INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (this "AGREEMENT"),
dated as of November 4, 2005 by and
between Hybrid Fuel Systems, Inc., a
Georgia corporation (the "Company"), and
Dutchess Private Equities Fund, LP, a
Delaware limited partnership (the
"Investor").
Whereas, the parties desire that, upon the
terms and subject to the conditions
contained herein, the Investor shall invest
up to Five Million dollars
($5,000,000) to purchase the Company's
Common Stock, $0.001 par value per share
(the "Common Stock");
Whereas, such investments will be made in
reliance upon the provisions of
Section 4(2) under the Securities Act of
1933, as amended (the "1933 Act"), Rule
506 of Regulation D, and the rules and
regulations promulgated thereunder,
and/or upon such other exemption from the
registration requirements of the 1933
Act as may be available with respect to any
or all of the investments in Common
Stock to be made hereunder; and Whereas,
contemporaneously with the execution
and delivery of this Agreement, the parties
hereto are executing and delivering
a Registration Rights Agreement
substantially in the form attached hereto (as
amended from time to time, the
"Registration Rights Agreement") pursuant to
which the Company has agreed to provide
certain registration rights under the
1933 Act, and the rules and regulations
promulgated thereunder, and applicable
state securities laws.
NOW THEREFORE, in consideration of the
foregoing recitals, which shall be
considered an integral part of this
Agreement, the covenants and agreements set
forth hereafter, and other good and
valuable consideration, the receipt and
sufficiency of which is hereby
acknowledged, the Company and the Investor hereby
agree as follows:
SECTION 1. DEFINITIONS.
As used in
this Agreement, the following terms shall have the following
meanings specified or indicated below, and
such meanings shall be equally
applicable to the singular and plural forms
of such defined terms.
"1933 Act"
shall have the meaning set forth in the preamble of this
agreement.
"1934 Act"
shall mean the Securities Exchange Act of 1934, as it may be
amended.
"Affiliate" shall have the meaning specified in Section 5(h),
below.
"Agreement" shall mean this Investment Agreement.
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"Best Bid"
shall mean the highest posted bid price of the Common Stock.
"Buy In"
shall have the meaning specified in Section 6, below.
"Buy In
Adjustment Amount" shall have the meaning specified in Section
6.
"By-laws"
shall have the meaning specified in Section 4(c).
"Certificate of Incorporation" shall have the meaning specified in
Section
4(c).
"Closing"
shall have the meaning specified in Section 2(h).
"Closing Date"
shall mean no more than seven (7) Trading Days following
the Put Notice Date.
"Common
Stock" shall have the meaning set forth in the preamble of this
Agreement.
"Control"
or "Controls" shall have the meaning specified in Section 5(h).
"Covering
Shares" shall have the meaning specified in Section 6.
"Effective
Date" shall mean the date the SEC declares effective under the
1933 Act the Registration Statement
covering the Securities.
"Environmental Laws" shall have the meaning specified in Section
4(m).
"Execution
Date" shall mean the date indicated in the preamble to this
Agreement.
"Indemnities" shall have the meaning specified in Section 11.
"Indemnified Liabilities" shall have the meaning specified in
Section 11.
"Ineffective Period" shall mean any period of time that the
Registration
Statement or any Supplemental Registration
Statement (as defined in the
Registration Rights Agreement) becomes
ineffective or unavailable for use for
the sale or resale, as applicable, of any
or all of the Registrable Securities
(as defined in the Registration Rights
Agreement) for any reason (or in the
event the prospectus under either of the
above is not current and deliverable)
during any time period required under the
Registration Rights Agreement.
"Investor"
shall have the meaning indicated in the preamble of this
Agreement.
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"Material
Adverse Effect" shall have the meaning specified in Section
4(a).
"Maximum
Common Stock Issuance" shall have the meaning specified in
Section 2(I).
"Minimum
Acceptable Price" with respect to any Put Notice Date shall
mean
seventy-five percent (75%) of the lowest
closing bid prices for the ten (10)
Trading Day period immediately preceding
such Put Notice Date.
"Open
Period" shall mean the period beginning on and including the
Trading
Day immediately following the Effective
Date and ending on the earlier to occur
of (i) the date which is thirty-six (36)
months from the Effective Date; or (ii)
termination of the Agreement in accordance
with Section 9, below.
