Exhibit 10.1
SECURITIES PURCHASE
AGREEMENT
This Securities
Purchase Agreement (this “ Agreement ”), dated
September 27, 2007, is entered into by and between Nova Biosource
Fuels, Inc., a Nevada corporation (the “ Company
”), and the purchaser identified on the signature page hereto
(the “ Purchaser ”).
RECITALS
A.
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/or Rule 506 of Regulation D promulgated thereunder, the Company
desires to issue and sell to the Purchaser, without registration
under the Securities Act, and the Purchaser desires to purchase
from the Company certain Securities (as defined below), as more
fully described in this Agreement.
B.
Contemporaneously with this Agreement, the Company intends to enter
into substantially identical agreements (the “ Other
Purchase Agreements ”) with other purchasers
(collectively with the Purchaser, the “ Purchasers
”) whose obligations with regard to the Company and under the
Transaction Documents (as defined below) will be several and not
joint with the obligations of any other Purchasers, including the
Purchaser.
C.
The Securities will be convertible into shares of the
Company’s Common Stock (as defined below), as more fully
described in this Agreement.
D.
The proceeds from the sale of the Securities contemplated hereby
will be used by the Company to fund the purchase price of the
acquisition of substantially all of the assets of Clinton County
Bio Energy, L.L.C., an Iowa limited liability company (the “
Clinton County Seller ”) pursuant to an Asset Purchase
Agreement (the “ Acquisition Agreement ”), dated
as of August 15, 2007, by and among Nova Biofuels Clinton County,
LLC, a Delaware limited liability company, the Clinton County
Seller, and certain members of the Clinton County Seller.
E.
The Company’s obligations under the Indenture shall be
unconditionally guaranteed, jointly and severally, on a senior
basis by each of the Guarantors (as defined below).
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
Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1
Definitions . In addition to the terms defined elsewhere in
this Agreement, for all purposes of this Agreement, the following
terms shall 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.
“ Asset
Purchase Agreement ” means the Asset Purchase Agreement
dated as of August 15, 2007 by and among Nova Biofuels Clinton
County, LLC, Clinton County Bio Energy, L.L.C. and the Members of
Clinton County Bio Energy, L.L.C.
“
Board ” means the board of directors of the
Company.
“
Business Day ” means any day except Saturday, Sunday
and any day which shall be a federal legal holiday or a day on
which banking institutions in the State of New York are authorized
or required by law or other governmental action to
close.
“
Closing ” means the closing of the purchase and sale
of the Securities pursuant to Article II .
“ Closing
Agent ” means Jefferies & Company, Inc., serving in
the capacity as closing agent.
“ Closing
Escrow Agreement ” means the Closing Escrow Agreement to
be entered into as of the date hereof, by and between the Company,
the Closing Agent and the Escrow Agent.
“
Collateral Agent ” means The Bank of New York Trust
Company, N.A.
“
Commission ” means the United States Securities and
Exchange Commission.
“ Common
Stock ” means the common stock of the Company, $0.001 par
value per share.
“
Conversion Shares ” means the shares of Common Stock
issuable upon conversion of the Securities, pursuant to their
terms.
“
Disclosure Materials ” has the meaning set forth in
Section 3.1(i).
“
Effective Date ” means the date that the Registration
Statement required by Section 2(a) of the Registration Rights
Agreement is first declared effective by the Commission.
“ Escrow
Agent ” means The Bank of New York Trust Company,
N.A.
“
Exchange Act ” means the Securities Exchange Act of
1934, as amended.
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“
Guarantee ” means the guarantee of the obligations of
the Company under the Securities, including the due and punctual
payment of interest on the Securities, jointly and severally, on a
senior basis, by each of the Guarantors.
“
Guarantors ” means Nova Holding Clinton County, LLC
and Nova Biofuels Clinton County, LLC.
“
Indenture ” means the Indenture to be dated as of the
date of the Closing between the Company, each of the Guarantors and
the Trustee, pursuant to which the Securities will be
issued.
“
Lien ” means any lien, charge, encumbrance, security
interest, right of first refusal or other restrictions of any
kind.
“
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 ” means Jefferies & Company,
Inc.
“ Pledge
Agreement ” means the Pledge Agreement to be entered into
as of the date of the Closing by and between the Company, the
Purchasers and the Collateral Agent.
“
Purchase Price ” means $1,000 for each $1,000 of
principal amount of Securities to be purchased by the Purchaser at
the Closing, which aggregate amount is set forth on Schedule A
hereto.
“
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.
“
Registration Rights Agreement ” means the Registration
Rights Agreement, dated as of the date of this Agreement, among the
Company and the Purchasers, in the form of Exhibit A
.
“
Registration Statement ” means a registration
statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Purchasers of the
Registrable Securities (as defined in the Registration Rights
Agreement).
“ 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.
