EXHIBIT 10(j)
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SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement
(this "Agreement") is dated as of June
24, 2009, between Cel-Sci Corporation, a Colorado corporation (the
"Company"),
and each purchaser identified on the signature pages hereto (each,
including its
successors and assigns, a "Purchaser" and collectively the
"Purchasers").
WHEREAS, subject to the terms and
conditions set forth in this Agreement
and pursuant to an effective registration statement under the
Securities Act of
1933, as amended (the "Securities Act"), the Company desires to
issue and sell
to each Purchaser, and each Purchaser, severally and not jointly,
desires to
purchase from the Company, securities of the Company as more fully
described in
this Agreement.
NOW, THEREFORE, IN CONSIDERATION of
the mutual covenants contained in this
Agreement, and for other good and valuable consideration the
receipt and
adequacy of which are hereby acknowledged, the Company and each
Purchaser agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In
addition to the terms defined
elsewhere in this
Agreement, 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.
"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 June 29, 2009 or such
earlier date as may be
agreed to by the parties.
"Closing
Statement" means the Closing Statement in the form on Annex A
attached hereto.
"Commission" means the United
States Securities and Exchange
Commission.
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"Common
Stock" means the common stock of the Company, par value
$0.01
per share, 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 Hart &
Trinen, 1624 Washington Street,
Colorado 80206.
"Disclosure Schedules" means the Disclosure Schedules
of the Company
delivered concurrently herewith.
"Evaluation Date" shall have the meaning
ascribed to such term in
Section 3.1(r).
"Exchange
Act" means the Securities Exchange Act of 1934, as
amended,
and the rules and regulations promulgated
thereunder.
"Exempt Issuance" means the issuance of (a) shares of Common
Stock or
options to employees, officers or
directors of the Company pursuant to any
stock or option plan duly adopted
for such purpose, by a majority of the
non-employee members of the Board of
Directors or a majority of the members
of a committee of non-employee
directors established for such purpose, (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, and (c)
securities issued pursuant to acquisitions or
strategic transactions
approved by a majority of the
disinterested
directors of the Company, provided
that any such issuance shall only be to
a Person (or to the equityholders of
a Person) which is, itself or through
its subsidiaries,
an operating company or an asset
in a business
synergistic with the
business of the Company and shall provide
to the
Company additional benefits in
addition to the investment of funds, but
shall not include a transaction in which
the Company is issuing securities
primarily for the purpose of raising
capital or to an entity whose primary
business is investing in securities.
"FDA" shall
have the meaning ascribed to such term in Section 3.1(gg).
"FDCA"
shall have the meaning ascribed to
such term in Section
3.1(gg).
"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(z).
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"Intellectual Property Rights" shall have the meaning ascribed to
such
term in Section 3.1(o).
"Liens"
means a lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other
restriction.
"Material
Adverse Effect" shall have the meaning assigned to such term
in Section 3.1(b).
"Material Permits" shall have the meaning
ascribed to such term in
Section 3.1(m).
"Per
Share Purchase Price" equals $0.40, 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 prior to the
Closing.
"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.
"Pharmaceutical Product" shall have the meaning ascribed to
such term
in Section 3.1(gg).
"Proceeding"
means an action, claim, suit, investigation or proceeding
(including, without
limitation, an informal investigation
or partial
proceeding, such as a deposition), whether
commenced or threatened.
"Prospectus" means the final prospectus filed for
the Registration
Statement.
"Prospectus Supplement" means the
supplement to the Prospectus
complying with Rule 424(b) of
the Securities Act that is filed with the
Commission and delivered by the Company to
each Purchaser at the Closing.
"Purchaser Party" shall have the meaning
ascribed to such term in
Section 4.8.
"Registration Statement" means the effective
registration statement
with Commission file No. 333-151667 which
registers the sale of the Shares,
the Warrants and the Warrant Shares to the
Purchasers.
"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.
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"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"
means the Shares, the Warrants and the Warrant Shares.
"Securities
Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated
thereunder.
"Shares" means the shares of Common Stock issued or
issuable to each
Purchaser pursuant to this Agreement.
"Short
Sales" means all "short sales" as
defined in Rule 200 of
Regulation SHO under the
Exchange Act (but shall not be deemed to include
the location and/or reservation of
borrowable shares of Common Stock).
