Exhibit 4.7
SECURITIES PURCHASE
AGREEMENT
This Securities Purchase Agreement
(this “ Agreement ”) is dated as of November 15,
2004 among Knobias, Inc., a Delaware corporation (the “
Company ”), and each purchaser identified on the
signature pages hereto (each, including its successors and assigns,
a “ Purchaser ” and collectively the “
Purchasers ”).
WHEREAS, subject to the terms and
conditions set forth in this Agreement and pursuant to Section 4(2)
of the Securities Act of 1933, as amended (the “
Securities Act ”) and Rule 506 promulgated thereunder,
the Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the
Company, securities of the Company as more fully described in this
Agreement.
NOW, THEREFORE, IN CONSIDERATION of
the mutual covenants contained in this Agreement, and for other
good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and each Purchaser agrees as
follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions . In addition
to the terms defined elsewhere in this Agreement: (a) capitalized
terms that are not otherwise defined herein have the meanings given
to such terms in the Notes (as defined herein), and (b) the
following terms have the meanings indicated in this Section
1.1:
“ Action ” shall
have the meaning ascribed to such term in Section
3.1(j).
“ 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 under the Securities Act. With respect to a
Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as such
Purchaser will be deemed to be an Affiliate of such
Purchaser.
“ Closing ” means
the closing of the purchase and sale of the Securities pursuant to
Section 2.1 .
“ Closing Date ”
means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and
all conditions precedent to (i) the Purchasers’ obligations
to pay the Subscription Amount and (ii) the Company’s
obligations to deliver the Securities have been satisfied or
waived.
“ Commission ”
means the Securities and Exchange Commission.
“ Common Stock ”
means the common stock of the Company, no par value, and any
securities into which such common stock shall hereinafter have been
reclassified into.
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“ Common Stock
Equivalents ” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at
any time Common Stock, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that
is at any time convertible into or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
“ Company Counsel
” means Watkins & Eager PLLC and Ritchie, Duncan &
Goodwin, LLC.
“ Conversion Price
” shall have the meaning ascribed to such term in the
Notes.
“ Disclosure Schedules
” shall have the meaning ascribed to such term in Section 3.1
hereof.
“ Effective Date
” means the date that the initial Registration Statement
filed by the Company pursuant to the Registration Rights Agreement
is first declared effective by the Commission.
“ Exchange Act ”
means the Securities Exchange Act of 1934, as amended.
“ Exempt Issuance
” means the issuance of (a) shares of Common Stock or options
to employees, officers or directors of the Company pursuant to the
Company’s 2004 Stock Incentive Plan or any stock or option
plan duly adopted by a majority of the non-employee members of the
Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose,
(b) securities upon the exercise of or conversion of any securities
issued hereunder, convertible securities, options or warrants
issued and outstanding on the date of this Agreement, provided that
such securities have not been amended since the date of this
Agreement to increase the number of such securities, (c) securities
issued pursuant to acquisitions or strategic transactions, provided
any such issuance shall only be to a Person which is, itself or
through its subsidiaries, an operating company in a business
synergistic with the business of the Company and in which the
Company receives benefits in addition to the investment of funds,
but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an
entity whose primary business is investing in securities, (d)
securities issued pursuant to an equity offering of up to
$5,000,000 at a price per share equal to or greater than the
Conversion Price (as defined in the Note), which issuance shall
occur prior to the one month anniversary of the date hereof and (e)
options and warrants issued by the Company to replace those
previously issued by Knobias Holdings, Inc., and assumed by the
Company pursuant to the Merger.
“ GAAP ” shall
have the meaning ascribed to such term in Section 3.1(h)
hereof.
“ KW ” means
Keith Wellner, attorney for DCOFI Master LDC, with offices at 830
Third Avenue, New York, New York 10022.
“ Liens ” means a
lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
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“ Material Adverse
Effect ” shall have the meaning assigned to such term in
Section 3.1(b) hereof.
“ Material Permits
” shall have the meaning ascribed to such term in Section
3.1(m).
“ Merger ” shall
mean the merger of Knobias Holdings, Inc., a Delaware corporation,
into KHI Acquisition, Inc., a Delaware corporation, pursuant to
that certain Agreement and Plan of Reorganization Among Knobias
Holdings, Inc., Consolidated Travel Systems, Inc., and KHI
Acquisition, Inc., dated June 30, 2004.
“ Notes ” means,
the 8% Secured Convertible Notes due, subject to the terms therein,
two years from their date of issuance, issued by the Company to the
Purchasers hereunder, in the form of Exhibit A .
“ 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.
“ 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 the date hereof, among the Company and the Purchasers, in the
form of Exhibit B attached hereto.
