Exhibit 10.1
ThermoEnergy
Corporation
Securities Purchase
Agreement
This Securities
Purchase Agreement (this “Agreement” ) is dated
as of ______________, 2009, by and between ThermoEnergy
Corporation, a Delaware corporation (the
“Company” ), and _____________________ (the
“Investor” ).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act (as defined below)
and Rule 506 promulgated thereunder, the Company desires to issue
and sell to the Investor, and the Investor desires to purchase from
the Company certain 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 the Investor agree as follows:
ARTICLE 1
Definitions
Section
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 indicated
in this Section 1.1:
“Action” means any action, suit, inquiry, notice of
violation, proceeding (including any partial proceeding such as a
deposition) or investigation pending or threatened in writing
against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator,
governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock
exchange or trading facility.
“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 144.
“Arkansas Courts”
has the meaning set forth in Section
7.9.
“Board” means the Board of Directors of the
Company.
“Business Day”
means any day except Saturday,
Sunday and any day which is a federal legal holiday or a day on
which banking institutions in the City of New York are authorized
or required by law or other governmental action to
close.
“Claim” has the meaning set forth in Section
4.6(c).
“Closing” means the closing of the purchase and sale of
Units pursuant to Article 2.
“Closing Date”
means the date on which the Closing
occurs.
“Commission” means the Securities and Exchange
Commission.
“Common Stock”
means the common stock of the
Company, par value $0.001 per share, and any securities into which
such common stock may hereafter be reclassified.
“Common Stock
Equivalents” means
any securities of the Company or any Subsidiary which entitle the
holder thereof to acquire Common Stock at any time, including
without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into
or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock or other securities that entitle the holder
to receive, directly or indirectly, Common Stock.
“Company Counsel”
means Nixon Peabody, LLP.
“Company Deliverables”
has the meaning set forth in Section
2.2(a).
“
Company Stock Options ” has the meaning set forth in
Section 3.1(g).
“Contingent Obligations”
has the meaning set forth in Section
3.1(r).
“
Convertible Securities ” has the meaning set forth in
Section 3.1(g).
“Cut
Back Shares” has
the meaning assigned thereto in Section 4.1(a).
“Effective Date”
means the date that any Registration
Statement filed pursuant to Article 4 is first declared effective
by the Commission.
“Effectiveness Period”
has the meaning set forth in Section
4.1(b).
“Environmental Law”
has the meaning set forth in Section
3.1(aa).
“ ERISA ” means the Employee
Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder.
“ERISA
Affiliate” means
any trade or business, whether or not incorporated, that together
with the Company would be deemed to be a single employer for
purposes of Section 4001 of ERISA or Sections 414(b), (c), (m), (n)
or (o) of the Internal Revenue Code of 1986, as amended.
“Evaluation Period”
has the meaning set forth in Section
3.1(r).
“Exchange Act”
means the Securities Exchange Act of
1934, as amended.
“Exempt Issuance”
means the issuance by the Company
(a) to employees, officers, directors of, and consultants to, the
Company of shares of Common Stock or options for the purchase of
shares of Common Stock pursuant to stock option or long-term
incentive plans approved by the Board, (b) of shares of Common
Stock upon the exercise of Warrants issued hereunder, (c) of shares
of Common Stock upon conversion of shares of Series A Preferred
Stock, (d) of shares of Common Stock upon exercise of Prior
Warrants or conversion of Prior Convertible Securities, (e) of
securities issued pursuant to acquisitions, licensing agreements,
or other strategic transactions, (f) of securities issued in
connection with equipment leases, real property leases, loans,
credit lines, guaranties or similar transactions approved by the
Board, (g) of securities issued in connection with join ventures or
similar strategic relationships approved by the Board, (h) of
securities in a merger, or (i) of securities in a public offering
registered under the Securities Act; provided that in the case of
securities issued pursuant clauses (e), (g) and (h), the
purpose of such issuance may not be primarily to obtain cash
financing.
“
Filing Date” means the date that is 120 days after the
Closing Date.
“Financing Notice”
has the meaning set forth in Section
5.5(b).
“GAAP” means generally accepted accounting principles
as in effect from time to time in the United States of
America.
