SECURITIES PURCHASE
AGREEMENT
This Securities Purchase Agreement (this “
Agreement ”) is dated as of May 27, 2009, between
A.C. Moore Arts & Crafts, Inc., a Pennsylvania corporation (the
“ Company ”), and Glenhill Special Opportunities
Master Fund LLC, a Delaware limited liability company (the “
Purchaser ”).
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 the Purchaser, and the
Purchaser 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 the Purchaser agree as
follows:
1.1 Definitions . In addition to the
terms defined elsewhere in this Agreement, for all purposes of this
Agreement, the following terms have the meanings set forth in this
Section 1.1:
“
Acquiring Person ” shall have the meaning ascribed to
such term in Section 4.5.
“
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 405 under the Securities Act.
“ Best Efforts ” means the
efforts that a prudent person desirous of achieving a result would
use in similar circumstances to ensure that such result is achieved
as expeditiously as practical; provided, however , that an
obligation to use Best Efforts under this Agreement does not
require the Company to dispose of or make any change to its
business, expend any material funds or incur any other material
burden.
“
Board of Directors ” means the board of directors of
the Company.
“ Business Day ” means any
day except any Saturday, any Sunday, any day which is 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.
“ Closing ” means the closing
of the purchase and sale of the Securities pursuant to
Section 2.1.
“ Closing Date ” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchaser’s obligation
to pay the Purchase Price and (ii) the Company’s
obligation to deliver the Securities, in each case, have been
satisfied or waived.
“
Commission ” means the United States Securities and
Exchange Commission.
“ Common Stock ” means the
common stock of the Company, no par value, and any other class of
securities into which such securities may hereafter be reclassified
or changed.
“ 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
Blank Rome LLP, with offices located at One Logan Square, 130 North
18th Street, Philadelphia, PA 19103.
“ 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.
“ EGS ” means Ellenoff
Grossman & Schole LLP with offices located at 150 East 42nd
Street, 11th Floor, New York, New York 10017.
“ 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, rights or options to
employees, officers or directors of the Company pursuant to any
stock option or equity incentive plan duly adopted for such
purpose, by the Board of Directors, including a majority of the
non-employee members of the Board of Directors or a majority of the
members of a committee of non-employee directors established for
such purpose or (b) securities upon the exercise or exchange
of or conversion of any Securities issued hereunder and/or other
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 price, exchange price or
conversion price of such securities.
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“
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(aa).
“ Intellectual Property Rights
” shall have the meaning ascribed to such term in
Section 3.1(o).
“ 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 ”
means (i) a material adverse effect on the results of
operations, assets, liabilities, business, or financial condition
of the Company and the Subsidiaries taken as a whole on a
consolidated basis or (ii) a material and adverse impairment
of the Company’s ability to perform its obligations under any
of the Transaction Documents, provided, that none of the following
alone shall be deemed, in and of itself, to constitute a Material
Adverse Effect: (i) a change in the market price or trading
volume of the Common Stock or (ii) changes in general economic
conditions or changes affecting the industry in which the Company
operates generally (as opposed to Company-specific changes) so long
as such changes do not have a disproportionate effect on the
Company and its Subsidiaries taken as a whole.
“ Material Permits ” shall
have the meaning ascribed to such term in Section
3.1(m).
“ Participation Maximum ”
shall have the meaning ascribed to such term in Section
4.11(a).
