THE ISSUER
HAS FILED A REGISTRATION STATEMENT (INCLUDING A PROSPECTUS) WITH
THE COMMISSION FOR THE OFFERING TO WHICH THIS COMMUNICATION
RELATES. BEFORE YOU INVEST, YOU SHOULD READ THE PROSPECTUS IN THAT
REGISTRATION STATEMENT AND OTHER DOCUMENTS THE ISSUER HAS FILED
WITH THE COMMISSION FOR MORE COMPLETE INFORMATION ABOUT THE ISSUER
AND THIS OFFERING. YOU MAY GET THESE DOCUMENTS FOR FREE BY VISITING
EDGAR OR THE COMMISSION’S WEB SITE AT WWW.SEC.GOV.
ALTERNATIVELY, THE ISSUER, ANY UNDERWRITER OR DEALER PARTICIPATING
IN THE OFFERING WILL ARRANGE TO SEND YOU THE PROSPECTUS IF YOU
REQUEST IT BY CALLING THE ISSUER.
SECURITIES PURCHASE
AGREEMENT
This Securities
Purchase Agreement (this “ Agreement ”) is dated
as of August 19, 2009, between Emisphere Technologies Inc., a
Delaware corporation (the “ Company ”), and each
purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “ Purchaser ” and
collectively the “ Purchasers ”).
WHEREAS, subject
to the terms and conditions set forth in this Agreement and
pursuant to 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:
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.
1
“
Closing ” means the closing of the purchase and sale
of the Securities pursuant to Section 2.1.
“ Closing
Date ” means the Trading Day on which all of the
Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to
(i) the Purchasers’ obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the
Securities, in each case, have been satisfied or waived.
“
Commission ” means the United States Securities and
Exchange Commission.
“ Common
Stock ” means the common stock of the Company, 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
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 Brown Rudnick LLP, with offices located
at One Financial Center, Boston, MA 02111.
“
Concurrent Private Placement ” means the private
placement to MHR Fund Management, LLC and affiliates thereof of
unregistered shares of Common Stock and warrants to purchase shares
of Common Stock pursuant to the terms of a Securities Purchase
Agreement by and between the Company and the purchasers listed
therein dated as of the date hereof.
“
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, (c) securities issued
2
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 benefits in addition
to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is
investing in securities, and (d) any securities issued in the
Concurrent Private Placement or any securities issued upon the
exercise or exchange of or conversion of any securities issued in
connection therewith.
“ FDA
” shall have the meaning ascribed to such term in
Section 3.1(ff).
“
FDCA ” shall have the meaning ascribed to such term in
Section 3.1(ff).
“
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(y).
“
Intellectual Property Rights ” shall have the meaning
ascribed to such term in Section 3.1(o).
“ Issuer
Free Writing Prospectus ” means any “issuer free
writing prospectus,” as defined in Rule 433 under the
Securities Act (“ Rule 433 ”), relating to
the Securities in the form filed or required to be filed with the
Commission or, if not required to be filed, in the form retained in
the Company’s records pursuant to Rule 433(g) under the
Securities Act.
“
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 $0.70, 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.
“
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(ff).
3
“
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. 333-146212
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.
“
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.
4
“ 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 Mellon Investor Services,
L.L.C., the current transfer agent of the Company, with a mailing
address of 111 Founders Plaza-Suite 1100, East Hartford, CT
06108 and a facsimile number of (860) 528-6472, and any
successor transfer agent of the Company.
“
Variable Rate Transaction ” shall have the meaning
ascribed to such term in Section 4.12(b).
“
Warrants ” means, collectively, the Common Stock
purchase warrants delivered to the Purchasers at the Closing in
accordance with Section 2.2(a) hereof, which Warrants shall be
exercisable immediately and have a term of exercise equal to
five years , in the form of Exhibit A attached
hereto.
“ Warrant
Shares ” means the shares of Common Stock issuable upon
exercise of the Warrants.
“ WS
” means Weinstein Smith LLP with offices located at 420
Lexington Avenue, Suite 2620, New York, New York
10170-0002.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing
. On the Closing Date, upon the terms and subject to the conditions
set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company
agrees to sell, and the Purchasers, severally and not jointly,
agree to purchase, up to an aggregate of $4,000,000 of Shares and
Warrants. Each Purchaser shall deliver to the Company, via wire
transfer of immediately available funds equal to such
Purchaser’s Subscription Amount as set forth on the signature
page hereto executed by such Purchaser and the Company shall
deliver to each Purchaser its respective Shares and a Warrant as
determined pursuant to Section 2.2(a), and the Company and
each Purchaser shall deliver the other items set forth in
Section 2.2 deliverable at the Closing. Upon satisfaction of
the covenants and conditions set forth in Sections 2.2 and
2.3, the Closing shall occur at the offices of WS or such other
location as the parties shall mutually agree.
5
(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, substantially in the form of
Exhibit B attached hereto;
(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 47% of the number of
Shares purchased by such Purchaser, with an exercise price equal to
$0.70 , 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
(ii) such
Purchaser’s Subscription Amount by wire transfer to the
account as specified in writing by the Company.
