EXHIBIT 4.1
FAST EDDIE RACING STABLES, INC.
SECURITIES PURCHASE AGREEMENT
March 9, 2005
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TABLE OF CONTENTS
Page
----
1. Agreement to Sell and
Purchase...........................................1
2. Fees and
Warrant.........................................................1
3. Closing, Delivery and
Payment............................................2
3.1
Closing..........................................................2
3.2
Delivery.........................................................2
4. Representations and
Warranties of the Company............................3
4.1
Organization, Good Standing and
Qualification....................3
4.2
Subsidiaries.....................................................4
4.3
Capitalization; Voting
Rights....................................4
4.4
Authorization; Binding
Obligations...............................5
4.5
Liabilities......................................................5
4.6
Agreements;
Action...............................................5
4.7
Obligations to Related
Parties...................................6
4.8
Changes..........................................................7
4.9
Title to Properties and Assets; Liens,
Etc.......................8
4.10
Intellectual
Property............................................8
4.11
Compliance
with Other Instruments................................9
4.12
Litigation.......................................................9
4.13
Tax
Returns and Payments.........................................9
4.14
Employees.......................................................10
4.15
Registration Rights and Voting
Rights...........................10
4.16
Compliance
with Laws; Permits...................................11
4.17
Environmental and Safety
Laws...................................11
4.18
Valid
Offering..................................................11
4.19
Full
Disclosure.................................................11
4.20
Insurance.......................................................12
4.21
SEC
Reports.....................................................12
4.22
Listing.........................................................12
4.23
No
Integrated Offering..........................................12
4.24
Stop
Transfer...................................................13
4.25
Dilution........................................................13
4.26
Patriot
Act.................................................... 12
5. Representations and
Warranties of the Purchaser.........................13
5.1
No
Shorting.....................................................13
5.2
Requisite Power and
Authority...................................14
5.3
Investment
Representations......................................14
5.4
Purchaser Bears Economic
Risk...................................14
5.5
Acquisition for Own
Account.....................................14
5.6
Purchaser Can Protect Its
Interest..............................14
5.7
Accredited
Investor.............................................15
5.8
Legends.........................................................15
5.9
Limitation on Acquisition of Common Stock of the
Company........14
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6. Covenants of the
Company................................................16
6.1
Stop-Orders.....................................................16
6.2
Listing.........................................................16
6.3
Market
Regulations..............................................16
6.4
Reporting
Requirements..........................................16
6.5
Use
of Funds....................................................16
6.6
Access to
Facilities............................................17
6.7
Taxes...........................................................17
6.8
Insurance.......................................................17
6.9
Intellectual
Property...........................................18
6.10
Properties......................................................18
6.11
Confidentiality.................................................19
6.12
Required
Approvals..............................................19
6.13
Reissuance
of Securities........................................20
6.14
Opinion.........................................................20
6.15
Margin
Stock....................................................19
6.16
Restricted
Cash Disclosure......................................19
6.17
Financing
Right of First Refusal................................19
7. Covenants of the
Purchaser..............................................21
7.1
Confidentiality.................................................21
7.2
Non-Public
Information..........................................21
7.3
Other...........................................................20
7.4
No
Shorting.....................................................20
7.5
Limitation on Acquisition of Common Stock of
Company............20
8. Covenants of the
Company and Purchaser Regarding Indemnification........22
8.1
Company
Indemnification.........................................22
8.2
Purchaser's
Indemnification.....................................22
9. Conversion of
Convertible Note..........................................22
9.1
Mechanics of
Conversion.........................................22
10. Registration
Rights.....................................................24
10.1
Registration Rights
Granted.....................................24
10.2
Offering
Restrictions...........................................24
11.
Miscellaneous...........................................................24
11.1
Governing
Law...................................................24
11.2
Survival........................................................25
11.3
Successors......................................................25
11.4
Entire
Agreement................................................26
11.5
Severability....................................................26
11.6
Amendment
and Waiver............................................26
11.7
Delays or
Omissions.............................................26
11.8
Notices.........................................................26
11.9
Attorneys'
Fees.................................................27
11.10
Titles and
Subtitles............................................27
11.11
Facsimile
Signatures; Counterparts..............................27
11.12
Broker's
Fees...................................................28
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11.13
Construction....................................................28
LIST OF EXHIBITS
--------------------------------------------------------------------------------
Form of Convertible Term
Note................................... Exhibit A
Form of
Warrant.................................................