"Subscription Amount" means, as to each
Purchaser, the aggregate
amount to be paid for Shares and Warrants
purchased hereunder as specified
below such Purchaser's name on
the signature page of this Agreement and
next to the heading "Subscription
Amount," in United States dollars and in
immediately available funds.
"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 Warrants and any
other documents or agreements
executed in connection with the transactions
contemplated hereunder.
"Transfer
Agent" means Computershare Investor Services, the
current
transfer agent of the
Company, with a mailing address of
350 Indiana
Street, Suite 800
Golden, CO 80401 and a facsimile
number of (303)
262-0700, and any successor transfer agent
of the Company.
"Warrants" means, collectively, the Common Stock
purchase warrants
delivered to the
Purchasers at the Closing in accordance
with Section
2.2(a) hereof, which Warrants shall
be exercisable 181 days from the date
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hereof and have a term of exercise equal
to 5 years, in the form of Exhibit
A attached hereto.
"Warrant Shares" means the shares of
Common Stock issuable upon
exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the
Closing Date, the Company shall
sell, and the
Purchasers, severally and not jointly, shall purchase,
the Shares and Warrants
shown on the signature pages to this Agreement. Each
Purchaser shall deliver to
the Company, via wire transfer or a certified check
of immediately available
funds equal to, such Purchaser's
Subscription Amount as set forth on the
signature page hereto executed by such
Purchaser on the Closing Date and the
Company shall deliver to each Purchaser its respective
Shares and a Warrant as
determined pursuant to Section 2.2(a) on the Closing
Date, and the Company and
each Purchaser shall deliver the
other items set forth in
Section 2.2
deliverable at the Closing. The Closing
shall occur at such location as the
parties shall mutually agree.
2.2 Deliveries.
(a) On or
prior to the Closing Date, the Company
shall deliver or
cause to be delivered to each Purchaser
the following:
(i) this Agreement duly executed by the Company;
(ii) a legal opinion of Company
Counsel, in a form mutually
agreed upon
by the Purchaser and the Company;
(iii) a copy of the irrevocable instructions to
the Company's
transfer agent instructing the
transfer agent to deliver via the
Depository
Trust Company Deposit Withdrawal Agent Commission
System
("DWAC")
Shares equal to such Purchaser's Subscription Amount
divided
by the
Per Share Purchase Price, registered
in the name of such
Purchaser;
(iv) a Warrant registered in the name
of such Purchaser to
purchase up
to a number of shares of Common Stock equal to 67% of such
Purchaser's
Shares, with an exercise price equal to $0.50, subject to
adjustment therein (such Warrant certificate may be
delivered within
three
Trading Days of the Closing Date); and
(v) the Prospectus and Prospectus
Supplement (which may be
delivered in
accordance with Rule 172 under the Securities Act).
(b) On or
prior to the Closing Date, each Purchaser shall deliver
or
cause to be delivered to the Company the
following:
(i) this Agreement duly executed by such Purchaser; and
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(ii) such Purchaser's Subscription Amount by wire transfer to
the
account as
specified in writing by the Company.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties
of the Company. Except as set forth in
the Disclosure Schedules, which Disclosure
Schedules shall be deemed a part
hereof and shall qualify any representation
or otherwise made herein to the
extent of the disclosure contained
in the corresponding section of
the
Disclosure Schedules, the Company hereby makes the following
representations and
warranties to each 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. If the Company has
no
subsidiaries, all other
references to the Subsidiaries or any of them in
the Transaction Documents shall be
disregarded.
(b)
Organization and Qualification. The
Company and each of the
Subsidiaries is an entity duly
incorporated or otherwise organized, validly
existing and in good standing
under the laws of the jurisdiction of its
incorporation or
organization, 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,
could not have or reasonably
be expected to result in: (i) a
material
adverse effect on
the legality, validity or
enforceability of any
Transaction Document, (ii) a
material adverse effect on the results of
operations, assets,
business, prospects or condition
(financial or
otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii)
a material adverse
effect on the Company's ability to perform
in any
material respect on a timely basis
its obligations under any Transaction
Document (any of (i), (ii) or (iii),
a "Material Adverse Effect") and no
Proceeding has been instituted in any such
jurisdiction revoking, limiting
or curtailing or
seeking to revoke, limit or curtail
such power and
authority or qualification.
