SECURITIES PURCHASE
AGREEMENT
THIS
SECURITIES PURCHASE AGREEMENT is entered into as of
September 4, 2009, by and between PMFG, Inc. (the “
Company ”), a corporation organized under the
laws of the State of Delaware, with its principal offices at 14651
North Dallas Parkway, Suite 500, Dallas, Texas 75254, and the
purchasers whose names and addresses are set forth on the signature
pages hereof (individually referred to as a “
Purchaser ” and, collectively, the “
Purchasers ”).
WHEREAS,
on June 16, 2009, the Company’s stockholders approved an
amendment to the Company’s certificate of incorporation to
authorize the issuance of 5,000,000 shares of preferred stock, par
value $0.01 per share (the “ Preferred Stock
”);
WHEREAS,
the Company proposes to create a new series of Preferred Stock,
designated as the Series A Convertible Preferred Stock, par
value $0.01 per share (the “ Convertible Preferred
Stock ”), by filing a Certificate of Designations in
the form attached hereto as Exhibit A (the “
Certificate of Designations ”) with the office
of the Secretary of State of the State of Delaware. The form of
notice of conversion for the Convertible Preferred Stock is
attached hereto as Exhibit B ; and
WHEREAS,
on the terms and subject to the conditions set forth in this
Agreement, the Company proposes to issue and sell to the Purchasers
shares of Convertible Preferred Stock (the “ Preferred
Shares ”) convertible into shares of common stock,
par value $0.01 per share (the “ Common Stock
”), of the Company and Warrants (the “
Warrants ”, and together with the Preferred
Shares, the “ Securities ”) exercisable
for shares of Common Stock, in substantially the form attached
hereto as Exhibit C .
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Company and the Purchasers agree as
follows:
SECTION
1. Authorization of Sale of the Securities . Subject to the
terms and conditions of this Agreement, the Company has authorized
the sale of the Securities.
SECTION
2. Agreement to Sell and Purchase the Securities . At the
Closing (as defined in Section 3.1 ), the Company will
sell to the Purchasers, and the Purchasers will buy from the
Company, upon the terms and conditions hereinafter set forth,
(i) the number of Preferred Shares (at the purchase price) set
forth below such Purchaser’s name on the signature pages
hereof and (ii) a Warrant to purchase the number of shares of
Common Stock equal to 50% of the shares of Common Stock underlying
the Preferred Shares referred to in clause (i) above. The
purchase price for each Preferred Share shall be $1,000 (the
“ Purchase Price ”). The purchase price
for the Preferred Shares and the Warrant being purchased by each
Purchaser at the Closing (as defined in Section 3.1 )
shall be equal to the aggregate Purchase Price of the Preferred
Shares being so purchased by such Purchaser.
SECTION
3. Closing and Delivery of the Securities .
3.1
Closing . The purchase and sale of the Securities shall
occur (the “ Closing ”) at
10:00 a.m., Dallas, Texas time, on the date hereof (the
“ Closing Date ”). The Closing shall take
place at the office of Jones Day located at 2727 North Harwood
Street, Dallas, Texas 75201.
3.2
Delivery of the Securities . At the Closing, the Company
shall deliver to each Purchaser (or to its designated
representative) one or more stock certificates representing the
Preferred Shares and the Warrants registered in the name of each
Purchaser, or in such nominee name(s) as designated in such
Purchaser’s Stock Certificate Questionnaire, in the form set
forth in Exhibit D attached hereto, representing the
number of Securities set forth in Section 2 above and
bearing the legend specified in Section 5.12 hereof
referring to the fact that the Securities were sold in reliance
upon the exemption from registration under the Securities Act of
1933, as amended (the “ Securities Act
”), provided by Section 4(2) thereof and Rule 506
thereunder.
3.3
Conditions to Closing . (a) The Company’s
obligation to complete the purchase and sale of the Securities and
deliver the stock certificates representing the Preferred Shares
and the Warrants to the Purchasers at the Closing shall be subject
to the following conditions, any one or more of which may be waived
by the Company: (i) receipt by the Company of same-day funds
in the full amount of the purchase price for the Securities being
purchased hereunder; (ii) the accuracy of the representations
and warranties made by the Purchasers and the fulfillment of those
undertakings of the Purchasers to be fulfilled prior to the
Closing; and (iii) receipt by the Company for each Purchaser
of completed versions of Exhibit D ,
Exhibit E and Exhibit F-1 or F-2 (as
applicable) attached hereto.