Exhibit B-1
Form of Option
Exhibit B-2
Form of
Opinion.................................................
Exhibit C
Form of Escrow
Agreement........................................ Exhibit D
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SECURITIES PURCHASE AGREEMENT
THIS
SECURITIES PURCHASE
AGREEMENT (this "Agreement") is made and entered
into as of March 9, 2005, by and between FAST EDDIE RACING STABLES, INC., a
Florida corporation (the "Company"), and Laurus Master Fund,
Ltd., a Cayman
Islands company (the "Purchaser").
RECITALS
WHEREAS,
the Company has authorized the sale to the Purchaser of a
Convertible Term Note in the aggregate
principal amount of Three Million Dollars
($3,000,000) (as amended, modified or supplemented from time to time, the
"Note"), which Note is convertible
into shares of the
Company's common
stock,
$0.01 par value per share (the "Common
Stock") at an initial
fixed conversion
price of $ 0.83 per share of Common Stock
("Fixed Conversion Price");
WHEREAS,
the Company
wishes to issue (x) a
warrant to the
Purchaser to
purchase up to 1,084,338 shares of the Company's Common Stock (subject to
adjustment as set forth therein) and (y) an option to purchase up to 643,700
shares of the Company's Common Stock (subject to adjustment as set forth
therein) in connection with Purchaser's
purchase of the Note;
WHEREAS,
Purchaser desires to purchase the Note, the Option (as defined
in
Section 2) and the Warrant (as defined in
Section 2) on the terms and conditions
set forth herein; and
WHEREAS,
the Company
desires to issue and
sell the Note, the
Option and
Warrant to Purchaser on the terms and
conditions set forth herein.
AGREEMENT
NOW, THEREFORE,
in consideration of the foregoing recitals and the
mutual promises, representations,
warranties and covenants hereinafter set forth
and for other good and valuable
consideration,
the receipt and
sufficiency of
which are hereby acknowledged, the parties
hereto agree as follows:
1.
Agreement to Sell and
Purchase. Pursuant to
the terms and
conditions
set forth in this Agreement, on the Closing Date (as defined in
Section 3), the
Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company, a Note in the aggregate principal amount of
$3,000,000 convertible in accordance
with the terms thereof
into shares of the
Company's Common Stock in accordance with the terms of the Note and this
Agreement. The Note purchased on the Closing Date shall be known as the
"Offering." A form of the Note is annexed hereto as Exhibit A. The Note will
mature on the Maturity Date (as defined in the Note).
Collectively,
the Note,
the Option and Warrant and Common
Stock issuable in payment of the Note,
upon
conversion of the Note and upon exercise of the Warrant and the Option are
referred to as the "Securities."
2. Fees,
Option and Warrant. On the Closing Date:
(a) The Company will issue and deliver to the Purchaser a Warrant
to
purchase
up to 1,084,338
shares of Common Stock
in connection
with the
Offering
(as
D-1
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amended,
modified or supplemented from time to time, the "Warrant")
pursuant
to Section 1 hereof. The Warrant must be delivered on the
Closing
Date.
A form of Warrant is annexed hereto as Exhibit B-1. All the
representations, covenants, warranties, undertakings, and
indemnification,
and other
rights made or granted to or for the benefit of the Purchaser
by
the
Company are hereby also made and granted in respect of the Warrant
and
shares of
the Company's Common Stock issuable upon exercise of the
Warrant
(the
"Warrant Shares").
(b) The Company will issue and deliver to the Purchaser an Option
to
purchase
up to 643,700 shares of Common Stock in connection with the
Offering
(as amended,
modified or
supplemented
from time to time,
the
"Option")
pursuant to Section 1
hereof. The Option
must be delivered
on
the
Closing Date. A form
of the Option is annexed hereto as Exhibit B-2.
All
the representations, covenants, warranties, undertakings, and
indemnification, and other rights made or granted to or for the
benefit of
the
Purchaser by the Company are hereby also
made and granted in respect
of the
Option and shares of
the Company's
Common Stock issuable upon
exercise
of the Option (the "Option Shares").
(b) Subject to the terms of Section 2(d) below, the Company shall
pay to
Laurus Capital
Management, LLC, the
manager of the
Purchaser, a
closing
payment in an amount
equal to three and
three quarters
percent
(3.75%) of
the aggregate
principal amount of
the Note. The foregoing fee
is
referred to herein as the "Closing Payment."
