IN
MAKING AN INVESTMENT DECISION PURCHASERS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING
THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR
REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE
NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. PURCHASERS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
COMMON
STOCK WARRANT AND SERIES E PREFERRED STOCK
PURCHASE AGREEMENT
COMMON
STOCK WARRANT AND SERIES E PREFERRED STOCK
PURCHASE AGREEMENT
This Common Stock Warrant
and Series E Preferred Stock Purchase Agreement
(the “Agreement”) is made as of the 12
th
day of
February, 2009 (the “Effective Date”), by and among
Xata
Corporation , a Minnesota corporation (the
“Company”) and each of those persons and entities,
severally and not jointly, listed as a Purchaser on the Schedule of
Purchasers attached as Exhibit 2.1 hereto (each, a
“Purchaser” and collectively, the
“Purchasers”).
In
consideration of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt of which
is hereby acknowledged, the Company and each Purchaser (severally
and not jointly) hereby agree as follows:
SECTION
1. Authorization of Sale of
the Securities.
Subject
to the terms and conditions of this Agreement, the Company has, or
before the Initial Closing Date (as defined in Section 3) will
have, authorized (a) the sale and issuance of 1,355,857 shares
of its Series E Preferred Stock (the “Shares”)
having rights, preferences and privileges as set forth in the
Company’s Certificate of Designation of Preferences of
Series E Preferred Stock (the “Certificate of
Designation”) attached hereto as Exhibit 1 ,
(b) the issuance of shares of common stock (the “Common
Stock”) to be issued upon conversion of the Shares (the
“Conversion Shares”), (c) the issuance of warrants
to purchase 406,759 shares of Common Stock (the
“Warrants”) and (d) the issuance of shares of
Common Stock to be issued upon exercise of the Warrants (the
“Warrant Shares”). The Shares, the Conversion Shares,
the Warrants and the Warrant Shares shall be referred to herein as
the “Securities.”
SECTION
2. Agreement to Sell and
Purchase the Shares and the Warrants.
2.1 Sale of Shares. At each Closing (as defined in
Section 3), the Company will sell and issue to each Purchaser
participating in such Closing, and each Purchaser participating in
such Closing will purchase from the Company at a purchase price per
Share equal to $2.22, the number of Shares set forth next to such
Purchaser’s name on the Schedule of Purchasers attached
hereto as Exhibit 2.1 (the “Schedule of
Purchasers”).
2.2 Issuance of Warrants. At the Closing (as defined in
Section 3), the Company will sell and issue to each Purchaser
participating in such Closing, and each Purchaser participating in
such Closing will purchase from the Company a Warrant in the form
attached hereto at Exhibit 2.2 exercisable into the
number of Warrant Shares set forth next to such Purchaser’s
name on the Schedule of Purchasers with a purchase price equal to
$0.125 per Warrant Share.
1
SECTION
3. Closing and
Delivery.
3.1 Closing. The initial closing of the purchase and sale of
the Shares and the Warrants to be sold pursuant to this Agreement
shall be held immediately following the satisfaction of the closing
conditions contained herein, at the offices of Faegre & Benson
LLP, 2200 Wells Fargo Center, Minneapolis, Minnesota, or on such
other date and place as may be agreed to by the Company and the
Purchasers. The date of the closing of the initial purchase and
sale of the Shares and the Warrants is referred to herein as the
“Initial Closing Date”, and such closing is referred to
as the “Initial Closing.” The terms “Closing
Date” and “Closing” shall refer to the Initial
Closing Date and the Initial Closing and, in the event there are
one or more additional closings thereafter, shall also apply with
respect to each such subsequent closing (unless otherwise
specified).
3.2 Delivery of the Shares and the Warrants at the Closing.
At each Closing, the Company shall deliver to each Purchaser
participating in such Closing (i) a stock certificate
registered in the name of such Purchaser, or in such nominee
name(s) as designated by such Purchaser, representing the Shares to
be purchased by such Purchaser as set forth in the Schedule of
Purchasers and (ii) a Warrant registered in the name of such
Purchaser or in such nominee name(s) as designated by such
Purchaser representing the Warrant Shares issuable to such
Purchaser as set forth in the Schedule of Purchasers.