“
Security Agreement ” means the Security Agreement to
be entered into as of the date of the Closing, by and between each
of the Guarantors, the Purchasers and the Collateral
Agent.
“
Security Documents ” means the Pledge Agreement, the
Security Agreement and all agreements, certificates and other
documents to be executed and delivered thereunder or in connection
therewith.
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“
Securities ” means the Company’s 10% Senior
Secured Convertible Notes due 2012.
“
Securities Act ” means the Securities Act of 1933, as
amended.
“
Subsidiary ” means any subsidiary, joint venture or
any entity in which the Company, directly or indirectly, owns
greater than 2% of the capital stock or equity or similar
interests.
“ 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
System, or (iii) if the Common Stock is not quoted on the OTC
Bulletin Board System, a day on which the Common Stock is quoted in
the over-the-counter market as reported by The Pink Sheets, LLC (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 Capital Market, The NASDAQ
Global Market or The NASDAQ Global Select Market on which the
Common Stock is listed or quoted for trading on the date in
question.
“
Transaction Documents ” means this Agreement, the
Registration Rights Agreement, the Indenture, the Security
Documents, the Other Purchase Agreements and any other documents or
agreements executed in connection with the transactions
contemplated hereunder.
“
Trustee ” means The Bank of New York Trust Company,
N.A.
ARTICLE II.
PURCHASE AND SALE
2.1
Closing . Subject to the terms and conditions set forth in
this Agreement, at the Closing the Company shall issue and sell to
the Purchaser, and the Purchaser shall purchase from the Company,
the number of Securities set forth on the signature page hereto.
The Closing shall take place on the date hereof (the “
Closing Date ”) at the offices of Jones Day, 222 East
41st Street, New York, New York 10017-6702 or at such other time
and location as the parties may agree.
2.2
Closing Deliveries and Conditions to Closing .
(a)
At the Closing, the Company shall deliver or cause to be delivered
to the Purchaser, and the obligations of the Purchaser to close the
purchase of the Securities shall be subject to the fulfillment or
satisfaction of, each of the following:
(i)
The Indenture duly executed by the Company, each of the Guarantors
and the Trustee and a note duly executed by the Company and
authenticated by the Trustee pursuant to the terms of the Indenture
evidencing the principal amount of Securities set forth below the
Purchaser’s name on the signature page hereto.
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(ii)
The Guarantees duly executed by each of the Guarantors pursuant to
the terms of the Indenture.
(iii)
The legal opinions of Woodburn & Wedge, special Nevada counsel
to the Company, and Baker & McKenzie LLP, special counsel to
the Company, each in agreed form, addressed to the Purchaser.
(iv)
The Registration Rights Agreement duly executed by the Company.
(v)
The Security Documents duly executed by the Company, each of the
Guarantors and the Collateral Agent, as applicable, and the Company
and each of the Guarantors shall have taken all actions required
thereunder to perfect the security interests to be granted under
the Security Documents.
(vi)
The representations and warranties made by the Company in Article
III shall be true and correct in all material respects (except for
those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the
Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date,
which shall be true and correct as of such specified date), all
covenants, agreements and conditions contained in this Agreement to
be performed or complied with by the Company and each of the
Guarantors prior to the Closing shall have been performed or
complied with (or waived by the Purchaser), and the Company and
each of the Guarantors shall have obtained any approvals, consents
and qualifications necessary to perform their respective
obligations hereunder.
(vii)
The Company shall have delivered to the Purchaser at the Closing a
certificate signed on its behalf by its Chief Executive Officer
certifying that the conditions specified in Section 2.2 hereof have
been fulfilled.
(viii)
At the Closing, the Company shall have delivered to the Purchaser
copies of each of the following, in each case certified by the
Secretary of the Corporation to be in full force and effect on the
date of the Closing:
(a)
the articles of incorporation of the Company and certificate of
formation for each of the Guarantors as of the Closing (which shall
be the Articles) certified by the Secretary of State of the State
of Nevada as of a date not more than ten (10) days prior to the
Closing;
(b)
a good standing certificate with respect to the Company and each of
the Guarantors certified by the Secretary of State of the requisite
entity’s state of incorporation or formation as of a date not
more than ten (10) days prior to the Closing;
(c)
the by-laws of the Company and operating agreement of each of the
Guarantors;
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(d)
resolutions of the board or directors, and, as necessary, the
shareholders of the Company, authorizing the execution, delivery
and performance of the Asset Purchase Agreement, the Transaction
Documents, and the transactions contemplated hereby and thereby,
including the issuance and sale of the Securities and the
reservation of the Conversion Shares; and
(e)
resolutions of the board of directors, and, as necessary, the
members of each of the Guarantors, authorizing the execution,
delivery and performance of the Asset Purchase Agreement,
Transaction Documents, as applicable, and the transactions
contemplated hereby and thereby.
