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Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this
"Agreement," “Purchase Agreement,” or
“Securities Purchase Agreement” ), dated as of
June 13, 2008, by and among ICP Solar Technologies, Inc., a Nevada
corporation, ( "Company" ), and each buyer listed on the
Schedule of Buyers attached hereto that has executed this Agreement
(each, including its successors and assigns, a
“Buyer” and collectively the
“Buyers” ). Buyers may include individuals or
entities identified by the Company, subject to the approval of the
Lead Investor (as defined below), such approval which shall not be
unreasonably withheld.
WHEREAS:
A. The Company and the Buyers
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
“Commission” or the "SEC" ) under the
Securities Act of 1933, as amended (the "1933 Act" );
B.
Buyers desire to purchase and the Company desires to issue and sell
in a private offering, upon the terms and conditions set forth in
this Agreement, (i) senior secured convertible debentures (the
“Debentures” ) of the Company and (ii) Warrants
(as defined in Section 1(a) in the form described in this
Agreement, to purchase shares of common stock, par value $0.00001
per share, of the Company ( “Common Stock” ).
The aggregate Purchase Price of this offering of the Debentures and
Warrants to all of the Buyers shall be a minimum amount of Two
Million U.S. Dollars (U.S. $2,000,000)(the “Minimum
Offering Amount” ) and a maximum amount of Three Million
U.S. Dollars (U.S. $3,000,000)(the “Maximum Offering
Amount” )(collectively, the “Offering”
);
C.
The terms of the Debentures, including the terms on which the
Debentures may be converted into Common Stock, are set forth in
Debenture, in the form attached hereto as Exhibit A ;
D. Contemporaneously with the
execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, in the
form attached hereto as Exhibit B (the "Registration
Rights Agreement" ), pursuant to which the Company has agreed
to provide certain registration rights under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state
securities laws.
E.
The Debentures will rank senior to all outstanding and future
indebtedness of the Company, guaranteed by each of the Company's
Active Subsidiaries pursuant to the subsidiary guarantee attached
hereto as Exhibit C-1 (the "Subsidiary
Guarantee "), and secured by a first priority, perfected
security interest in certain of the assets of the Company and the
stock and certain of the assets of each of the Company's
subsidiaries, as evidenced by the security agreement attached
hereto as Exhibit C-2 (the " Security Agreement ")
and the Intellectual Property Security Agreement attached hereto as
Exhibit C-3 (the " Intellectual Property Security
Agreement ").
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NOW THEREFORE , the Company and each Buyer, severally and
not jointly, hereby agree as follows:
1.
PURCHASE AND SALE OF DEBENTURES AND WARRANTS
.
(a)
Certain Definitions . The Company and the
each Buyer (severally and not jointly) mutually agree to the terms
of each of the Transaction Documents. For purposes hereof:
“1934 Act” shall mean the Securities
Exchange Act of 1934, as amended.
"Approved Stock Plan" means any employee benefit plan which
has been duly adopted by the Board of Directors of the Company or a
majority of the members of a committee of non-employee directors
established for such purpose, pursuant to which the Company's
securities may be issued to any employee, consultant, officer or
director for services provided to the Company; provided, however,
that no more than an aggregate of 2,000,000 shares of Common Stock
Equivalents may be issued in connections with all Approved Stock
Plans. A
“Active Subsidiaries” shall mean all of the
Company’s Subsidiaries, other than the Inactive
Subsidiaries.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which commercial banks in the City of New York,
New York are authorized or required by law or executive order to
remain closed.
“Closing Bring-Down Certificate” shall have the
meaning set forth in Section 3(c) below.
“Closing Certificate” shall have the
meaning set forth in Section 1(b)(iv)(B) below.
“Closing Legal Opinion” shall have the meaning
set forth in Section 1(b)(iv)(C) below.
“Collateral” shall have the meaning ascribed to
it in the Security Agreement.
“Common Stock” shall have the meaning
set forth in Recital “B” above.
“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.