“ Registration
Statement ” means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and
covering the resale of the Underlying Shares by each Purchaser as
provided for in the Registration Rights Agreement.
“ Required Approvals
” shall have the meaning ascribed to such term in Section
3.1(e).
“ Required Minimum
” means, as of any date, the maximum aggregate number of
shares of Common Stock then issued or potentially issuable in the
future pursuant to the Transaction Documents, including any
Underlying Shares issuable upon exercise or conversion in full of
all Warrants and Notes (including Underlying Shares issuable as
payment of interest), ignoring any conversion or exercise limits
set forth therein, and assuming that the Conversion Price is at all
times on and after the date of determination 75% of the then
Conversion Price on the Trading Day immediately prior to the date
of determination.
“ 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.
“ SEC Reports ”
shall have the meaning ascribed to such term in Section 3.1(h)
hereof.
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“ Securities ”
means the Notes, the Warrants, the Warrant Shares and the
Underlying Shares.
“ Securities Act
” means the Securities Act of 1933, as amended.
“ Security Agreement
” means the Security Agreement, dated the date hereof, among
the Company and the Purchasers, in the form of Exhibit F
attached hereto.
“ Security Documents
” means the Security Agreement, the Subsidiary Guarantee and
any other documents and filing required thereunder in order to
grant the Purchasers a perfected security interest in all of the
assets of the Company, including all UCC-1 filing
receipts.
“ Standby Equity
Agreement ” means that certain Standby Equity
Distribution Agreement between Cornell Capital Partners, LP, and
the Company, effective as of the Merger, and the transaction
documents related thereto.
“ Subscription Amount
” means, as to each Purchaser, the aggregate amount to be
paid for Notes and Warrants purchased hereunder as specified below
such Purchaser’s name on the signature page of this Agreement
and next to the heading “Subscription Amount”, in
United States Dollars and in immediately available
funds.
“ Subsequent Financing
” shall have the meaning ascribed to such term in Section
4.13.
“ Subsidiary ”
means any subsidiary of the Company as set forth on Schedule
3.1(a) .
“ Subsidiary Guarantee
” means the Subsidiary Guarantee, dated the date hereof,
among each of the Subsidiaries and the Purchasers, in the form of
Exhibit G attached hereto.
“ Trading Day ”
means a day on which the Common Stock is traded on a Trading
Market.
“ Trading Market
” means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in
question: the Nasdaq SmallCap Market, the American Stock Exchange,
the New York Stock Exchange, the Nasdaq National Market or the OTC
Bulletin Board.
“ Transaction Documents
” means this Agreement, the Notes, the Warrants, the Security
Agreement, the Subsidiary Guarantee, the Registration Rights
Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
“ Underlying Shares
” means the shares of Common Stock issuable upon conversion
of the Notes and upon exercise of the Warrants and issued and
issuable in lieu of the cash payment of interest on the
Notes.
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“ VWAP ” means,
for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price
of the Common Stock for such date (or the nearest preceding date)
on the primary Trading Market on which the Common Stock is then
listed or quoted as reported by Bloomberg Financial L.P. (based on
a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using
the VAP function; (b) if the Common Stock is not then listed or
quoted on the Trading Market and if prices for the Common Stock are
then reported in the “Pink Sheets” published by the
Pink Sheets, LLC (or a similar organization or agency succeeding to
its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (c) in all other cases,
the fair market value of a share of Common Stock as determined by a
nationally recognized-independent appraiser selected in good faith
by Purchasers holding a majority of the principal amount of Notes
then outstanding.
“ Warrants ”
means collectively the Common Stock purchase warrants, in the form
of Exhibit C delivered to the Purchasers at the Closing in
accordance with Section 2.2(a) hereof, which Warrants shall be
exercisable immediately and have a term of exercise equal to five
years.
“ Warrant Shares
” means the shares of Common Stock issuable upon exercise of
the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing . On the Closing
Date, upon the terms and subject to the conditions set forth
herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and
each Purchaser agrees to purchase in the aggregate, severally and
not jointly, up to $250,000 principal amount of the Notes. Each
Purchaser shall deliver to the Company via wire transfer or a
certified check immediately available funds equal to their
Subscription Amount and the Company shall deliver to each Purchaser
their respective Note and Warrants as determined pursuant to
Section 2.2(a) and the other items set forth in Section 2.2
issuable at the Closing. Upon satisfaction of the conditions set
forth in Section 2.2, the Closing shall occur at the offices of the
Company, or such other location as the parties shall mutually
agree
2.2 Deliveries
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a)
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On the Closing
Date, the Company shall deliver to the counsel for such Purchasers
with respect to each Purchaser the following:
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(i)
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this Agreement
duly executed by the Company;
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(ii)
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a Note with a
principal amount equal to such Purchaser’s Subscription
Amount, registered in the name of such Purchaser;
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(iii)
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a Warrant registered in the name
of such Purchaser to purchase up to a number of shares of Common
Stock equal to 180% of such
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Purchaser’s Subscription
Amount divided by the Conversion Price (as defined in the Note)
immediately prior to the date hereof, with an exercise price equal
to $0.01;
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(iv)
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the
Registration Rights Agreement duly executed by the
Company;
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(v)
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the Security
Agreement, duly executed by the Company, along with all the
Security Documents;
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(vi)
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a legal opinion
of Company Counsel, in the form of Exhibit D attached
hereto.