(b) The
Purchasers’ obligation to accept delivery of the stock
certificates representing the Preferred Shares and the Warrants and
to pay for the Securities evidenced thereby shall be subject to the
following conditions: (i) the accuracy in all material
respects of the representations and warranties made by the Company
herein and the fulfillment in all material respects of those
undertakings of the Company to be fulfilled prior to Closing,
(ii) receipt of an opinion of Jones Day, counsel to the
Company, addressed to the Purchasers in form and substance
reasonably satisfactory to Needham & Company, LLC (the “
Placement Agent ”) and the Purchasers’
counsel and rendering the opinions set forth in
Exhibit G attached hereto, (iii) receipt of a
lock-up agreement in the form set forth in Exhibit H
attached hereto by each of the individuals set forth on
Schedule 3.3 and (iv) receipt of (x) a
certificate executed by the Chief Executive Officer and the Chief
Financial Officer of the Company, dated as of the Closing Date, in
form and substance reasonably satisfactory to the Purchasers, to
the effect that the representations and warranties of the Company
set forth in Section 4 of this Agreement are true and
correct in all material respects as of the date hereof, and the
Company has complied in all material respects with all the
agreements and satisfied in all material respects all the
conditions herein on its part to be performed or satisfied on or
prior to the Closing Date and (y) a certificate signed by the
Secretary of the Company to which is attached a true, complete and
correct copy of each of the amended and restated certificate of
incorporation of the Company, the amended and restated bylaws of
the Company and certain resolutions of the Board of Directors of
the Company, to the effect that (1) other than the Certificate
of Designations, no document
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with respect to
any amendment to the certificate of incorporation of the Company
has been filed in the office of the Secretary of State of the State
of Delaware since June 16, 2009, and no action has been taken
or, to the best knowledge of the Secretary of the Company, is
contemplated by the Board of Directors or the stockholders of the
Company, for the purpose of effecting any such amendment or the
dissolution, merger or consolidation of the Company, (2) no
proposal for any amendment, repeal or other modification to the
amended and restated bylaws of the Company has been taken since
August 15, 2008 or is currently pending before the Board of
Directors or stockholders of the Company and (3) the
resolutions of the Board of Directors of the Company authorizing
the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement
have not been altered, amended or superseded and remain in full
force and effect as of the date hereof. Each Purchaser’s
obligations hereunder are expressly conditioned on the purchase by
all of the other Purchasers of the Securities that they have agreed
to purchase from the Company.
SECTION
4. Representations, Warranties and Covenants of the Company
. Except as otherwise described in (i) the Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K and definitive proxy statements filed or furnished by the
Company and Peerless Mfg. Co. (“ Peerless
”), the Company’s predecessor, with the Securities and
Exchange Commission (the “ SEC ”) since
June 30, 2008 (the “ SEC Documents ”
and collectively, including the documents incorporated by reference
therein, the “ Company Information ”),
(ii) as set forth on the Disclosure Schedules (
provided , that disclosure in any subparagraph of such
Disclosure Schedules shall apply to any section or subparagraph
hereof to the extent it is reasonably apparent on its face that
such disclosure would apply to, and fulfill the disclosure
requirement of, such section or subparagraph of this Agreement), or
(iii) other disclosure materials previously delivered to the
Purchasers (the “ Disclosure Materials
”), each which qualify the following representations and
warranties in their entirety, the Company hereby represents and
warrants to, and covenants with, the Purchasers, effective as of
the Closing Date (unless otherwise stated), as follows:
4.1
Organization and Qualification . The Company and each of the
subsidiaries (each a “ Subsidiary ” and,
collectively, the “ Subsidiaries ”)
listed in Exhibit 21.1 to the Company’s Annual Report on
Form 10-K for the fiscal year ended June 30, 2008 (the “
2008 Form 10-K ”) is a business entity
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, to the extent such
concepts are applicable under the laws of such jurisdiction. The
Company and each Subsidiary has all requisite power and authority
to carry on its business as now conducted. The Company and each of
its Subsidiaries is duly licensed or qualified as a foreign
business entity (corporate or otherwise) to do business and is in
good standing in all jurisdictions in which the nature of the
activities conducted by it or the character of the assets owned or
leased by it requires such license or qualification, to the extent
such concepts are applicable under the laws of each such
jurisdiction, except to the extent that the failure to be so
qualified or be in good standing would not reasonably be expected
to, individually or in the aggregate, (i) have a material
adverse effect on the Company’s performance of its
obligations under this Agreement or the Warrants or the
consummation of any transaction contemplated hereby, or (ii)
materially and adversely affect the Company and its Subsidiaries,
taken as a whole, or their respective businesses, properties,
business prospects, conditions (financial or other) or results of
operations, taken as a whole (such effects described in clauses
(i) and (ii) being referred to collectively herein as a
“ Material Adverse Effect ”).