"Pricing
Period" shall mean the period beginning on the Put Notice Date
and ending on and including the date that
is five (5) Trading Days after such
Put Notice Date.
"Principal
Market" shall mean the American Stock Exchange, Inc., the
National Association of Securities Dealers,
Inc. Over-the-Counter Bulletin
Board, the NASDAQ National Market System or
the NASDAQ SmallCap Market,
whichever is the principal market on which
the Common Stock is listed.
"Prospectus" shall mean the prospectus, preliminary prospectus
and
supplemental prospectus used in connection
with the Registration Statement.
"Purchase
Amount" shall mean the total amount being paid by the Investor
on a particular Closing Date to purchase
the Securities.
"Purchase
Price" shall mean ninety-three percent (93%) of the lowest
closing Best Bid price of the Common Stock
during the Pricing Period.
"Put"
shall have the meaning set forth in Section 2(b)(1) hereof.
"Put
Amount" shall have the meaning set forth in Section 2(b)
hereof.
"Put
Notice" shall mean a written notice sent to the Investor by the
Company stating the Put Amount in U.S.
dollars, the Company intends to sell to
the Investor pursuant to the terms of the
Agreement and stating the current
number of Shares issued and outstanding on
such date.
"Put
Notice Date" shall mean the Trading Day immediately following the
day
on which the Investor receives a Put
Notice, however a Put Notice shall be
deemed delivered on (a) the Trading Day it
is received by facsimile or otherwise
by the Investor if such notice is received
prior to 9:00 am Eastern Time, or (b)
the immediately succeeding Trading Day if
it is received by facsimile or
otherwise after 9:00 am Eastern Time on a
Trading Day. No Put Notice may be
deemed delivered on a day that is not a
Trading Day.
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"Put
Restriction" shall mean the days between the beginning of the
Pricing
Period and Closing Date. During this time,
the Company shall not be entitled to
deliver another Put Notice.
"Registration Period" shall have the meaning specified in Section
5(c),
below.
"Registration Rights Agreement" shall have the meaning set forth in
the
recitals, above.
"Registration Statement" means the registration statement of the
Company
filed under the 1933 Act covering the
Common Stock issuable hereunder.
"Related Party" shall
have the meaning specified in Section 5(h).
"Resolution" shall have the meaning specified in Section 8(e).
"SEC"
shall mean the U.S. Securities & Exchange Commission.
---
"SEC
Documents" shall have the meaning specified in Section 4(f).
"Securities" shall mean the shares of Common Stock issued pursuant
to the
terms of the Agreement.
"Shares"
shall mean the shares of the Company's Common Stock.
"Sold
Shares" shall have the meaning specified in Section 6.
"Subsidiaries" shall have the meaning specified in Section
4(a).
"Trading
Day" shall mean any day on which the Principal Market for the
Common Stock is open for trading, from the
hours of 9:30 am until 4:00 pm.
"Transaction Documents" shall mean this Agreement, the Registration
Rights
Agreement, and each of the other agreements
entered into by the parties hereto
in connection with this Agreement.
SECTION 2. PURCHASE AND SALE OF COMMON
STOCK.
(A) PURCHASE AND SALE OF COMMON STOCK.
Subject to the terms and conditions set
forth herein, the Company shall issue and
sell to the Investor, and the Investor
shall purchase from the Company, up to that
number of Shares having an aggregate
Purchase Price of Five Million dollars
($5,000,000).
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(B) DELIVERY OF PUT NOTICES.
(I) Subject to the terms and conditions of
the Transaction Documents, and from
time to time during the Open Period, the
Company may, in its sole discretion,
deliver a Put Notice to the Investor which
states the dollar amount (designated
in U.S. Dollars) (the "Put Amount"), which
the Company intends to sell to the
Investor on a Closing Date (the "Put"). The
Put Notice shall be in the form
attached hereto as Exhibit C and
incorporated herein by reference. The amount
that the Company shall be entitled to Put
to the Investor (the "Put Amount")
shall be equal to, at the Company's
election, either: (A) Two Hundred percent
(200%) of the average daily volume (U.S.
market only) of the Common Stock for
the Three (3) Trading Days prior to the
applicable Put Notice Date, multiplied
by the average of the three (3) daily
closing bid prices immediately preceding
the Put Date, or (B) One Hundred Thousand
dollars ($100,000). During the Open
Period, the Company shall not be entitled
to submit a Put Notice until after the
previous Closing has been completed. The
Purchase Price for the Common Stock
identified in the Put Notice shall be equal
to ninety-three percent (93%) of the
lowest closing Best Bid price of the Common
Stock during the Pricing Period.