“
Permitted Encumbrances ” means any of the
following:
(a) Liens
imposed by law for taxes that are not yet due or are being
contested;
(b) carriers’, warehousemen’s,
mechanics’, materialmen’s, repairmen’s and other
like Liens imposed by applicable law, arising in the ordinary
course of business of the Company and its Subsidiaries and securing
obligations that are not overdue by more than thirty (30) days
or are being contested;
(c) pledges and deposits made in the
ordinary course of business of the Company and its Subsidiaries in
compliance with workers’ compensation, unemployment insurance
and other social security laws or regulations;
(d) deposits to secure the performance of
bids, trade contracts and leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business of the Company
and its Subsidiaries;
(e) Liens
in respect of judgments;
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(f) easements, covenants, conditions,
restrictions, building code laws, zoning restrictions,
rights-of-way and similar encumbrances on real property imposed by
law or arising in the ordinary course of business of the Company
and its Subsidiaries that do not materially interfere with the
ordinary conduct of business of the Company and its Subsidiaries
and such other minor title defects or survey matters that are
disclosed by current surveys that, in each case, do not materially
interfere with the current use of the real property or the ordinary
conduct of business of the Company and its Subsidiaries;
(g) Liens
existing on the date hereof and listed on the Disclosure Schedules
and any renewals or extensions thereof upon substantially the same
terms and conditions;
(h) Liens
on fixed or capital assets acquired by the Company and any of its
Subsidiaries;
(i) landlords’ and lessors’
Liens in respect of rent not overdue for more than thirty
(30) days (other than overdue rent that is subject to a good
faith dispute and for which appropriate reserves in conformity with
GAAP have been established on the books of the Company or any of
its Subsidiaries);
(j) possessory Liens in favor of brokers
and dealers arising in connection with the acquisition or
disposition of investments owned as of the date hereof;
(k) Liens
arising solely by virtue of any statutory or common law provisions
relating to banker’s liens, liens in favor of securities
intermediaries, rights of setoff or similar rights and remedies as
to deposit accounts or securities accounts or other funds
maintained with depository institutions or securities
intermediaries;
(l) Liens
arising from precautionary UCC filings regarding “true”
operating leases or the consignment of goods to the Company or any
of its Subsidiaries;
(m) Liens
in favor of customs and revenues authorities imposed by applicable
law arising in the ordinary course of business of the Company and
its Subsidiaries in connection with the importation of
goods;
(n) any
interest or title of a licensor, sublicensor, lessor or sublessor
under licenses, sublicenses, leases or subleases entered into by
the Company or any of its Subsidiaries in their ordinary course of
business that do not materially interfere with the ordinary conduct
of business of the Company and its Subsidiaries; or
(o) any
subordination of the interest of the Company or any Subsidiary, as
lessee under any lease, to the Lien of any mortgage or deed of
trust encumbering the interest or title of the lessor under such
lease.
“ Per Share Purchase Price ”
equals $2.50, subject to adjustment for reverse and forward stock
splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this
Agreement and on or prior to the Closing Date.
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“ 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 4.11(b).
“ Proceeding ” means an
action, claim, suit, investigation or proceeding (including,
without limitation, a partial proceeding, such as a deposition),
whether commenced or threatened in writing.
“
Purchase Price ” shall have the meaning ascribed to
such term in Section 2.1.
“
Purchaser Party ” shall have the meaning ascribed to
such term in Section 4.8.
“ Registration Rights Agreement
” means the Registration Rights Agreement, dated the date
hereof, among the Company and the Purchaser, in the form of
Exhibit A attached hereto.
“ Registration Statement ”
means a registration statement meeting the requirements set forth
in the Registration Rights Agreement and covering the resale by the
Purchaser of the Securities.
“ Required Approvals ” shall
have the meaning ascribed to such term in Section
3.1(e).
“ 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.
“ Rule 424 ” means
Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from
time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same purpose and effect
as such Rule.
“ SEC
Reports ” shall have the meaning ascribed to such term in
Section 3.1(h).
“
Securities ” shall have the meaning ascribed to such
term in Section 2.1.
“ Securities Act ” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“ 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).
“ Subsequent Financing ”
shall have the meaning ascribed to such term in Section
4.11(a).
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“ Subsequent Financing Notice
” shall have the meaning ascribed to such term in
Section 4.11(b).
“ Subsidiary ” means any
subsidiary of the Company as set forth on Schedule 3.1(a)
and shall, where applicable, also include any direct or indirect
subsidiary of the Company formed or acquired after the date
hereof.
“ Trading Day ” means a day
on which the principal Trading Market is open for
trading.
“ Trading Market ” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE
Amex, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market, the New York Stock Exchange or the OTC
Bulletin Board (or any successors to any of the
foregoing).