SECTION
4. Representations,
Warranties and Covenants of the Company.
Except
as set forth in the Schedule of Exceptions dated as of even date
herewith and provided to the Purchasers separately from this
Agreement, the Company hereby represents and warrants to, and
covenants with, the Purchasers as follows:
4.1 Organization and Qualification. Each of the Company and
each Subsidiary (as defined below) has been duly incorporated and
is a validly existing corporation in good standing under the laws
of the jurisdiction of its incorporation, with requisite corporate
power and authority to own its properties and conduct its business
as presently conducted. The Company and each Subsidiary are duly
qualified to do business as foreign corporations in good standing
in each jurisdiction in which their ownership or lease of property
or the conduct of their businesses require such qualification,
except where the failure to be so qualified would not have a
Material Adverse Effect on the Company. The Company has furnished
representatives of the Purchasers with correct and complete copies
of the charter and by-laws of the Company, both as amended and
currently in effect. Except as set forth in the Schedule of
Exceptions, the Company does not presently own, directly or
indirectly, any of the stock or other equity interests in any
entity other than GeoLogic Solutions, Inc. “Subsidiary”
shall mean any corporation or other entity of which a majority of
the capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other
persons performing similar functions are at the time directly or
indirectly owned by the Company. For the purposes of this
Agreement, a “Material Adverse Effect” means with
respect to the Company, any change or effect that is or reasonably
could be materially adverse to the business, properties, results of
operations and condition (financial or other) or anticipated future
results of operations or condition (financial or other) of the
Company and the Subsidiaries, or that has or reasonably could have
a material adverse effect on the transactions contemplated by this
Agreement.
2
(a) The authorized capital stock of the Company consists of
25,000,000 shares of Common Stock, par value $0.01 per share and
10,000,000 shares of preferred stock, with no stated par value, of
which (1) 8,775,769 shares of Common Stock are issued and
outstanding, (2) 2,250,000 shares of the preferred stock are
designated as Series B Preferred Stock, 1,964,429 of which are
issued and outstanding, (3) 1,400,000 shares of the preferred
stock are designated as Series C Preferred Stock, 1,269,036 of
which are issued and outstanding, (4) 1,600,000 shares of the
preferred stock are designated as Series D Preferred Stock,
1,566,580 of which are issued and outstanding (5) options to
purchase 0 shares of Common Stock are outstanding under the
Company’s 1991 Long Term Incentive and Stock Option Plan and
no additional shares of Common Stock available for issuance
pursuant to such plan, (6) options to purchase 0 shares of
Common Stock are outstanding under the Company’s 2001 Interim
Incentive and Stock Option Plan and no additional shares of Common
Stock available for issuance pursuant to such plan,
(7) options to purchase 459,000 shares of Common Stock are
outstanding under the Company’s 2002 Long Term Incentive and
Stock Option Plan and no additional shares of Common Stock are
available for issuance pursuant to such plan, (8) options to
purchase 2,248,322 shares of Common Stock are outstanding under the
Company’s 2007 Long-term Incentive Stock Option Plan and an
additional 591,236 shares of Common Stock are available for
issuance pursuant to such plan, (9) options to purchase an
additional 190,000 shares of Common Stock are outstanding, which
options were issued outside of any equity incentive plan of the
Company, (10) 1,544,119 shares of Common Stock have been
reserved for issuance upon the exercise of outstanding warrants to
purchase Common Stock (excluding the Warrants), (11) 158,706
shares of Common Stock have been reserved for issuance upon the
conversion of Senior Subordinated Convertible Promissory Notes
issued by the Company on January 31, 2008, in connection with
the acquisition of GeoLogic Solutions, Inc., and
(12) 1,400,000 shares of the preferred stock are designated as
Series E Preferred Stock, none of which are issued or outstanding
prior to the Initial Closing Date. Other than the Series B,
Series C, Series D or Series E Preferred Stock,
there are no other authorized or designated series of preferred
stock. The Series E Preferred Stock has the rights,
preferences and privileges set forth in the Certificate of
Designation. All outstanding shares of the Company have been duly
authorized, validly issued, fully paid and are non-assessable and
free of any liens or encumbrances created by the Company. Other
than as contemplated by this Agreement (including the Exchange
Agreement and the Investor Rights Agreement) or under the stock
plans described in this Section 4.2(a), and except as
described in this Section 4.2, there are no other options,
warrants, calls, rights, commitments, preemptive rights, rights of
first refusal or other rights or agreements to which the Company is
a party or by which it is bound obligating the Company to issue,
deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital
stock of the Company or obligating the Company to grant, extend or
enter into any such option, warrant, call, right, commitment or
agreement.