(c) The Company shall
reimburse the
Purchaser for its
reasonable
expenses
(including legal fees
and expenses) incurred
in connection with
the
preparation
and negotiation of this Agreement and the Related
Agreements
(as hereinafter
defined), and expenses
incurred in connection
with
the Purchaser's due diligence review of the Company and its
Subsidiaries (as defined in Section 4.2) and all related matters.
Amounts
required
to be paid under this
Section 2(c) will be paid on the
Closing
Date and
shall be $52,500 for such expenses referred to in this Section
2(c).
(d) The Closing Payment and the expenses referred to in the
preceding
clause (c) (net of
deposits previously paid by the Company)
shall be
paid at closing out of funds held pursuant to a Escrow Agreement
(as
defined below) and a disbursement letter (the "Disbursement
Letter").
3.
Closing, Delivery and Payment.
3.1 Closing. Subject to the terms and conditions herein, the
closing
of the transactions contemplated hereby
(the "Closing"), shall take place on the
date hereof, at such time or place as the
Company and Purchaser
may mutually
agree (such date is hereinafter referred to
as the "Closing Date").
3.2 Delivery. Pursuant
to the Escrow
Agreement, at the
Closing on
the Closing Date, the Company will deliver
to the Purchaser, among other things,
a Note in the form attached as Exhibit A
representing
the aggregate
principal
amount of $3,000,000, a Warrant in
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the form attached as Exhibit B-1 in the
Purchaser's name representing 1,084,338
Warrant Shares, an Option in the form
attached as Exhibit B-2 in the Purchaser's
name representing 643,700 Option Shares and the Purchaser
will deliver to the
Company, among other things, the amounts
set forth in the Disbursement Letter by
certified funds or wire transfer (it being
understood
that $2,500,000 of the
proceeds of the Note shall be placed in the
Restricted
Account (as defined
in
the Restricted Account Agreement referred to below) on the Closing
Date and up
to $500,000 of the proceeds of the Note
will be utilized for
expenses incurred
in connection with the transactions referred to in this Agreement, with the
remainder of such $500,000 of proceeds to
be provided to the Company for working
capital purposes).
4.
Representations
and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as
follows (which
representations
and
warranties are supplemented by the Company's filings under the Securities
Exchange Act of 1934 made prior to the date
of this Agreement (collectively, the
"Exchange Act Filings"), copies of which
have been provided to the Purchaser):
4.1 Organization,
Good Standing and Qualification. Each of the
Company and each of its Subsidiaries is a corporation, partnership or limited
liability company, as the case may be, duly
organized, validly
existing and in
good standing under the laws of its
jurisdiction of
organization.
Each of the
Company and each of its Subsidiaries has the corporate power and authority to
own and operate its properties and assets, to execute and deliver (i)
this
Agreement, (ii) the Note, the Option and the
Warrant to be issued in connection
with this Agreement, (iii) the Master Security Agreement dated as of the date
hereof between the Company, certain Subsidiaries of the Company and the
Purchaser (as amended, modified or supplemented
from time to time, the
"Master
Security Agreement"), (iv) the Registration Rights Agreement relating to the
Securities dated as of the date hereof
between the Company and the Purchaser (as
amended, modified or supplemented from time
to time, the
"Registration
Rights
Agreement"), (v) the Subsidiary Guaranty dated as of the date hereof made
by
certain Subsidiaries of the Company (as
amended, modified or
supplemented from
time to time, the "Subsidiary Guaranty"),
(vi) the Stock Pledge
Agreement dated
as of the date hereof among the Company,
certain Subsidiaries of the Company and
the Purchaser (as amended, modified or supplemented from time to time, the
"Stock Pledge Agreement"), (vii) the Escrow Agreement dated as of the date
hereof among the Company, the Purchaser and the escrow agent referred to
therein, substantially in the form of
Exhibit D hereto (as amended, modified or
supplemented from time to time, the "Escrow
Agreement"),
(viii) the
Restricted
Account Agreement dated as of the date
hereof among the Company, the Purchaser
and North Fork Bank (as amended, modified
or supplemented from time to time, the
"Restricted Account Agreement"), (ix) the
Restricted Account Side Letter related
to the Restricted Account Agreement dated as of the date hereof
between the
Company and the Purchaser (as amended, modified or supplemented from time to
time, the "Restricted Account Side Letter")
and (x) all other agreements related
to this Agreement and the Note and referred to
herein (the preceding
clauses
(ii) through (x), collectively, the
"Related Agreements"), to issue and sell the
Note and the shares of Common Stock
issuable upon conversion of the Note (the
"Note Shares"), to issue and sell the Option and the Option Shares and the
Warrant and the Warrant Shares, to issue and sell the Warrant and
the Warrant
Shares, and to carry out the provisions of this Agreement and the Related
Agreements and to carry on its business as presently conducted. Each of the
Company and each of its Subsidiaries is duly qualified and is
authorized to do
business and is in good standing as a
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foreign corporation, partnership or limited liability
company, as the case may
be, in all jurisdictions in which the nature of its activities and of its
properties (both owned and leased) makes
such qualification
necessary,
except
for those jurisdictions in which failure to do so has not, or could not
reasonably be expected to have,
individually
or in the aggregate, a material
adverse effect on the business,
assets, liabilities, condition (financial or
otherwise), properties, operations or prospects of the Company and its
Subsidiaries, taken individually and as a
whole (a "Material Adverse Effect").