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b)
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On the Closing
Date, each Purchaser shall deliver or cause to be delivered to
Company Counsel the following:
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(i)
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this Agreement
duly executed by such Purchaser;
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(ii)
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such
Purchaser’s Subscription Amount by wire transfer to the
account of the Company;
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(iii)
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the Security
Agreement, duly executed by such Purchaser; and
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(iv)
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the
Registration Rights Agreement duly executed by such
Purchaser.
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2.3 Closing Conditions
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a)
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The obligations
of the Company hereunder in connection with the Closing are subject
to the following conditions being met:
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(i)
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the accuracy in
all material respects when made and on the Closing Date of the
representations and warranties of the Purchasers contained
herein;
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(ii)
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all
obligations, covenants and agreements of the Purchasers required to
be performed at or prior to the Closing Date shall have been
performed; and
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(iii)
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the delivery by
the Purchasers of the items set forth in Section 2.2(b) of this
Agreement.
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b)
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The respective
obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being
met:
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(i)
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the accuracy in
all material respects on the Closing Date of the representations
and warranties of the Company contained herein;
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(ii)
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all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed;
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(iii)
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the delivery by
the Company of the items set forth in Section 2.2(a) of this
Agreement;
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(iv)
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there shall
have been no Material Adverse Effect with respect to the Company
since the date hereof; and
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(v)
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from the date
hereof to the Closing Date, trading in the Common Stock shall not
have been suspended by the Commission (except for any suspension of
trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as
reported by Bloomberg Financial Markets shall not have been
suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium
have been declared either by the United States or New York State
authorities nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or
inadvisable to purchase the Notes at the Closing.
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ARTICLE III.
REPRESENTATIONS AND
WARRANTIES
3.1 Representations and
Warranties of the Company . Except as set forth in the draft
Form 8-K delivered to the Purchasers concurrently herewith as
Schedule 3.1 (the “ Disclosure Schedule ”) which
Disclosure Schedule shall be deemed a part hereof, the Company
hereby makes the representations and warranties set forth below to
each Purchaser.
(a) Subsidiaries . All of the
direct and indirect subsidiaries of the Company are set forth in
the first paragraph of Item 2.01 of the Disclosure Schedule under
the caption “The Reverse Merger Transaction.” The
Company owns, directly or indirectly, all of the capital stock or
other equity interests of each Subsidiary free and clear of any
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 to
subscribe for or purchase securities. If the Company has no
subsidiaries, then references in the Transaction Documents to the
Subsidiaries will be disregarded.
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(b) Organization and
Qualification . Each of the Company and the Subsidiaries 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 or default of any of the
provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents.
Each of the Company and the Subsidiaries 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 have or reasonably be
expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document,
(ii) a material adverse effect on the results of operations,
assets, business, prospects or financial condition of the Company
and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material
respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “ Material Adverse
Effect ”) and no Proceeding has been instituted in any
such jurisdiction revoking, limiting or curtailing or seeking to
revoke, limit or curtail such power and authority or
qualification.
(c) Authorization;
Enforcement . The Company has the requisite corporate power and
authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution and delivery of
each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have
been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company in
connection therewith other than in connection with the Required
Approvals. Each Transaction Document has been (or upon delivery
will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof, will constitute the valid and
binding obligation of the Company enforceable against the Company
in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’
rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other
equitable remedies.
(d) No Conflicts . The
execution, delivery and performance of the Transaction Documents by
the Company and the consummation by the Company of the other
transactions contemplated thereby do not and will not: (i) conflict
with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict
with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the
Company or any Subsidiary, 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 (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in
a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any
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court or governmental authority to
which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or
asset of the Company or a Subsidiary is bound or affected; except
in the case of each of clauses (ii) and (iii), such as could not
have or reasonably be expected to result in a Material Adverse
Effect.