(b) All of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued and is fully
paid and nonassessable and is owned of record by the Company, free
and clear of any lien, charge, security interest, encumbrance or
claim.
4.3 Authorization of Securities. The Securities have been
duly authorized and when (i) the Shares have been delivered
and paid for in accordance with this Agreement,
(ii) the
3
Warrant
Shares have been delivered and paid for in accordance with the
Warrants, and (iii) the Conversion Shares have been delivered
in accordance with the Certificate of Designation, such Shares,
Warrant Shares and Conversion Shares will have been validly issued,
fully paid and non-assessable. None of the Securities are or will
be subject to any preemptive right or any right of refusal. The
Company has reserved for issuance a number of shares of Common
Stock that equals or exceeds (i) the number of shares of
Common Stock issuable upon conversion of outstanding preferred
stock and warrants to purchase capital stock of the Company, plus
(ii) the number of Conversion Shares (as of immediately
following all Closings hereunder), plus (iii) the number of
Warrant Shares issuable upon exercise of the Warrants (as of
immediately following all Closings hereunder).
4.4 Governmental Consents. No consent, approval,
authorization, or order of, or filing with, any governmental agency
or body or any court is required for the consummation of the
transactions contemplated by this Agreement in connection with the
issuance and sale of the Shares by the Company, except for the
filing of a Form D with the Securities and Exchange Commission
(the “SEC”) under the Securities Act of 1933, as
amended (the “Securities Act”), and such similar
filings as may be required following each Closing under state
securities laws.
4.5 Due Authorization, Execution and Delivery of Agreement,
Warrants and Amended and Restated Investor Rights Agreement.
This Agreement, the Warrants and the Amended and Restated Investor
Rights Agreement attached hereto as Exhibit 4.5 (the
“Investor Rights Agreement”) have been duly authorized,
executed and delivered by the Company. All corporate action on the
part of the Company and its directors and officers necessary for
the authorization, execution and delivery of this Agreement, the
Warrants and the Investor Rights Agreement, the performance of all
the Company’s obligations hereunder and thereunder and for
the authorization, issuance or reservation for issuance, sale and
delivery of the Securities has been taken, except only that the
Certificate of Designation, the form of which is attached hereto as
Exhibit 1 which has been duly approved by the Board of
Directors of the Company, has not yet been filed with the Secretary
of State of the State of Minnesota and will be so filed prior to
the Initial Closing. No approval by the stockholders of the Company
is required for the authorization, execution and delivery of this
Agreement, the performance of all the Company’s obligations
hereunder and thereunder and for the authorization, issuance or
reservation for issuance, sale and delivery of the Securities. This
Agreement, the Warrants and the Investor Rights Agreement
constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms,
subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, (ii) rules
of law governing specific performance, injunctive relief and other
equitable remedies, and (iii) the limitations imposed by
applicable law or public policy on provisions relating to indemnity
or contribution.