(f)
a certificate with respect to the Company and each of the
Guarantors evidencing the Company’s and each of the
Guarantors’ qualification as a foreign corporation or limited
liability company, as applicable, and good standing issued by the
Secretary of State (or comparable office) of each jurisdiction in
which the Company and each of the Guarantors conduct business, as
of a date within 10 days of the Closing Date.
(x)
At the Closing, the Company shall pay (or reimburse the Purchaser
for) the fees and expenses of the Purchaser specified in Section
5.1 as payable by the Company.
(xi)
As of the Closing, the purchase of the Securities by the Purchaser
shall be legally permitted by all laws and regulations to which the
Purchaser, the Company and each of the Guarantors are subject.
(xii)
As of the Closing, all authorizations, approvals or permits of, or
filings with any governmental authority, including state securities
or “Blue Sky” offices, that are required by law in
connection with the lawful sale and issuance of the Securities,
including the conversion of the Securities into the Conversion
Shares, shall have been duly obtained by the Company, and shall be
effective as of the Closing.
(xiii)
All corporate and other proceedings in connection with the
transactions contemplated by the Transaction Documents, and all
documents and instruments incident to such transactions, shall be
satisfactory in form and substance to the Purchaser, and the
Purchaser shall have received at or prior to the Closing all such
documents as the Purchaser shall have requested.
(xiv)
The Company shall have received net proceeds in the aggregate from
the sale of the Securities to the Purchasers under this Agreement
and the Other Purchase Agreements in an amount not less than the
amount set forth on Schedule A hereto.
(xv)
The Acquisition shall have been consummated substantially as
contemplated by the Asset Purchase Agreement. Other than Permitted
Indebtedness (as defined in the Indenture), the Acquisition will be
consummated without the incurrence of any indebtedness by the
Company.
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(xvi)
The Securities shall have been approved for trading on the Private
Offerings, Resales and Trading through Automatic Linkages (“
PORTAL ”) system of the National Association of
Securities Dealers, Inc., subject only to notice of issuance at or
prior to the time of purchase.
(xvii) The
Company shall have delivered to the Purchaser lock-up agreements in
the form attached hereto as Exhibit B (the “
Lock-Up Agreement ”) executed and delivered by the
directors and officers of the Company.
(xiii)
The Company shall have delivered the Letter of Credit to the LC
Agent.
(xix)
The Company, the Closing Agent and the Escrow Agent shall have
executed and delivered the Closing Escrow Agreement.
(b)
At the Closing, the Purchaser shall deliver or cause to be
delivered to the Company, and the obligations of the Company to
close the purchase and sale of the Securities shall be subject to
the fulfillment or satisfaction of, the following:
(i)
the aggregate principal amount of Securities, as set forth below
the Purchaser’s name on the signature page hereto, in United
States dollars and in immediately available funds, by wire transfer
to the account set forth on Schedule A hereto or to such other
account designated in writing by the Company for such purpose;
(ii)
the Registration Rights Agreement duly executed by the
Purchaser;
(iii)
the Security Agreement duly executed by the Purchaser to the extent
the Purchaser is a party thereto;
(iv)
the representations and warranties of the Purchaser shall be true
and correct in all material respects (except for those
representations and warranties that are qualified by materiality,
which shall be true and correct in all respects) as of the date
when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a
specific date, which shall be true and correct as of such specified
date), and the Purchaser shall have performed, satisfied and
complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed,
satisfied or complied with by the Purchaser at or prior to the
Closing Date; and
(v)
The Company shall have received net proceeds in the aggregate from
the sale of the Securities to the Purchasers under this Agreement
and the Other Purchase Agreements in an amount not less than the
amount set forth on Schedule A hereto.
2.3
Closing Mechanics
(a)
Closing Agent to Contact Purchasers . By the second business
day prior to the Closing, the Closing Agent, will contact the
Purchasers to confirm the closing mechanics set forth herein.
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(b)
Company to Deliver Executed Securities to Closing Agent for
Purchasers . At least two business days prior to the Closing
Date, the Company will deliver to the Closing Agent duly executed
certificates representing the Securities in the form contemplated
by the Indenture, registered in the names previously provided by
the Closing Agent to the Company, which certificates the Closing
Agent shall hold until the Closing Agent is directed to release
such certificates by the Company for sale to the Purchasers.
(c)
Purchasers to Fund Purchase Price . On or before 10:00 a.m.,
New York City time, on the Business Day prior to the Closing Date,
each of the Purchasers will deliver their respective portions of
the Purchase Price to the Closing Agent by wire transfer in
immediately available funds according to the wire transfer
instructions previously delivered to each of such Purchasers.
