Exhibit 4.1
SECURITIES
PURCHASE AGREEMENT
SECURITIES PURCHASE
AGREEMENT (the “
Agreement ”), dated as of July 31, 2009, by and
among Evolution Resources, Inc., a Nevada corporation, with
principal offices located at 43 Yazoo Avenue, Clarksdale,
Mississippi 38614 (the “ Company ”), and the
investors listed on the Schedule of Buyers attached hereto
(each, a “ Buyer ” and, collectively, the
“ Buyers ”). Capitalized terms used and
not defined elsewhere in this Agreement have the respective
meanings assigned to such terms in the Appendix
hereto.
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 of
Regulation D (“ Regulation D ”) as
promulgated by the United States Securities and Exchange Commission
(the “ SEC ”) under the Securities Act of 1933,
as amended (the “ 1933 Act”) ;
B.
The Buyers, severally and not jointly,
desire to purchase from the Company, and the Company wishes to sell
to the Buyers, upon the terms and conditions stated in this
Agreement, (i) secured senior notes, in the form attached as
Exhibit A , in an original aggregate principal amount of
$215,000 on the Closing Date (such notes, together with any promissory notes or
other securities issued in exchange or substitution therefor or
replacement thereof, and as any of the same may be amended,
supplemented, restated or modified and in effect from time to time,
the “ Notes ”) and (ii) five-year warrants, in
the form attached as Exhibit B , exercisable for an original
aggregate amount of 1,000,000 shares of Common Stock (the “
Warrant Shares ”) at an exercise price of $5.00 per
share (such warrants, together with any other warrants or other
securities issued in exchange or substitution therefore or
replacement thereof, and as any of the same may be amended,
supplemented, restated or modified and in effect from time to time,
the “ Warrants ”);
C.
Contemporaneously with the Closing
(as defined in Section 1(a) , below), the Company and each
of its Subsidiaries will execute and deliver a Security Agreement,
in the form attached as Exhibit C (as the same may be
amended, supplemented, restated or modified and in effect from time
to time, the “ Security Agreement ”), in favor
of the Buyers, pursuant to which the Company and its Subsidiaries
will agree to provide the Collateral Agent (as defined in the
Security Agreement), as agent for the Buyers, with a security
interest in substantially all of the assets of the Company and its
Subsidiaries;
E.
Within five (5) calendar days following
the Closing, the Company and each of its Subsidiaries will execute
and deliver one or more fully executed Deposit Account Control
Agreements, substantially in the form attached as Exhibit D
(the “ Account Control Agreements ”), pursuant
to which the Company and each of its Subsidiaries that maintain
bank, brokerage or other similar accounts will agree to provide the
Collateral Agent with “control” of such
accounts;
F.
Contemporaneously with the Closing, each
of the Company’s Subsidiaries will execute and deliver a
Subsidiary Guaranty, in the form attached hereto as Exhibit
E (as the same may be amended, supplemented, restated or
modified and in effect from time to time, the
“ Subsidiary Guaranty
”), pursuant to which the Subsidiaries will agree to guaranty
certain obligations of the Company;
G.
Contemporaneously with the Closing,
Christopher P. Chambers (the “Shareholder
Guarantor” ) will execute and deliver a Personal
Guaranty, in the form attached hereto as Exhibit F (as the
same may be amended, supplemented, restated or modified and in
effect from time to time, the “ Shareholder Guaranty
”), pursuant to which the Shareholder Guarantor will agree to
guaranty certain obligations of the Company (the guarantees under
the Subsidiary Guaranty and the Shareholder Guaranty, including any
such guarantees added after the Closing, being referred to herein
as the “ Guarantees ”);
H.
Contemporaneously with the Closing, the
Company and each of its Subsidiaries that directly owns capital
stock or other equity interests of any other Subsidiary will each
execute and deliver a Company and Subsidiary Pledge Agreement,
substantially in the form attached as Exhibit G (each, a
“ Company and Subsidiary Pledge Agreement ”),
pursuant to which the Company and each such Subsidiary will agree
to pledge all of the capital stock or other equity interests in the
Subsidiaries that it directly owns to the Buyers as collateral for
the Notes; and
I.
Contemporaneously with the Closing, the
Shareholder Guarantor will execute and deliver a Shareholder Pledge
Agreement, substantially in the form attached as Exhibit H
(the “ Shareholder Pledge Agreement ” and,
together with the Company and Subsidiary Pledge Agreement, the
“Pledge Agreements ”), pursuant to which the
Shareholder will agree to pledge all of the capital stock or
other equity interests in the Company and the Subsidiaries that he
directly owns to the Buyers as collateral for the Notes.
NOW THEREFORE , the Company and each of the Buyers, severally and
not jointly, hereby agree as follows:
1.
PURCHASE AND SALE OF NOTES AND
WARRANTS .
a.
Purchase and Sale of Notes and
Warrants . Subject to
the satisfaction (or waiver) of the conditions set forth in
Sections 7 and 8 below, the Company shall issue and
sell to each Buyer, and each Buyer severally agrees to purchase
from the Company (the “ Closing ”), (i) the
Notes in the respective principal amounts set forth opposite such
Buyer’s name on the Schedule of Buyers and (ii) the
Warrants exercisable for an aggregate number of Warrant Shares set
forth opposite such Buyer’s name on the Schedule of
Buyers . The aggregate purchase price (the “
Purchase Price ”) for the Notes and the Warrants
purchased by each Buyer shall be the product of (i)
$215,000, multiplied by (ii) the quotient of (A) the
principal amount of the Notes purchased by such Buyer as set forth
opposite such Buyer’s name on the Schedule of Buyers ,
divided by (B) $215,000 (such quotient, such Buyer’s “
Allocation Percentage ”)) (representing an aggregate
purchase price of $215,000 for the aggregate original principal
amount of $215,000 of Notes and the Warrants to be purchased by the
Buyers at the Closing).
b.