4.2 Subsidiaries.
Each direct and indirect Subsidiary of the
Company, the direct owner of such Subsidiary and its percentage ownership
thereof, is set forth on Schedule
4.2. For the purpose of this
Agreement,
a
"Subsidiary" of any person or entity
means (i) a
corporation
or other entity
whose shares of stock or other ownership
interests having
ordinary voting power
(other than stock or other ownership
interests having such
power only by reason
of the happening of a contingency)
to elect a majority of
the directors of such
corporation, or other persons or entities
performing similar functions for such
person or entity, are owned, directly or
indirectly, by such person or entity or
(ii) a corporation or other entity in which
such person or entity owns, directly
or indirectly, more than 50% of the equity
interests at such time.
4.3 Capitalization; Voting Rights.
(a) The authorized
capital stock of the Company, as of the date
hereof
consists of 100,000,000 shares, all of which are shares of
Common
Stock,
par value $0.01 per
share. The
authorized
capital stock of
each
Subsidiary
of the Company is set forth on Schedule 4.2.
(b) Except as disclosed on Schedule 4.3, other than: (i) the shares
reserved
for issuance under the
Company's stock option
plans; and (ii)
shares
which may be granted
pursuant to this
Agreement and the Related
Agreements, there are
no outstanding options, warrants, rights (including
conversion
or preemptive
rights and rights of
first refusal),
proxy or
stockholder agreements, or arrangements or agreements of
any kind for the
purchase
or acquisition from the Company of any of its securities.
Except
as
disclosed on Schedule 4.3, neither the offer, issuance or sale of any
of the
Note, the Option or the Warrant, or the issuance of any of the
Note
Shares,
the Option Shares or
Warrant Shares, nor
the consummation of any
transaction
contemplated hereby
will result in a
change in the price or
number of
any securities of the Company outstanding, under anti-dilution
or other
similar provisions contained in or affecting any such
securities.
(c) All issued and outstanding shares of the Company's Common
Stock:
(i) have
been duly authorized
and validly
issued and are fully
paid and
nonassessable; and
(ii) were issued in
compliance
with all applicable
state and
federal laws concerning the issuance of securities.
(d) The rights,
preferences,
privileges and
restrictions
of the
shares of
the Common Stock are as stated in the Company's Certificate of
Incorporation (the
"Charter").
The Note Shares,
the Option
Shares and
Warrant
Shares have been duly
and validly reserved
for issuance. When
issued and
paid for in compliance
with the provisions of
this Agreement
and the
Company's Charter, the Securities will be validly issued, fully
4
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paid and
nonassessable,
and will be free of
any liens or
encumbrances;
provided,
however, that the Securities may be subject
to restrictions on
transfer
under state and/or federal securities laws as set forth herein
or
as
otherwise required by such laws at the time a transfer is
proposed.
4.4 Authorization;
Binding Obligations. All corporate, partnership
or limited liability company, as the case may be, action on the part of the
Company and each of its Subsidiaries (including the respective officers and
directors) necessary for the authorization of this Agreement and the Related
Agreements, the performance of all obligations of the Company and its
Subsidiaries hereunder and under the other Related Agreements at the Closing
and, the authorization, sale, issuance and delivery of the
Note, the Option and
Warrant has been taken or will be taken
prior to the Closing. This Agreement and
the Related Agreements, when executed and delivered and to the
extent it is a
party thereto, will be valid and binding
obligations of each of the Company and
each of its Subsidiaries, enforceable against each such person in
accordance
with their terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization,
moratorium
or other laws of general application affecting enforcement of
creditors'
rights; and
(b) general principles
of equity that restrict the availability of
equitable
or legal remedies.