“ Transaction Documents ”
means this Agreement, the Registration Rights Agreement, all
exhibits and schedules thereto and hereto and any other documents
or agreements executed in connection with the transactions
contemplated hereunder.
“ Transfer Agent ” means
Stocktrans, the current transfer agent of the Company, with a
mailing address of 44 West Lancaster Avenue, Ardmore, Pennsylvania
19003 and any successor transfer agent of the Company.
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
the Purchaser agrees to purchase, Four Million (4,000,000) shares
of Common Stock (the “ Securities ”) for a
purchase price of $10,000,000 (the “ Purchase Price
”). The Purchaser shall deliver to the Company via wire
transfer immediately available funds equal to the Purchase Price,
and the Company shall deliver to the Purchaser the Securities, and
the Company and the Purchaser shall deliver the other items set
forth in Section 2.2 deliverable at the Closing. Upon
satisfaction of the covenants and conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the offices
of EGS or such other location as the parties shall mutually
agree.
(a) On or prior to the Closing Date, the
Company shall deliver or cause to be delivered to the Purchaser the
following:
(i) this Agreement duly executed by the
Company;
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(ii) a legal opinion of Company Counsel,
substantially in the form of Exhibit B attached
hereto;
(iii) a certificate dated as of the Closing
Date and signed by an officer of the Company certifying as to the
truth and accuracy of the representations and warranties of the
Company contained in this Agreement and the satisfaction of all its
covenants and agreements hereunder;
(iv) a certificate, executed by the
Secretary of the Company and dated as of the Closing Date,
certifying as to the: (w) resolutions adopted by the
Company’s Board of Directors in a form reasonably acceptable
to the Purchaser, (x) the Company’s Articles of
Incorporation, as amended, as effective on the date hereof and as
of the Closing Date, (y) the Company’s Amended and
Restated Bylaws as effective on the date hereof and as of the
Closing Date, and (z) signatures of the officer(s) authorized
to execute this Agreement and any certificate or document to be
delivered pursuant hereto, together with evidence of the incumbency
of such Secretary;
(v) a recent good standing certificate
regarding the Company from the office of the Secretary of State of
the State of Pennsylvania;
(vi) a copy of the irrevocable instructions
to the Transfer Agent instructing the Transfer Agent to deliver, on
an expedited basis, a certificate evidencing the number of shares
of Common Stock equal to the Purchase Price divided by the Per
Share Purchase Price, registered in the name of the Purchaser;
and
(vii) the
Registration Rights Agreement duly executed by the
Company.
(b) On or prior to the Closing Date, the
Purchaser shall deliver or cause to be delivered to the Company the
following:
(i) this
Agreement duly executed by the Purchaser;
(ii) the Purchase Price by wire transfer to
the account as specified in writing by the Company; and
(iii) the
Registration Rights Agreement duly executed by the
Purchaser.
(a) The obligations of the Company
hereunder in connection with the Closing are subject to the
following conditions being met:
(i) the accuracy in all material respects
on the Closing Date of the representations and warranties of the
Purchaser contained herein (unless as of a specific date
therein);
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(ii) all obligations, covenants and
agreements of the Purchaser required to be performed at or prior to
the Closing Date shall have been performed; and
(iii) the delivery by the Purchaser of the
items set forth in Section 2.2(b) of this
Agreement.
(b) The obligations of the Purchaser
hereunder in connection with the Closing are subject to the
following conditions being met:
(i) the accuracy in all material respects
when made and on the Closing Date of the representations and
warranties of the Company contained herein (unless as of a specific
date therein);
(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;
and
(v) 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).
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the
Company . Except as set forth in the SEC Reports or in the
disclosure schedules (collectively, the “ Disclosure
Schedules ”), which Disclosure Schedules shall be deemed
a part hereof and shall qualify every representation or warranty
made herein by the Company, the Company hereby makes the following
representations and warranties to the Purchaser:
(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, 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.
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(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,
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
nor 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, would not have
or reasonably be expected to result in a Material Adverse
Effect.