“Conversion Shares” shall have the
meaning set forth in Section 2(a) below.
“Convertible Securities” shall have the meaning
ascribed to it in the Debenture.
“Designated Insiders” shall have the meaning set
forth in Section 4(n) below.
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“Effective Date” shall have the
meaning set forth in the Registration Rights Agreement.
"Eligible Market" means the over the counter Bulletin Board
(“OTC-BB”), the New York Stock Exchange, Inc., the
Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market or the American Stock Exchange.
“Escrow Agreement” shall mean an Escrow
Agreement, in form of Exhibit D hereto, by and between the
Escrow Agent, the Company and the Buyers.
“Escrow Account” shall have the
meaning ascribed to it in the Escrow Agreement.
“Escrow Agent” shall have the meaning
ascribed to it in the Escrow Agreement.
“Exempt Issuance” means the issuance of (a) any
Common Stock issued or issuable in connection with any Approved
Stock Plan at a price equal to or greater than 75% of the initial
Conversion Price (as defined in the Debenture), up to a maximum of
five percent (5%) of the outstanding Common Stock, in the aggregate
(provided that no such options shall be issued to consultants or
advisors unless such options are not registered, either at the time
of issuance or at any time thereafter, and are subject to volume
limitations under Rule 144), except that, as to any anti-dilution
provisions or Subsequent Issuance Adjustments in the Debentures or
Warrants, this item (a) shall not constitute an Exempt Issuance
until after the 90 th day following the Effective Date,
(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, provided that the
principal amount thereof if not increased and the terms thereof are
not otherwise amended or modified after the Closing Date (c) 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 directly or indirectly
effectively 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), and (d) any Common Stock issued
or issuable in connection with any acquisition by the Company,
whether through an acquisition of stock or a merger of any
business, assets or technologies the primary purpose of which is
not to raise equity capital. Notwithstanding anything to the
contrary herein, no issuance of Variable Equity Securities shall be
an Exempt Issuance.
“Indebtedness” of any Person means,
without duplication (A) all indebtedness for borrowed money, (B)
all obligations issued, undertaken or assumed as the deferred
purchase price of property or services including (without
limitation) “Capital Leases” in accordance with
generally accepted accounting principles (other than trade payables
entered into in the ordinary course of business, consistent with
prior practice), (C) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other similar
instruments, (D) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property,
assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or
incurred as financing, in either case with respect to any property
or assets acquired with the proceeds of such
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indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property), (F)
all monetary obligations under any leasing or similar arrangement
which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified
as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any mortgage, lien, pledge, charge, security interest
or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (A) through (G) above; and (y)
"Contingent Obligation" means, as to any Person, any direct
or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of
another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with
respect thereto.
“Inactive Subsidiaries” shall mean ICP Asia
Ltd., a Hong Kong corporation, and ICP Global Tech PTY Ltd., an
Australian corporation.
“Intellectual Property” shall have the
meaning set forth in Section 3(j) below.
“Intellectual Property Security Agreement” shall
have the meaning ascribed to it in Recital “E”
above.
“Intellectual Property Rights” shall
have the meaning set forth in Section 3(j) below.
“Legend Removal Date” shall have the
meaning set forth in Section 6(a).
“Lien” shall have the meaning set
forth in Section 5 below.
“Limited Standstill Agreements” shall have the
meaning set forth in Section 4(n) below.
"Market Price," for any security as of any date, shall have
the meaning ascribed to it in the applicable security.
“Material Adverse Effect” shall have
the meaning set forth in Section 3(a) below.
“Officer’s Certificate” shall
have the meaning set forth in Section 8(c) below.
“Ongoing Share Reservation Requirement” shall
have the meaning set forth in Section 4(e) below.
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“Options” shall have the meaning
ascribed to it in the Debenture.
“Patents” shall have the meaning set
forth in Section 3(j) below.