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4.2
Authorized Capital Stock . The Company has authorized,
issued and outstanding capital stock as set forth on
Schedule 4.2 as of the date set forth therein. All of
the issued and outstanding shares of the Company’s Common
Stock have been duly authorized, validly issued and are fully paid
and nonassessable, were issued in compliance with all applicable
federal and state securities laws, and were not issued in violation
of or subject to any preemptive rights or other rights to subscribe
for or purchase securities. As of the date hereof, there are no
shares of Preferred Stock issued and outstanding. The rights,
preferences, privileges and restrictions of the Preferred Shares
will be as set forth in the Certificate of Designations. The shares
of Common Stock issuable upon conversion of the Preferred Shares
(the “ Conversion Shares ”) and the
exercise of the Warrants (the “ Warrant Shares
”) have been duly and validly reserved for issuance. Except
as set forth on Schedule 4.2 , the Company does not
have outstanding any options to purchase, or any right of first
refusal or preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into or
exchangeable or exercisable for, or any contracts or commitments to
issue or sell, shares of its capital stock, or any similar right to
participate in the transactions contemplated by the Agreement and
the Warrants. Except for customary adjustments as a result of stock
dividends, stock splits, combinations of shares, reorganizations,
recapitalizations, reclassifications or other similar events, there
are no anti-dilution or price adjustment provisions contained in
any security issued by the Company (or in any agreement providing
rights to security holders) and the issuance and sale of the
Preferred Shares and Warrants or other securities pursuant to any
provision of this Agreement will not give rise to any preemptive
rights or rights of first refusal, co-sale rights or any other
similar rights on behalf of any person or result in the triggering
of any anti-dilution or other similar rights. Except as set forth
on Schedule 4.2 , with respect to each Subsidiary,
(i) the Company owns all of the Subsidiary’s capital
stock (except for directors’ qualifying shares), directly or
indirectly through its other Subsidiaries, and free and clear of
all liens, mortgages, pledges, charges and encumbrances
(collectively, “ Liens ”) of any kind,
(ii) all the issued and outstanding shares of the
Subsidiary’s capital stock have been duly authorized, validly
issued and are fully paid and nonassessable, were issued in
compliance with applicable federal and state securities laws, and
were not issued in violation of or subject to any preemptive rights
or other rights to subscribe for or purchase securities, and
(iii) there are no outstanding options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase,
any securities or obligations convertible into or exchangeable or
exercisable for, or any contracts or commitments to issue or sell,
shares of the Subsidiary’s capital stock.
4.3
Issuance, Sale and Delivery of Shares . When issued and
delivered in accordance with the terms of this Agreement, the
Warrants and the Certificate of Designations, as applicable, the
Preferred Shares, Conversion Shares and Warrant Shares will be duly
authorized, validly issued, fully paid and nonassessable, and free
and clear of all Liens imposed by the Company. Except for the
Purchasers, no stockholder of the Company has any right (which has
not been waived or has not expired by reason of lapse of time)
following notification of the Company’s intent to file the
Registration Statement (as defined in Section 7.1(a) )
to require the Company to register the sale of any shares owned by
such stockholder under the Securities Act, in the Registration
Statement. Subject to the Nasdaq Issuance Limitation, the Maximum
Share Limitation and the Stockholder Approval (each defined in
Section 5.13 below), no further approval or authority
of the stockholders or the Board of Directors of the Company will
be required for the issuance and sale of the Securities to be sold
by the Company as contemplated herein or for the issuance of the
Conversion Shares as contemplated by the Preferred Shares or the
Warrant Shares as contemplated by the Warrants.