(a) The
obligations of the Company hereunder in connection with the Closing
are subject to the following conditions being met:
(i) the accuracy
in all material respects on the Closing Date of the representations
and warranties of the Purchasers contained herein (unless as of a
specific date therein);
(ii) all
obligations, covenants and agreements of each Purchaser required to
be performed at or prior to the Closing Date shall have been
performed; and
(iii) the delivery
by each Purchaser of the items set forth in Section 2.2(b) of
this Agreement.
6
(b) The respective
obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being
met:
(i) the accuracy
in all material respects on the Closing Date of the representations
and warranties of the Company contained herein (unless as of a
specific date therein);
(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed;
(iii) the delivery
by the Company of the items set forth in Section 2.2(a) of
this Agreement;
(iv) there shall
have been no Material Adverse Effect with respect to the Company
since the date hereof; and
(v) from the date
hereof to the Closing Date, trading in the Common Stock shall not
have been suspended by the Commission or the Company’s
principal Trading Market (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall
be terminated prior to the Closing), and, at any time prior to the
Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades
are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each
case, in the reasonable judgment of each Purchaser, makes it
impracticable or inadvisable to purchase the Securities at the
Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1
Representations and Warranties of the Company . Except
(a) 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, or (b) as set forth in the SEC Reports (as defined
below) filed after January 1, 2009 and prior to the date of
this Agreement (excluding all disclosures in any “risk
factor” section and any other prospective or forward-looking
information) the Company hereby makes the following representations
and warranties to each Purchaser:
(a)
Subsidiaries . The Company has no significant subsidiaries
(as such term is defined in Rule 1-02(w) of
Regulation S-X promulgated by the Commission) and does not own
any beneficial interest, directly or indirectly, in any
corporation, partnership, joint venture or other business
entity.
7
(b)
Organization and Qualification . The Company 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. The Company is not in
violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other
organizational or charter documents. The Company 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 or condition (financial or
otherwise) of the Company, 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 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 certificate of incorporation, bylaws or other
organizational 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 give to
others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of,
any material agreement, credit facility, debt or other instrument
(evidencing a Company debt
8
or otherwise)
or other understanding to which the Company is a party or by which
any property or asset of the Company 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 is subject (including
federal and state securities laws and regulations), or by which any
property or asset of the Company 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 or any Issuer Free Writing Prospectus,
(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 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 October 1, 2007 (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
9
necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(g)
Capitalization . 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. Except as set forth in
Schedule 3.1(g)(i), no Person has any right of first
refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the
Transaction Documents. Except as set forth in
Schedule 3.1(g)(ii), 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 is or may become bound to issue additional shares
of Common Stock or Common Stock Equivalents. Except as set forth in
Schedule 3.1(g)(iii), the issuance and sale of the
Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Purchasers)
and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under
any of such securities. All of the outstanding shares of capital
stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was
issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. 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
10
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 as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end
audit adjustments.
(i) Material
Changes; Undisclosed Events, Liabilities or Developments .
Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a
subsequent SEC Report filed prior to the date hereof, (i) there has
been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent
or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or
disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting, (iv) 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, no event, liability, occurrence or
development has occurred or exists with respect to the Company or
its respective business, properties, operations, assets or
financial condition that would be required to be disclosed by the
Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly
disclosed at least 1 Trading Day prior to the date that this
representation is made.
(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 or any
of its 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. The Company, nor any
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 director or
11
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 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
employees is a member of a union that relates to such
employee’s relationship with the Company, and the Company is
not a party to a collective bargaining agreement, and the Company
believes that its relationship with its employees is 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 to any liability with respect to any of the
foregoing matters. The Company is in compliance with all U.S.
federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(l)
Compliance . Except as set forth in
Schedule 3.1(l), the Company is not: (i) 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 under), nor has the
Company 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) in violation of
any judgment, decree or order of any court, arbitrator or
governmental body or (iii) nor 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 possesses 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 the Company has not received
any notice of proceedings relating to the revocation or
modification of any Material Permit.
(n) Title to
Assets . Except as set forth in Schedule 3.1(n),
the Company has 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 it that is material to the business of
the Company, in each case free and clear of all Liens (which for
purposes of this Agreement shall mean a lien, charge, security
interest, encumbrance, right of first refusal,
preemptive
12
right or other
restriction), 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
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 are held by
it under valid, subsisting and enforceable leases with which the
Company is in compliance. !
(o) Patents and
Trademarks . The Company has, or has 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 ”). The Company
has not received a notice (written or otherwise) that any of the
Intellectual Property Rights used by the Company violates or
infringes upon the rights of any Person. To the knowledge of the
Company, all such Intellectual Property Rights are enforceable. The
Company has 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 is 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 is engaged, including, but not limited to, directors and
officers insurance coverage at least equal to the aggregate
Subscription Amount. The Company does not have 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 on 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 (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,
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