(c)
Authorization; Enforcement. The
Company has the requisite
corporate power and
authority to enter into and to
consummate the
transactions
contemplated by each of the
Transaction Documents and
otherwise to carry out
its obligations hereunder and
thereunder. The
execution and delivery of each of the
Transaction Documents by the Company
and the consummation by it of
the transactions contemplated hereby and
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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, or (ii)
conflict with, or constitute a default (or an
event that with notice or
lapse of time or both would become a default)
under, result in the creation
of any Lien upon any of the properties or
assets of the Company or any
Subsidiary, or give to others any rights of
termination, amendment,
acceleration or cancellation (with or
without
notice, lapse of time or both) of, any
agreement, credit facility, debt or
other instrument (evidencing a
Company or Subsidiary debt or otherwise) or
other understanding to which the Company
or any Subsidiary is a party or by
which any property or asset of the
Company or any Subsidiary is bound or
affected, or (iii) subject to
the Required Approvals, conflict with or
result in a violation of
any law, rule, regulation, order,
judgment,
injunction, decree or
other restriction of any court or
governmental
authority to which the
Company or a Subsidiary is subject
(including
federal and state
securities laws and regulations), or by
which any
property or asset of the
Company or a Subsidiary is bound or affected;
except in the case of each of
clauses (ii) and (iii), such as could not
have or reasonably be expected to result
in a Material Adverse Effect.
(e)
Filings, Consents and Approvals. 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 of the
Prospectus
Supplement, (iii) application(s) to
each applicable Trading Market for the
listing of the
Securities for trading thereon in the time
and manner
required thereby and (iv)
such filings as are required to be made under
applicable state securities laws
(collectively, the "Required Approvals").
(f) Issuance
of the Securities; Registration. 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
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nonassessable, free and clear of all
Liens imposed by the Company. The
Warrant Shares, when issued in
accordance with the terms of the Warrants,
will be validly issued, fully paid and
nonassessable, free and clear of all
Liens imposed by the
Company. The Company has reserved
from its duly
authorized capital stock
the maximum number of shares of Common
Stock
issuable pursuant to
this Agreement and the Warrants. The
Company has
prepared and filed the
Registration Statement in conformity with
the
requirements of the Securities Act, which
became effective on July 10, 2008
(the "Effective Date"), including
the Prospectus, and such amendments and
supplements thereto as
may have been required to the
date of this
Agreement. The Registration Statement is
effective under the Securities Act
and no stop order
preventing or suspending the
effectiveness of the
Registration Statement
or suspending or preventing the
use of the
Prospectus has been issued by the
Commission and no proceedings for that
purpose have been instituted
or, to the knowledge of the Company,
are
threatened by the
Commission. The Company, if required by the rules
and
regulations of the Commission,
proposes to file the Prospectus, with the
Commission pursuant to Rule 424(b). At the
time the Registration Statement
and any amendments thereto became
effective, at the date of this Agreement
and at the Closing Date, the
Registration Statement and any amendments
thereto conformed and
will conform in all material
respects to the
requirements of the
Securities Act and did not and will not contain any
untrue statement of a
material fact or omit to state any material
fact
required to be stated therein or necessary
to make the statements therein
not misleading; and the
Prospectus and any amendments or
supplements
thereto, at time the Prospectus or
any amendment or supplement thereto was
issued and at the Closing Date,
conformed and will conform in all material
respects to the requirements of the
Securities Act and did not and will not
contain an untrue statement of a
material fact or omit to state a material
fact necessary in order to make
the statements therein, in light of the
circumstances under which they were made,
not misleading.
(g)
Capitalization. The capitalization of the Company is as set
forth
on Schedule 3.1(g). Except as shown on
Schedule 3.1(g), (i) the Company has
not issued any capital stock since its
most recently filed periodic report
under the Exchange Act,
other than pursuant to the exercise of employee
stock options under the
Company's stock option plans, the issuance of
shares of Common Stock to
employees pursuant to the Company's employee
stock purchase 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 (ii) 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, (iii) except
as a result of the purchase and sale
of the
Securities, 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 and (iv) the
issuance and sale of the Securities will
not
obligate the Company to issue shares of
Common Stock or other securities to
any Person (other than the
Purchasers) and, except as shown on Schedule
3.1(g), will not result in a right
of any holder of Company securities to
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adjust the exercise, conversion,
exchange or reset price under any of such
securities. All of the
outstanding shares of capital stock of the Company
are validly issued,
fully paid and nonassessable, have been issued
in
compliance with all federal and
state securities laws, and none of such
outstanding shares was issued
in violation of any preemptive rights
or
similar rights to subscribe for or
purchase securities. 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.