Purchasers will receive from the Company interest on the amount
they funded according to the prior sentence at the initial interest
rate to be borne by the Securities for the number of days such
funds remain deposited into the escrow account of the Closing
Escrow Agreement (computed on the basis of a 360-day year), payable
on the Closing Date, as set forth in the Closing Escrow Agreement;
if there is no Closing, Purchasers will receive from the Company
interest on the amount they funded according to the prior sentence
based on the return on Permitted Investments (as defined in the
Closing Escrow Agreement) applicable to such funded amounts,
payable when such funds are returned to such Purchasers, as set
forth in the Closing Escrow Agreement. The delivery of funds from
such Purchaser to the Closing Agent shall be deemed to constitute
irrevocable instructions from such Purchaser to the Closing Agent
that the Purchasers’ conditions to the Closing will be deemed
to be satisfied upon (i) receipt by the Closing Agent of the
Company Closing Certificate (as defined below) and (ii) the written
consent of Schulte Roth & Zabel LLP (which may be by email),
upon behalf of Highbridge International LLC, that the
Purchasers’ conditions to Closing have been satisfied, and,
in such event, such Purchaser agrees that the Closing Agent may
instruct the Escrow Agent to release the funds as contemplated by,
and subject to, the provisions of Section 2.3(f). Funds received by
the Closing Agent pursuant to this Section 2.3 (or funded by
the Closing Agent in its sole discretion pursuant to Section
2.3(d)) will be held in trust for the applicable Purchasers and not
as property or in the title of the Closing Agent.
(d)
Closing Agent Right to Fund for Late Purchasers . In the
event that any Purchaser shall fail to deliver all or any of its
respective portion of the Purchase Price on or before 9:00 a.m.,
New York City time, on the Closing Date:
(i)
The Closing Agent may, in its sole discretion, but shall not be
obligated to, fund the unfunded portion of the Purchase Price
applicable to such Purchaser, on behalf of such Purchaser. The
funding of any portion of the Purchase Price by the Closing Agent
pursuant to this Section 2.3(d) shall not relieve a
defaulting Purchaser of any liability that it may have to the
Company or the Closing Agent pursuant to this Agreement or for the
breach of its obligations under this Agreement.
(ii)
In the event that the Closing Agent shall have funded any such
unfunded portion as set forth in the preceding clause (i), the
Closing Agent may, in its sole discretion, but shall not be
obligated to, (A) retain, at and following the Closing, beneficial
ownership in the Securities as such Purchaser would have been
entitled to had it timely funded, (B) direct the disposition of
such Note to another party or (C) require
8
such Purchaser, upon
written notice, to purchase such Securities from the Closing Agent
within two business days after the Closing Date at a price equal to
the initial offering price of such Securities plus accrued and
unpaid interest to the date of settlement.
(iii)
In the case of the preceding clause (ii)(A) or (B), if so requested
by the Closing Agent, (A) such Purchaser shall take any action
reasonably requested by the Closing Agent to effect the transfer of
the applicable Securities to the Closing Agent or such other party,
as the case may be, and shall be deemed to have consented to the
Closing Agent retaining and taking beneficial ownership, or
directing the disposition, of such Securities and (B) the Company
shall transfer registration of such Securities to, or as directed
by, the Closing Agent.
(e)
Distribution of Purchase Price Received by Closing Agent to
Escrow Agent . Upon receipt of the Purchase Price from any
Purchaser, the Closing Agent will distribute such funds to the
Escrow Agent for deposit into the escrow account to be established
pursuant to the Closing Escrow Agreement (the “
Closing Escrow Account ”).
(f)
Release of Purchase Price Funds; Delivery of Securities . On
the Closing Date:
(i)
upon (A) receipt by the Closing Agent of a certificate from the
Chief Executive Officer of the Company (the “ Company
Closing Certificate ”) certifying that the conditions to
the Purchasers’ obligations to close, as set forth in Section
2.2(a), have been satisfied and (B) the consent of Schulte Roth
& Zabel LLP, upon behalf of Highbridge International LLC, that
such conditions have been satisfied, the Closing Agent will
instruct the Escrow Agent, pursuant to the terms of the Closing
Escrow Agreement, to release the Purchase Price as set forth in the
Closing Escrow Agreement; and
(ii)
in consideration for the receipt of the Purchase Price deposited in
the Closing Escrow Account as specified above, the Company shall
deliver the Securities to the applicable Purchasers in accordance
with the instructions contained in Annex A hereto.
(g)
Returning of Funds from the Closing Agent . To the extent
the Closing Agent receives any funds from the Escrow Agent for the
benefit of any Purchaser pursuant to the Closing Escrow Agreement,
whether upon termination of the transactions contemplated hereby,
as interest upon funds held in the escrow account or otherwise, the
Closing Agent shall wire such funds to the applicable Purchaser, in
accordance with instructions provided by such Purchaser(s), within
one (1) Business Day of receipt of such funds by the Closing
Agent.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1
Representations and Warranties of the Company . The Company
hereby makes the following representations and warranties to the
Purchaser and to the Placement Agent (as defined below):
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(a)
Organization and Qualification . Each of the Company and
each Subsidiary is an entity 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 articles of
incorporation, bylaws or other organizational or charter documents.