4.6 No Conflicts. The execution, delivery and performance of
this Agreement, the Warrants and the Investor Rights Agreement, and
the issuance and sale of the Securities, will not conflict with, or
result in a breach or violation of (i) any of the terms and
provisions of the charter or bylaws of the Company or any
Subsidiary, (ii) any statute, rule, regulation or order of any
governmental agency or body, any court, domestic or foreign, or any
self-regulatory organization having jurisdiction over the Company
or any Subsidiary or any of their respective properties, or
(iii) any of the terms and provisions of, or constitute a
default (with or without notice or lapse of time) under, or give to
any third party a right of termination, amendment,
4
acceleration
or cancellation (with or without notice or lapse of time) of, any
agreement or instrument to which the Company or any Subsidiary is a
party or by which the Company or any Subsidiary is bound or to
which any of the properties of the Company or any Subsidiary is
subject. The Company has full power and authority to authorize,
issue and sell the Securities as contemplated by this
Agreement.
4.7 Title to Assets. The Company and each Subsidiary have
good and marketable title to all real properties and all other
properties and assets owned by it that are material to the
operation of the business of the Company or each Subsidiary, in
each case free from liens and defects that would materially affect
the value thereof or materially interfere with the use made or to
be made thereof by them; and the Company and each Subsidiary hold
all leased real and personal property that are material to the
operation of their respective businesses under valid and
enforceable leases with no exceptions that would materially
interfere with the use made or to be made thereof by
them.
4.8 Permits. The Company and each Subsidiary possess all
certificates, authorizations and permits issued by appropriate
governmental agencies or bodies necessary to conduct the business
now operated by them and to own, lease, license and use their
respective properties in the manner so owned, leased, licensed and
used, except to the extent that the failure to so possess could not
individually or in the aggregate reasonably be expected to have or
result in a Material Adverse Effect. Neither the Company nor any
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization
or permit that, if determined adversely to the Company or the
Subsidiary would individually or in the aggregate have a Material
Adverse Effect.
4.9 Legal Actions. There are no pending legal, governmental
or administrative actions, suits or proceedings against or
affecting the Company or any Subsidiary or any of their respective
properties or any director, officer or employee (related to any
such person’s services as a director, officer or employee of
the Company or any Subsidiary) that, if determined adversely to the
Company or the Subsidiary would individually or in the aggregate
have a Material Adverse Effect, or could materially and adversely
affect the ability of the Company to perform its obligations under
this Agreement, or which are otherwise material in the context of
the sale of the Shares and the Warrants and, to the knowledge of
the Company’s executive officers, no such actions, suits or
proceedings are threatened or contemplated. Neither the Company nor
any Subsidiary has initiated and neither has any plan to initiate
any action, suit or proceeding.
4.10 Labor. No material labor dispute exists or, to the
knowledge of the Company’s executive officers, is imminent
with respect to any of the employees of the Company or any
Subsidiary.
4.11 No Violations. Neither the Company nor any Subsidiary
is (i) in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of
time could reasonably be expected to result in a default by the
Company or the 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 agreement or instrument to which
it is a party or by which it or any of its properties is bound,
(ii) in violation of any order of any court,
arbitrator,
5
governmental
body or self-regulatory organization, or (iii) in violation of
any statute, rule or regulation of any governmental authority or
self-regulatory organization, including, without limitation, any
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 would not, individually or in the aggregate, reasonably be
expected to have or result in a Material Adverse Effect.
4.12 Insurance. The Company maintains insurance and in such
coverage amounts as is customary in the business in which the
Company is engaged. The Company believes that such insurance is
sufficient against such losses and risks and in such amounts as are
reasonably necessary for the business in which the Company is
engaged.
4.13 Company Contracts. Except as filed under the SEC
Documents (defined below), neither the Company nor any Subsidiary
is a party to any material contract, as such contracts are defined
in Item 601(a)(10) of Regulation S-K under the Securities
Act (each such contract, a “Company Contract”). To the
knowledge of the executive officers of the Company, each Company
Contract is valid, binding and in full force and effect and is
enforceable by the Company or the Subsidiary in accordance with its
terms subject to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws affecting
creditors’ rights generally and to general equitable
principles. As of the date hereof, no party to any such Company
Contract has notified the Company or any Subsidiary that it intends
to terminate such Company Contract. The Company and each Subsidiary
have performed, in all respects, all obligations required to be
performed by it to date under the Company Contracts, as amended,
and neither the Company nor any Subsidiary is (with or without the
lapse of time or the giving of notice, or both) in breach or
default in any respect thereunder and, to the knowledge of the
executive officers of the Company, no other party to any of the
Company Contracts, as of the date hereof, is (with or without the
lapse of time or the giving of notice, or both) in breach or
default in any respect thereunder, except in each case to the
extent that such breach or default could not reasonably likely
result in a Material Adverse Effect.