(h)
SEC Reports; Financial Statements.
The Company has filed all
reports, schedules,
forms, statements and other documents required to be
filed by the Company
under the Securities Act and the
Exchange Act,
including pursuant to Section
13(a) or 15(d) thereof, for the two years
preceding the date
hereof (or such shorter period as the
Company was
required by law or
regulation to file such material)
(the foregoing
materials, including the
exhibits thereto and documents incorporated
by
reference therein,
together with the Prospectus and
the Prospectus
Supplement, being collectively
referred to herein as the "SEC Reports") on
a timely basis or has received a valid
extension of such time of filing and
has filed any such
SEC Reports prior to the expiration
of any such
extension. As of their
respective dates, the SEC Reports complied in all
material respects with
the requirements of the Securities Act and
the
Exchange Act, as
applicable, and none of the SEC Reports, when
filed,
contained any untrue
statement of a material fact or omitted to state a
material fact required to be
stated therein or necessary in order to make
the statements therein, in the light
of the circumstances under which they
were made, not misleading. The
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 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 or on Schedule 3.1(i) filed prior
to the date hereof, (i) there has
been no event,
occurrence or development that has
had or that could
reasonably be expected to result in
a Material Adverse Effect, (ii) the
Company has not incurred any
liabilities (contingent or otherwise) other
than (A) trade payables and
accrued expenses incurred in the
ordinary
course of business consistent
with past practice and (B) liabilities not
required to be reflected in the Company's
financial statements pursuant to
GAAP or disclosed in filings made
with the Commission, (iii) the Company
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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 plans. The Company does not have
pending before the Commission
any request for confidential treatment of
information. Except for the issuance of
the Securities contemplated by this
Agreement or as set forth on Schedule
3.1(i), no event, liability, fact,
circumstance, occurrence
or development has occurred or exists
or is
reasonably expected to occur
or exist with respect to the Company or its
Subsidiaries or
their respective business,
prospects, 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.
(j)
Litigation. There is no action,
suit, inquiry, notice of
violation, proceeding or
investigation pending or, to the knowledge of the
Company, threatened against or affecting
the Company, any Subsidiary or any
of their respective
properties before or by any
court, arbitrator,
governmental or administrative
agency or regulatory authority (federal,
state, county, local or
foreign) (collectively, an "Action") which
(i)
adversely affects or challenges the
legality, validity or enforceability of
any of the Transaction Documents or
the Securities or (ii) could, if there
were an unfavorable decision, have or
reasonably be expected to result in a
Material Adverse Effect.
Neither the Company nor any Subsidiary, nor any
director or officer
thereof, is or has been the subject of any
Action
involving a claim of
violation of or liability under federal or
state
securities laws or a claim of breach of
fiduciary duty. There has not been,
and to the knowledge of the Company,
there is not pending or contemplated,
any investigation by the Commission
involving the Company or any current or
former director or officer of the
Company. The Commission has not issued
any stop order or
other order suspending the
effectiveness of any
registration statement filed
by the Company or any Subsidiary under the
Exchange Act or the Securities Act.
(k)
Labor Relations. No material labor
dispute exists or, to the
knowledge of the Company, is
imminent with respect to any of the employees
of the Company, which could
reasonably be expected to result in a Material
Adverse Effect. None of the
Company's or its Subsidiaries' employees is a
member of a union that relates to
such employee's relationship with the
Company 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 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
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wages and hours, except where the
failure to be in compliance could not,
individually or in the aggregate,
reasonably be expected to have a Material
Adverse Effect.
(l)
Compliance. Neither the Company nor any
Subsidiary: (i) is in
default under or in violation
of (and no event has occurred that has not
been waived that, with notice or
lapse of time or both, would result in a
default by the Company or any Subsidiary
under), nor has the Company or any
Subsidiary received notice of
a claim that it is in default under or that
it is in violation of, any indenture, loan
or credit agreement or any other
agreement or instrument to which it is a
party or by which it or any of its
properties is bound (whether
or not such default or violation has been
waived), (ii) is in
violation of any 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 could not have or
reasonably be
expected to result in a Material Adverse
Effect.