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4.4
Due Execution, Delivery and Performance . The Company has
full corporate power and authority to enter into the Agreement and
the Warrants and perform the transactions contemplated hereby and
thereby. The Agreement has been duly authorized, executed and
delivered by the Company. Each of the Warrants has been duly
authorized and, as of the Closing, will have been executed and
delivered by the Company. The making and performance of the
Agreement and the Warrants by the Company and the consummation of
the transactions contemplated herein and therein will not result in
the creation of any Liens upon any assets of the Company pursuant
to the terms or provisions of, or result in a breach or violation
of, or constitute, either by itself or upon notice or the passage
of time or both, a default under any agreement, mortgage, deed of
trust, lease, franchise, license, indenture, permit or other
instrument to which the Company or any Subsidiary is a party or by
which the Company or its properties, or any Subsidiary or such
Subsidiary’s properties, may be bound or affected and in each
case which would have a Material Adverse Effect or, to the
Company’s knowledge (which, as used herein, in each instance
shall mean the actual knowledge of the Company’s Chief
Executive Officer or Chief Financial Officer), any statute or any
authorization, judgment, decree, order, rule or regulation of any
court or any regulatory body, administrative agency or other
governmental body applicable to the Company or any Subsidiary or
any of their respective properties. No consent, approval,
authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required for
the execution and delivery of this Agreement or the Warrants or the
consummation of the transactions contemplated by this Agreement,
except for the filing of a Form D with the SEC, the filing of
the Registration Statement (as defined in
Section 7.1(a) ) and compliance with the applicable
federal and state securities laws with respect to post-Closing
obligations. Upon their execution and delivery, and with respect to
the Agreement, assuming the valid execution thereof by the
respective Purchasers, the Agreement and the Warrants will
constitute valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally
and except as enforceability may be subject to general principles
of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and, with respect to the
Agreement, except as the indemnification agreements of the Company
in Section 7.3 hereof may be legally
unenforceable.
4.5
No Conflicts . The execution, delivery and performance of
the Agreement and the Warrants by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby
do not and will not: (i) conflict with or violate any
provision of the Company’s or its Subsidiaries’
certificates of incorporation, bylaws or other organizational
documents, (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default)
under, result in the creation of any Liens upon any of the
properties or assets of the Company or any Subsidiary, or give to
others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or
by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) conflict with or result in a
violation of any law, rule, regulation, order, judgment,
5
injunction,
decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal
and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or
affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result
in a Material Adverse Effect.
4.6
SEC Documents . Each of the Company and Peerless have timely
filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC since June 30, 2008,
pursuant to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the “ Exchange Act
”). As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents. As of their respective
filing dates, the SEC Documents, taken as a whole, did not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.
4.7
Accountants . Grant Thornton LLP, whose report on the
consolidated financial statements (which term as used in this
Agreement includes the related notes thereto) of the Company was
included in the 2008 Form 10-K, are independent accountants with
respect to the Company as required by the Exchange Act and the
rules and regulations promulgated thereunder.
4.8
Contracts . All agreements that were required to be filed as
exhibits to the SEC Documents under Item 601 of
Regulation S-K (collectively, the “ Material
Agreements ”) to which the Company or any Subsidiary
is a party, or the property or assets of the Company or any
Subsidiary are subject, have been filed as exhibits to one or more
of the SEC Documents. All Material Agreements, other than those
agreements that are substantially performed or expired by their
terms, are valid and enforceable against the Company or one of its
Subsidiaries, as the case may be, in accordance with their
respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be
subject to general principles of equity and except as rights to
indemnity and contribution may be limited by state or federal
securities laws or public policy underlying such laws. Neither the
Company nor any of its Subsidiaries is in breach of or default
under any of the Material Agreements, and to the Company’s
knowledge, no other party to a Material Agreement is in breach of
or default under such Material Agreement, except in each case, for
such breaches or defaults as would not reasonably be expected to
have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has received a notice of termination nor is the
Company otherwise aware of any threats to terminate any of the
Material Agreements.