(c) Authorization; Enforcement . The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by each of the
Transaction Documents to which it is a party and otherwise to carry
out its obligations hereunder and thereunder. The execution and
delivery of each of the Transaction Documents to which it is a
party 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, the Board of Directors or the
Company’s stockholders in connection therewith other than in
connection with the Required Approvals. Each Transaction Document
to which it is a party 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 by the Company of the Transaction
Documents, the issuance and sale of the Securities and the
consummation by it of the transactions contemplated hereby and
thereby to which it is a party 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, (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the
properties or assets of the Company or 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 would not have
or reasonably be expected to result in a Material Adverse
Effect.
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(e) Filings, Consents and Approvals . The
Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing
or registration with, any court or other federal, state, local or
other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filings required
pursuant to Section 4.4 of this Agreement, (ii) the
filing with the Commission pursuant to the Registration Rights
Agreement, (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 Securities for trading thereon in
the time and manner required thereby, and (iv) the filing of
Form D with the Commission and such filings and approvals as
are required to be made under applicable state securities laws,
including any approval under the provisions of Subchapter 25F of
the Pennsylvania Business Corporation Law of 1988, as amended
(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 Company has
reserved from its duly authorized capital stock the number of
shares of Common Stock issuable pursuant to this
Agreement.
(g) Capitalization . The capitalization
of the Company is as set forth in the Company’s Form 10-Q for
the quarter ended April 4, 2009 and Form 10-K for the fiscal
year ended January 3, 2009, as amended on May 4, 2009
which includes, the number of shares of Common Stock owned
beneficially by each person who is known by the Company to be the
beneficial owner of more than 5% of Common Stock as of
April 28, 2009. 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
stock option and equity incentive plans and pursuant to the
conversion and/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 for options and rights granted pursuant to the
Company’s stock option and equity incentive plans, there are
no outstanding options, warrants, scrip 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
Purchaser) 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 material 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. No further approval
or authorization of any stockholder, the Board of Directors 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 .
The Company (i) 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 ”) and (ii) has filed SEC
Reports due in the one year preceeding the date hereof 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 (as
amended or superceded) complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as
applicable, and none of the SEC Reports (as amended or superceded),
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
Company has never been an issuer subject to Rule 144(i) under the
Securities Act. The financial statements of the Company included in
the SEC Reports (as amended or superceded) 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; Undisclosed Events,
Liabilities or Developments . 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 would reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than
(A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or disclosed
in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock
and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing
Company stock option and equity incentive plans. The Company does
not have pending before the Commission any request for confidential
treatment of information. Except for the issuance of the Securities
and the transactions contemplated by this Agreement, no event,
liability, fact, circumstance, occurrence or development has
occurred or exists, with respect to the Company or its Subsidiaries
or their respective business, properties, operations, assets or
financial condition, that would be required to be disclosed by the
Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly
disclosed at least 1 Trading Day prior to the date that this
representation is made.
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(j) Litigation . There is no action,
suit, inquiry, notice of violation or proceeding or, to the
knowledge of the Company, investigation 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) would, 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 to the
Company’s knowledge, 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 would
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 or such Subsidiary, and neither the
Company nor 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 in favor of any third party,
and the continued employment of each such executive officer does
not subject the Company or any of its Subsidiaries to any material
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 would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
12
(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 judgment, decree, or order of any court,
arbitrator or governmental body or (iii) is or has been in
violation of any statute, rule, ordinance 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 would
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 would not 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 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 Encumbrances and except for Liens
that do not individually or in the aggregate have or would result
in a Material Adverse Effect. Any real property and facilities held
under lease by the Company and the Subsidiaries are held by them
under leases with which the Company and the Subsidiaries are in
material 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 as
described in the SEC Reports as necessary or material for use in
connection with their respective businesses 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 any of 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
expected to have a Material Adverse Effect.
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(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 least equal to the
Purchase Price. 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 $120,000 other than
for: (i) payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf
of the Company and (iii) other employee benefits, including
stock option agreements under any stock option plan of the
Company.
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