Exhibit 10.1
SECURITIES PURCHASE
AGREEMENT
This Securities Purchase Agreement
(this “ Agreement ”) is dated as of
October 15, 2009, between Cardium Therapeutics, 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:
ARTICLE I.
DEFINITIONS
1.1 Definitions . In addition
to the terms defined elsewhere in this Agreement, for all purposes
of this Agreement, the following terms have the meanings set forth
in this Section 1.1:
“ Acquiring Person
” shall have the meaning ascribed to such term in
Section 4.5.
“ Action ” shall
have the meaning ascribed to such term in
Section 3.1(j).
“ Affiliate ”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under
Rule 405 under the Securities Act.
“ Board of Directors
” means the board of directors of the Company.
“ Business Day ”
means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or
required by law or other governmental action to close.
“ Closing ” means
the closing of the purchase and sale of the Securities pursuant to
Section 2.1.
“ Closing Date ”
means 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, but in no event later than 3
Trading Days following the date hereof.
“ Commission ”
means the United States Securities and Exchange
Commission.
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“ Common Stock ”
means the common stock of the Company, par value $0.0001 per share,
and any other class of securities into which such securities may
hereafter be reclassified or changed.
“ Common Stock
Equivalents ” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at
any time Common Stock, including, without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that
is at any time convertible into or exercisable or exchangeable for,
or otherwise entitles the holder thereof to receive, Common
Stock.
“ Company Counsel
” means Sheppard Mullin Richter & Hampton LLP, with
offices located at 12275 El Camino Real, Suite 200, San Diego, CA
92130-2006.
“ 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, or consultants or
advisors to, 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 in connection with
acquisitions, sponsored research, collaborations, technology
license, development, marketing or other similar agreements or
strategic transactions approved by a majority of the disinterested
directors of the Company (the primary purpose of which is not to
raise equity capital), (d) shares of Common Stock by reason of
a stock split, combination or dividend, (e) securities issued
to banks, equipment lessors or other financial institutions in
connection with loans made to the Company, and (f) securities
issued to suppliers or third party service providers in connection
with the provision of goods or services (the primary purpose of
which is not to raise equity capital).
“ GAAP ” shall
have the meaning ascribed to such term in
Section 3.1(h).
“ Indebtedness ”
shall have the meaning ascribed to such term in
Section 3.1(z).
“ Intellectual Property
Rights ” shall have the meaning ascribed to such term in
Section 3.1(o).
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“ 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).
“ Participation Maximum
” shall have the meaning ascribed to such term in
Section 4.11(a).
“ Per Share Purchase
Price ” equals $1.30 , subject to adjustment for
reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock
that occur after the date of this Agreement and prior to the
Closing Date.
“ 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.
“ Placement Agent
” shall mean Dawson James Securities, Inc.
“ Pre-Notice ”
shall have the meaning ascribed to such term in
Section 4.11(b).
“ Pro Rata Portion
” shall have the meaning ascribed to such term in
Section 4.11(e).
“ Proceeding ”
means an action, claim, suit, investigation or
proceeding.
“ 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. 333-147947 which registers the sale
of the Shares, the Warrants and the Warrant Shares by the Company
to the Purchasers.
“ Required Approvals
” shall have the meaning ascribed to such term in
Section 3.1(e).
“ Rule 144 ”
means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
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“ Rule 424 ”
means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from
time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same purpose and effect
as such Rule.
“ SEC Reports ”
shall have the meaning ascribed to such term in
Section 3.1(h).
“ Securities ”
means the Shares, the Warrants and the Warrant Shares.
“ Securities Act
” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
“ Shares ” means
the shares of Common Stock issued or issuable to each Purchaser
pursuant to this Agreement.
“ Short Sales ”
means all “short sales” as defined in Rule 200 of
Regulation SHO under the Exchange Act (but shall not be deemed to
include the location and/or reservation of borrowable shares of
Common Stock).
“ Subscription Amount
” means, as to each Purchaser, the aggregate amount to be
paid for Shares and Warrants purchased hereunder as specified below
such Purchaser’s name on the signature page of this Agreement
and next to the heading “Subscription Amount,” in
United States dollars and in immediately available
funds.