“Payment Shares” shall mean (i)
Default Shares (as defined in the Debenture), (ii) Interest Payment
Shares (as defined in the Debenture), (iii) Monthly Redemption
Shares and (iv) shares issuable upon conversion of Liquidated
Damages (as defined in the Debenture) 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 or thereunder, including without limitation, the
right to be included in the Registration Statement (as defined in
the Registration Rights Agreement) filed pursuant to the
Registration Rights Agreement.
“Permitted Liens” shall mean: (i) Liens on
equipment purchased in the ordinary course of business, consistent
with prior practice (ii) Liens subordinate to those created by this
Agreement as long as the lienholder enters into a subordination
agreement acceptable to the Buyers in their reasonable discretion,
(iii) landlords', carriers', warehousemen's, mechanics' and other
similar Liens arising by operation of law in the ordinary course of
the Company's business; provided, however, that all such Liens
shall be discharged or bonded off within sixty (60) days from the
filing thereof; and (iv) Liens for taxes (excluding any Lien
imposed pursuant to any provision of ERISA) not yet due or which
are being contested in good faith by appropriate proceedings and
the Company maintains appropriate reserves in respect thereto
provided that in Buyer's judgment such Lien does not adversely
affect Buyer's rights or the priority of Buyer's Lien in the
Collateral.
“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.
“Principal Market” shall have the
meaning set forth in Section 4(g) below.
“Purchase Price” shall have the
meaning set forth in Section 1(b)(ii) below.
“Registration Rights Agreement” shall have the
meaning set forth in Recital “D” above.
“Registration Statement” shall have the meaning
set forth in the Registration Rights Agreement.
“Required Holders” shall have the
meaning ascribed to it in the Debenture.
“Security Agreement” shall have the
meaning ascribed to it in Recital “E” above.
“SEC Documents” shall have the meaning
set forth in Section 3(g) below.
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“Securities” shall have the meaning
set forth in Section 2(a) below.
“Security Documents” shall mean the Security
Agreement, the form of Subsidiary Guarantee, the Intellectual
Property Security Agreement and any other documents and filing
required thereunder in order to grant the Buyers a first priority
security interest in the assets of the Company and the Subsidiaries
as provided in the Security Agreement, including but not limited to
all UCC-1 filing receipts and documentation evidencing filing of
liens with the United States Patent and Trademark Office.
“Series A Warrants” shall have the
meaning set forth in Section 1(c) below.
“Series A Warrant Amount” shall have
the meaning set forth in Section 1(c) below.
“Series B Warrants” shall have the
meaning set forth in Section 1(d) below.
“Series B Warrant Amount” shall have
the meaning set forth in Section 1(d) below.
“Series C Warrants” shall have the
meaning set forth in Section 1(d) below.
“Subscription Amount” shall have the
meaning set forth in Section 10 below.
“Subsidiaries” shall have the meaning
set forth in Section 3(a) below.
"Trading Day" shall mean any day on which the Common Sock is
traded for any period on the Principal Market, or on the principal
securities exchange or other securities market on which the Common
Stock is then being traded.
“Trading Market” means the Eligible Market on
which the Common Stock is listed or quoted for trading on the date
in question.
“Transaction Documents” shall mean this
Securities Purchase Agreement, the Debenture, the Registration
Rights Agreement, the Security Documents, the Warrants, and any
other agreements delivered together with this Agreement or in
connection herewith.
“Underlying Shares” means the shares of Common
Stock issued and issuable upon conversion or redemption of the
Debentures or as Payment Shares, issued and issuable upon exercise
of the Warrants and issued and issuable in lieu of the cash payment
of interest on the Debentures in accordance with their terms.
“Variable Equity Securities” shall
have the meaning set forth in Section 4(d)(ii) below.
“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
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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 Common Stock is not then listed or quoted for trading on a
Trading Market and if prices for the Common Stock are then reported
in the “Pink Sheets” published by Pink Sheets, LLC (or
a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the
Common Stock so reported; or (c) 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 Buyers of a
majority in interest of the Securities then outstanding and
reasonably acceptable to the Company.
“Warrants” shall mean all Series A
Warrants, Series B Warrants, the Series C Warrants.