4.14 SEC Documents. Reference is hereby made to all
registration statements, proxy statements and other statements,
reports, schedules, forms and other documents filed by the Company
or any affiliate of the Company with the SEC since January 1,
2008, including copies of all the exhibits referenced therein (the
“SEC Documents”). All statements, reports, schedules,
forms and other documents required to have been filed by the
Company with the SEC since January 1, 2008 have been so timely
filed and the Company is currently in compliance with its filing
obligations under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). As of their respective dates (or,
if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such amendment or superseding
filing): (i) each of the SEC Documents complied in all
material respects with the applicable requirements of the
Securities Act or the Exchange Act, as the case may be, and the
rules and regulations thereunder; and (ii) none of the SEC
Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not
misleading.
4.15 Related Party Transactions. Except as set forth in the
SEC Documents, none of the officers or directors of the Company
and, to the knowledge of the executive officers of the
6
Company,
none of the employees of the Company is presently a party to any
transaction with the Company (other than customary transactions
involving reasonable amounts 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 executive officers 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.
4.16 Financial Statements. The financial statements included
in the SEC Documents (the “Financial Statements”)
present fairly the financial position of the Company as of the
dates shown and its results of operations and cash flows for the
periods shown, and such Financial Statements have been prepared in
conformity with the generally accepted accounting principles in the
United States (“GAAP”) applied on a consistent basis
(except as may be indicated in the audit report or notes to such
Financial Statements or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC, and except that the unaudited
Financial Statements may not have contained footnotes and were
subject to normal and recurring year-end adjustments which were
not, or are not reasonably expected to be, individually or in the
aggregate, material in amount), and complied as to form in all
material respects with the published rules and regulations of the
SEC applicable thereto at the time of filing. Except as and to the
extent disclosed or reserved against in the Financial Statements
and the notes thereto, neither the Company nor any Subsidiary has
any liability, debt or obligation, whether accrued, absolute,
contingent or otherwise, and whether due or to become due which,
individually or in the aggregate, are material to the Company and
the Subsidiaries, taken as a whole. Neither the Company nor any
Subsidiary has incurred any liabilities, debts or obligations of
any nature whatsoever which are, individually or in the aggregate,
material to the Company and the Subsidiaries, taken as a whole,
other than those incurred in the ordinary course of its business,
other than as disclosed in the SEC Documents. The Financial
Statements present the Company and all Subsidiaries of the Company
on a consolidated basis, to the extent required by GAAP.
4.17 Receivables. The accounts receivable reflected on the
balance sheet of the Company as of September 30, 2008 in the
September 30, 2008 Financial Statements represent valid
obligations of customers of the Company arising from bona fide
transactions entered into in the ordinary course of business and,
to the knowledge of the Company, will be collected in full no later
than 90 days after the respective date on which each such
receivable is due (without any counterclaim or set off).