“ Subsequent Financing
” shall have the meaning ascribed to such term in
Section 4.11(a).
“ Subsequent Financing
Notice ” shall have the meaning ascribed to such term in
Section 4.11(b).
“ Subsidiary ”
means any subsidiary of the Company as set forth on Schedule
3.1(a) , and shall, where applicable, also include any direct
or indirect subsidiary of the Company formed or acquired after the
date hereof.
“ Trading Day ”
means a day on which the principal Trading Market is open for
trading.
“ Trading Market
” means any of the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in
question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq
Global Market, the Nasdaq Global Select Market, or the New York
Stock Exchange (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.
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“ Transfer Agent
” means Computershare Trust Company, N.A., the current
transfer agent of the Company, with a mailing address of 350
Indiana Street, Suite 800, Golden, CO 80401 and a facsimile number
of 303.262.0700 and any successor transfer agent of the
Company.
“ Underwritten Public
Offering ” means an offering pursuant to any bona fide
firm commitment underwritten public offering with a recognized
underwriter where no investors are contacted privately prior to the
public announcement of such offering.
“ 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
after the 181 st day following the date hereof and have a term of
exercise equal to six 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 $6,000,000 of Shares and Warrants.
Each Purchaser shall deliver to the Company, via wire transfer or a
certified check of immediately available funds equal to such
Purchaser’s Subscription Amount as set forth on the signature
page hereto executed by such Purchaser 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.
2.2 Deliveries .
(a) On or prior to the Closing Date,
the Company shall deliver or cause to be delivered to each
Purchaser the following:
(i) this Agreement duly executed by
the Company;
(ii) a legal opinion of Company
Counsel, substantially in the form of Exhibit B attached
hereto;
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(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 65% of such Purchaser’s Shares,
with an exercise price equal to $1.40 , 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.
2.3 Closing Conditions
.
(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.
(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 when made and on the Closing Date of the representations
and warranties of the Company contained herein (unless as of a
specific date therein);
(ii) all obligations, covenants and
agreements of the Company required to be performed at or prior to
the Closing Date shall have been performed;
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(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 as set forth in the SEC
Reports or the Disclosure Schedules, which Disclosure Schedules
shall be deemed a part hereof and shall qualify any representation
or otherwise made herein to the extent of the disclosure contained
in the corresponding section of the Disclosure Schedules, the
Company hereby makes the following representations and warranties
to each Purchaser and the Placement Agent:
(a) Subsidiaries . All of the
direct and indirect subsidiaries of the Company are set forth on
Schedule 3.1(a) . The Company owns, directly or indirectly,
all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all of the issued and
outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive
and similar rights to subscribe for or purchase securities. If the
Company has no subsidiaries, all other references to the
Subsidiaries or any of them in the Transaction Documents shall be
disregarded.
(b) Organization and
Qualification . The Company and each of the Subsidiaries is an
entity 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. To the
Company’s knowledge, neither the Company nor any Subsidiary
is in violation nor default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and
the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the
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business conducted or property owned
by it makes such qualification necessary, except where the failure
to be so qualified or in good standing, as the case may be, could
not have or reasonably be expected to result in: (i) a
material adverse effect on the legality, validity or enforceability
of any Transaction Document, (ii) a material adverse effect on
the results of operations, assets, business, prospects or condition
(financial or otherwise) of the Company and the Subsidiaries, taken
as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a
timely basis its obligations under any Transaction Document (any of
(i), (ii) or (iii), a “ Material Adverse Effect
”) and, to the Company’s knowledge, 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 or any Subsidiary’s certificate or articles
of incorporation, bylaws or other organizational or charter
documents, or (ii) conflict with, or constitute a default (or
an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the
properties or assets of the Company or any Subsidiary, or give to
others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or
by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals,
to the knowledge of the Company, conflict with or result in a
violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is
subject (including federal
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and state securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably
be expected to result in a Material Adverse Effect.