“Warrant Amount” shall mean the Series A Warrant
Amount or Series B Warrant Amount, as applicable.
“Warrant Shares” shall have the
meaning set forth in Section 2(a) below.
(b) Closing of Purchase of Debentures and Warrants;
Escrow . 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 each Buyer and
each Buyer, severally and not jointly, agrees to purchase from the
Company a Debenture in the principal amount equal to the
Subscription Amount (as defined in Section 10), divided by -90, to
account for the Original Issue Discount (as defined below) and an
accompanying number of Series A Warrants, Series B Warrants and
Series C Warrants (as each is defined below) to purchase a number
of shares of Common Stock equal to the applicable 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 . The purchase price for each Debenture and
the Warrants to be purchased by each Buyer at the Closing (the
"Purchase Price" ) shall be $ 0.90 for each $1.00 of
principal amount of Debentures and related Warrants to be purchased
by such Buyer at the Closing, representing a ten percent (10%)
original issue discount (the “Original Issue
Discount”), and such amount shall be the amount set forth
opposite such Buyer's name in column (5) of the Schedule of Buyers
annexed hereto. On or before the Closing Date (as defined below),
(i) each Buyer shall pay the Purchase Price for the Debentures and
the Warrants to be issued and sold to it at the Closing (as defined
below) by wire transfer of immediately available funds to the
Company, in accordance with the Company's written wiring
instructions, against delivery of a duly executed Debenture having
an aggregate initial principal amount (the “Original
Principal Amount” ) equal to the Purchase Price divided
by 0.90 (to account for the Original Issue Discount) and the number
of Warrants equal to the applicable Warrant Amount, and (ii) the
Company shall deliver such Debentures and Warrants duly executed on
behalf of the Company, to such Buyer, against delivery of such
Purchase Price. Notwithstanding the receipt by the Escrow Agent of
funds representing a Buyer’s Purchase Price prior to June 13,
2008, the consideration for each Buyer’s Debenture and
Warrants shall be deemed to have been delivered on June 13, 2008
for purposes of the Rule 144 holding period.
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(iii) Closing Date . Subject to the satisfaction or waiver
of the terms and conditions of this Agreement, the "Closing" with
respect to a Buyer shall occur when subscriber funds representing
the aggregate Purchase Price of the Debenture being purchased by
such Buyer are transmitted by wire transfer of immediately
available funds by each 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 last Closing hereunder shall occur not later than June 16,
2008. The Closing contemplated by this Agreement shall occur on the
applicable Closing Date at the offices of the Company, or at such
other location as may be agreed to by the parties.
(iv) Closing Deliveries . Closing deliveries required
hereunder shall be made to the Escrow Agent pursuant to Section
1(d) below. On the Closing Date, the Company will deliver or cause
to be delivered to each Buyer (the “Company
Documents” ):
(A)
the items required to be delivered to Buyer pursuant to Section 8,
duly executed by the Company where so required,
(B) a certificate ( "Closing Certificate" ) signed by its
chief executive officer or chief financial officer (1) 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, (2) adopting the covenants
and conditions set forth in this Agreement in relation to the
applicable Debenture and Warrants, and (3) certifying that an Event
of Default has not occurred,
(C)
a legal opinion of the Company's counsel, dated as of the Closing
Date, in form, scope and substance reasonably satisfactory to the
Buyer and in substantially the same form as Exhibit F
attached hereto in relation to the Company, the applicable
Debenture, the applicable Warrant and the Transaction Documents (
"Closing Legal Opinion" ),
(D)
a duly executed Debenture with a principal amount equal to such
Buyer’s Subscription Amount divided by 0.90 to account
for the Original Issue Discount, registered in the name of such
Buyer,
(E)
a duly executed Series A Warrant registered in the name of such