The sale of the Note and the subsequent
conversion of the Note
into Note Shares
are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived
or complied with. The issuance of the
Warrant and the subsequent exercise of the Warrant for
Warrant Shares and
the
issuance of the Option and the subsequent
exercise of the Option
for the Option
Shares are not and will not be subject
to any preemptive rights or rights of
first refusal that have not been properly
waived or complied with.
4.5 Liabilities. Neither the Company nor any of its Subsidiaries
has
any contingent liabilities, except current liabilities
incurred in the ordinary
course of business and liabilities
disclosed in any Exchange Act Filings.
4.6 Agreements; Action. Except as set forth on Schedule 4.6 or
as
disclosed in any Exchange Act Filings:
(a) there are no agreements, understandings, instruments,
contracts,
proposed
transactions,
judgments,
orders, writs or
decrees to which the
Company
or any of its
Subsidiaries
is a party
or by which it is bound
which may
involve: (i) obligations (contingent or otherwise) of, or
payments
to, the Company in excess of $50,000 (other than obligations of,
or
payments to, the Company arising from purchase or sale agreements
entered
into in the ordinary course of business); or (ii) the transfer or
license of
any patent, copyright,
trade secret or other proprietary right
to or from
the Company (other
than licenses arising
from the purchase of
"off
the shelf" or other standard products); or (iii) provisions
restricting the development, manufacture or distribution of the
Company's
products
or services; or (iv) indemnification by
5
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the
Company with respect to infringements of proprietary rights.
(b) Since December
31, 2004, neither the Company nor any of its
Subsidiaries has: (i)
declared or paid any
dividends, or
authorized or
made any
distribution
upon or with respect
to any class or series of its
capital
stock; (ii) incurred
any indebtedness
for money borrowed or
any
other
liabilities (other than ordinary course obligations) individually
in
excess of
$50,000 or, in the case of indebtedness and/or liabilities
individually less than
$50,000, in excess of
$100,000 in the
aggregate;
(iii) made
any loans or advances to any person not in excess, individually
or in the
aggregate, of $100,000, other than ordinary course
advances for
travel
expenses; or (iv)
sold, exchanged or
otherwise disposed of any of
its assets
or rights, other than the sale of its inventory in the ordinary
course of
business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness,
liabilities,
agreements,
understandings,
instruments,
contracts
and proposed
transactions
involving the same
person or entity
(including
persons or
entities the Company has reason to believe are
affiliated
therewith)
shall be aggregated
for the purpose of meeting the
individual
minimum dollar amounts of such subsections.
4.7 Obligations to Related Parties. Except as set forth on
Schedule
4.7, there
are no obligations of the Company or any of its Subsidiaries to
officers,
directors,
stockholders
or employees of the
Company or any of
its
Subsidiaries other than:
(a) for payment
of salary for services rendered and for bonus
payments;
(b) reimbursement for reasonable expenses incurred on behalf of
the
Company
and its Subsidiaries;
(c) for other standard employee benefits made generally available
to
all
employees (including
stock option
agreements outstanding
under any
stock
option plan approved by the Board of Directors of the Company);
and
(d) obligations
listed in the
Company's financial statements or
disclosed
in any of its Exchange Act Filings.
Except as described above or set forth on Schedule
4.7, none of the officers,
directors or, to the best of the Company's knowledge, key employees or
stockholders of the Company or any members of their immediate families, are
indebted to the Company, individually or in the aggregate,
in excess of $50,000
or have any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a
business
relationship, or any firm or corporation which
competes with the Company, other
than passive investments in publicly traded
companies
(representing less
than
one percent (1%) of such company) which may
compete with the Company. Except as
described above, no officer, director or stockholder, or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with the Company and no agreements, understandings or proposed
transactions are contemplated between the
Company and any such person. Except as
6
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set forth on Schedule 4.7, the Company is not a
guarantor or
indemnitor of any
indebtedness of any other person, firm or
corporation.