(C) RESERVED
(D) INVESTOR'S OBLIGATION TO PURCHASE
SHARES. Subject to the conditions set
forth in this Agreement, following the
Investor's receipt of a validly delivered
Put Notice, the Investor shall be required
to purchase from the Company during
the related Pricing Period that number of
Shares having an aggregate Purchase
Price equal to the lesser of (i) the Put
Amount set forth in the Put Notice, and
(ii) Twenty percent (20%) of the aggregate
trading volume of the Common Stock
during the applicable Pricing Period times
(x) the lowest closing bid price of
the Company's Common Stock during the
specified Pricing Period, but only if said
Shares bear no restrictive legend, are not
subject to stop transfer
instructions, pursuant to Section 2(h),
prior to the applicable Closing Date.
(E) Reserved
(F) CONDITIONS TO INVESTOR'S OBLIGATION TO
PURCHASE SHARES. Notwithstanding
anything to the contrary in this Agreement,
the Company shall not be entitled to
deliver a Put Notice and the Investor shall
not be obligated to purchase any
Shares at a Closing (as defined in Section
2(h)) unless each of the following
conditions are satisfied:
(I) a Registration Statement shall have
been declared effective and shall
remain effective and available for the resale of all the Registrable
Securities (as defined in the Registration Rights Agreement) at all times
until the Closing with respect to the
subject Put Notice;
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(II) at all times during the period
beginning on the related Put Notice Date
and ending on and including the related
Closing Date,
the Common Stock
shall
have been listed on the Principal Market and shall not have been
suspended
from trading thereon for a period of two
(2) consecutive
Trading Days
during
the Open Period and the Company
shall not have been
notified of any
pending
or threatened proceeding or other action to
suspend the trading of the Common
Stock;
(III) the Company has complied with its
obligations and is otherwise not in
breach of a material provision of, or in default under,
this Agreement,
the
Registration Rights Agreement or any other agreement
executed in
connection
herewith which has not been corrected prior
to delivery of the Put Notice Date;
(IV) no injunction shall have been issued
and remain in force, or action
commenced by a governmental authority which
has not been stayed or abandoned,
prohibiting the purchase or the issuance of
the Securities; and (V) the issuance
of the Securities will not violate any
shareholder approval requirements of the
Principal Market.
If any of the events described in clauses
(i) through (v) above occurs during a
Pricing Period, then the Investor shall
have no obligation to purchase the Put
Amount of Common Stock set forth in the
applicable Put Notice.
(G) RESERVED
(H) MECHANICS OF PURCHASE OF SHARES BY
INVESTOR. Subject to the satisfaction of
the conditions set forth in Sections 2(f),
7 and 8, the closing of the purchase
by the Investor of Shares (a "Closing")
shall occur on the date which is no
later than seven (7) Trading Days following
the applicable Put Notice Date (each
a "Closing Date"). Prior to each Closing
Date, (I) the Company shall deliver to
the Investor pursuant to this Agreement,
certificates representing the Shares to
be issued to the Investor on such date and
registered in the name of the
Investor; and (II) the Investor shall
deliver to the Company the Purchase Price
to be paid for such Shares, determined as
set forth in Sections 2(b) and 2(d).
In lieu of delivering physical certificates
representing the Securities and
provided that the Company's transfer agent
then is participating in The
Depository Trust Company ("DTC") Fast
Automated Securities Transfer ("FAST")
program, upon request of the Investor, the
Company shall use its commercially
reasonable efforts to cause its transfer
agent to electronically transmit the
Securities by crediting the account of the
Investor's prime broker (which shall
be specified by the Investor a reasonably
sufficient time in advance) with DTC
through its Deposit Withdrawal Agent
Commission ("DWAC") system.