4.18 Intellectual Property. The Company and each Subsidiary
own or possess, or can acquire on reasonable terms that could not
individually or in the aggregate reasonably be expected to have a
Material Adverse Effect, sufficient legal rights to all patents,
patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
propriety or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively,
“Intellectual Property Rights”) necessary to conduct
its business as now operated by it and as currently proposed to be
operated by it. To the knowledge of the executive officers of the
Company, the methods, products, services, works, technologies,
systems and processes employed by the Company to conduct its
business do not infringe upon or misappropriate any Intellectual
Property Rights of any person or entity anywhere in the
world,
7
except
for Intellectual Property Rights which the Company can acquire on
reasonable terms that could not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect. No claims
or written notice (i) challenging the validity, effectiveness
or ownership by the Company or the Subsidiary of any of the
Intellectual Property Rights of the Company or the Subsidiary, or
(ii) to the effect that the use, distribution, licensing,
sublicensing, sale or any other exercise of rights in any product,
service, work, technology or process as now used or offered or
proposed for use, licensing, sublicensing, sale or other manner of
commercial exploitation by the Company or the Subsidiary infringes
or will infringe on any Intellectual Property Rights of any person
or entity have been asserted or, to the knowledge of the executive
officers of the Company, are threatened by any person or entity,
nor are there, to the knowledge of the executive officers of the
Company, any valid grounds for any bona fide claim of any such kind
except as can be cured by the Company by procurement of
Intellectual Property Rights which the Company can acquire on
reasonable terms that could not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect. There has
been no material default (nor does any set of circumstances exist
that will cause such a default) with respect to any license
granting Intellectual Property Rights to the Company or any
Subsidiary. No employee or third party is or has been infringing or
using without authorization any Intellectual Property Rights of the
Company or any Subsidiary. The Company and each Subsidiary use and
have used, best efforts to maintain the confidentiality of its
trade secrets.
4.19 Nasdaq Compliance. The Company is in compliance with
and will, upon each Closing and the issuance of the Shares and the
Warrants, be in compliance with the continued listing and
maintenance requirements of The Nasdaq Capital Market
(“Nasdaq”). The issuance of the Conversion Shares and
the Warrant Shares will be in compliance with the continued listing
and maintenance requirements of Nasdaq. The Company has no reason
to believe that it will not in the foreseeable future following
each Closing continue to be in compliance with all such listing and
maintenance requirements. The issuance and sale of the securities
hereunder does not contravene the rules and regulations of
Nasdaq.
(a) The Company and each Subsidiary have timely made or
filed all federal, state and foreign income and all other tax
returns, reports and declarations required by any jurisdiction to
which it is subject and have timely paid all taxes and other
governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith, and have
set aside on their books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid
taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local
tax. None of the Company’s or any Subsidiary’s tax
returns is presently being audited by any taxing
authority.
(b) All “nonqualified deferred compensation
plans” (within the meaning of Section 409A of the Code)
to which the Company is a party and which is subject to
Section 409A complies with the requirements of paragraphs (2),
(3) and (4) of Section 409A(a) by its
8
terms
and has been operated in accordance with such requirements during
all periods in which Section 409A is applicable. No event has
occurred that would be treated by Section 409A(b) as a
transfer of property for purposes of Section 83 of the Code.
The exercise price of all Company employee stock options is at
least equal to the fair market value of the Company Common Stock on
the date such options were granted, and the Company has not
incurred, and will not incur, any liability under Section 409A
of the Code upon the vesting of any such options based on the terms
and conditions applicable to the options as of the date of this
Agreement..
4.21 No Integration or General Solicitation. Neither the
Company nor any affiliate (as defined in Rule 501(b) of
Regulation D under the Securities Act) (an
“Affiliate”) of the Company has, directly, or through
any agent, (a) sold, offered for sale, solicited any offers to
buy or otherwise negotiated in respect of, any security (as defined
in the Securities Act) which is or will be integrated with the
sales of the Securities in a manner that would require the
registration under the Securities Act of the Securities; or
(b) offered, solicited offers to buy or sold the Securities in
any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in
any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act; and the Company will not
engage in any of the actions described in subsections (a) and
(b) of this paragraph.
4.22 No Registration. Subject to the accuracy of each of the
Purchaser’s representations herein, it is not necessary in
connection with the offer, sale and delivery of the Securities to
the several Purchasers in the manner contemplated by this Agreement
to register the Securities under the Securities Act or to qualify
the Company’s issuance of the Securities under applicable
state securities laws.