4.9
No Defaults . Except as to defaults, violations and breaches
which individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect, the Company is not in
violation or default of any provision of its certificate of
incorporation, bylaws or other organizational documents, or in
breach of or default with respect to any provision of any
agreement, judgment, decree, order, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which
it is a party or by which it or
6
any of its
properties are bound; and no event has occurred that, with notice
or lapse of time or both, would constitute an event of default on
the part of the Company as defined in such documents, except such
defaults which individually or in the aggregate would not
reasonably be expected to have a Material Adverse
Effect.
4.10
No Actions . There are no legal or governmental actions,
suits or proceedings pending or, to the Company’s knowledge,
threatened to which the Company or any Subsidiary is or may be a
party to or of which property owned or leased by the Company or any
Subsidiary is or may be the subject, or related to environmental or
discrimination matters, or instituted by the SEC, The NASDAQ Stock
Market, LLC, any state securities commission or other governmental
or regulatory agency, which actions, suits or proceedings,
individually or in the aggregate, might prevent or might reasonably
be expected to, individually or in the aggregate, have a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor, to the
Company’s knowledge, any director or officer thereof, is or
has been the subject of any actions, suits or proceedings pending
or, to the Company’s knowledge, threatened involving a claim
of violation of or liability under federal or state securities laws
or a claim of breach of fiduciary duty. No labor disturbance by the
employees of the Company or any Subsidiary exists or, to the
Company’s knowledge, is imminent which might reasonably be
expected to have a Material Adverse Effect. Neither the Company nor
any Subsidiary is a party to or subject to the provisions of any
material injunction, judgment, decree or order of any court,
regulatory body, administrative agency or other governmental
body.
4.11
Regulatory Permits . The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in
the SEC Documents, except where the failure to possess such permits
could not have or reasonably be expected to result in a Material
Adverse Effect (“ Material Permits ”),
and neither the Company nor any Subsidiary has received any notice
of proceedings relating to the revocation or modification of any
Material Permit.
4.12
Properties . Each of the Company and its Subsidiaries has
good and marketable title to all the properties and assets
reflected as owned by it in the consolidated financial statements
included in the 2008 Form 10-K, in each case free and clear of all
Liens of any kind except (i) those, if any, reflected in such
consolidated financial statements, or (ii) those which,
individually or in the aggregate, would not have a Material Adverse
Effect. The properties described in the 2008 Form 10-K as being
leased by the Company or any Subsidiary, are held under valid and
binding leases with such exceptions as do not materially interfere
with the use made or proposed to be made of such property by the
Company or such subsidiary.
4.13
No Material Change . Since June 30, 2008, except as
disclosed in the SEC Documents or the Disclosure Materials,
(i) neither the Company nor any Subsidiary has incurred any
material liabilities or obligations, indirect, or contingent, or
entered into any material verbal or written agreement or other
transaction which is not in the ordinary course of business or
which could reasonably be expected to result in a material
reduction in the future earnings of the Company; (ii) neither
the Company nor any Subsidiary has incurred any liabilities not
(a) required to be reflected in the Company’s financial
statements pursuant to accounting principles generally accepted in
the United States of America or (b) required to be disclosed
in
7
filings made
with the SEC; (iii) neither the Company nor any Subsidiary has
altered its method of accounting; (iv) neither the Company nor
any Subsidiary has sustained any material loss or interference with
its respective businesses or properties from fire, flood,
windstorm, accident or other calamity not covered by insurance;
(v) the Company has not paid or declared any dividends or
other distributions with respect to its capital stock and neither
the Company nor any Subsidiary is in default in the payment of
principal or interest on any outstanding debt obligations;
(vi) there has not been any change in the capital stock of the
Company, other than the sale of the Securities hereunder and shares
or options issued pursuant to employee equity incentive plans or
purchase plans approved by the Company’s Board of Directors,
or indebtedness material to the Company (other than in the ordinary
course of business); and (vii) there has not been any material
adverse change in the condition (financial or otherwise), assets,
properties, business, prospects or results of operations of the
Company. The Company does not have pending before the SEC any
request for confidential treatment of information.