Each of the Company and each Subsidiary is duly qualified to
conduct business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the
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 (i) an
adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material and adverse effect on the
operations, results of operations, assets, properties, prospects,
business or condition (financial or otherwise) of the Company and
the Subsidiaries, taken as a whole, or (iii) an adverse impairment
to the Company’s ability to perform on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or
(iii), a “ Material Adverse Effect ”).
(b)
Subsidiaries . The Company has no direct or indirect
Subsidiaries other than those listed in Schedule 3.1(b) .
Except as disclosed in Schedule 3.1(b) , the Company owns,
directly or indirectly, all of the capital stock of each Subsidiary
free and clear of any and all Liens, 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.
(c)
Authorization; Enforcement . The Company and each of the
Guarantors have the requisite corporate power and authority to
enter into and to consummate the transactions contemplated by each
of the Transaction Documents, as applicable, and otherwise to carry
out their obligations thereunder. The execution, delivery and
performance of each of the Transaction Documents by the Company and
each of the Guarantors, as applicable, and the consummation by the
Company and each of the Guarantors of the transactions contemplated
thereby have been duly authorized by all necessary corporate action
on the part of the Company and its shareholders and each of the
Guarantors and no further corporate action is required by the
Company or its shareholders or each of the Guarantors in connection
therewith. Each Transaction Document has been duly executed by the
Company and each of the Guarantors, as applicable, and, when
delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company and each of the
Guarantors, enforceable against the Company and each of the
Guarantors in accordance with its terms, except (i) as rights to
indemnity and contribution may be limited by state or federal
securities laws or the public policy underlying such laws, (ii) as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally
and (iii) as enforceability may be subject to general principles of
equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) (clauses (i) – (iii)
collectively, the “ Enforceability Exceptions
”).
(d)
The Securities and the Guarantees . The Securities have been
duly authorized by the Company and each Guarantor and, when duly
executed, authenticated, and delivered as provided in the Indenture
and paid for as provided herein, will be duly and validly issued
and will constitute valid and binding obligations of the Company
enforceable against the Company in
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accordance with their
terms, subject to the Enforceability Exceptions, and will be
entitled to the benefits of the Indenture; and the Guarantees have
been duly authorized by each of the Guarantors and, when the
Securities and the Guarantees by each of the Guarantors have been
duly executed, authenticated, issued and delivered as provided in
the Indenture and paid for as provided herein, as the case may be,
will be valid and binding obligations of each of the Guarantors,
enforceable against each of the Guarantors in accordance with their
terms, subject to the Enforceability Exceptions, and will be
entitled to the benefits of the Indenture.
(e)
No Conflicts . The execution, delivery and performance of
the Transaction Documents by the Company and each of the
Guarantors, as applicable, and the consummation by the Company and
each of the Guarantors, as applicable, of the transactions
contemplated thereby, including the issuance and sale of the
Securities (including the Guarantees and the issuance of the
Conversion Shares), do not and will not (i) conflict with or
violate any provision of the Company’s or any
Subsidiary’s 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, any agreement, credit
facility, debt or other instrument 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 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.
(f)
Filings, Consents and Approvals . The Company and each of
the Guarantors are not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing
or registration with, any court or other federal, state, local or
other governmental authority or other Person in connection with the
execution, delivery and performance by the Company and each of the
Guarantors of the Transaction Documents, as applicable, including
the issuance of the Securities (including the Guarantees and the
issuance of the Conversion Shares), other than: (i) the
filing with the Commission of one or more Registration Statements
in accordance with the requirements of the Registration Rights
Agreement, (ii) notice filings required by state securities laws,
the failure of which to make will not affect the validity of the
Securities or the enforceability of this Agreement, and (iii) those
that have been made or obtained prior to the date of this
Agreement. The Company and its Subsidiaries are unaware of any
facts or circumstances that would reasonably be expected to prevent
the Company or any of the Guarantors from obtaining or effecting
any of the registration, application or filings pursuant to the
preceding sentence.
(g)
Issuance of Securities and Conversion Shares . The
Conversion Shares have been duly authorized and reserved for
issuance upon conversion of the Securities by all necessary
corporate action of the Company. The issuance of the Securities,
upon issuance in accordance with the terms of the Transaction
Documents, will be free from all taxes, liens and charges. All
Conversion Shares, when so issued in accordance with the
Company’s Articles of Incorporation and delivered upon such
conversion in accordance with the terms of the Indenture and
the
11
Securities, will be
duly authorized and validly issued, fully paid and nonassessable
and free and clear of all liens, encumbrances, equities, claims or
preemptive or similar rights with the holders being entitled to all
rights accorded to a holder of Common Stock.