“
Governmental Authority” has the meaning set forth in
Section 3.1(e).
“Hazardous Substance”
has the meaning set forth in Section
3.1(aa).
“Indebtedness”
has the meaning set forth in Section
3.1(r).
“Indemnified Party”
has the meaning set forth in Section
4.6(c).
“Indemnified Person”
has the meaning set forth in Section
4.6(a).
“Indemnifying Party”
has the meaning set forth in Section
4.6(c).
“Intellectual Property
Rights” has the
meaning set forth in Section 3.1(o).
“Investor Deliverables”
has the meaning set forth in Section
2.2(b).
“Lien” means any lien, charge, encumbrance, security
interest, right of first refusal or other restrictions of any
kind.
“Losses” has the meaning set forth in Section
5.7.
“Material Adverse Effect”
means any of (i) a material and
adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material and adverse effect on the
results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken
as a whole, or (iii) a material impairment of the Company’s
ability to perform on a timely basis its obligations under any
Transaction Document.
“NASD
Rules” has the
meaning set forth in Section 4.3(o).
“OFAC” has the meaning set forth in Section
3.1(ee).
“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”
has the meaning set forth in Section
3.1(s).
“Plan
of Distribution” has the meaning set forth in Section
4.2(o).
“Post-Effective
Amendment” means a
post-effective amendment to the Registration Statement.
“ Post-Effective Amendment Filing
Deadline ” means the seventh Business Day
after the Registration Statement ceases to be effective pursuant to
applicable securities laws due to the passage of time or the
occurrence of an event requiring the Company to file a
Post-Effective Amendment.
“Pre-Notice” has the meaning set forth in Section
5.5(b).
“
Prior Warrants ” has the meaning set forth in Section
3.1(g).
“Proceeding” means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
“
Prospectus” has the meaning set forth in Section
4.3.
“Proposed Financing”
has the meaning set forth in Section
5.5(a).
“Proposed Financing
Notice” has the
meaning set forth in Section 5.5(b).
“
Purchase Price” has the meaning set forth in Section
2.1.
“Registrable Securities”
means the Shares and the Warrant
Shares; provided, however, that the Investor shall not be required
to exercise the Warrants in order to have the Warrant Shares
included in any Registration Statement.
“Registration Period”
means the period commencing on the
date hereof and ending on the date on which all of the Registrable
Securities may be sold to the public without registration under the
Securities Act in reliance on Rule 144.
“Registration Statement”
means a registration statement filed
on the appropriate Form with, and declared effective by, the
Commission under the Securities Act and covering the resale by the
Investor of the Registrable Securities.
“Requested Information”
has the meaning set forth in Section
4.3(a).
“Restriction Termination
Date” has the
meaning assigned thereto in Section 4.1(a).
“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
415 Response Effort” has the meaning assigned thereto in Section
4.1(a).
“SEC
Objection” has the
meaning assigned thereto in Section 4.1(a).
“SEC
Restrictions” has
the meaning assigned thereto in Section 4.1(a).
“SEC
Reports” has the
meaning set forth in Section 3.1(h).
“Securities” means the Shares, the Warrant, and the Warrant
Shares.
“Securities Act”
means the Securities Act of 1933, as
amended.
“Series A Preferred
Stock” means the
shares of the preferred stock of the Company, par value $0.01 per
share, that have been designated as “Series A Convertible
Preferred Stock.”
“Shares” means the shares of Common Stock issuable to the
Investor at the Closing.
“Subsidiary” means any “significant subsidiary”
as defined in Rule 1-02(w) of Regulation S-X promulgated by the
Commission under the Exchange Act.
“Trading Day”
means (i) a day on which the Common
Stock is traded on a Trading Market, or (ii) if the Common Stock is
not listed on a Trading Market, a day on which the Common Stock is
traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (iii) if the Common Stock is not then listed or
quoted on the OTC Bulletin Board, a day on which the Common Stock
is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization
or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or
quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.
“Trading Market”
means whichever of the New York
Stock Exchange, the American Stock Exchange, the Nasdaq National
Market, or the Nasdaq Over-the-Counter Market on which the Common
Stock is listed or traded on the date in question.
“Transfer Agent”
has the meaning set forth in Section
5.1(c).