Buyer to purchase up to a number of shares of Common Stock equal to
the Series A Warrant Amount (as defined in Section 1(c)), and a
duly executed Series B Warrant registered in the name of such Buyer
to purchase up to a number of shares of Common Stock equal to the
Series B Warrant Amount (as defined in Section 1(d), and a duly
executed Series C Warrant registered in the name of such Buyer to
purchase up to a number of shares of Common Stock equal to the
Series C Warrant Amount (as defined in Section 1(e)),
(F)
Limited Standstill Agreements, duly executed by each of the
Designated Insiders (as defined in Section 4(n)),
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(G)
The Company shall have delivered to such Buyer a true copy of
certificate evidencing the formation and good standing of the
Company and each of its Subsidiaries in such entity's jurisdiction
of formation issued by the Secretary of State (or comparable
office) of such jurisdiction, as of a date within ten (10) days of
the Closing Date,
(H)
The Company shall have delivered to such Buyer a true copy of one
or more certificates evidencing the Company's qualification as a
foreign corporation and good standing issued by the Secretary of
State (or comparable office) of each jurisdiction in which the
Company conducts business and in which failure to so qualify would
have a Material Adverse Effect, as of a date within five (5) days
of the Closing Date, and
(I)
The Company shall have delivered to such Buyer a certified copy of
the Articles of Incorporation as certified by the Secretary of the
State of Nevada as of a date that is five (5) days prior to the
Closing Date.
On the Closing Date, each Buyer shall deliver or cause to be
delivered to the Company the following (the “Buyer
Documents” ):
(A)
this Securities Purchase Agreement and the Registration Rights
Agreement duly executed by such Buyer,
(B)
such Buyer’s Subscription Amount by wire transfer to the
account as specified in writing by the Company (subject to offsets
for any expenses to which such Buyer is entitled).
(c) Warrants
.
(i) Series A Warrants. Each Buyer’s
Debenture shall be accompanied by a warrant ( “Series A
Warrant” ) to purchase a number of shares equal to 100%
of the Original Principal Amount of the Debenture being purchased
by such Buyer, divided by the Initial Conversion Price (as defined
in the Debenture) (the “Series A Warrant Amount”
). The Series A Warrants shall be in the form of the Warrant
annexed hereto as Exhibit E-1 , except that the
“Initial Exercise Price,” as defined therein, shall
equal fifty cents ($0.50), subject to adjustment therein. The
Series A 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 six (6) year term.
(ii) Series B Warrants. Each Buyer’s Debenture shall
be accompanied by a warrant ( “Series B Warrant”
) to purchase a number of shares equal to 100% of the Original
Principal Amount of the Debenture being purchased by such Buyer,
divided by the Initial Conversion Price (as defined in the
Debenture) (the “Series B Warrant Amount” ). The
Series B Warrants shall be in the form of the Warrant annexed
hereto as Exhibit E-2 , except that the “Initial
Exercise Price,” as defined therein, shall equal one dollar
($1.00), subject to adjustment therein. The Series B Warrants shall
contain Exercise Price adjustment provisions that are
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consistent with the adjustment provisions
afforded to the Conversion Price of the Debenture in the Debenture
and shall have a six (6) year term.
(iii) Series C Warrants. Each Buyer’s Debenture shall
be accompanied by a warrant ( “Series B Warrant”
) to purchase a number of shares equal to 100% of the Original
Principal Amount of the Debenture being purchased by such Buyer,
divided by the Initial Conversion Price (as defined in the
Debenture) (the “Series C Warrant Amount” ). The
Series C Warrants shall be in the form of the Warrant annexed
hereto as Exhibit E-3 , except that the “Initial
Exercise Price,” as defined therein, shall equal one dollar
($1.00), subject to adjustment therein. The Series C 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 six (6) year term.
The Series C Warrants shall not be exercisable until after all of
the Series B Warrants of the Holder have been exercised in
full.