Closing Date . The date and time of the closing of the
purchase and sale of the Notes and Warrants (the “ Closing
Date ”) shall be 10:00 a.m., New York City time, on the
first Business Day following the date of this Agreement, subject to
the satisfaction (or waiver) of all of the conditions to the
Closing set forth in Sections 7 and 8 (or such later
or earlier date as is
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mutually agreed to by the Company and the
Buyers). The Closing shall occur at the offices of Haynes and
Boone, LLP, 1221 Avenue of the Americas, 26 th Floor,
New York, New York, 10020, or at such other place as the Company
and the Buyers may collectively designate in writing.
c.
Form of Payment and
Delivery . On the
Closing Date, (i) each Buyer shall pay such Buyer’s
Allocation Percentage of the Purchase Price to the Company for the
Notes and Warrants to be issued and sold to such Buyer on the
Closing Date, by wire transfer of immediately available funds in
accordance with the Company’s written wire instructions, and
(ii) the Company shall deliver to each Buyer (x) a Note (or Notes
in the principal amounts as such Buyer shall request) representing
the original principal amount of the Notes that such Buyer is
purchasing hereunder on the Closing Date, in each case duly
executed on behalf of the Company and registered in the name of
such Buyer or its designee and (y) a Warrant (or Warrants
exercisable for any number of Warrant Shares as such Buyer shall
request) to purchase the aggregate number of Warrant Shares set
forth opposite such Buyer’s name on the Schedule of
Buyers , in each case duly executed on behalf of the Company
and registered in the name of such Buyer or its
designee.
d.
Currency; Interest
. All payments to a Buyer under
this Agreement or any of the other Transaction Documents shall be
made in lawful money of the United States of America, by wire
transfer of immediately available funds to such accounts as such
Buyer may from time to time designate by written notice in
accordance with Section 10(f) of this Agreement. All
references herein and in each of the other Transaction Documents to
“dollars” or “$” shall mean the lawful
money of the United States of America. Any amounts payable
pursuant to this Agreement that are not paid when due shall bear
interest at the rate equal to the lesser of (i) 2.0% per
month, prorated for partial months, and (ii) the highest lawful
interest rate.
2.
BUYER’S REPRESENTATIONS AND
WARRANTIES .
Each Buyer represents and warrants, as of
the date of this Agreement and the Closing Date, with respect to
only itself, that:
a.
Investment Purpose
. Such Buyer is acquiring the Notes
(together with the related Guarantees) and the Warrants (the Notes,
the Warrants, the Guarantees and the Warrant Shares being
collectively referred to herein as the “ Securities
”), for such Buyer’s own account and not with a view
towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered under, or
exempted from the registration requirements of, the 1933 Act;
provided , however, that by making the representations
herein, such 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.
b.
Accredited Investor Status
. Such Buyer is an
“accredited investor” as that term is defined in Rule
501(a) of Regulation D.
c.
Reliance on Exemptions
. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of the
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Securities Laws and that the Company is
relying in part upon the truth and accuracy of, and such
Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the
Securities.
d.
Information . Such 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 that have been requested by
such Buyer. Such 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
investigations conducted by such Buyer or its advisors, if any, or
its representatives shall modify, amend or affect such
Buyer’s right to rely on the Company’s representations
and warranties contained in Sections 3 and 10(l)
below or contained in any of the other Transaction Documents.
Such Buyer understands that its investment in the Securities
involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its
acquisition of the Securities.
e.
No Governmental Review
. Such Buyer understands that no
Governmental Entity has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of an
investment in the Securities nor have such authorities passed upon
or endorsed the merits of the offering of the
Securities.
f.
Transfer or Resale
. Such Buyer understands that,
except as provided in Section 4(u) below: (i) the Securities
have not been and are not being registered under the 1933 Act or
any other Securities Laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered
thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect
that the Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such
registration, or (C) such Buyer provides the Company with
reasonable assurance that the Securities can be sold, assigned or
transferred pursuant to Rule 144 promulgated under the 1933 Act, as
amended (or a successor rule thereto) (“ Rule 144
”); (ii) any sale of the Securities made in reliance on Rule
144 may be made only in accordance with the terms of Rule 144, and
further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the Person
through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or any other
Securities Laws; and (iii) except as set forth in Section
4(u) neither the Company nor any other person is under any
obligation to register the Securities under the 1933 Act or any
other Securities Laws. Notwithstanding the foregoing
provisions of this paragraph, the Securities may be pledged in
connection with a bona fide margin account or other loan or
financing arrangement secured by the Securities.
g.
Legends . Such Buyer understands that, except as set
forth below, the certificates or other instruments representing the
Notes and the Warrants and, until such time as the resale of the
Warrant Shares has been registered under the 1933 Act, the stock
certificates representing the Warrant Shares (the “ Share
Certificates ”) shall bear a restrictive legend in the
following form (the “ 1933 Act Legend ”) (and a
stop-transfer order may be placed against transfer of such Share
Certificates):
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THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR
(B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
The legend set forth above shall be
removed and the Company shall issue a certificate without such
legend to the holder of the Securities, if (i) such Securities
are registered for resale under the 1933 Act, (ii) in
connection with a sale transaction, such holder provides the
Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of the
Securities may be made without registration under the 1933 Act,
(iii) such holder provides the Company with reasonable
assurances that the Securities can be sold without the requirement
to be in compliance with Rule 144(c)(1) promulgated under the
1933 Act (or a successor rule thereto) and otherwise without
restriction or limitation pursuant to Rule 144 promulgated under
the 1933 Act (or a successor rule thereto) or (iv) such holder
provides the Company reasonable assurances that the Securities have
been or are being sold pursuant to Rule 144.
h.
Authorization; Enforcement;
Validity . Such Buyer is
a validly existing corporation, partnership, limited liability
company or other entity and has the requisite corporate,
partnership, limited liability or other organizational power and
authority to purchase the Securities pursuant to this Agreement.