“Transaction Documents”
means this Agreement, the Warrant
and any other documents or agreements executed in connection with
the transactions contemplated hereunder.
“Unit” means a Unit consisting of one Share and a
Warrant to purchase one and one-third shares of Common Stock,
issued in combination.
“Warrants” means the Common Stock Purchase Warrants, in the
form of Exhibit A , which are issuable to the Investor
at the Closing.
“Warrant Shares”
means the shares of Common Stock
issuable upon exercise of the Warrants.
ARTICLE 2
Purchase and
Sale
Section 2.1. Issuance of
Securities at the Closing . Upon the terms and
subject to the conditions set forth in this Agreement, and in
accordance with applicable law, the Company agrees to sell to the
Investor, and the Investor agrees to purchase from the Company, for
the purchase price of $0.35 per Unit (the “Purchase
Price” ), on the Closing Date, ____________ Units, each
Unit to consist of (i) one Share and (ii) a Warrant to purchase
0.50 share of Common Stock.
Section 2.2.
Payment of Purchase Price . As
consideration for the issuance of the Securities being purchased at
each Closing, the Investor shall on the respective Closing Date pay
to the Company, by wire transfer or other form of immediately
available funds, an amount equal to applicable aggregate Purchase
Price for the Securities being purchased at such
Closing.
Section 2.3. Delivery of
Securities . At each Closing, the Company shall,
against payment by the Investor of the applicable Purchase Price,
(i) issue to the Investor the Warrants included in the Units being
purchased at such Closing and (ii) execute and deliver to the
transfer agent for the Common Stock irrevocable instructions to
issue to the Investor the number of Shares included in the Units
being purchased at such Closing.
Section 2.4.
Additional Closing Deliveries . At each
Closing, the Company shall deliver or cause to be delivered to the
Investor the following (the “Company
Deliverables” ):
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The legal
opinion of Company Counsel, in substantially the form of Exhibit
B hereto, addressed to the Investor;
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A copy of the
Certificate of Incorporation of the Company, together with all
amendments thereto, certified by the Secretary of State of the
State of Delaware as of a date not more than five Business Days
prior to the Closing Date;
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Copies of each
of the following documents, in each case certified by the Secretary
of the Company to be in full force and effect on the Closing
Date:
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resolutions of
the board of directors of the Company approving the execution,
delivery and performance of the Transaction Documents and the
transactions contemplated thereby;
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the By-laws of
the Company; and
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irrevocable
instructions to the Company’s transfer agent as to the
reservation and issuance of the Warrant Shares; and
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A good standing
certificate of the Company issued by the Secretary of State of the
State of Delaware dated as of a date no earlier than five Business
Days prior to the Closing Date.
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ARTICLE 3
Representations and
Warranties
Section
3.1. Representations and Warranties of the
Company . The Company hereby makes the following
representations and warranties to the Investor:
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Subsidiaries . The
Company has no direct or indirect Subsidiaries other than as
specified in the SEC Reports. Except as disclosed in the SEC
Reports, the Company owns, directly or indirectly, all of the
capital stock of each Subsidiary free and clear of any and all
Liens other than Liens disclosed in the SEC Reports, and all 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.
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Organization and Qualification
. Each of the Company and each Subsidiary is duly
incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on
its business as currently conducted. Neither the Company nor any
Subsidiary is in violation 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
each Subsidiary is duly qualified to conduct its respective
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, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect, and no proceedings have been instituted in any such
jurisdiction revoking, limiting or curtailing, or seeking to
revoke, such power and authority or qualification.
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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 thereunder. The execution and delivery of
each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have
been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon
delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
application.
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No
Conflicts . The
execution, delivery and performance of the Transaction Documents by
the Company and the consummation by the Company of the transactions
contemplated thereby 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, or give to
others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, or
result in the imposition of any Lien upon any of the material
properties or assets of the Company or of any Subsidiary pursuant
to, 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) result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset
of the Company or a Subsidiary is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect.
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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 (a “Governmental
Authority” ) or other Person in connection with the
execution, delivery and performance by the Company of the
Transaction Documents and the consummation of the transactions
contemplated thereby, other than (i) the filing of a Notice of Sale
of Securities on Form D with the Commission under Regulation D of
the Securities Act (ii) filings required under applicable state
securities laws, and (iii) the filing with the Commission of one or
more Registration Statements in accordance with the requirements of
Article 4 of this Agreement,.