(e) Filings, Consents and
Approvals . The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state,
local or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filings required
pursuant to Section 4.4 of this Agreement, (ii) the
filing with the Commission of the Prospectus Supplement,
(iii) application(s) to each applicable Trading Market for the
listing of the Securities for trading thereon in the time and
manner required thereby and (iv) such filings as are required
to be made under applicable state securities laws (collectively,
the “ Required Approvals ”).
(f) Issuance of the Securities;
Registration . The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and
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 December 19, 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 necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
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(g) Capitalization . The
capitalization of the Company is as set forth on Schedule
3.1(g) . 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. 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 a
result of the purchase and sale of the Securities, there are no
outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable
or exchangeable for, or giving any Person any right to subscribe
for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of
Common Stock or Common Stock Equivalents. 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 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
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with United States generally
accepted accounting principles applied on a consistent basis during
the periods involved (“ GAAP ”), except as may
be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Material Changes; Undisclosed
Events, Liabilities or Developments . Since the date of the
latest audited financial statements included within the SEC
Reports, except as specifically disclosed in a subsequent SEC
Report filed prior to the date hereof, (i) there has been no
event, occurrence or development that has had or that 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 or as set forth on
Schedule 3.1(i) , no event, liability, fact, circumstance,
occurrence or development has occurred or exists or is reasonably
expected to occur or exist with respect to the Company or its
Subsidiaries or their respective business, prospects, properties,
operations, assets or financial condition that would be required to
be disclosed by the Company under applicable securities laws at the
time this representation is made or deemed made that has not been
publicly disclosed at least 1 Trading Day prior to the date that
this representation is made.
(j) Litigation . There is no
action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an
“ Action ”) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) could, if
there were an unfavorable decision, have or reasonably be expected
to result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of
breach of fiduciary duty. There has not been, and to the knowledge
of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any
current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities
Act.
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(k) Labor Relations . No
material labor dispute exists or, to the knowledge of the Company,
is imminent with respect to any of the employees of the Company,
which could reasonably be expected to result in a Material Adverse
Effect. None of the Company’s or its Subsidiaries’
employees is a member of a union that relates to such
employee’s relationship with the Company or such Subsidiary,
and neither the Company nor any of its Subsidiaries is a party to a
collective bargaining agreement, and the Company and its
Subsidiaries believe that their relationships with their employees
are good. No executive officer, to the knowledge of the Company,
is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary
information agreement or non-competition agreement, or any other
contract or agreement or any restrictive covenant in favor of any
third party, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to
any liability with respect to any of the foregoing matters except
where such violations or continued employment could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. To the Company’s knowledge, 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.
(l) Compliance . Neither the
Company nor any Subsidiary: (i) is in default under or in
violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived),
(ii) is in violation of any judgment, decree or order of any
court, arbitrator or governmental body or (iii) is or has been
in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws applicable to its business and all
such laws that affect the environment, except in each case as could
not have or reasonably be expected to result in a Material Adverse
Effect.
(m) Regulatory Permits . The
Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except
where the failure to possess such permits could not reasonably be
expected to result in a Material Adverse Effect (“
Material Permits ”), and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
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(n) Title to Assets . The
Company and the Subsidiaries have good and marketable title in fee
simple to all real property owned by them and good and marketable
title in all personal property owned by them that is material to
the business of the Company and the Subsidiaries, in each case free
and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the
Company and the Subsidiaries and Liens for the payment of federal,
state or other taxes, the payment of which is neither delinquent
nor subject to penalties. Any real property and facilities held
under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases with which the
Company and the Subsidiaries are in compliance in all material
respects.
(o) Patents and Trademarks .
The Company and the Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights
necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the
“ Intellectual Property Rights ”). Neither the
Company nor any Subsidiary has received a notice (written or
otherwise) that any of the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property
Rights. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties, except where failure to do
so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(p) Insurance . The Company
and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts as are reasonably prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage at
least equal to the aggregate Subscription Amount. Neither the
Company nor any Subsidiary has knowledge of any facts or
circumstances which would cause the Company or such Subsidiary to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.
(q) Transactions With Affiliates
and Employees . Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of
the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the
13
knowledge of the Company, any entity
in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or
partner, in each case in excess of $120,000 other than for
(i) payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf
of the Company and (iii) other employee benefits, including
stock option agreements under any