4.8 Changes. Since
December 31, 2004, except as disclosed in any
Exchange Act Filing or in any Schedule to this Agreement or to any of the
Related Agreements, there has not been:
(a) any change
in the business, assets, liabilities, condition
(financial
or otherwise), properties, operations or prospects of the
Company or
any of its Subsidiaries, which individually or in the aggregate
has had,
or could reasonably be
expected to have,
individually or in the
aggregate,
a Material Adverse Effect;
(b) any resignation or
termination of any officer, key employee or
group of
employees of the Company or any of its Subsidiaries;
(c) any material change, except in the ordinary course of
business,
in the contingent
obligations of the Company or any of its Subsidiaries by
way of
guaranty, endorsement, indemnity, warranty or otherwise;
(d) any damage,
destruction
or loss, whether or not covered by
insurance,
which has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(e) any waiver by the Company or any of its Subsidiaries of a
valuable
right or of a material debt owed to it;
(f) any direct or
indirect loans made by
the Company or any of its
Subsidiaries to any
stockholder,
employee, officer or director of the
Company
or any of its
Subsidiaries,
other than advances made in the
ordinary
course of business;
(g) any material change in any compensation arrangement or
agreement
with any
employee, officer,
director or stockholder of the Company or any
of its
Subsidiaries;
(h) any declaration or payment of any dividend or other
distribution
of the
assets of the Company or any of its Subsidiaries;
(i) any labor organization activity related to the Company or any
of
its
Subsidiaries;
(j) any debt, obligation or liability incurred, assumed or
guaranteed
by the Company or any
of its Subsidiaries,
except those for
immaterial
amounts and for
current liabilities
incurred in the
ordinary
course of
business;
(k) any sale,
assignment or transfer
of any patents,
trademarks,
copyrights, trade
secrets or other intangible assets owned by the Company
or any of
its Subsidiaries;
(l) any change in any material agreement to which the Company or
any
of its
Subsidiaries
is a party or by which
either the Company or
any of
its
Subsidiaries is bound
7
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which
either individually or in the aggregate has had, or could
reasonably
be
expected to have,
individually or in the aggregate, a Material Adverse
Effect;
(m) any other event or
condition of any character that, either
individually or in the aggregate, has had, or could reasonably be
expected
to have,
individually or in the aggregate, a Material Adverse Effect; or
(n) any arrangement
or commitment by the Company or any of its
Subsidiaries to do any of the acts described in subsection (a)
through (m)
above.
4.9 Title to Properties and Assets; Liens, Etc. Except as set
forth
on Schedule 4.9, each of the Company and
each of its
Subsidiaries has good
and
marketable title to its properties and
assets, and good title
to its leasehold
estates, in each case subject to no
mortgage, pledge,
lien, lease,
encumbrance
or charge, other than:
(a) those resulting from taxes which have not yet become
delinquent;
(b) minor liens and
encumbrances which do
not materially
detract
from the
value of the property
subject thereto or
materially impair
the
operations
of the Company or any of its Subsidiaries; and
(c) those that have
otherwise arisen in the ordinary course of
business.
All facilities, machinery, equipment, fixtures, vehicles and other
properties
owned, leased or used by the Company and
its Subsidiaries are in good operating
condition and repair, ordinary wear and tear
excepted, and are reasonably fit
and usable for the purposes for which they are being used.
Except as set
forth
on Schedule 4.9, the Company and its
Subsidiaries
are in compliance with all
material terms of each lease to which it is
a party or is otherwise bound.
4.10 Intellectual Property.
(a) Each of the Company and each of its Subsidiaries owns or
possesses
sufficient
legal rights to all patents,
trademarks,
service
marks,
trade names, copyrights, trade secrets, licenses,
information and
other
proprietary rights and
processes necessary
for its business as now
conducted
and to the
Company's knowledge, as presently proposed to be
conducted
(the "Intellectual Property"), without any known infringement
of
the
rights of others. There are no outstanding options, licenses or
agreements
of any kind relating to the foregoing proprietary rights, nor
is the
Company or any of its Subsidiaries bound by or a party to any
options,
licenses or
agreements of any kind
with respect to the patents,
trademarks,
service marks,
trade names, copyrights, trade secrets,
licenses,
information and other
proprietary
rights and processes
of any
other
person or entity other than such licenses or agreements arising
from
the
purchase of "off the shelf" or standard products.
(b) Neither the Company nor any of its Subsidiaries has received
any
communications
alleging that the Company or any of its Subsidiaries has
violated
any of the
patents, trademarks, service marks, trade names,
copyrights
or trade secrets or other
8
<PAGE>
proprietary rights of
any other person or
entity, nor is the
Company or
any of its
Subsidiaries aware of any basis therefor.