This Agreement has been duly and validly authorized, executed
and delivered on behalf of such Buyer and is a valid and binding
agreement of such Buyer enforceable against such Buyer in
accordance with its terms. The Security Agreement and each of
the other agreements entered into by such Buyer in connection with
the transactions contemplated hereby as of the Closing will have
been duly and validly authorized, executed and delivered on behalf
of such Buyer as of the Closing and will be valid and binding
agreements of such Buyer, enforceable against such Buyer in
accordance with their respective terms.
i.
Residency . Such Buyer is a resident of that jurisdiction
specified below its address on the Schedule of Buyers
.
j.
No Other Agreements
. As of the Closing Date, such
Buyer has not, directly or indirectly, made any agreements with the
Company relating to the terms or conditions of the transactions
contemplated by the Transaction Documents except as set forth in
the Transaction Documents.
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3.
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY .
The Company represents and warrants, as
of the date of this Agreement and on the Closing Date, to each
Buyer, that:
a.
Organization and Qualification;
Subsidiaries . The
Company was formed on March 15, 2005. Set forth in
Schedule 3(a) is a true and correct list of the
Company’s Subsidiaries and the jurisdiction in which each is
organized or incorporated, together with their respective
jurisdictions of organization and the percentage of the outstanding
capital stock or other equity interests of each such entity that is
held by the Company or any of its Subsidiaries. Other than
with respect to the entities listed on Schedule 3(a) , the
Company does not directly or indirectly own any security or
beneficial ownership interest, in any other Person (including
through joint venture or partnership agreements) or have any
interest in any other Person. Each of the Company and its
Subsidiaries is a corporation, limited liability company,
partnership or other entity and is duly organized or formed and
validly existing in good standing under the laws of the
jurisdiction in which it is incorporated or organized and has the
requisite corporate, partnership, limited liability company or
other organizational power and authority to own its properties and
to carry on its business as now being conducted and as proposed to
be conducted by the Company and its Subsidiaries. Each of the
Company and its Subsidiaries is duly qualified to do business and
is in good standing in every jurisdiction in which its ownership or
lease of property or the nature of the business conducted or
proposed to be conducted by the Company and its Subsidiaries will
make such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing could not
have and could not be, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect. Except as set
forth in Schedule 3(a) , the Company holds all right, title
and interest in and to 100% of the capital stock, equity or similar
interests of each of its Subsidiaries, in each case, free and clear
of any Liens, including any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of
free and clear ownership by a current holder, and no such
Subsidiary owns capital stock or holds an equity or similar
interest in any other Person.
b.
Authorization; Enforcement;
Validity . Each of the
Company and each of its Subsidiaries has the requisite corporate or
limited liability company power and authority to enter into and
perform its obligations under this Agreement and each of the other
Transaction Documents to which such Person is a party and to issue
the Securities in accordance with the terms hereof and thereof.
The execution and delivery of the Transaction Documents by
the Company and each of its Subsidiaries and the consummation by
the Company and each of its Subsidiaries of the transactions
contemplated hereby and thereby, including the issuance of the
Notes, the Warrants, the Warrant Shares and the Guarantees, have
been duly authorized by the respective boards of directors,
members, managers, trustees, stockholders, other equityholders or
holders of beneficial interests, as applicable, of the Company and
each of its Subsidiaries and no further consent or authorization is
required by the Company, any of its Subsidiaries or any of their
respective boards of directors, members, managers, trustees,
stockholders, other equityholders or holders of beneficial
interests, as applicable. This Agreement and the other
Transaction Documents dated of even date herewith have been duly
executed and delivered by the Company and each of its Subsidiaries
that is a party thereto, and constitute the valid and binding
obligations of the Company and each of its Subsidiaries,
enforceable against the Company and each of its Subsidiaries in
accordance with their respective terms. As of the
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Closing, the Transaction Documents dated
after the date of this Agreement and on or prior to the Closing
Date shall have been duly executed and delivered by the Company and
each of its Subsidiaries that is a party thereto and shall
constitute the valid and binding obligations of the Company and
each of its Subsidiaries, enforceable against the Company and each
of its Subsidiaries in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors’ rights
generally and general principles of equity.
c.
Capitalization . The authorized Capital Stock of the Company
consists of:
(i)
1,000,000 shares of Preferred Stock, of
which 22,500 shares of Series A Convertible Preferred Stock (the
“ Series A Preferred Stock ”) are issued and
outstanding, and
(ii)
75,000,000 shares of Common Stock, of
which:
(A)
17,081,077 shares are issued and
outstanding;
(B)
no shares are reserved for issuance
pursuant to the Company’s stock option, restricted stock and
employee stock purchase plans described on Schedule
3(c)(ii)(B) ; and
(C)
3,800,000 shares are reserved for
issuance pursuant to outstanding Options and Convertible
Securities.
No shares of Common Stock or Preferred
Stock are reserved for issuance under any plan, agreement or
arrangement, other than shares of Common Stock reserved for
issuance in connection with the conversion of the Series A
Preferred Stock; and except as described in the foregoing
provisions of this Section 3(c) , there are no shares of
Capital Stock, Options, Convertible Securities or other equity
securities of the Company authorized, issued or outstanding.
All of the outstanding and issuable shares of Capital Stock
have been, or upon issuance will be, validly issued and are, or
upon issuance will be, fully paid and nonassessable.