(d) Escrow . In order to facilitate the
Closing, the Company and the Buyers have agreed to establish an
Escrow Account with Company Counsel, into which each Buyer
participating in the Closing shall deposit its Subscription Amount,
by way of check or wire transfer of immediately available funds to
the Escrow Account specified in the Escrow Agreement. For purposes
of Closing, the Subscription Amount and Investor Documents
deposited into the Escrow Account by the Buyers on account of the
Company are deemed to have been delivered to the Company and the
Company Documents deposited into the Escrow Account by the Company
on account of the Buyers are deemed to have been delivered to the
Buyers. All funds and documents delivered into the Escrow Account
will be held and disbursed in accordance with the terms and
provisions of the Escrow Agreement.
2.
BUYER’S REPRESENTATIONS AND WARRANTIES
. Each 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 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 promulgated under the 1933 Act (an
"Accredited Investor" ).
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(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) Transfer Or Re-Sale . The Buyer
understands that (i) except as provided in the Registration Rights
Agreement, 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(e) and who is an Accredited
Investor, or (d) the Securities are sold pursuant to Rule 144 or
Rule 144; and (ii) any sale of such Securities made in reliance on
Rule 144 or Rule 144 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.
(f) Organization; Authorization; Enforcement
. Buyer is a 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 other Transaction Documents
to which Buyer is a signatory and to consummate the transactions
contemplated hereby and thereby in accordance with the terms hereof
and thereof. The execution and delivery of this Agreement and the
other Transaction Documents to which Buyer is a signatory have 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 and delivery by the Buyer
of the other Transaction Documents to which Buyer is a signatory,
such agreements will constitute, legal, valid and binding
agreements of the Buyer enforceable in accordance with their terms
except (i) as limited by general equitable principles and
applicable
11
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.
(g) Residency . The Buyer’s residency
is as indicated on its signature page hereto.
(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) Short Sales Prior To The Date Hereof
. Buyer and its Affiliates have not from the time that such
Buyer first received a term sheet (written or oral) from the
Company or any other person setting forth the material terms of the
transactions contemplated hereunder until the date hereof entered
into or effected, or attempted to induce any third party to enter
into or effect, any short sales of the Common Stock, or any hedging
transaction which establishes a net short position with respect to
the Common Stock.
(j) Independent Investment De cision .
Such Buyer has independently evaluated the merits of its decision
to purchase the Securities pursuant to the Transaction Documents,
and such Buyer confirms that it has not relied on the advice of any
other Buyer's business and/or legal counsel in making such
decision.
3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
. The Company represents and warrants to each Buyer that,
except as set forth on the Company’s disclosure schedules
referred to herein and attached hereto or any update thereto prior
to the Closing Date (collectively, the “Disclosure
Schedules” ):
(a) Organization And Qualification .
The Company and each of its Active 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, their principal corporate address, and
the jurisdiction in which each is incorporated. The Company and
each of its Active 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 Active 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 obligations under this Agreement, the
Registration Rights Agreement, the Debenture or the Warrants.
"Subsidiaries" means any corporation or other organization,
whether incorporated or
12
unincorporated, in which the Company owns,
directly or indirectly, any equity or other ownership interest.
Neither of the Inactive Subsidiaries currently has any assets.
(b) Authorization; Enforcement . (i)
The Company has all requisite corporate power and authority to
enter into and perform this Agreement, the Security Documents, the
Registration Rights 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
Documents, the Registration Rights 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 Documents, the Registration Rights 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, 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.
(c) Capitalization . As of the date
hereof, the authorized capital stock of the Company is as set forth
on Schedule 3(c-1) . The authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock, of
which approximately 34,140,195 shares are outstanding as of
the date hereof and 100,000,000 shares of preferred stock, par
value $ 0.00001 per share, of which none 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-1) . If any such securities are listed on the
Schedule 3(c-1 ), the number or amount of each such
outstanding convertible security and the conversion terms are set
forth in said Schedule 3(c-1) . All of such outstanding
shares of capital stock set forth in Schedule 3(c-1) 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-2) , 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 exercisable or exchangeable for any shares of
capital stock of the Company or any of its
13
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, the Payment
Shares, or the Warrant Shares. The Company has furnished to each
Buyer true and correct copies of the Company's and each
Subsidiary’s Articles of Incorporation as in effect on the
date hereof ( "Articles of Incorporation" ), the Company's
Bylaws, 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 each 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
(“Closing Bring-Down Certificate” ). 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 best 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, other
than restrictions on transfer under the Transaction Documents,
applicable state and federal securities laws, or liens or
encumbrances created by or imposed by a Buyer.