4.23 No Material Changes. Except as disclosed in the SEC
Documents, since September 30, 2008, (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 required to be disclosed in filings made with the SEC,
(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 and stock purchase plans. Except as disclosed
in the SEC Documents, since September 30, 2008, no material
off-balance sheet liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or required
to be disclosed in filings made with the SEC which could
individually or in the aggregate reasonably be expected to have a
Material Adverse Effect have been incurred. No material default
exists with respect to or under any obligations of the Company or
any Subsidiary to repay money borrowed (including, without
limitation, all notes payable and drafts accepted representing
extensions of credit, all obligations under letters of credit, all
obligations evidenced by bonds, debentures, notes or other similar
instruments and all obligations upon which interest charges are
customarily paid) and all contractual obligations (whether absolute
or contingent) of such entity to repurchase goods sold and
distributed or any instrument or agreement relating thereto and no
event or circumstance exists with respect thereto that (with notice
or the lapse of time or both) could give rise to such a
default.
9
4.24 Accounting Controls. The Company maintains a system of
internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset
accountability, (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 the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. Since
the date of the most recent evaluation of such internal accounting
controls, there has been no change in internal control over
financial reporting that occurred during the most recent fiscal
quarter that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over
financial reporting, including any corrective actions with regard
to significant deficiencies and material weaknesses.
4.25 Form S-3. The Company satisfies the requirements for
use of Form S-3 for registration of the resale of the Securities as
contemplated herein. There exist no facts or circumstances that
would prohibit or delay the preparation or initial filing of the
Registration Statement. The Company has filed registration
statements on Form S-3 covering the registration for resale of the
common stock issuable upon conversion of the Series B
Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock and any common stock issuable upon exercise of
warrants issued in connection therewith (the “Prior
Registration Statements”). The Prior Registration Statements
are effective under the Securities Act and no stop order preventing
or suspending the effectiveness of the Prior Registration
Statements or suspending or preventing the use of any related
prospectus has been issued by the SEC and no proceedings for the
purpose have been instituted or, to the knowledge of the Company,
are threatened by the SEC.
4.26 No Anti-Dilution Event. The issuance of the Securities
does not constitute an anti-dilution event for any existing
security holders of the Company, pursuant to which such security
holders would be entitled to additional securities or a reduction
in the applicable conversion price or exercise price of any
securities due to any issuance proposed to be conducted
hereunder.
4.27 Registration Rights. The Company has not granted or
agreed to grant any person or entity any rights (including
“piggy—back” registration rights) to require the
Company to file a registration statement under the Securities Act
with respect to any securities, or to include such securities with
the Securities in any registration statement, except for such as
have been satisfied or waived.
4.28 Investment Company Act. The Company is not, and upon
the issuance and sale of the Shares and the Warrants as herein
contemplated and the application of the net proceeds therefrom will
not be an “investment company” as such term is defined
in the Investment Company Act of 1940, as amended (the “1940
Act”). Furthermore, in the event that the SEC shall inform
the Company that the SEC believes that the Company is an
“investment company” as such term is defined in the
1940 Act, the Company shall manage its investments and promptly
take such other actions as is reasonably necessary such that the
SEC shall no longer consider the Company to be an “investment
company” as such term is defined in the 1940 Act.
10
4.29 Sarbanes-Oxley Act. The Company has established and
maintains disclosure controls and procedures (as such term is
defined in Rule 13a-14 under the 1934 Act), which (i) are
designed to ensure that material information relating to the
Company, including its consolidated subsidiaries, is made known to
the Company’s principal executive officer and its principal
financial officer by others within those entities, particularly
during the periods in which the periodic reports required under the
1934 Act are being prepared; (ii) provide for the periodic
evaluation of the effectiveness of such disclosure controls and
procedures as of the end of the period covered by the
Company’s most recent annual or quarterly report filed with
the SEC; and (iii) are effective in all material respects to
perform the functions for which they were established. Based on the
evaluation of its disclosure controls and procedures, the Company
is not aware of (i) any significant deficiency in the design
or operation of internal controls which could adversely affect the
Company’s ability to record, process, summarize and report
financial data or any material weaknesses in internal controls; or
(ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Company’s internal controls. The Chief Executive Officer and
the Chief Financial Officer of the Company have signed, and the
Company has furnished to the SEC, all certifications required by
Section 906 and Section 302 of the Sarbanes-Oxley Act of
2002 (the “Sarbanes-Oxley Act”); such certifications
contain no qualifications or exceptions to the matters certified
therein, except as to knowledge, and have not been modified or
withdrawn; and neither the Company nor any of its officers has
received notice from any governmental entity questioning or
challenging the accuracy, completeness, content, form or manner of
filing or submission of such certifications.