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Issuance
of the Securities . The
Securities have been duly authorized. Each Share, when
issued and paid for in accordance with this Agreement, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens. Each Warrant, when issued and paid for in
accordance with this Agreement, will be duly and validly issued.
The Company has reserved and set aside from its duly authorized
capital stock a sufficient number of shares of Common Stock to
satisfy in full the Company’s obligations to issue the
Warrant Shares upon exercise of the Warrants. The
Warrants Shares, when issued and paid for upon exercise of the
Warrants in accordance with their terms, will be duly and validly
issued, fully paid and nonassessable, free and clear of all
Liens.
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Capitalization . The
authorized capital stock of the Company consists of 150,000,000
shares of Common Stock and 20,000,000 shares of Preferred Stock,
par value $0.01, of which 10,000,000 shares have been designed
Series A Preferred Stock and 10,000,000 shares are
undesignated. As of the close of business on the
Business Day immediately prior to the date hereof, (i) 208,334
shares of Series A Preferred Stock were issued and outstanding, all
of which are validly issued, fully-paid and non-assessable, (ii)
49,656,013 shares of Common Stock were issued and outstanding, all
of which are validly issued, fully-paid and non-assessable, (iii)
83,797 shares of Common Stock were held by the Company in Treasury,
(iv) 8,343,800 shares of Common Stock were reserved for issuance
upon exercise of outstanding options granted to employees,
directors, and consultants of the Company (the “ Company
Stock Options ”); (v) 28,062,657 shares of Common Stock
were reserved for issuance upon exercise of outstanding warrants to
purchase Common Stock (the “ Prior Warrants ”);
(vi) 208,334 shares of Common Stock were reserved for issuance upon
conversion of outstanding shares of Series A Preferred Stock, and
(vii) 13,329,398 shares of Common Stock were reserved for issuance
upon conversion of other convertible notes, debentures or
securities ( “Prior Convertible Securities
”). 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 pursuant to (i) the outstanding shares of
Series A Preferred Stock, (ii) the Company Stock Options, (iii) the
Prior Warrants or (iv) the Prior Convertible Securities, or as a
result of the purchase and sale of the Securities as contemplated
by this Agreement, there are no outstanding options, warrants,
script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or
obligations convertible into 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 issue 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 Investor) and will not
result in a right of any holder of Company securities to adjust the
exercise or conversion price under such securities. No further
approval or authorization of any stockholder, the Board of
Directors of the Company or any other Person 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.
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SEC
Reports; Financial Statements . The Company has filed all reports
required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the twelve months preceding the date hereof (the foregoing
materials, being collectively referred to herein as the
“SEC Reports” ). As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act
and the rules and regulations of the Commission promulgated
thereunder, 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 light of the circumstances under which
they were made, not misleading. 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 GAAP applied on a consistent basis
during the periods involved, except as may be otherwise specified
in such financial statements or the notes thereto, 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.
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Financial
Statements and Material Changes . Except as set forth in the SEC Reports
(including the financial statements included therein), (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 or
obligations (contingent or otherwise) other than (A) trade
payables, accrued expenses and other liabilities incurred in the
ordinary course of business consistent with past practice and (B)
liabilities incurred in the ordinary course of business not
required to be reflected in the Company’s financial
statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its
method of accounting or the identity of its auditors, (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.
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Litigation and Investigations
. There is no Action which (i) adversely affects
or challenges the legality, validity or enforceability of any of
the Transaction Documents or the Securities or (ii) except as
specifically disclosed in the SEC Reports, could, if there were an
unfavorable decision, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any Subsidiary, nor any director or officer
thereof (in his capacity as such), 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, except as specifically disclosed in the SEC Reports. There
has not been, and to the knowledge of the Company, there is not
pending any investigation by the Commission involving the Company
or any current or former director or officer of the Company (in his
or her capacity as such). 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. There are no
outstanding comments by the Staff of the Commission on any filing
by the Company or any Subsidiary under the Exchange Act or the
Securities Act.