Except as set forth on Schedule
3(c) :
(1)
no shares of the Capital Stock of the
Company or any of its Subsidiaries are subject to preemptive rights
or any other similar rights or any Liens suffered or permitted by
the Company or any of its Subsidiaries;
(2)
there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights
convertible into or exercisable for, any shares of Capital Stock of
the Company or any of its Subsidiaries, or contracts, commitments,
understandings 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 or options,
warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights
convertible into or exercisable for, any shares of Capital Stock of
the Company or any of its Subsidiaries;
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(3)
there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933
Act;
(4)
other than the Series A Preferred Stock,
there are no outstanding securities or instruments of the Company
or any of its Subsidiaries that contain any redemption or similar
provisions, and there are no contracts, commitments, understandings
or arrangements by which the Company or any of its Subsidiaries is
or may become bound to redeem a security of the Company or any of
its Subsidiaries, and there are no other stockholder agreements or
similar agreements to which the Company, any of its Subsidiaries
or, to the Company’s Knowledge, any holder of the
Company’s Capital Stock is a party;
(5)
other than the Series A Preferred Stock,
there are no securities or instruments containing anti-dilution or
similar provisions that will or may be triggered by the issuance of
the Securities;
(6)
the Company does not have any stock
appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement; and
(7)
to the Company’s Knowledge, no
officer or director of the Company or beneficial owner of any of
the Company’s outstanding Common Stock has pledged Common
Stock in connection with a margin account or other loan secured by
such Common Stock.
The Company has furnished to each Buyer
true and correct copies of:
(W)
the Company’s Amended and Restated
Articles of Incorporation, as amended and in effect (the “
Articles of Incorporation ”);
(X)
the Company’s Bylaws, as amended
and in effect (the “ Bylaws ”);
(Y)
the organizational documents of each of
the Company’s Subsidiaries, as amended and in effect;
and
(Z)
all documents and instruments containing
the terms of all securities, if any, that, directly or indirectly,
are convertible into, or exercisable or exchangeable for, Common
Stock, and the material rights of the holders thereof in respect
thereto.
d.
Issuance of Securities
. The Notes and Warrants are duly
authorized and, upon issuance in accordance with the terms of this
Agreement, shall be free from all taxes and Liens with respect to
the issuance thereof and entitled to the rights set forth therein.
The Warrant Shares are duly authorized and, upon issuance in
accordance with the terms of the Warrants, will be validly issued,
fully paid and nonassessable and free from taxes and Liens with
respect to the issuance thereof, with the holders being entitled to
all rights accorded to a holder of Common
8
Stock. The issuance by the Company
of the Securities is exempt from registration under the 1933 Act
and any other applicable Securities Laws.
e.
No Conflicts . The execution and delivery of this Agreement
and the other Transaction Documents by the Company and each of its
Subsidiaries, the performance by the Company and each of its
Subsidiaries of its obligations hereunder and thereunder and the
consummation by the Company and each of its Subsidiaries of the
transactions contemplated hereby and thereby (including the
reservation for issuance and the issuance of the Shares) will
not:
(i)
result in a violation of the certificate
or articles of incorporation, certificate or articles of
organization, bylaws, operating agreement, partnership agreement or
any other governing documents, as applicable, of any such
Person;
(ii)
conflict with, or constitute a breach or
default (or an event which, with the giving of notice or passage of
time or both, constitutes or would constitute a breach or default)
under, or give to others any right of termination, amendment,
acceleration or cancellation of, or other remedy with respect to,
any agreement, indenture or instrument to which any such Person is
a party; or
(iii)
result in a violation of any law, rule,
regulation, order, judgment or decree (including Securities Laws
and the rules and regulations, if any, of the Principal Market)
applicable to any such Person or by which any property or asset of
any such Person is bound or affected.
Neither the Company nor any of its
Subsidiaries is in violation of any term of its certificate or
articles of incorporation, certificate or articles of organization,
bylaws, operating agreement, partnership agreement or any other
governing document, as applicable. Neither the Company nor
any of its Subsidiaries is or has been in violation of any term of
or in default under (or with the giving of notice or passage of
time or both would be in violation of or default under) any
contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any Law applicable to the Company or
its Subsidiaries, except where such violation or default could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect or result in the acceleration of any
Indebtedness or other obligation. The business of the Company
and its Subsidiaries has not been and is not being conducted, in
violation of any Law of any Governmental Entity except as could
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Except for the filing of
instruments to perfect security interests and as set forth in
Schedule 3(e) , neither the Company nor any of its
Subsidiaries is, has been, or will be required to obtain any
consent, authorization or order of, or make any filing or
registration with, any court or Governmental Entity in order for it
to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents in accordance with the
terms hereof or thereof. All consents, authorizations,
orders, filings and registrations that the Company or any of its
Subsidiaries is or has been required to obtain as described in the
preceding sentence have been obtained or effected on or prior to
the date of this Agreement and prior to the date of the
effectiveness of such requirement.
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f.
SEC Documents; Financial
Statements .
(i)
The Company has filed all reports,
schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the “1934
Act ” ) and the 1933 Act (all of the foregoing filed
prior to the date this representation is made (including all
exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein) being
referred to herein as the “ SEC Documents ” and
the Company’s consolidated balance sheet as of May 31, 2009,
as included in the Company’s registration statement on Form
S-1 filed with the SEC on July 2, 2009 (the “Registration
Statement” ), being referred to herein as the “
Most Recent Balance Sheet ”). A complete and
accurate list of the SEC Documents is set forth on Schedule
3(f)(i) . Each of the SEC Documents was filed with the
SEC via the SEC’s EDGAR system within the time frames
prescribed by the SEC for the filing of such SEC Documents such
that each filing was timely filed with the SEC. As of their
respective dates, the SEC Documents complied in all material
respects with the Securities Laws. 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. Since the filing of each of the
SEC Documents, no event has occurred that would require an
amendment or supplement to any such SEC Document and as to which
such an amendment or supplement has not been filed and made
publicly available on the SEC’s EDGAR system no less than
five Business Days prior to the date this representation is made.
The Company has not received any written comments from the
SEC staff that have not been resolved to the satisfaction of the
SEC staff.