The Company understands that a delay in the
issuance of Securities beyond the
Closing Date could result in economic loss
to the Investor. After the Effective
Date, as compensation to the Investor for
such loss, the Company agrees to pay
late payments to the Investor for late
issuance of Securities (delivery of
Securities after the applicable Closing
Date) in accordance with the following
schedule (where "No. of Days Late" is
defined as the number of trading days
beyond the Closing Date. The Amounts are
cumulative.):
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LATE PAYMENT FOR EACH
NO.OF DAYS LATE
$10,000 OF
COMMON STOCK
1
$100
2
$200
3
$300
4
$400
5
$500
6
$600
7
$700
8
$800
9
$900
10
$1,000
Over 10
$1,000 + $200 for each
Business Day late beyond 10 days
The Company shall pay any payments incurred
under this Section in immediately
available funds upon demand by the
Investor. Nothing herein shall limit the
Investor's right to pursue actual damages
for the Company's failure to issue and
deliver the Securities to the Investor,
except to the extent that such late
payments shall constitute payment for and
offset any such actual damages alleged
by the Investor, and any Buy In Adjustment
Amount.
(I) OVERALL LIMIT ON COMMON STOCK
ISSUABLE. Notwithstanding anything contained
herein to the contrary, if during the Open
Period the Company becomes listed on
an exchange that limits the number of
shares of Common Stock that may be issued
without shareholder approval, then the
number of Shares issuable by the Company
and purchasable by the Investor, including
the shares of Common Stock issuable
to the Investors, shall not exceed that
number of the shares of Common Stock
that may be issuable without shareholder
approval, subject to appropriate
adjustment for stock splits, stock
dividends, combinations or other similar
recapitalization affecting the Common Stock
(the "Maximum Common Stock
Issuance"), in excess of the Maximum Common
Stock Issuance shall first be
approved by the Company's shareholders in
accordance with applicable law and the
By-laws and Amended and Restated
Certificate of Incorporation of the Company, if
such issuance of shares of Common Stock
could cause a delisting on the Principal
Market. The parties understand and agree
that the Company's failure to seek or
obtain such shareholder approval shall in
no way adversely affect the validity
and due authorization of the issuance and
sale of Securities or the Investor's
obligation in accordance with the terms and
conditions hereof to purchase a
number of Shares in the aggregate up to the
Maximum Common Stock Issuance
limitation, and that such approval pertains
only to the applicability of the
Maximum Common Stock Issuance limitation
provided in this Section 2(I). SECTION
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3. INVESTOR'S REPRESENTATIONS, WARRANTIES
AND COVENANTS. The Investor represents
and warrants to the Company, and covenants,
that: (A) SOPHISTICATED INVESTOR.
The Investor has, by reason of its business
and financial experience, such
knowledge, sophistication and experience in
financial and business matters and
in making investment decisions of this type
that it is capable of (I) evaluating
the merits and risks of an investment in
the Securities and making an informed
investment decision; (II) protecting its
own interest; and (III) bearing the
economic risk of such investment for an
indefinite period of time.
(B) AUTHORIZATION; ENFORCEMENT. This
Agreement has been duly and validly
authorized, executed and delivered on
behalf of the Investor and is a valid and
binding agreement of the Investor
enforceable against the Investor in accordance
with its terms, subject as to
enforceability to general principles of equity and
to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation
and other similar laws relating to, or
affecting generally, the enforcement of
applicable creditors' rights and
remedies.
(C) SECTION 9 OF THE 1934 ACT. During the
term of this Agreement, the Investor
will comply with the provisions of Section
9 of the 1934 Act, and the rules
promulgated thereunder, with respect to
transactions involving the Common Stock.
The Investor agrees not to short, either
directly or indirectly through its
affiliates, principals or advisors, the
Company's common stock during the term
of this Agreement.
(D) ACCREDITED INVESTOR. Investor is an
"Accredited Investor" as that term is
defined in Rule 501(a)(3) of Regulation D
of the 1933 Act.
(E) NO CONFLICTS. The execution, delivery
and performance of the Transaction
Documents by the Investor and the
consummation by the Investor of the
transactions contemplated hereby and
thereby will not result in a violation of
Partnership Agreement or other
organizational documents of the Investor.
(F) OPPORTUNITY TO DISCUSS. The Investor
has received all materials relating to
the Company's business, finance and
operations which it has requested. The
Investor has had an opportunity to discuss
the business, management and
financial affairs of the Company with the
Company's management.
(G) INVESTMENT PURPOSES. The Investor is
purchasing the Securities for its own
account for investment purposes and not
with a view towards distribution and
agrees to resell or otherwise dispose of
the Securities solely in accordance
with the registration provisions of the
1933 Act (or pursuant to an exemption
from such registration provisions).