4.14
Intellectual Property . The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications,
patent rights, inventions, trademarks (both registered and
unregistered), trademark applications, service marks, trade names,
trade secrets, inventions, copyrights, licenses, know-how and other
similar intellectual property rights necessary or material for use
in connection with their respective businesses and which the
failure to so have could have a Material Adverse Effect
(collectively, the “ Intellectual Property
Rights ”). Neither the Company nor any Subsidiary has
received a notice (written notice or otherwise), and has no
knowledge, that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of
any others. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing
infringement of any of the Intellectual Property Rights of others.
The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all
of their intellectual properties, except where failure to do so
could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
4.15
Compliance . The Company has not been advised, and has no
reason to believe, that it is not conducting its business in
compliance with all applicable laws, rules and regulations of the
jurisdictions in which it is conducting business, including,
without limitation, all applicable local, state and federal
environmental laws and regulations; except where failure to be so
in compliance would not have a Material Adverse Effect.
4.16
Taxes . The Company has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or
accrued all taxes shown as due thereon, to the extent such taxes
have become due, except where the failure to so file would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. The Company has no knowledge of a tax
deficiency which has been or might be asserted or threatened
against it that would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
4.17
Transfer Taxes . On the Closing Date, all stock transfer or
other taxes (other than income taxes) which are required to be paid
in connection with the sale and transfer of the Securities to be
sold to each Purchaser hereunder will be, or will have been, fully
paid or provided for by the Company and all laws imposing such
taxes will be or will have been fully complied with.
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4.18
Disclosure Controls and Procedures . Except as disclosed in
the SEC Documents, the Company has established and maintains
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) that are designed to ensure
that material information relating to the Company and its
Subsidiaries is made known to the Company’s principal
executive officer and principal financial officer by others within
those entities; and such disclosure controls and procedures are
effective in all material respects to perform the functions for
which they were established. The Company is not aware of any change
in its internal control over financial reporting that has occurred
during its most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.
4.19
Accounting Controls . Except as disclosed in the SEC
Documents, the Company maintains a system of accounting controls
sufficient to provide reasonable assurances that (i) transactions
are executed in accordance with management’s general or
specific authorization, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with
generally accepted accounting principles as applied in the United
States and to maintain accountability for assets, (iii) access
to assets is permitted only in accordance with management’s
general or specific authorization, and (iv) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect
to any differences.
4.20
Investment Company . The Company is not an “investment
company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for
an investment company, within the meaning of the Investment Company
Act of 1940, as amended.
4.21
No General Solicitation; Offering Materials . Neither the
Company, nor any of its affiliates (as such term is defined in the
Exchange Act), nor any person acting on its behalf, has engaged in
any form of general solicitation or general advertising (within the
meaning of Regulation D promulgated under the Securities Act)
in connection with the offer or sale of the Securities. The Company
has not distributed any offering material in connection with the
offering and sale of the Securities. The Company has not in the
past nor will it hereafter take any action independent of the
Placement Agent to sell, offer for sale or solicit offers to buy
any securities of the Company which would bring the offer, issuance
or sale of the Securities, as contemplated by this Agreement,
within the provisions of Section 5 of the Securities Act,
unless such offer, issuance or sale was or shall be within the
exemptions of Section 4 of the Securities Act.
4.22
Private Placement . No registration under the Securities Act
is required for the offer and sale of the Securities by the Company
to the Purchasers as contemplated hereby. The issuance and sale of
the Securities hereunder does not contravene the rules and
regulations of The NASDAQ Stock Market LLC.
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4.23
Disclosure . As of the date of this Agreement, all
disclosure provided to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, including the
Disclosure Schedules to this Agreement and the Disclosure
Materials, furnished by or on behalf of the Company with respect to
the representations and warranties made herein are true and correct
with respect to such representations and warranties and do not
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made,
not misleading. The Company acknowledges and agrees that no
Purchaser makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than those
specifically set forth in Section 5 hereof.