(ii)
As of their respective dates, the
consolidated financial statements of the Company and its
Subsidiaries included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and
the Securities Laws with respect thereto. Such consolidated
financial statements have been prepared in accordance with
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 exclude footnotes) and fairly present in all material
respects the financial position of the Company and its Subsidiaries
as of the dates thereof and the 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 that are
not material individually or in the aggregate).
(iii)
None of the Company, its Subsidiaries and
their respective officers, directors and Affiliates or, to the
Company’s Knowledge, any stockholder of the Company has made
any filing with the SEC, issued any press release or made,
distributed, paid for or approved (or engaged any other Person to
make or distribute) any other public statement, report,
advertisement or communication on behalf of the Company or any of
its Subsidiaries or otherwise relating to the Company or any of its
Subsidiaries that contains any untrue statement of a material fact
or omits any statement
10
of material fact necessary in order to
make the statements therein, in the light of the circumstances
under which they are or were made, not misleading or has provided
any other information to any Buyer, including information referred
to in Section 2(d), that, considered in the aggregate,
contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are or
were made, not misleading. Except as set forth in Schedule
3(f)(iii) , none of the Company, its Subsidiaries and their
respective officers, directors, employees or agents has provided
any Buyer with any material, nonpublic information.
(iv)
The Company is not required to file and
will not be required to file any agreement, note, lease, mortgage,
deed or other instrument entered into prior to the date this
representation is made and in effect on the date this
representation is made and to which the Company or any Subsidiary
is a party or by which the Company or any Subsidiary is bound that
has not been previously filed as an exhibit (including by way of
incorporation by reference) to its reports filed or made with the
SEC under the 1934 Act.
(v)
The accounting firm that has expressed
its opinion with respect to the consolidated financial statements
included in the Registration Statement (the “ Audit
Opinion ”) is independent of the Company pursuant to the
standards set forth in Rule 2-01 of Regulation S-X promulgated by
the SEC and such firm was otherwise qualified to render the Audit
Opinion under applicable Securities Laws. Each accounting
firm that since such filing has conducted or will conduct a review
or audit of any of the Company’s consolidated financial
statements is independent of the Company pursuant to the standards
set forth in Rule 2-01 of Regulation S-X promulgated by the SEC and
is otherwise qualified to conduct such review or audit and render
an audit opinion under applicable Securities Laws.
(vi)
There is no transaction, arrangement or
other relationship between the Company and an unconsolidated or
other off-balance-sheet entity that is required to be disclosed by
the Company in its reports pursuant to the 1934 Act that has not
been so disclosed in the SEC Documents at least five Business Days
prior to the date of this Agreement.
(vii)
There have been no internal or SEC
inquiries or investigations (formal or informal) regarding
accounting or revenue recognition discussed with, reviewed by or
initiated at the direction of any executive officer, board of
directors or any committee thereof of the Company or any of its
Subsidiaries.
(viii)
The Company is not a “shell
company” (as defined in Rule 12b-2 under the 1934
Act).
g.
Sarbanes-Oxley Compliance; Internal
Accounting Controls; Disclosure Controls and Procedures; Books and
Records .
11
(i)
The Company and its Subsidiaries are in
all material respects in compliance with the applicable provisions
of the Sarbanes-Oxley Act of 2002, as amended, and the rules and
regulations thereunder (collectively, “ Sarbanes-Oxley
”).
(ii)
Neither the Company nor any of its
Subsidiaries nor any director, officer or employee, of the Company
or any of its Subsidiaries has received or otherwise had or
obtained Knowledge of any complaint, allegation, assertion or
claim, whether written or oral, regarding the accounting or
auditing practices, procedures, methodologies or methods of the
Company or any of its Subsidiaries or its internal accounting
controls, including any complaint, allegation, assertion or claim
that the Company or any of its Subsidiaries has engaged in
questionable accounting or auditing practices.
(iii)
No attorney representing the Company or
any of its Subsidiaries, whether or not employed by the Company or
any of its Subsidiaries, has reported evidence of a material
violation of Securities Laws, breach of fiduciary duty or similar
violation by the Company or any of its Subsidiaries or any of their
respective officers, directors, employees or agents to their
respective boards of directors or any committee thereof or pursuant
to Section 307 of Sarbanes-Oxley.
(iv)
The Company has, and has caused each of
its Subsidiaries to, at all times, keep books, records and accounts
with respect to all of such Person’s business activities, in
accordance with sound accounting practices and GAAP consistently
applied. The Company and each of its Subsidiaries maintains a
system of internal accounting controls sufficient to provide
reasonable assurance that (A) transactions are executed in
accordance with management’s general or specific
authorizations, (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset and
liability accountability, (C) access to assets or incurrence of
liability is permitted only in accordance with management’s
general or specific authorization and (D) the recorded
accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and
appropriate action is taken with respect to any
differences.
(v)
The Company has timely filed and made
publicly available on the SEC’s EDGAR system no less than
five Business Days prior to the date of this representation, all
certifications and statements required by (A) Rule 13a-14
or Rule 15d-14 under the 1934 Act and (B) Section 906 of
Sarbanes-Oxley with respect to any Company SEC
Documents.
(vi)
The Company maintains disclosure controls
and procedures required by Rule 13a-15 or Rule 15d-15
under the 1934 Act; such disclosure controls and procedures
are, and at all times have been, effective to ensure that the
information required to be disclosed by the Company in the reports
that it files with or submits to the SEC (A) is recorded,
processed, summarized and reported accurately within the time
periods specified in the SEC’s rules and forms and
(B) is accumulated and communicated to the Company’s
management, including its principal executive officer and principal
financial officer, as appropriate to allow timely decisions
regarding required disclosure.
12
(vii)
The Company maintains internal control
over financial reporting required by Rule 13a-14 or
Rule 15d-14 under the 1934 Act; such internal control
over financial reporting is, and has at all times been, effective
and does not contain, and has not contained, any material
weaknesses.
h.