(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 Debentures
or upon issuance of the Warrant Shares upon exercise of or
otherwise pursuant to the Warrants. The Company further
acknowledges that its obligation to issue Conversion Shares upon
conversion of or otherwise pursuant to the Debentures, to issue
Warrant Shares upon exercise of or otherwise pursuant to the
Warrants in accordance with this Agreement, and to otherwise issue
Payment Shares or other shares of Common Stock to the Buyer 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 Debentures and the Warrants and the consummation of
the transactions contemplated hereby and thereby are in the best
interest of the Company and its stockholders.
14
(f) No Conflicts . Except as otherwise
set forth in Schedule 3(f ), 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) 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 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, or to
the knowledge of the Company, patent, patent license or instrument
to which the Company or any of its Active 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 Active Subsidiaries or by which any property
or asset of the Company or any of its Active 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 Active Subsidiaries is in
violation of its Articles of Incorporation, By-laws or other
organizational documents and neither the Company nor any of its
Active 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 Active Subsidiaries in default) under, and neither the
Company nor any of its Active 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 Active Subsidiaries is a party or by which any property or
assets of the Company or any of its Active 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 Active 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, the 1934 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 Debentures or the
Warrants in accordance with the terms hereof or thereof or to issue
and sell the Debentures and Warrants in accordance with the terms
hereof and to issue the Conversion Shares upon conversion of or
otherwise pursuant to the Debentures 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 and its Active
Subsidiaries are unaware of any facts or circumstances which might
give rise to any of the foregoing.
15
(g) SEC Documents; Financial Statements
. Since at least the beginning of the most recent fiscal
quarter that began more than two (2) years prior to the Closing
Date, 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 1934 Act (all of
the foregoing filed prior to the date hereof and since at least the
beginning of the most recent fiscal quarter that began more than
two (2) years prior to the Closing Date, 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. True and complete copies of the SEC Documents
are available on the SEC’s internet website (www.sec.gov),
except for such exhibits and incorporated documents. Upon the
request of a Buyer, the Company will promptly provide copies of the
SEC Documents to such Buyer. 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 (and the Buyers thereto) 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, consistent with prior
practice, 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, consistent
with prior practice, 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, consistent with
prior practice, that have been publicly disclosed at least five (5)
days prior to the date hereof or as set forth on Schedule
3(h) hereof, since the date of the Company’s most recent
10-Q or 10-K, there has been no material adverse change and no
material adverse development in the assets, liabilities, business,
properties, operations, financial condition, results
16
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. Except as
disclosed in Schedule 3(h), since the date of the
Company’s most recent audited financial statements contained
in a Form 10-KSB, neither the Company nor any of its Subsidiaries
has
(i) declared or paid any dividends on its Common Stock;
(ii)
sold any assets, individually or in the aggregate, in excess of
$100,000 outside of the ordinary course of business, consistent
with prior practice;
(iii)
except as set forth in Schedule 3(h) , had capital
expenditures, individually or in the aggregate, in excess of
$100,000;
(iv)
issued any stock, bonds or other corporate securities or any
rights, options or warrants with respect thereto;
(v)
borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities
incurred in the ordinary course of business, consistent with prior
practice, which are comparable in nature and amount to the current
liabilities incurred in the ordinary course of business, consistent
with prior practice, during the comparable portion of its prior
fiscal year, as adjusted to reflect the current nature and volume
of the Company's or such subsidiary's business;
(vi)
discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business,
consistent with prior practice;
(vii)
declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any
shares of its capital stock;
(viii)
sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, in either case in excess of $100,000,
except in the ordinary course of business, consistent with prior
practice;
(ix)
sold, assigned or transferred any patent rights, trademarks, trade
names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary
confidential information to any person except to customers in the
ordinary course of business, consistent with prior practice, or to
the Purchasers or their representatives;
(x)
suffered any material losses or waived any rights of material
value, whether or not in the ordinary course of business, or
suffered the loss of any material amount of prospective
business;
17
(xi)
made any changes in employee compensation except in the ordinary
course of business and consistent with past practices;
(xii)
made capital expenditures or commitments therefor that aggregate in
excess of $100,000;
(xiii) [omitted];
(xiv) made charitable contributions or pledges in excess of
$10,000;
(xv)
suffered any material damage, destruction or casualty loss, whether
or not covered by insurance;
(xvi)
experienced any material problems with any employee or senior
management in connection with the terms and conditions of their
employment;
(xvii)
effected any two or more events of the foregoing kind which in the
aggregate would be material to the Company or its Subsidiaries;
or
(xviii)
entered into an agreement, written or otherwise, to take any of the
foregoing actions.