(m)
Regulatory Permits. The Company and the Subsidiaries
possess all
certificates, authorizations and permits
issued by the appropriate federal,
state, local or foreign regulatory
authorities necessary to conduct their
respective businesses as
described in the SEC Reports, except where the
failure to possess such permits could
not 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 Liens as do not materially affect
the value of such property and do
not materially interfere with the use
made and proposed to be
made of such property by the Company and
the
Subsidiaries and Liens for the
payment of federal, state or other taxes,
the payment of which is neither
delinquent nor subject to penalties. Any
real property and
facilities held under lease by the Company
and the
Subsidiaries are held by them
under valid, subsisting and enforceable
leases with which the Company and the
Subsidiaries are in compliance.
(o) Patents
and Trademarks. The Company and the Subsidiaries have, or
have rights to use, all patents, patent
applications, trademarks, trademark
applications, service
marks, trade names, trade secrets,
inventions,
copyrights, licenses and other
intellectual property rights and similar
rights necessary or material for use
in connection with their respective
businesses as described in the SEC Reports
and which the failure to so have
could have a Material
Adverse Effect (collectively, the
"Intellectual
Property Rights"). Neither the
Company nor any Subsidiary has received a
notice (written or otherwise) that 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
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<PAGE>
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.
(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
aggregate Subscription Amount.
Neither the Company nor any Subsidiary has
any reason to
believe that it will not be able to renew
its existing
insurance coverage as and when such
coverage expires or to obtain similar
coverage from similar insurers as may be
necessary to continue its business
without a significant increase in
cost.
(q)
Transactions With Affiliates and Employees. Except as set forth
in
the SEC Reports and in Schedule
3.1(q), 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.
(r)
Sarbanes-Oxley; Internal Accounting Controls. The
Company is in
material compliance with all
provisions of the Sarbanes-Oxley Act of 2002
which are applicable to it as
of the Closing Date. The Company and the
Subsidiaries maintain a system of
internal accounting controls sufficient
to provide reasonable
assurance that: (i) transactions are executed
in
accordance with
management's general or specific
authorizations, (ii)
transactions are recorded as
necessary to permit preparation of financial
statements in conformity with GAAP
and to maintain asset accountability,
(iii) access to assets is permitted
only in accordance with management's
general or specific authorization, and
(iv) the recorded accountability for
assets is compared with the
existing assets at reasonable intervals and
appropriate action is taken with
respect to any differences. The Company
has established disclosure controls
and procedures (as defined in Exchange
Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed
such
disclosure controls and procedures
to ensure that information required to
be disclosed by the Company in
the reports it files or submits under the
Exchange Act is recorded,
processed, summarized and reported, within the
time periods specified in the
Commission's rules and forms. The Company's
certifying officers have
evaluated the effectiveness of the Company's
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<PAGE>
disclosure controls and
procedures as of the end of the period covered by
the Company's most recently
filed periodic report under the Exchange Act
(such date, the
"Evaluation Date"). The Company presented
in its most
recently filed periodic report
under the Exchange Act the conclusions of
the certifying officers about the
effectiveness of the disclosure controls
and procedures based on their
evaluations as of the Evaluation Date. Since
the Evaluation Date, there have been
no changes in the Company's internal
control over financial
reporting (as such term is defined in the Exchange
Act) that has materially
affected, or is reasonably likely to materially
affect, the Company's internal control
over financial reporting.
(s)
Certain Fees. Except for the fees and
expenses of Ascendiant
Securities, LLC, as set forth in the
Prospectus Supplement, no brokerage or
finder's fees or commissions
are or will be payable by the Company to any
broker, financial
advisor or consultant, finder,
placement agent,
investment banker, bank or
other Person with respect to the transactions
contemplated by the
Transaction Documents. The Purchasers shall have
no
obligation with respect to any
fees or with respect to any claims made by
or on behalf of other
Persons for fees of a type contemplated in
this
Section that may be due in connection with
the transactions contemplated by
the Transaction Documents.
(t)
Investment Company. The Company is not, and is not an
Affiliate
of, and immediately after receipt of
payment for the Securities, will not
be or be an Affiliate of, an "investment
company" within the meaning of the
Investment Company Act of 1940, as
amended. The Company shall conduct its
business in a manner so that it will
not become an "investment company"
subject to registration
under the Investment Company Act of 1940,
as
amended.