Absence of Certain Changes
. Since April 9, 2009, neither the
Company nor any of its Subsidiaries has taken any steps, and
neither the Company nor any of its Subsidiaries currently expects
to take any steps to seek protection pursuant to any bankruptcy law
nor does the Company or any of its Subsidiaries have any knowledge
or reason to believe that the creditors of such Person intend to
initiate involuntary bankruptcy proceedings or any knowledge of any
fact that would reasonably lead a creditor to do so. Neither
the Company nor any of its Subsidiaries is as of the date this
representation is made, nor after giving effect to the transactions
contemplated hereby or by any of the other Transaction Documents
will be, Insolvent. Since April 9, 2009, neither the Company
nor any of its Subsidiaries has declared or paid any dividends or
sold any assets outside of the ordinary course of business.
Since April 9, 2009, neither the Company nor any of its
Subsidiaries has had any capital expenditures outside the ordinary
course of its business.
i.
Absence of Litigation
. Except as set forth on
Schedule 3(i) , (i) there has at no time been any action,
suit, proceeding, inquiry or investigation (“
Litigation ”) before or by any court, public board,
Governmental Entity, self-regulatory organization or body pending
or, to the Company’s Knowledge, threatened against or
affecting the Company or any of its Subsidiaries, and (ii) to the
Company’s Knowledge, no director or officer of the Company or
any of its Subsidiaries has been involved in securities-related
Litigation during the past five years. No Litigation
disclosed on Schedule 3(i) has, has had or could reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect.
j.
Full Disclosure; No Undisclosed
Events, Liabilities, Developments or Circumstances
. Since April 9, 2009, there has
been no Material Adverse Effect and no circumstances exist that, in
the aggregate, could reasonably be expected to be, cause or have a
Material Adverse Effect. Except (A) as and to the extent
disclosed or reserved against on the Most Recent Balance Sheet, (B)
as incurred since the date thereof in the ordinary course of
business consistent with past practice, (C) as incurred at the
Closing Date under the Notes and the other Transaction Documents,
or (D) as set forth on Schedule 3(j) , neither the Company,
nor any of its Subsidiaries has any material liabilities or
obligations of any nature, whether fixed or unfixed, known or
unknown, secured or unsecured, absolute, accrued, contingent or
otherwise and whether due or to become due. No representation
or warranty or other statement made by the Company in this
Agreement or any of the other Transaction Documents, the Schedules
hereto or any certificate or instrument delivered pursuant to this
Agreement contains any untrue statement or omits to state a
material fact necessary to make any such statement, in light of the
circumstances in which it was made, not misleading.
k.
Acknowledgment Regarding Buyers’
Purchase of Notes and Warrants . The Company acknowledges and agrees that each
Buyer is acting solely in the capacity of an arm’s length
purchaser with respect to the Company in connection with this
Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby. The Company further
acknowledges that no Buyer is acting as a financial advisor or
fiduciary of any party to
13
this Agreement or any of the other
Transaction Documents (or in any similar capacity) with respect to
this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given
by any Buyer or any of its representatives or agents in connection
with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer’s
purchase of the Securities. The Company further represents to each
Buyer that the decision of the Company and each of its Subsidiaries
to enter into the Transaction Documents has been based solely on
the independent evaluation by such Person and its
representatives.
l.
No General Solicitation
. Except as set forth in
Schedule 3(l) , neither the Company nor any of its
Affiliates, nor any Person acting on the behalf of any of the
foregoing, has engaged or will engage in any form of general
solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act), including advertisements,
articles, notices, or other communications published in any
newspaper, magazine or similar media or broadcast over radio,
television or internet or any seminar or meeting whose attendees
have been invited by general solicitation or general advertising,
in connection with the offer or sale of the Securities.
m.
No Integrated Offering
. Neither the Company nor any of
its Affiliates, nor any Person acting on the behalf of any of the
foregoing, has, directly or indirectly, made any offers or sales of
any security or solicited any offers to purchase any security,
under circumstances that would require registration of any of the
Securities under the 1933 Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for
purposes of the 1933 Act, the stockholder approval requirements of
the Principal Market (as defined in Section 3(t)), or any other
regulatory or self-regulatory authority, nor will the Company or
any of its Affiliates or any Person acting on behalf of any of the
foregoing take any action or steps that would require registration
of the issuance of any of the Securities under the 1933 Act or
cause the offering of the Securities to be integrated with other
offerings for purposes of the 1933 Act, the stockholder approval
requirements of the Principal Market (as defined in Section 3(t)),
or any other regulatory or self-regulatory authority.
n.
Reserved .
o.
Employee Relations
. Neither the Company nor any of
its Subsidiaries is involved in any labor union dispute nor, to the
Knowledge of the Company, is any such dispute threatened.
None of the employees of either the Company or any of its
Subsidiaries is or has been a member of a union that relates, or
following the Closing will relate, to such employee’s
relationship with the Company and neither the Company nor any of
its Subsidiaries is or following the Closing will be, a party to a
collective bargaining agreement. No executive officer (as
defined in Rule 3b-7 under the 1934 Act), nor any other individual
whose termination would be required to be disclosed on a Current
Report on Form 8-K, has notified the Company that such individual
intends to leave the Company or otherwise terminate such
individual’s employment with the Company. Schedule
3(o) lists each individual who will be employed by the Company
as of the Closing Date. Such individuals constitute all of
the employees necessary to conduct the Company’s business as
presently conducted and proposed to be conducted (as described to
Buyers prior to the date hereof). No such individual is, has
been, 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
14
agreement or any restrictive covenant,
and the employment of each such individual does not, has not and
will not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters. The
Company and each of its Subsidiaries is, and has at all times been,
in compliance with all Laws relating to employment and employment
practices, terms and conditions of employment and wages and hours.