Except
as set forth in Schedule 3(h) , neither the Company nor any
of its Subsidiaries has taken any steps to seek protection pursuant
to any bankruptcy law nor does the Company have any knowledge or
reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so.
(i) Absence of Litigation . Except as
disclosed in Schedule 3(i-1 ), to the best 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 best knowledge of the Company or any of its
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-2) 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, where it, if adversely decided, would have a
Material Adverse Effect.
(j) Patents, Copyrights, Etc . All of
the Company’s material patents, patent applications, Patents
(as defined below), 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-1) hereof. The Company and
its Subsidiaries own or possess adequate rights or licenses to use
all of the Intellectual property and the rights to receive proceeds
from patent licensing agreements, patent infringement litigation
or
18
other litigation related to such intellectual
property (collectively, the “Intellectual Property
Rights” ). Any Liens, encumbrances or licenses that have
been granted against the Intellectual Property are listed in
Schedule 3(j-2) . Except as set forth in Schedule
3(J-2) , to the best of the Company’s knowledge, none of
the Company's Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate, within three
years from the date of this Agreement. Except as otherwise set
forth on Schedule 3(j-2) , the Company owns all right and
title to the Intellectual Property free and clear of any Liens or
encumbrances and has not granted any licenses or rights to use any
of the Patents to any third party. 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-1) hereof
(and, except as otherwise set forth in Schedule 3(j-2)
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-2) 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 Rights 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.
For
purposes hereof, "Patents" means all domestic and foreign
letters patent, design patents, utility patents, industrial
designs, inventions, trade secrets, ideas, concepts, methods,
techniques, processes, proprietary information, technology,
know-how, formulae, rights of publicity and other general
intangibles of like nature, now existing or hereafter acquired
(including, without limitation, all domestic and foreign letters
patent, design patents, utility patents, industrial designs,
inventions, trade secrets, ideas, concepts, methods, techniques,
processes, proprietary information, technology, know-how and
formulae described in Schedule 3(j-1) hereof), all
applications, registrations and recordings thereof (including,
without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office, or in any similar
office or agency of the United States or any other country or any
political subdivision thereof), and all reissues, divisions,
continuations, continuations in part and extensions or renewals
thereof, in each case owned by the Company or an of its
Subsidiaries.
(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 to the knowledge
of the Company, 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, or has
knowledge of a breach of any contract or agreement to which the
Company or any of its Subsidiaries is a party, either of which has
or is reasonably likely to have a Material Adverse Effect.
19
(l) Tax Status . Except as set forth on
Schedule 3(l) , the Company and each of its Subsidiaries has
timely made or filed all federal, state and foreign income and all
other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent
that the Company and each of its Subsidiaries has set aside on its
books provisions reasonably adequate for the payment of all unpaid
and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its
books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for
any such claim. The Company has not executed a waiver with respect
to the statute of limitations relating to the assessment or
collection of any foreign, federal, 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) Transactions With And Obligations To
Affiliates . Other than the grant o
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