4.30 Audit Committee. The Company’s board of directors
has validly appointed an audit committee whose composition
satisfies the requirements of Rule 4350(d)(2) of the Rules of
the National Association of Securities Dealers, Inc. (the
“NASD Rules”) and the Company’s board of
directors and/or the audit committee has adopted a charter that
satisfies the requirements of Rule 4350(d)(1) of the NASD
Rules. The audit committee has reviewed the adequacy of its charter
within the past twelve months. Neither the Company’s board of
directors nor the audit committee has been informed, nor is any
director of the Company aware, of (1) any significant
deficiencies in the design or operation of the Company’s
internal controls which could adversely affect the Company’s
ability to record, process, summarize and report financial data or
any material weakness in the Company’s internal controls; or
(2) any fraud, whether or not material, that involves
management or other employees of the Company who have a significant
role in the Company’s internal controls.
4.31 Foreign Corrupt Practices Act. Neither the Company nor
any of its Subsidiaries has violated the Foreign Corrupt Practices
Act. Without limiting the foregoing, neither the Company nor any of
its Subsidiaries has, to obtain or retain business, directly or
indirectly offered, paid or promised to pay, or authorized the
payment of, any money or other thing of value to: (a) any
person or entitiy who is an official, officer, agent, employee or
representative of any governmental body or of any existing or
prospective customer (whether government owned or non-government
owned); (b) any political party or official thereof;
(c) any candidate for political or political party office; or
(d) any other person or entity while knowing or having reason
to believe that all or any portion of such money or thing of value
would be
11
offered,
given or promised, directly or indirectly, to any such official,
officer, agent, employee, representative, political party,
political party official, candidate or person or entity affiliated
with such customer, political party or official or political
office.
4.32 Loans to Officers and Directors. Since July 30,
2002, the Company has not, directly or indirectly, including
through any subsidiary, extended or maintained credit, or arranged
for the extension of credit, or renewed an extension of credit, in
the form of a personal loan to or for any of its directors or
executive officers in violation of Section 402 of the
Sarbanes-Oxley Act of 2002.
4.33 Employee Benefits. Except as disclosed in the SEC
Documents, a Change of Control (as defined below) will not (either
alone or upon the occurrence of any additional or subsequent
events) constitute an event that will or may result (either alone
or in connection with any other circumstance or event) in any
payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any
employee of the Company or any of its Subsidiaries or any Affiliate
of the Company.
4.34 Nasdaq Listing. The Common Stock has been approved for
listing subject to notice of issuance on Nasdaq. The Company has
taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange
Act or the quotation of the Common Stock on Nasdaq, nor has the
Company received any notification that the SEC or Nasdaq is
contemplating terminating such registration, listing or quotation.
Prior to the Initial Closing Date, the Company shall file with
Nasdaq a notice of listing of additional shares or other document
required by Nasdaq, if any, for the listing of the Conversion
Shares and the Warrant Shares with Nasdaq and shall provide
evidence of such filing to the Purchasers. The Company shall use
its best efforts to obtain the listing, subject to official notice
of issuance, of the Conversion Shares and Warrant Shares on Nasdaq
prior to the Initial Closing Date. So long as the Purchasers
beneficially own any Preferred Stock or Common Stock, the Company
shall maintain the listing of the Common Stock on Nasdaq or a
registered national securities exchange.
4.35 Qualified Small Business . The Company represents and
warrants to Purchasers that the Company is a “qualified small
business” within the meaning of Section 1202(d) of the
Internal Revenue Code of 1986, as amended (the “Code”),
as of the date hereof and the Shares should qualify as
“qualified small bu
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