The Company and each of its Subsidiaries is, and has at all
times been, in compliance with all Laws relating to employee
benefits and employee benefit plans (as such terms are defined in
ERISA).
p.
Intellectual Property
Rights . The Company and
its Subsidiaries own or possess adequate rights or licenses to use
all trademarks, trademark applications and registrations, trade
names, service marks, service mark registrations, service names,
patents, patent rights, patent applications, copyrights (whether or
not registered), inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property
rights (collectively, “ Intellectual Property ”)
necessary to conduct their respective businesses as conducted as of
the date this representation is made. Except as set forth in
Schedule 3(p) , (i) none of the rights of the Company or any
of its Subsidiaries in its Intellectual Property have expired or
terminated, or are expected to expire or terminate within five
years from the date of this Agreement, except to the extent such
termination could not and could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect, (ii) there has been no infringement by the Company or any
of its Subsidiaries or any of the Company’s or any of its
Subsidiaries’ licensors or licensees of any Intellectual
Property rights of others, (iii) there has been no infringement by
any third parties of any Intellectual Property owned or licensed by
the Company or any of its Subsidiaries, or of any development of
similar or identical trade secrets or technical information by
others, (iv) there is no claim, action or proceeding against or
being threatened against, the Company, any of its Subsidiaries or
any of their respective licensors regarding their Intellectual
Property or infringement of other Intellectual Property rights and
there is no claim, action or proceeding against or being threatened
against the Company, any of its Subsidiaries or any of their
respective licensors regarding their Intellectual Property or
infringement of other Intellectual Property rights, (v) there are
no facts or circumstances that could reasonably be expected to give
rise to any of the foregoing, (vi) there is no patent or patent
application which contains claims that interfere with the issued or
pending claims of any of the Intellectual Property owned or
licensed by the Company or any of its Subsidiaries, and (vii) none
of the technology employed by the Company or any of its
Subsidiaries has been obtained or is being used by the Company or
any of its Subsidiaries in violation of any material contractual
obligation binding on the Company or any of its Subsidiaries or is
being used by any of the officers, directors or employees of the
Company or of its Subsidiaries on behalf of the Company or any of
its Subsidiaries in violation of the rights of any Person or
Persons. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy,
confidentiality and the value of all of their material Intellectual
Property.
q.
Environmental Laws
. Each of the Company and its
Subsidiaries (i) is, and has at all times been, in compliance with
any and all, and has not violated any, Environmental Laws,
(ii) has no, and has never had any, liability for failure to
comply with any Environmental Law, (iii) has received all permits,
licenses or other approvals required of it under applicable
Environmental Laws to conduct its business as presently conducted,
and (iv) is in compliance with all terms and conditions
of any such permit, license or approval.
15
r.
Insurance . The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as management of the
Company believes to be prudent and customary in the businesses in
which the Company and its Subsidiaries are engaged. Neither
the Company nor any such Subsidiary has been refused any insurance
coverage sought or applied for, and neither the Company nor any
such 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 at a cost that would not
reasonably be expected to have a Material Adverse
Effect.
s.
Regulatory Permits
. The Company and its Subsidiaries
possess all certificates, authorizations, approvals, licenses and
permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective
businesses as conducted at the time this representation is made
(“ Permits ”), and neither the Company nor any
such Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such Permit. The
Company and its Subsidiaries have no reason to believe that they
will not be able to obtain necessary Permits as and when necessary
to enable the Company and its Subsidiaries to conduct their
respective businesses.
t.
Principal Market
. The Company is not in violation
of any of the rules, regulations or requirements of the OTC
Bulletin Board (the “ Principal Market ;”
provided however, that, if after the date of this Agreement
the Common Stock is listed on another national securities exchange,
the “ Principal Market ” shall mean such
national securities exchange) and has no Knowledge of any facts or
circumstances which would reasonably lead to delisting or
suspension, or termination of the trading of, the Common Stock by
the Principal Market in the foreseeable future. Since June
26, 2007, (i) the Company’s Common Stock has been quoted on
the Principal Market, (ii) trading in the Common Stock has not been
suspended by the SEC or the Principal Market and (iii) the Company
has received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or delisting, or
termination of the trading, of the Common Stock from the Principal
Market.
u.
Tax Status . The Company and each of its Subsidiaries (i)
has made or filed all federal, state and foreign income and all
other tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and
other governmental assessments and charges shown or determined to
be due on such returns, reports and declarations, except those
being contested in good faith and for which the Company has made
appropriate reserves on its books, and (iii) 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 (referred to in clause (i) above) apply.
There are no unpaid taxes claimed in writing to be due from
the Company or any of its Subsidiaries by the taxing authority of
any jurisdiction, and there is no basis for any such claim.
Neither the Company nor any of its Subsidiaries is a
“United States real property holding corporation”
(“ USRPHC ”) as that term is defined in Section
897(c)(2) of the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder.
v.
Transactions With
Affiliates . Except as
set forth on Schedule 3(v) , no Related Party of the Company
or any of its Subsidiaries, nor any Affiliate thereof, is
presently, has been
16
within the past three years, or will be
as a result of the transactions contemplated by this Agreement and
the other Transaction Documents, a party to any transaction,
contract, agreement, instrument, commitment, understanding or other
arrangement or relationship with the Company or any of its
Subsidiaries, whether for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments or consideration to or from any such
Related Party. No Related Party of the Company or any of its
Subsidiaries, or any of their respective affiliates, has any direct
or indirect ownership interest in any Person (other than ownership
of less than 2% of the outstanding common stock of a publicly
traded corporation) in which the Company or any of its Subsidiaries
has any direct or indirect ownership interest or with which the
Company or any of its Subsidiaries competes or has a business
relationship.
w.