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(H) NO REGISTRATION AS A DEALER. The
Investor is not and will not be required to
be registered as a "dealer" under the 1934
Act, either as a result of its
execution and performance of its
obligations under this Agreement or otherwise.
(I) GOOD STANDING. The Investor is a
Limited Partnership, duly organized,
validly existing and in good standing in
the State of Delaware.
(J) TAX LIABILITIES. The Investor
understands that it is liable for its own tax
liabilities.
(K) REGULATION M. The Investor will comply
with Regulation M under the 1934 Act,
if applicable. SECTION 4. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY. Except
as set forth in the Schedules attached
hereto, or as disclosed on the Company's
SEC Documents, the Company represents and
warrants to the Investor that:
(A) ORGANIZATION AND QUALIFICATION. The
Company is a corporation duly organized
and validly existing in good standing under
the laws of the State of Georgia,
and has the requisite corporate power and
authorization to own its properties
and to carry on its business as now being
conducted. Both the Company and the
companies it owns or controls, its
"Subsidiaries," are duly qualified to do
business and are in good standing in every
jurisdiction in which its ownership
of property or the nature of the business
conducted by it makes such
qualification necessary, except to the
extent that the failure to be so
qualified or be in good standing would not
have a Material Adverse Effect. As
used in this Agreement, "Material Adverse
Effect" means any material adverse
effect on the business, properties, assets,
operations, results of operations,
financial condition or prospects of the
Company and its Subsidiaries, if any,
taken as a whole, or on the transactions
contemplated hereby or by the
agreements and instruments to be entered
into in connection herewith, or on the
authority or ability of the Company to
perform its obligations under the
Transaction Documents (as defined in
Section 1 and 4(b), below).
(B) AUTHORIZATION; ENFORCEMENT; COMPLIANCE
WITH OTHER INSTRUMENTS.
(I) The Company has the requisite corporate
power and authority to enter into
and perform this Agreement, the
Registration Rights Agreement, and each of the
other agreements entered into by the
parties hereto in connection with the
transactions contemplated by this Agreement
(collectively, the "Transaction
Documents"), and to issue the Securities in
accordance with the terms hereof and
thereof.
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(II) The execution and delivery of the
Transaction Documents by the Company and
the consummation by it, of the transactions
contemplated hereby and thereby,
including without limitation the
reservation for issuance and the issuance of
the Securities pursuant to this Agreement,
have been duly and validly authorized
by the Company's Board of Directors and no
further consent or authorization is
required by the Company, its Board of
Directors, or its shareholders.
(III) The Transaction Documents have been
duly and validly executed and
delivered by the Company.
(IV) The Transaction Documents constitute
the valid and binding obligations of
the Company enforceable against the Company
in accordance with their terms,
except as such enforceability may be
limited by general principles of equity or
applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or
similar laws relating to, or affecting
generally, the enforcement of creditors'
rights and remedies.
(C) CAPITALIZATION. As of the date hereof,
the authorized capital stock of the
Company consists of (i) 150,000,000 shares
of Common Stock, $0.001 par value per
share, of which as of the date hereof,
101,006,954 shares are issued and
outstanding; no shares of Preferred Stock
authorized; (as of June 30, 2005, and
21,775,000 shares reserved for issuance
pursuant to options, warrants and other
convertible securities. All of such
outstanding shares have been, or upon
issuance will be, validly issued and are
fully paid and nonassessable.
Except as disclosed in the Company's
publicly available filings with Periodic
Filings,
(I) no shares of the Company's capital
stock are subject to preemptive rights or
any other similar rights or any liens or
encumbrances suffered or permitted by
the Company; (II) there are no outstanding
debt securities; (III) there are no
outstanding shares of capital stock,
options, warrants, scrip, rights to
subscribe to, calls or commitments of any
character whatsoever relating to, or
securities or rights convertible into, any
shares of capital stock of the
Company or any of its Subsidiaries, or
contracts, commitments, understandings or
arrangements by which the Company or any of
its Subsidiaries is or may become
bound to issue additional shares of capital
stock of the Company or any of its
Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or
commitments of any character whatsoever
relating to, or securities or rights
convertible into, any shares of capital
stock of the Company or any of its
Subsidiaries; (IV) there are no agreements
or arrangements under which the
Company or any of its Subsidiaries is
obligated to register the sale of any of
their securities under the 1933 Act (except
the Registration Rights Agreement),
(V) there are no outstanding securities of
the Company or any of its
Subsidiaries which contain any redemption
or similar provisions, and there are
no contracts, commitments, understandings
or arrangements by which the Company
or any of its Subsidiaries is or may become
bound to redeem a security of the
Company or any of its Subsidiaries; (VI)
there are no securities or instruments
containing anti-dilution or similar
provisions that will be triggered by the
issuance of the Securities as described in
this Agreement; (VII) the Company
does not have any stock appreciation rights
or "phantom stock" plans or
agreements or any similar plan or
agreement; and (VIII) there is no dispute as
to the classification of any shares of the
Company's capital stock. The Company
has furnished to the Investor, or the
Investor has had access through EDGAR to,
true and correct copies of the Company's
Amended and Restated Certificate of
Incorporation, as in effect on the date
hereof (the "Certificate of
Incorporation"), and the Company's By-laws,
as in effect on the date hereof (the
"By-laws"), and the terms of all securities
convertible into or exercisable for
Common Stock and the material rights of the
holders thereof in respect thereto.