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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.
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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 order of any court,
arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection,
occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect.
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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, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such
permits.
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Title to
Assets . The
Company and the Subsidiaries have good and marketable title in fee
simple to all real property owned by them that is material to their
respective businesses and good and marketable title in all personal
property owned by them that is material to their respective
businesses, in each case free and clear of all Liens, except for
Liens (i) that 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 or
(ii) have previously been disclosed to the Investor in writing. All
real property and facilities held under lease by the Company and
the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in
material compliance, except as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect.
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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, copyrights, licenses and other similar
rights that are 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, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect (collectively, the “Intellectual Property
Rights” ). No claims or Actions have been made or filed
by any Person against the Company to the effect that Intellectual
Property Rights used by the Company or any Subsidiary violate or
infringe upon the rights of such claimant. To the knowledge of the
Company, after commercially reasonable investigation, all of the
Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual
Property Rights.
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Insurance . The
Company and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. The Company has no reason
to believe that it will not be able to renew its and the
Subsidiaries’ 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 on terms
consistent with the market for the Company’s and such
Subsidiaries’ respective lines of business.
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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 a party to any
transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of
the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director,
trustee or partner.
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Sarbanes-Oxley; Internal Accounting
Controls . The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002 (including
the rules and regulations of the Commission adopted thereunder)
which are applicable to it as of the Closing Date. The
Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures as of
the filing date of the most recently filed periodic report under
the Exchange Act (such date, the “ Evaluation Date
”). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the
certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been
no significant changes in the Company’s internal controls (as
such term is defined in Item 307(b) of Regulation S-K under the
Exchange Act) or, to the Company’s knowledge, in other
factors that could significantly affect the Company’s
internal controls. The Company maintains a standard
system of accounting established and administered in accordance
with GAAP.
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Certain
Fees .
No brokerage or finder’s fees
or commissions are or will be payable by the Company to any broker,
financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement except to Merriman
Curhan Ford & Co. (the “Placement Agent” ).
The Investor shall have no obligation with respect to any fees or
with respect to any claims (other than such fees or commissions
owed by the Investor pursuant to written agreements executed by the
Investor which fees or commissions shall be the sole responsibility
of the Investor) made by or on behalf of the Placement Agent or any
other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by this
Agreement.
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Certain
Registration Matters . Assuming the accuracy of the Investor’s
representations and warranties set forth in Section 3.2(b)-(e), no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Investor under the
Transaction Documents.
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Investment Company
. The Company is not, and is not an Affiliate of,
and immediately following the Closing will not have become, an
“investment company” within the meaning of the
Investment Company Act of 1940, as amended.
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No
Additional Agreements . The
Company does not have any agreement or understanding with the
Investor with respect to the transactions contemplated by the
Transaction Documents other than as specified in the Transaction
Documents.
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Full
Disclosure . All disclosures provided to the Investor
regarding the Company, its business and the transactions
contemplated hereby, furnished by or on behalf of the Company
(including the Company’s representations and warranties set
forth in this Agreement) are true and correct in all material
respects 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.
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Environmental Matters
.
To the Company’s knowledge,
after commercially reasonable investigation: (i) the Company and
its Subsidiaries have complied with all applicable Environmental
Laws; (ii) the properties currently owned or operated by Company
(including soils, groundwater, surface water, buildings or other
structures) are not contaminated with any Hazardous Substances;
(iii) the properties formerly owned or operated by Company or its
Subsidiaries were not contaminated with Hazardous Substances during
the period of ownership or operation by Company and its
Subsidiaries; (iv) Company and its Subsidiaries are not subject to
liability for any Hazardous Substance disposal or contamination on
any third party property; (v) Company and its Subsidiaries have not
been associated with any release or threat of release of any
Hazardous Substance; (vi) Company and its Subsidiaries have not
received any notice, demand, letter, claim or request for
information alleging that Company and its Subsidiaries may be in
violation of or liable under any Environmental Law; and (vii)
Company and its Subsidiaries are not subject to any orders,
decrees, injunctions or other arrangements with any Governmental
Authority or subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or
relating to Hazardous Substances.
