting.
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(s)
Certain Fees . Except as set forth on
Schedule 3.1(s), 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 the Transaction Documents. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by the Transaction Documents.
(t)
Private Placement . Assuming the
accuracy of the Purchasers’ representations and warranties
set forth in Section 3.2, no registration under the Securities Act
is required for the offer and sale of the Securities by the Company
to the Purchasers as contemplated hereby. The issuance and sale of
the Securities hereunder does not contravene the rules and
regulations of the Trading Market.
(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 of 1940, as amended.
(v)
Registration Rights . Other than
each of the Purchasers and as disclosed on Schedule 3.1 (v) , ,
no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the
Company.
(w)
Listing and Maintenance Requirements
. The Company’s Common Stock is registered pursuant to
Section 12(b) or 12(g) 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 has the Company received any
notification that the Commission is contemplating terminating such
registration. The Company has not, in the 12 months preceding
the date hereof, 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 similar charter documents) or the
laws of its state of incorporation that is or could become
applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a
result of the Compan
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