(c) The Company
does not believe it is or will be necessary to
utilize
any inventions, trade secrets or proprietary information of any
of
its
employees made prior to their employment by the Company or any
of its
Subsidiaries,
except for
inventions,
trade
secrets or proprietary
information that have
been rightfully
assigned to the
Company or any of
its
Subsidiaries.
4.11 Compliance with Other Instruments. Neither the Company nor any
of its Subsidiaries is in violation or
default of (x) any term of its Charter or
Bylaws, or (y) of any provision of any indebtedness, mortgage, indenture,
contract, agreement or instrument to which it is party or
by which it is bound
or of any judgment, decree, order or writ, which violation or
default, in the
case of this clause (y), has had, or could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect. The
execution, delivery and performance of and compliance
with this Agreement
and
the Related Agreements to which it is a party,
and the issuance and sale of the
Note by the Company and the other
Securities by the Company each pursuant hereto
and thereto, will not, with or without the
passage of time or giving of notice,
result in any such material violation, or be in conflict with or
constitute a
default under any such term or
provision,
or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the
properties or
assets of the Company or any of its
Subsidiaries or the suspension, revocation,
impairment, forfeiture or nonrenewal of any
permit, license,
authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.
4.12 Litigation.
Except as set forth on Schedule 4.12 hereto, there
is no action, suit, proceeding or investigation pending or, to the Company's
knowledge, currently threatened against the Company or
any of its Subsidiaries
that prevents the Company or any of its
Subsidiaries
from entering into this
Agreement or the other Related Agreements,
or from consummating the transactions
contemplated hereby or thereby, or which has had, or could reasonably be
expected to have, either individually or in the aggregate,
a Material Adverse
Effect or any change in the current
equity ownership of the Company or any of
its Subsidiaries, nor is the Company aware
that there is any basis to assert any
of the foregoing. Neither the Company nor any of its
Subsidiaries is a party or
subject to the provisions of any order,
writ, injunction,
judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company
or any of its Subsidiaries currently
pending or which the Company or any of its
Subsidiaries intends to initiate.
4.13 Tax Returns and
Payments. Each of the
Company and each of its
Subsidiaries has filed all tax returns (federal, state and local) due and
required to be filed by it. All taxes shown to be due and payable on such
returns, any assessments imposed, and all other taxes due and
payable by the
Company or any of its Subsidiaries on or before the
Closing, have been
paid or
will be paid prior to the time they
become delinquent. Except as set forth on
Schedule 4.13, neither the Company nor any
of its Subsidiaries has been advised:
(a) that any of its returns, federal, state or other, have been or
are being
audited as of the date hereof; or
9
<PAGE>
(b) of any deficiency
in assessment or
proposed judgment
to
its federal, state or other taxes.
The Company has no knowledge of any
liability for any tax to be imposed upon its
properties or assets as of the date of this
Agreement that is not adequately
provided for.
4.14 Employees.
Except as set forth on
Schedule 4.14, neither
the
Company nor any of its Subsidiaries has any collective bargaining agreements
with any of its employees. There is no labor union organizing
activity pending
or, to the Company's knowledge, threatened
with respect to the Company or any of
its Subsidiaries. Except as disclosed in
the Exchange Act Filings or on Schedule
4.14, neither the Company nor any of its
Subsidiaries is a party to or bound by
any currently effective employment
contract, deferred
compensation arrangement,
bonus plan, incentive plan, profit sharing
plan, retirement
agreement or other
employee compensation plan or agreement. To
the Company's knowledge, no employee
of the Company or any of its Subsidiaries, nor any consultant with whom the
Company or any of its Subsidiaries
has contracted,
is in violation of any
term
of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such
individual to be employed by, or to
contract with, the Company or any of its
Subsidiaries
because of the nature
of
the business to be conducted by the Company
or any of its
Subsidiaries; and
to
the Company's knowledge the continued employment by the Company or any
of its
Subsidiaries of its present employees,
and the performance of
the Company's and
its Subsidiaries' contracts with its
independent contractors, will not result in
any such violation. Neither the Company nor any of its
Subsidiaries
is aware
that any of its employees is obligated
under any contract
(including
licenses,
covenants or commitments of any nature) or
other agreement,
or subject to any
judgment, decree or order of any court or
administrative
agency, that would
interfere with their