Notwithstanding the provisions of this Section 4.23 ,
the Company and its Subsidiaries shall not provide the Purchasers
or their agents or counsel with any information that constitutes or
might constitute material, nonpublic information without their
prior written consent other than as may be included in the
Disclosure Schedules to this Agreement and the Disclosure
Materials. The Company agrees that it will promptly disclose to the
public any such material, nonpublic information by the earlier of
(i) the date on which the Company files its Annual Report on
Form 10-K for the fiscal year ended June 30, 2009 (the
“2009 Form 10-K” ) with the SEC, and
(ii) the date on which the Company is required to file its
2009 Form 10-K with the SEC pursuant to the Exchange Act, including
any extension permitted pursuant to Rule 12b-25 under the
Exchange Act.
4.24
Insurance . The Company and its Subsidiaries maintain
insurance of the types and in the amounts as are prudent and
customary for their respective businesses, including, but not
limited to, insurance covering all real and personal property owned
or leased by the Company against theft, damage, destruction, acts
of vandalism and all other risks customarily insured against by
similarly situated companies, all of which is in full force and
effect.
4.25
Corrupt Practices . Neither the Company nor, to the
knowledge of the Company, any agent or other person acting on
behalf of the Company, has violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as amended,
including (i) directly or indirectly, using any corporate
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political
activity, (ii) making any unlawful payment to foreign or
domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds, or
(iii) failing to disclose fully any contribution made by the
Company or made by any person acting on its behalf and of which the
Company is aware in violation of law.
4.26
Price of Common Stock . The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly
or indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid
or agreed to pay to any person any compensation for soliciting
another to purchase any other securities of the Company, other
than, in the case of clauses (ii) and (iii), compensation paid
to the Placement Agent in connection with the placement of the
Securities.
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4.27
Transactions with Affiliates . Except as disclosed in the
SEC Documents, none of the officers or directors of the Company is
presently a party to any transaction with the Company or any
Subsidiary (other than as holders of stock options and/or warrants,
and for services as 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 or director or, to the Company’s knowledge,
any entity in which any officer or director has a substantial
interest or is an officer, director, trustee or partner.
4.28
Employee Relations . The Company is not involved in any
union labor dispute nor, to the Company’s knowledge, is any
such dispute threatened. The Company is not a party to a collective
bargaining agreement, and the Company believes that its relations
with its employees are good. No executive officer (as defined in
Rule 501(f) of the Securities Act) of the Company has notified the
Company that such officer intends to leave the employ of the
Company or otherwise terminate such officer’s employment with
the Company. To the Company’s knowledge, no executive officer
of the Company, as a consequence of his or her employment by the
Company is, or is now expected to be, in violation of any material
term of any agreement, covenant or contract (including any
employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant with any previous
employer), and the continued employment of each such executive
officer by the Company will not subject the Company to any
liability with respect to any of the foregoing matters. The Company
and its Subsidiaries are in compliance with all U.S. federal,
state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of
employment and 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.
4.29
Application of Takeover Protection . Assuming the accuracy
of, and compliance with, the Purchaser’s representations,
warranties and covenants herein, the execution and delivery of this
Agreement and the Warrants and the consummation of the transactions
contemplated hereby and thereby will not impose any restriction on
any Purchaser, or create in any party (including any current
stockholder of the Company) any rights, under any share
acquisition, business combination, poison pill (including any
distribution under a rights agreement), or other similar
anti-takeover provisions under the Company’s certificate of
incorporation, bylaws or other organizational documents or the laws
of its state of incorporation.
4.30
Public Announcements . Prior to Closing, no party shall make
any public announcement regarding the existence or terms of the
Agreement without the prior written consent of all of the parties,
other than as required by law. No later than 9:00 A.M., Eastern
Daylight Time, on the first trading day immediately following the
date hereof, the Company shall issue a press release reasonably
acceptable to the Purchasers’ counsel disclosing the material
terms of the transactions contemplated by this
Agreement.
4.31
NASDAQ Compliance and Listing . The Company’s Common
Stock is registered pursuant to Section 12(b) of the Exchange Act
and the Company’s outstanding shares of Common Stock are
listed on the NASDAQ Global Market. The Company has filed an
application with The NASDAQ Stock Market LLC to list the Conversion
Shares and Warrant
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Shares on the
NASDAQ Global Market, and has received notification that the
listing has been approved, subject to notice of issuance of such
shares. The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by
the Company or any Subsidiary under the Exchange Act or the
Securities Act.