(u)
Registration Rights. Except as shown on Schedule 3.1(g), no
Person
has any right to cause the
Company to effect the registration under the
Securities Act of any securities of the
Company.
(v)
Listing and Maintenance Requirements.
The Common Stock is
registered pursuant to Section 12(b)
or 12(g) of the Exchange Act, and the
Company has taken no action
designed to, or which to its knowledge
is
likely to have the effect of,
terminating the registration of the Common
Stock under the Exchange Act nor has the
Company received any notification
that the Commission is
contemplating terminating such registration.
The
Company has not, in the 12
months preceding the date hereof,
received
notice from any Trading
Market on which the Common Stock is or has been
listed or quoted to the effect that the
Company is not in compliance with
the listing or maintenance requirements of
such Trading Market. The Company
is, and has no reason to believe that it
will not in the foreseeable future
continue to be, in
compliance with all such listing and
maintenance
requirements.
(w)
Application of Takeover Protections. The Company and the
Board of
Directors have taken all
necessary action, if any, in order to render
inapplicable any control share
acquisition, business combination, poison
pill (including any distribution under a
rights agreement) or other similar
anti-takeover provision under the
Company's certificate of incorporation
(or similar charter documents)
or the laws of its state of incorporation
13
<PAGE>
that is or could become
applicable to the Purchasers as a result of
the
Purchasers and the Company fulfilling
their obligations or exercising their
rights under the Transaction
Documents, including without limitation as a
result of the Company's
issuance of the Securities and the
Purchasers'
ownership of the Securities.
(x)
Disclosure. The Company confirms that neither it
nor any other
Person acting on its behalf
has provided any of the Purchasers or their
agents or counsel with any
information that it believes constitutes or
might constitute material,
non-public information. The Company understands
and confirms that the Purchasers will rely
on the foregoing representation
in effecting
transactions in securities of the
Company. All of the
disclosure furnished by or on
behalf of the Company to the Purchasers
regarding the Company,
its business and the transactions
contemplated
hereby, including the Disclosure
Schedules to this Agreement, is true and
correct and does not contain any
untrue statement of a material fact or
omit to state any material fact
necessary in order to make the statements
made therein, in light of the
circumstances under which they were made, not
misleading. The press
releases disseminated by the Company during
the
twelve months preceding the date of
this Agreement taken as a whole do not
contain any untrue statement of a material
fact or omit 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 and when made, not
misleading. The Company acknowledges and
agrees
that no Purchaser makes or has made
any representations or warranties with
respect to the
transactions contemplated hereby
other than those
specifically set forth in Section 3.2
hereof.
(y) No
Integrated Offering. Assuming the accuracy of the
Purchasers'
representations and
warranties set forth in Section 3.2,
neither the
Company, nor any of its
Affiliates, nor any Person acting on its or their
behalf has, directly
or indirectly, made any offers or
sales of any
security or solicited any offers to buy
any security, under circumstances
that would cause this offering of
the Securities to be integrated with
prior offerings by the Company for
purposes of any applicable shareholder
approval provisions of any Trading Market
on which any of the securities of
the Company are listed or designated.
(z)
Solvency. Based on the consolidated
financial condition of the
Company as of the Closing
Date, after giving effect to the receipt by the
Company of the proceeds from the sale of
the Securities hereunder, (i) the
fair saleable value of the Company's
assets exceeds the amount that will be
required to be paid on or in respect of
the Company's existing debts and
other liabilities (including known
contingent liabilities) as they mature,
(ii) the Company's assets do not
constitute unreasonably small capital to
carry on its business as now
conducted and as proposed to be conducted
including its capital
needs taking into account the particular
capital
requirements of the
business conducted by the Company,
and projected
capital requirements and
capital availability thereof, and (iii)
the
current cash flow of the
Company, together with the proceeds the Company
would receive, were it to
liquidate all of its assets, after taking into
account all anticipated uses
of the cash, would be sufficient to pay all
amounts on or in respect of its
liabilities when such amounts are required
to be paid. The Company does
not intend to incur debts beyond its ability
to pay such debts as they
mature (taking into account the
timing and
14
<PAGE>
amounts of cash to be payable on or
in respect of its debt). The Company
has no knowledge of any facts
or circumstances which lead it to believe
that it will file for reorganization or
liquidation under the bankruptcy or
reorganization laws of any
jurisdiction within one year from the Closing