(h)
Capitalization . The authorized capital stock of the Company
consists solely of 500,000,000 shares of Common Stock and 5,000,000
shares of preferred stock, $0.001 par value per share. As of the
date hereof prior to Closing: (i) the number of shares of
Common Stock set forth on Schedule 3.1(h) hereto are issued
and outstanding and no shares of Common Stock are held in treasury,
(ii) the number of shares of Common Stock set forth on Schedule
3.1(h) hereto are reserved for future issuance pursuant to the
Company’s equity incentive plan, pursuant to outstanding
warrants and the Securities as indicated in such schedule, (iii) no
shares of preferred stock are issued and outstanding and (iv) the
number of shares of Common Stock set forth on Schedule
3.1(h) are reserved for issuance pursuant to securities
exercisable or exchangeable for, or convertible into, shares of
Common Stock. All outstanding shares of common stock are validly
issued, fully paid and nonassessable.
Except as
disclosed in Schedule 3.1(h) , (i) none of the
Company’s capital stock is 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 options,
warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any 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
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, or exercisable or exchangeable for, any capital
stock of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing
indebtedness of the Company or any of its Subsidiaries or by which
the Company or any of its Subsidiaries is or may become bound which
are required to be disclosed in any Exchange Act report, (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 Securities Act; (v) there are no outstanding
securities or instruments 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; (vii) the Company does not have any stock appreciation
rights or “phantom stock” plans or agreements or any
similar plan or agreement; (viii) the Company and its Subsidiaries
have no liabilities or obligations required to be disclosed in the
SEC Reports but not so disclosed in the SEC Reports, other than
those incurred in the ordinary course of the Company’s or its
Subsidiaries’ respective businesses and which, individually
or in the aggregate, do not or would not have a Material Adverse
Effect; and (ix) there are no financing statements securing
obligations in any material amounts, either singly or in the
aggregate, filed in connection with the Company or any of its
Subsidiaries. The Company has filed in its SEC Reports with the
Commission true, correct and complete copies of the Company’s
Articles of Incorporation, as amended and as in effect on the date
hereof, and the Company’s Bylaws, as amended and as in effect
on the date hereof, and the
12
form of all
securities convertible into, or exercisable or exchangeable for,
shares of Common Stock.
(i)
SEC Reports; Financial Statements . During the two (2) years
prior to the date hereof, the Company has filed all reports,
schedules, forms, statements and other documents required to be
filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof (the foregoing
materials including all exhibits and schedules thereto, being
collectively referred to herein as the “ SEC Reports
” and, together with the Schedules to this Agreement, the
Confidential Information Memorandum dated August 20, 2007, as
supplemented on September 27, 2007 and any other materials prepared
by the Company and delivered to the Purchaser in writing, the
“ Disclosure Materials ”). The Company has
delivered to the Purchaser or its representative true, correct and
complete copies of the SEC Reports not available on the EDGAR
system. 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, except to the extent
superseded by an amended SEC Report filed at least five (5)
Business Days prior to the date hereof, none of the SEC Reports or
the Disclosure Materials, when filed or prepared, as applicable,
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 generally accepted accounting
principles applied on a consistent basis during the periods
involved (“ GAAP ”), except as may be otherwise
specified in such financial statements or the notes thereto, and
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 or as otherwise
disclosed in the SEC Reports. No other information provided by or
on behalf of the Company to the Purchaser which is not included in
the SEC Reports and that has not be subsequently modified,
corrected, supplemented or superceded in writing, including,
without limitation, information referred to in Section 3.2(g) of
this Agreement or in any disclosure schedules, contains any untrue
statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of
the circumstance under which they are or were made not
misleading.
(j)
Litigation . Except as disclosed in Schedule 3.1(j) ,
there is no Action pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, or any
of the Company’s Subsidiaries or any of the Company’s
or its Subsidiaries’ officers or directors that (i) adversely
affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Indenture or (ii) 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, 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 and
there has not been, and to the knowledge of the Company there is
not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer
of the Company.
13
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.
(k)
Transactions With Affiliates and Employees . Except as set
forth on Schedule 3.1(k) , none of the officers, directors
or employees of the Company or any Subsidiary is presently a party
to any transaction with the Company or any Subsidiary (other than
for ordinary course 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.