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(D) ISSUANCE OF SHARES. The Company has
reserved ________ Shares for issuance
pursuant to this Agreement has been duly
authorized and reserved for issuance
(subject to adjustment pursuant to the
Company's covenant set forth in Section
5(f) below) pursuant to this Agreement.
Upon issuance in accordance with this
Agreement, the Securities will be validly
issued, fully paid and non-assessable
and free from all taxes, liens and charges
with respect to the issue thereof. In
the event the Company cannot register a
sufficient number of Shares for issuance
pursuant to this Agreement, the Company
will use its best efforts to authorize
and reserve for issuance the number of
Shares required for the Company to
perform its obligations hereunder as soon
as reasonably practicable.
(E) NO CONFLICTS. The execution, delivery
and performance of the Transaction
Documents by the Company and the
consummation by the Company of the transactions
contemplated hereby and thereby will not
(I) result in a violation of the
Certificate of Incorporation, any
Certificate of Designations, Preferences and
Rights of any outstanding series of
preferred stock of the Company or the
By-laws; or (II) conflict with, or
constitute a material default (or an event
which with notice or lapse of time or both
would become a material default)
under, or give to others any rights of
termination, amendment, acceleration or
cancellation of, any material agreement,
contract, indenture mortgage,
indebtedness or instrument to which the
Company or any of its Subsidiaries is a
party, or to the Company's knowledge result
in a violation of any law, rule,
regulation, order, judgment or decree
(including United States federal and state
securities laws and regulations and the
rules and regulations of the Principal
Market or principal securities exchange or
trading market on which the Common
Stock is traded or listed) applicable to
the Company or any of its Subsidiaries
or by which any property or asset of the
Company or any of its Subsidiaries is
bound or affected. Except as disclosed in
Schedule 4(e), neither the Company nor
its Subsidiaries is in violation of any
term of, or in default under, the
Certificate of Incorporation, any
Certificate of Designations, Preferences and
Rights of any outstanding series of
preferred stock of the Company or the
By-laws or their organizational charter or
by-laws, respectively, or any
contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or
regulation applicable to the Company or
its Subsidiaries, except for possible
conflicts, defaults, terminations,
amendments, accelerations, cancellations
and violations that would not
individually or in the aggregate have a
Material Adverse Effect. The business of
the Company and its Subsidiaries is not
being conducted, and shall not be
conducted, in violation of any law,
statute, ordinance, rule, order or
regulation of any governmental authority or
agency, regulatory or
self-regulatory agency, or court, except
for possible violations the sanctions
for which either individually or in the
aggregate would not have a Material
Adverse Effect. Except as specifically
contemplated by this Agreement and as
required under the 1933 Act or any
securities laws of any states to the
Company's knowledge, the Company is not
required to obtain any consent,
authorization, permit or order of, or make
any filing or registration (except
the filing of a registration statement)
with, any court, governmental authority
or agency, regulatory or self-regulatory
agency or other third party in order
for it to execute, deliver or perform any
of its obligations under, or
contemplated by, the Transaction Documents
in accordance with the terms hereof
or thereof. All consents, authorizations,
permits, orders, filings and
registrations which the Company is required
to obtain pursuant to the preceding
sentence have been obtained or effected on
or prior to the date hereof and are
in full force and effect as of the date
hereof. Except as disclosed in Schedule
4(e), the Company and its Subsidiaries are
unaware of any facts or circumstances
which might give rise to any of the
foregoing. The Company is not, and will not
be, in violation of the listing
requirements of the Principal Market as in
effect on the date hereof and on each of
the Closing Dates and is not aware of
any facts which would reasonably lead to
delisting of the Common Stock by the
Principal Market in the foreseeable
future.