Application of Takeover Protections;
Rights Agreement . The
Company and its board of directors have taken all necessary action,
if any, in order to render inapplicable any control share
acquisition, business combination, or other similar anti-takeover
provision under the Amended and Restated Articles of Incorporation
or any certificates of designations or the laws of the State of
Nevada to the transactions contemplated by this Agreement, the
Company’s issuance of the Securities in accordance with the
terms hereof and any Buyer’s ownership of the Securities.
The Company has not adopted a stockholder rights plan or
similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the
Company.
x.
Foreign Corrupt Practices
. Neither the Company, nor any of
its Subsidiaries, nor any director, officer, agent, employee or
other person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf
of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended; or made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
y.
Outstanding Indebtedness;
Liens . Payments of
principal and other payments due under the Notes will, upon
issuance at the Closing, rank senior to all other Indebtedness of
the Company or any of its Subsidiaries (in right of payment,
whether with respect of payment of redemptions, interest or damages
or upon liquidation or dissolution or otherwise). Except as
set forth on Schedule 3(y) , (i) neither the Company
nor any of its Subsidiaries has any, and upon consummation of the
transactions contemplated hereby and by the other Transaction
Documents will not have any, outstanding Indebtedness other than
the Indebtedness permitted under Section 5(g), (ii) there are no,
and upon consummation of the transactions contemplated hereby and
by the other Transaction Documents there will not be any, Liens on
any of the assets of the Company and its Subsidiaries other than
the Liens permitted under Section 5(i), and (iii) there are no, and
upon consummation of the transactions contemplated hereby and by
the other Transaction Documents there will not be any, financing
statements securing obligations of any amounts filed against the
Company or any of its Subsidiaries or any of their respective
assets, other than under the Security Agreement.
17
z.
Real Property . Neither the Company nor any of its
Subsidiaries owns any real property. Schedule 3(z)
contains a complete and correct list of all the real property,
facilities and fixtures that (i) are leased or, in the case of
fixtures, otherwise owned or possessed by the Company or any of its
Subsidiaries, (ii) in connection with which the Company or any of
its Subsidiaries has entered into an option agreement,
participation agreement or acquisition agreement or (iii) the
Company or any of its Subsidiaries has agreed to lease or otherwise
acquire or may be obligated to lease or otherwise acquire in
connection with the conduct of its business (collectively,
including any of the foregoing acquired after the date of this
Agreement, the “ Real Property ”), which list
identifies all of the Real Property and specifies which of the
Company and its Subsidiaries leases, owns or possesses each item of
the Real Property. Schedule 3(z) also contains a complete
and correct list of all leases and other agreements with respect to
which the Company or any of its Subsidiaries is a party or
otherwise bound or affected with respect to the Real Property,
except easements, rights of way, access agreements, surface damage
agreements, surface use agreements or similar agreements that
pertain to Real Property that is contained wholly within the
boundaries of any leased Real Property otherwise described on
Schedule 3(z) (the “ Real Property Leases
”). All of the Real Property Leases are valid and in
full force and effect and are enforceable against all parties
thereto. Neither the Company nor any of its Subsidiaries nor,
to the Company’s Knowledge, any other party thereto is in
default in any material respect under any of such Real Property
Leases and no event has occurred which with the giving of notice or
the passage of time or both could constitute a default under, or
otherwise give any party the right to terminate, any of such Real
Property Leases, or could adversely affect the Company’s or
any of its Subsidiaries’ interest in and title to the Real
Property subject to any of such Real Property Leases. No Real
Property Lease is subject to termination, modification or
acceleration as a result of the transactions contemplated
hereby.
aa.
Tangible Assets
. The Company and its Subsidiaries
have good and marketable title to all of the tangible assets that
are material to their businesses (the “ Assets
”), in each case free and clear of any Lien, other than
Permitted Liens. The Assets include all tangible assets necessary
for the conduct of the Company’s and its Subsidiaries
businesses as presently proposed to be conducted. The Assets
that are facilities, fixtures, equipment, and other personal
property have been maintained in accordance with normal industry
practice, and are in good operating condition and repair (subject
to normal wear and tear), and are suitable for the purposes for
which they are now used and proposed to be used. There are no
existing agreements, options, commitments or rights with, of or to
any Person to acquire any such Assets, or any interests
therein.
bb.
No Materially Adverse Contracts,
Etc . The Company is not
subject to any charter, contract, agreement, instrument, corporate
or other legal restriction, or any judgment, decree, order, rule,
regulation or other Law that has, has had, or is expected in the
future to have, a Material Adverse Effect.
cc.
Investment Company
. The Company is not, and upon each
Closing will not be, an “investment company,” a company
controlled by an “investment company,” or an
“affiliated person” of, or “promoter” or
“principal underwriter” for, an “investment
company,” as such terms are defined in the Investment Company
Act.
18
dd.
Stock Options . Every Option issued by the Company (i) has (or, if
no longer outstanding, had), with respect to each share of Common
Stock into which it is convertible or for which it is exercisable
or exchangeable, an exercise price equal to or greater than the
fair market value per share of Common Stock on the date of grant of
such Option, (ii) was issued in compliance with the terms of the
plan under which it was issued and in compliance with applicable
Laws, rules and regulations, including the rules and regulations of
the Principal Market, and (iii) has been accounted for in
accordance with GAAP and otherwise been disclosed accurately and
completely and in accordance with the requirements of the
Securities Laws, including Rule 402 of Regulation S-K promulgated
by the SEC, and the Company has paid, or properly reserved for, all
taxes payable with respect to each such Option (including with
respect to the issuance and exercise thereof), and has not deducted
any amounts from its taxable income that it is not entitled to
deduct with respect to any such stock option (including the
issuance and exercise thereof).
4.
AFFIRMATIVE COVENANTS
.
a.
Best Efforts . Each party shall use its reasonable best
efforts to timely satisfy each of the conditions to be satisfied by
it as provided in Sections 7 and 8 of this
Agreement.
b.
Form D and Blue Sky
. The Company agrees to timely file
a F