(l)
Internal Accounting and Disclosure Controls . The Company
and the Subsidiaries maintain 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 and liability accountability, (iii) access to assets
or incurrence of liabilities is permitted only in accordance with
management’s general or specific authorization, and (iv) the
recorded accountability for assets and liabilities is compared with
the existing assets and liabilities at reasonable intervals and
appropriate action is taken with respect to any differences. The
Company maintains disclosure controls and procedures (as such term
is defined in Rule 13a-14 under the Exchange Act) that are
effective in ensuring that information required to be disclosed by
the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the rules and forms of the
Commission, including, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the Company’s
management, including its principal executive officer or officers
and its principal financial officer or officers, as appropriate, to
allow timely decisions regarding required disclosure. Except as
disclosed in Schedule 3.1(l) , since March 31, 2006, neither
the Company nor any of its Subsidiaries have received any notice or
correspondence from any accountant relating to any material
weakness in any part of the system of internal accounting controls
of the Company or any of its Subsidiaries.
(m)
Certain Fees . Except for dealings with the Placement Agent,
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 the
Transaction Documents. The Purchaser shall have no obligation with
respect to any fees or with respect to any claims (other than such
fees or commissions owed by the Purchaser pursuant to written
agreements executed by the Purchaser which fees or commissions
shall be the sole responsibility of the Purchaser) made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by the Transaction Documents. Other than the Placement
Agent and the Placement Agent’s fees, neither the Company nor
any of its Subsidiaries has engaged any placement agent or other
agent in connection with the sale of the
14
Securities and has not
incurred any placement agent’s fees, financial advisory fees,
or broker’s commissions relating to or arising out of the
transactions contemplated hereby.
(n)
Certain Registration Matters . Assuming the accuracy of the
Purchaser’s representations and warranties set forth in
Section 3.2(c) through (g), no registration under the Securities
Act is required for the offer and sale of the Securities (including
the Guarantees) by the Company and each of the Guarantors to the
Purchaser under the Transaction Documents. The Company has not
offered the Securities by means of any form of general solicitation
or general advertising, including but not limited to the
following: (A) any advertisement, article, notice or other
communication published in a newspaper or magazine or similar media
or broadcast over television or radio whether closed circuit or
generally available or (B) any seminar, meeting or industry
investor conference whose attendees were invited by any general
solicitation or general advertising. As of the date hereof, the
Company is eligible to register the resale of its Common Stock on
Form S-3 promulgated under the Securities Act.
(o)
No Integrated Offering . None of the Company, its
Subsidiaries, any of their Affiliates, and any Person acting on
their behalf has, directly or indirectly, made any offers or sales
of any security or solicited any offers to by any security, under
circumstances that would require registration of the issuance of
any of the Securities under the Securities Act, whether through
integration with prior offerings or otherwise. None of the Company,
its Subsidiaries, their Affiliates and any Person acting on their
behalf will take any action or steps referred to in the preceding
sentence that would require registration of the issuance of any of
the Securities under the Securities Act or cause the offering of
the Securities to be integrated with other offerings for purposes
of any such applicable stockholder approval provisions.
(p)
Investment Company . The Company is not, and upon
consummation of the sale of Securities, will not be, an
“investment company,” a company controlled by an
“investment company” or an “affiliated
person” of, or “promoter” or “principal
underwriter” for, an “investment company” within
the meaning of the Investment Company Act of 1940, as amended.
(q)
No Additional Agreements . The Company does not have any
agreement or understanding with the Purchaser or any other
Purchasers with respect to the transactions contemplated by the
Transaction Documents other than as specified in this Agreement and
the Other Purchase Agreements, respectively. This Purchase
Agreement is identical with each of the Other Purchase Agreements,
other than the provisions of the Other Purchase Agreements
concerning the identity of the other Purchasers, the amount of
Securities purchased by such other Purchasers, certain
representations and warranties and covenants relating to the
material non-public information and the disclosure thereof.
(r)
ERISA; Employee Relations . Each employee benefit plan (as
defined in Section 3(3) of ERISA) and any other plan,
agreement or arrangement for the benefit of any director, officer
or employee of the Company (each, an “ Employee Benefit
Plan ”) has been operated in material compliance with its
terms and with all applicable laws, including, but not limited to,
ERISA and the Code. All contributions due and payable on or before
the Closing in respect of any Employee Benefit Plan have been made
in full.
15
Neither the
Company nor any of its Subsidiaries is a party to any collective
bargaining agreement or employs any member of a union. The Company
and its Subsidiaries believe that their relations with their
employees are good, except where such failure would not, either
individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect. No executive officer of the Company
or any of its Subsidiaries (as defined in Rule 501(f) of the
Securities Act) has notified the Company or any such Subsidiary
that such officer intends to leave the Company or any such
Subsidiary or otherwise terminate such officer’s employment
with the Company or any such Subsidiary. No executive officer of
the Company or any of its Subsidiaries, is, or is now reasonably
expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other similar contract
or agreement or any restrictive covenant, and the continued
employment of each such executive officer would not reasonably be
expected to subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.
The Company and
its Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of
employments and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse
Effect.