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<PAGE>
(F) SEC DOCUMENTS; FINANCIAL STATEMENTS. As
of the date hereof, the Company has
filed all reports, schedules, forms,
statements and other documents required to
be filed by it with the SEC pursuant to the
reporting requirements of the 1934
Act (all of the foregoing filed prior to
the date hereof and all exhibits
included therein and financial statements
and schedules thereto and documents
incorporated by reference therein being
hereinafter referred to as the "SEC
Documents"). The Company has delivered to
the Investor or its representatives,
or they have had access through EDGAR to,
true and complete copies of the SEC
Documents. As of their respective dates,
the SEC Documents complied in all
material respects with the requirements of
the 1934 Act and the rules and
regulations of the SEC promulgated
thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time
they were filed with the SEC,
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 light of the circumstances under which
they were made, not misleading. As of
their respective dates, the financial
statements of the Company included in the
SEC Documents complied as to form in all
material respects with applicable
accounting requirements and the published
rules and regulations of the SEC with
respect thereto. Such financial statements
have been prepared in accordance with
generally accepted accounting principles,
by a firm that is a member of the
Public Companies Accounting Oversight Board
("PCAOB") consistently applied,
during the periods involved (except (I) as
may be otherwise indicated in such
financial statements or the notes thereto,
or (II) in the case of unaudited
interim statements, to the extent they may
exclude footnotes or may be condensed
or summary statements) and fairly present
in all material respects the financial
position of the Company as of the dates
thereof and the results of its
operations and cash flows for the periods
then ended (subject, in the case of
unaudited statements, to normal year-end
audit adjustments). No other written
information provided by or on behalf of the
Company to the Investor which is not
included in the SEC Documents, including,
without limitation, information
referred to in Section 4(d) of this
Agreement, contains any untrue statement of
a material fact or omits to state any
material fact necessary to make the
statements therein, in the light of the
circumstance under which they are or
were made, not misleading. Neither the
Company nor any of its Subsidiaries or
any of their officers, directors, employees
or agents have provided the Investor
with any material, nonpublic information
which was not publicly disclosed prior
to the date hereof and any material,
nonpublic information provided to the
Investor by the Company or its Subsidiaries
or any of their officers, directors,
employees or agents prior to any Closing
Date shall be publicly disclosed by the
Company prior to such Closing Date.
(G) ABSENCE OF CERTAIN CHANGES. Except as
set forth in the SEC Documents, the
Company does not intend to change the
business operations of the Company in any
material way. The Company has not taken any
steps, and does not currently expect
to take any steps, to seek protection
pursuant to any bankruptcy law nor does
the Company or its Subsidiaries have any
knowledge or reason to believe that its
creditors intend to initiate involuntary
bankruptcy proceedings.
12
<PAGE>
(H) ABSENCE OF LITIGATION. Except as set
forth in the SEC Documents, there is no
action, suit, proceeding, inquiry or
investigation before or by any court,
public board, government agency,
self-regulatory organization or body pending
or, to the knowledge of the executive
officers of Company or any of its
Subsidiaries, threatened against or
affecting the Company, the Common Stock or
any of the Company's Subsidiaries or any of
the Company's or the Company's
Subsidiaries' officers or directors in
their capacities as such, in which an
adverse decision could have a Material
Adverse Effect.
(I) ACKNOWLEDGMENT REGARDING INVESTOR'S
PURCHASE OF SHARES. The Company
acknowledges and agrees that the Investor
is acting solely in the capacity of
arm's length purchaser with respect to the
Transaction Documents and the
transactions contemplated hereby and
thereby. The Company further acknowledges
that the Investor is not acting as a
financial advisor or fiduciary of the
Company (or in any similar capacity) with
respect to the Transaction Documents
and the transactions contemplated hereby
and thereby and any advice given by the
Investor or any of its respective
representatives or agents in connection with
the Transaction Documents and the
transactions contemplated hereby and thereby
is merely incidental to the Investor's
purchase of the Securities. The Company
further represents to the Investor that the
Company's decision to enter into the
Transact