4.32
No Integrated or Aggregated Offering . Neither the Company,
nor any person acting on its behalf, has, directly or indirectly,
made, or will make, any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would cause the offering of Securities contemplated by this
Agreement to be (i) integrated with prior offerings by the
Company for purposes of the Securities Act or (ii) aggregated
with prior offerings by the Company for the purposes of the rules
and regulations of the NASDAQ Global Market.
4.33
Seniority . As of the Closing, no indebtedness or other
equity of the Company is senior to the Convertible Preferred Stock
in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise, other than
(a) indebtedness secured by purchase money security interests
(which is senior only as to underlying assets covered thereby),
(b) capital lease obligations (which is senior only as to the
property covered thereby) and (c) the Company’s
obligations under the Revolving Credit and Term Loan Agreement,
dated as of April 30, 2008, among Peerless Mfg. Co., PMC
Acquisition, Inc., the Company, Comerica Bank, as administrative
agent for the lenders, and the other lenders party thereto, as such
credit facility may be amended, restated, modified, renewed,
replaced, supplemented or refinanced in whole or in part from time
to time (including successive amendments, restatements,
modifications, renewals, replacements, supplements or refinancings
and whether or not with the original administrative agent and
lenders or another administrative agent or agents or other lenders)
(the “ Credit Facility ”);
provided , that any such amendment, restatement,
modification, renewal, replacement, supplement or refinancing shall
not increase by more than ten (10) percent the aggregate
amount of the indebtedness and commitments covered thereby as of
the date hereof, or impose materially more restrictive limitations
on the payment of dividends on, or the redemption of, the Preferred
Stock, than those set forth therein as of the date hereof;
provided , further , that the modification of
financial or other covenants (other than the covenant set forth in
Section 8.5 of the Credit Facility on the date hereof with
respect to dividends and redemptions) or defaults, which has the
effect of making them more restrictive, shall be deemed (for
purposes of this Section 4.33 ) not to be an additional
restriction on the payment of dividends on, or the redemption of,
the Preferred Stock.
4.34
Registration . The Company satisfies the eligibility
requirements for the use of a registration statement on Form S-3 to
register the Conversion Shares and the Warrant Shares for resale by
the Purchasers under the Securities Act.
4.35
Shareholder Rights Plan . Assuming the accuracy of, and
compliance with, the Purchaser’s representations, warranties
and covenants herein, by reason of the Purchasers’
acquisition of Securities hereunder, no claim will be made or
enforced by the Company or, to the knowledge of the Company, any
other entity that any Purchaser is an “Acquiring
Person” under any shareholder rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that
any Purchaser could be deemed to trigger the provisions of any such
plan or arrangement, by virtue of receiving Securities under the
Agreement or the Warrants or under any other agreement between the
Company and the Purchasers.
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4.36
Acknowledgement Regarding Purchasers’ Trading Activity
. Anything in this Agreement or elsewhere herein to the contrary
notwithstanding (except for Section 5.10 hereof), it is
understood and agreed by the Company that none of the Purchasers
have been asked to agree, nor has any Purchaser agreed, to desist
from purchasing or selling, long and/or short, securities of the
Company, or “derivative” securities based on securities
issued by the Company or to hold the Securities for any specified
term. The Company further understands and acknowledges that
(a) one or more Purchasers may engage in hedging activities at
various times during the period that the Securities are
outstanding, including, without limitation, during the periods that
the value of the Conversion Shares and Warrant Shares deliverable
with respect to Securities are being determined and (b) such
hedging activities (if any) could reduce the value of the existing
stockholders’ equity interests in the Company at and after
the time that the hedging activities are being conducted. The
Company acknowledges that such aforementioned hedging activities do
not constitute a breach of the Agreement or the
Warrants.
4.37
Reimbursement . If any Purchaser becomes involved in any
capacity in any action, suit or proceeding by or against any
stockholder of the Company (except as a result of sales, pledges,
margin sales and similar transactions by such Purchaser to or with
any current stockholder), solely as a result of such
Purchaser’s acquisition of the Securities under this
Agreement, the Company will reimburse such Purchaser for its
reasonable legal and other ex
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