(s)
Tax . The Company and each of its Subsidiaries have filed
all foreign, federal, state and local tax reports and returns
required by any law or regulation to be filed by it, and such
returns are true and correct, except where such failure would not,
either individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect. The Company and each of its
Subsidiaries have paid all taxes, interest and penalties, if any,
reflected on such tax returns or otherwise due and payable by it,
except where such failure would not, either individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect. Each of the Company and each of its Subsidiaries have set
aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. Any deficiencies proposed
as a result of any governmental audits or such tax returns have
been paid or settled, and there are no present disputes as to taxes
payable by the Company. The Company has not elected pursuant to the
Internal Revenue Code of 1986, as amended (the “ Code
”), to be treated as a Subchapter S corporation or a
collapsible corporation pursuant to Section 1362(a) or Section
341(f) of the Code, respectively, nor has it made any other
elections pursuant to the Code (other than elections that relate
solely to methods of accounting, depreciation or amortization) that
would have a material adverse effect on the Company, its financial
condition, its business as presently conducted or proposed to be
conducted or any of its properties or material assets. The Company
has withheld or collected from each payment made to each of its
employees, the amount of all taxes (including, but not limited to,
federal income taxes, Federal Insurance Contribution Act taxes and
Federal Unemployment Tax Act taxes) required to be withheld or
collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositories, except where such
failure would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
16
(t)
Application of Takeover Protections; Rights Agreement . The
Company and its Board of Directors have taken all necessary action,
if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar
anti-takeover provision under the articles of incorporation or the
laws of the State of Nevada which is or could become applicable to
any Purchaser as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company’s
issuance of the Securities and any Purchaser’s ownership of
the Securities. The Company and its Board of Directors have taken
all necessary action, if any, in order to render inapplicable any
stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change
in control of the Company.
(u)
Absence of Certain Changes . Since October 31, 2006, there
has been no material adverse changes or developments in the
business, properties, operations, condition (financial or
otherwise), results of operations or prospects of the Company or
its Subsidiaries that have resulted, or could reasonably be
expected to result, in a Material Adverse Effect. Since October 31,
2006, the Company has not (i) declared or paid any dividends or
(ii) sold any assets, individually or in the aggregate, in excess
of $500,000 outside of the ordinary course of business. Neither the
Company nor any of its Subsidiaries has taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have
any knowledge or reason to believe that its creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge
of any fact that would reasonably lead a creditor to do so. The
Company and its Subsidiaries, individually and on a consolidated
basis, are not as of the date hereof, and after giving effect to
the transactions contemplated hereby to occur at the Closing, will
not be Insolvent (as defined below). For purposes of this Section
3.1(u), “ Insolvent ” means, with respect to any
Person, (i) the present fair saleable value of such Person’s
assets is less than the amount required to pay such Person’s
total Indebtedness (as defined in Section 3.1(hh)), (ii) such
Person is unable to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become
absolute and matured, (iii) such Person intends to incur or
believes that it will incur debts that would be beyond its ability
to pay as such debts mature or (iv) such Person has unreasonably
small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be
conducted.
(v)
Sarbanes-Oxley Act . The Company is in compliance with any
and all applicable requirements of the Sarbanes-Oxley Act of 2002
that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the Commission
thereunder that are effective as of the date hereof.
(w)
Intellectual Property Rights . The Company and its
Subsidiaries own or possess adequate rights or licenses to use all
trademarks, service marks and all applications and registrations
therefor, trade names, patents, patent rights, copyrights, original
works of authorship, inventions, trade secrets and other
intellectual property rights (“ Intellectual Property
Rights ”) necessary to conduct their respective
businesses as conducted on the date of this Agreement, except where
such failure would not, either individually or in the aggregate,
reasonably be expect to result in a Material Adverse Effect. None
of the Company’s registered, or applied for, Intellectual
Property Rights have expired or terminated or have been abandoned,
or are expected to expire or terminate or expected to be abandoned,
within three years from the date of this Agreement, except where
such expiration, termination or abandonment would not,
17
either individually or
in the aggregate, reasonably be expect to result in a Material
Adverse Effect. No product or service of the Company or its
Subsidiaries infringes the Intellectual Property Rights of others,
except where such infringement would not, either individually or in
the aggregate, reasonably be expect to result in a Material Adverse
Effect. There is no claim, action or proceeding being made or
brought, or to the knowledge of the Company or its Subsidiaries,
being threatened, against the Company or its Subsidiaries regarding
(i) its Intellectual Property Rights, or (ii) that the products or
services of the Company or its Subsidiaries infringe the
Intellectual Property Rights of others, except where such claim,
action or proceeding would not, either individually or in the
aggregate, reasonably be expect to result in a Material Adverse
Effect. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value
of all of their Intellectual Property Rights.
(x)
Environmental Laws . The Company and its Subsidiaries (i)
are in compliance with any and all Environmental Laws (as
hereinafter defined and (ii) are in compliance with all terms and
conditions of any such permit, license or approv
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