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As used in this
Agreement, the term “ Environmental Law ” means
any federal, state, local or foreign law, regulation, order,
decree, permit, authorization, opinion, common law or agency
requirement relating to: (A) the protection, investigation or
restoration of the environment, health and safety, or natural
resources; (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance or (C) noise, odor,
wetlands, pollution, contamination or any injury or threat of
injury to persons or property.
As used in this
Agreement, the term “ Hazardous Substance ”
means any substance that is: (i) listed, classified or regulated
pursuant to any Environmental Law; (ii) any petroleum product or
by-product, asbestos-containing material, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive materials or
radon; or (iii) any other substance which is the subject of
regulatory action by any Governmental Authority pursuant to any
Environmental Law.
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Taxes . The Company and its Subsidiaries
have filed all necessary federal, state and foreign income and
franchise tax returns when due (or obtained appropriate extensions
for filing) and have paid or accrued all taxes shown as due
thereon, and the Company has no knowledge of a tax deficiency which
has been or might be asserted or threatened against it or any
Subsidiary which would have a Material Adverse Effect.
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Private
Offering . Assuming the correctness of the
representations and warranties of the Investors set forth in this
Agreement, the offer and sale of the Convertible Notes and the
Warrants hereunder are, and upon (i) exercise of the Warrants, the
issuance of the Warrant Shares and (ii) upon conversion of the
Convertible Notes, the issuance of the Conversion Shares will be,
exempt from registration under the Securities Act. The
Company has offered the Convertible Notes and the Warrants for sale
only to the Investor.
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ERISA . Neither the Company nor any ERISA
Affiliate maintains, contributes to or has any liability or
contingent liability with respect to any employee benefit plan
subject to ERISA.
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Foreign
Assets Control Regulations and Anti-Money Laundering
.
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(i)
OFAC . Neither the issuance of the
Convertible Note and Warrant to the Investor, nor the use of the
respective proceeds thereof, shall cause the Investor to violate
the U.S. Bank Secrecy Act, as amended, and any applicable
regulations thereunder or any of the sanctions programs
administered by the U.S. Department of the Treasury’s Office
of Foreign Assets Control (“ OFAC ”) of the
United States Department of Treasury, any regulations promulgated
thereunder by OFAC or under any affiliated or successor
governmental or quasi-governmental office, bureau or agency and any
enabling legislation or executive order relating
thereto. Without limiting the foregoing, neither the
Company nor any Subsidiary (i) is a person whose property or
interests in property are blocked or subject to blocking pursuant
to Section 1 of Executive Order 13224 of September 23, 200l
Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg.
49079 (2001)), (ii) engages in any dealings or transactions
prohibited by Section 2 of such executive order, or is
otherwise associated with any such person in any manner violative
of Section 2, or (iii) is a person on the list of Specially
Designated Nationals and Blocked Persons or subject to the
limitations or prohibitions under any other OFAC regulation or
executive order.
(ii)
Patriot Act . The Company and each of its
Subsidiaries are in compliance, in all material respects, with the
USA PATRIOT Act. No part of the proceeds of the sale of
the Shares and the Warrants hereunder will be used, directly or
indirectly, for any payments to any governmental official or
employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or obtain
any improper advantage, in violation of the United States Foreign
Corrupt Practices Act of 1977, as amended.
Section 3.2. Representations
and Warranties of the Investor . The Investor
hereby represents and warrants to the Company as
follows:
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Authority . This
Agreement has been duly executed by the Investor, and when
delivered by the Investor in accordance with terms hereof, will
constitute the valid and legally binding obligation of the
Investor, enforceable against him in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable
principles of general application.
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Investment Intent . The
Investor is acquiring the Securities as principal for its own
account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof,
without prejudice, however, to the Investor’s right at all
times to sell or otherwise dispose of all or any part of such
Securities in compliance with applicable federal and state
securities laws. The Investor does not have any agreement or
understanding, directly or indirectly, with any Person to
distribute any of the Securities.
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Investor
Status . The
Investor is an “accredited investor” as defined in Rule
501(a) under the Securities Act and a “qualified
institutional buyer” as defined in Rule 144A under the
Securities Act. The Investor is not a registered
broker-dealer under Section 15 of the Exchange Act.
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Access to
Information . The
Invest
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