(e) Filings, Consents and
Approvals . The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state,
local or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) filings required pursuant to
Section 4.6, (ii) the filing with the Commission of the
Registration Statement, (iii) the notice and/or application(s) to
each applicable Trading Market for the issuance and sale of the
Notes and Warrants and the listing of the Underlying Shares for
trading thereon in the time and manner required thereby and (iv)
the filing of Form D with the Commission and such filings as are
required to be made under applicable state securities laws
(collectively, the “ Required Approvals
”).
(f) Issuance of the
Securities . The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company
other than restrictions on transfer provided for in the Transaction
Documents. The Underlying Shares, when issued in accordance with
the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all Liens imposed
by the Company. The Company has reserved from its duly authorized
capital stock a number of shares of Common Stock for issuance of
the Underlying Shares at least equal to the Required Minimum on the
date hereof. The Company has not, and to the knowledge of the
Company, no Affiliate of the Company has sold, offered for sale or
solicited offers to buy or otherwise negotiated in respect of any
security (as defined in Section 2 of the Securities Act) that would
be integrated with the offer or sale of the Securities in a manner
that would require the registration under the Securities Act of the
sale of the Securities to the Purchasers, or that would be
integrated with the offer or sale of the Securities for purposes of
the rules and regulations of any Trading Market.
(g) Capitalization . The
capitalization of the Company is as set forth in Item 2.01, the
Description of Securities section of the Disclosure Schedule and
the Company’s Amended and Restated Certificate of
Incorporation attached as Exhibit 3.3 of the Disclosure Schedule.
The Company has not issued any capital stock since the Merger other
than pursuant to the exercise of employee stock options under the
Company’s stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company’s employee
stock purchase plan and pursuant to the conversion or exercise of
outstanding Common Stock Equivalents. No Person has any right of
first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by
the Transaction Documents. Except as set forth in Item 2.01 and the
Description of Securities section of the Disclosure Schedule, as a
result of the purchase and sale of the Securities, there are no
outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable
for, or giving any
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Person any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable
into shares of Common Stock. The issuance and sale of the
Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Purchasers)
and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under
such securities. All of the outstanding shares of capital stock of
the Company are validly issued, fully paid and nonassessable, have
been issued in compliance with all federal and state securities
laws, and none of such outstanding shares was issued in violation
of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is
required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to
which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s
stockholders.
(h) SEC Reports; Financial
Statements . The Company has filed all reports required to be
filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two
years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing
materials, including the exhibits thereto, being collectively
referred to herein as the “ SEC Reports ”) on a
timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of
the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of
the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in
the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing.
Such financial statements have been prepared in accordance with
United States 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 except that unaudited financial
statements may not contain all footnotes required by GAAP, 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.
(i) Material Changes . Since
the date of the latest audited financial statements included within
the SEC Reports, except as specifically disclosed in the SEC
Reports, (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to
be reflected in the Company’s financial statements pursuant
to GAAP or
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required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its
method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the
Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the
Commission any request for confidential treatment of
information.
(j) Litigation . Other than
as set forth in the Disclosure Schedule under the caption
“Legal Proceedings,” there is no action, suit, inquiry,
notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “ Action ”) which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
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. 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. 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) Labor Relations . No
material labor dispute exists or, to the knowledge of the Company,
is imminent with respect to any of the employees of the Company
which could reasonably be expected to result in a Material Adverse
Effect.
(l) Compliance . Neither the
Company nor any Subsidiary (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental
body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to
its business except in each case as could not have a Material
Adverse Effect.
(m) Regulatory Permits . The
Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except
where the failure to possess such permits could not have or
reasonably be expected to result in a Material Adverse Effect
(“ Material Permits ”), and neither the Company
nor any Subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material
Permit.
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(n) Title to Assets . The
Company and the Subsidiaries have good and marketable title in fee
simple to all real property owned by them that is material to the
business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is
material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for Liens as do not
materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the
payment of federal, state or other taxes, the payment of which is
neither delinquent nor subject to penalties. Any real property and
facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases of
which the Company and the Subsidiaries are in
compliance.
(o) Patents and Trademarks .
The Company and the Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar
rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the
failure to so have could have a Material Adverse Effect
(collectively, the “ Intellectual Property Rights
”). Neither the Company nor any Subsidiary has received a
written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property
Rights of others.
(p) Insurance . The Company
and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged, including, but not
limited to, directors and officers insurance coverage at least
equal to the aggregate Subscription Amount. To the best of
Company’s knowledge, such insurance contracts and policies
are accurate and complete. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary
to continue its business without a significant increase in
cost.
(q) Transactions With Affiliates
and Employees . Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of
the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of
the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director,
trustee or partner, in each case in excess of $50,000 other than
(i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company
and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
Page 192 of 347
(r) Sarbanes-Oxley; Internal
Accounting Controls . The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002 which are
applicable to it as of the Closing Date. 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 GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure
controls
