SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT
(this “ Agreement
”), is dated as of September 14, 2009, by and between
Converted Organics Inc., a Delaware corporation (the “
Company ”), and Iroquois Master Fund Ltd. (“
Subscriber ”).
WHEREAS , the Company and the Subscriber are executing
and delivering this Agreement in reliance upon an exemption from
securities registration afforded by the provisions of
Section 4(2), Section 4(6) and/or Regulation D
(“ Regulation D ”) as promulgated by the
United States Securities and Exchange Commission (the “
Commission ”) under the Securities Act of 1933, as
amended (the “ 1933 Act ”).
WHEREAS , the parties desire that, upon the terms and
subject to the conditions contained herein, the Company shall issue
and sell to the Subscriber, as provided herein, and the Subscriber
shall purchase for $1,400,000 (the “ Purchase Price
”) (i) a secured promissory note in the principal amount
of $1,540,000 (“ Note ”), a form of which is
annexed hereto as Exhibit A , convertible into shares
of the Company’s common stock, $.0001 par value (the “
Common Stock ”), at a per share conversion price set
forth in the Note (“ Conversion Price ”), and
(ii) share purchase warrants (the “ Warrants
”) in the form attached hereto as Exhibit B, to
purchase shares of the Company’s Common Stock (the “
Warrant Shares ”) (the “ Offering
”). The Note, the shares of Common Stock issuable upon
conversion of the Notes (the “ Conversion Shares
”), the Warrants, and the Warrant Shares are collectively
referred to herein as the “ Securities ”;
and
WHEREAS , the aggregate proceeds of the sale of the Note
contemplated hereby shall be held in escrow pursuant to the terms
of a Funds Escrow Agreement to be executed by the parties
substantially in the form attached hereto as Exhibit C
(the “ Escrow Agreement ”).
NOW, THEREFORE , in consideration of the mutual covenants and
other agreements contained in this Agreement the Company and the
Subscriber hereby agree as follows:
1. Closing Date . The “
Closing Date ” shall be the date that the Purchase
Price is transmitted by wire transfer or otherwise credited to or
for the benefit of the Company. The consummation of the
transactions contemplated herein shall take place at the offices of
Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New
York, New York 10176, upon the satisfaction or waiver of all
conditions to closing set forth in this Agreement. Subject to the
satisfaction or waiver of the terms and conditions of this
Agreement, on the Closing Date, Subscriber shall purchase for the
Purchase Price and the Company shall sell to Subscriber a Note in
the Principal Amount of $1,540,000 and Warrants as described in
Section 2 of this Agreement.
2. Notes and Warrants .
(a) Notes . Subject to the
satisfaction or waiver of the terms and conditions of this
Agreement, on the Closing Date, Subscriber shall purchase and the
Company shall sell to the Subscriber a Note in the Principal Amount
designated on the signature page hereto for Subscriber’s
Purchase Price indicated thereon.
(b) Warrants . On the Closing Date,
the Company will issue and deliver an aggregate of 2,500,000
Class G Warrants to the Subscriber. The exercise price to
acquire a Warrant Share upon exercise of a Warrant shall be equal
to $1.25, subject to reduction as described in the Warrants. The
Warrants shall be exercisable until five (5) years after the
issue date of the Warrants.
(c) Allocation of Purchase Price .
The Purchase Price will be allocated among the components of the
Securities so that each component of the Securities will be fully
paid and non-assessable.
3. Security Interest . The
Subscriber will be granted a security interest in the assets of the
Company and Subsidiaries (as defined in Section 5(a) of this
Agreement), including ownership of the Subsidiaries and in the
assets of the Subsidiaries, which security interest will be
memorialized in a “ Security Agreement ,” a form
of which is annexed hereto as Exhibit D . The
Subsidiaries will guaranty the Company’s obligations under
the Transaction Documents as defined in Section 5(c). Such
guaranties will be memorialized in a “ Subsidiary
Guaranty ”, the form of which is annexed hereto as
Exhibit E . The Company will execute such other
agreements, documents and financing statements reasonably requested
by the Subscribers, which will be filed at the Company’s
expense with the jurisdictions, states and counties designated by
the Subscriber.
4. Subscriber Representations and
Warranties . Subscriber hereby represents and warrants to and
agrees with the Company that:
(a) Organization and Standing of the
Subscriber . Subscriber is a corporation duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization and Power .
Subscriber has the requisite power and authority to enter into and
perform this Agreement and the other Transaction Documents and to
purchase the Note being sold to it hereunder. The execution,
delivery and performance of this Agreement and the other
Transaction Documents by Subscriber and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action, and no further
consent or authorization of Subscriber or its Board of Directors or
stockholders is required. This Agreement and the other Transaction
Documents have been duly authorized, executed and when delivered by
Subscriber and constitute, or shall constitute when executed and
delivered, a valid and binding obligation of Subscriber enforceable
against Subscriber in accordance with the terms thereof.
(c) No Conflicts . The execution,
delivery and performance of this Agreement and the other
Transaction Documents and the consummation by Subscriber of the
transactions contemplated hereby and thereby or relating hereto do
not and will not (i) result in a violation of
Subscriber’s charter documents, bylaws or other
organizational documents, (ii) conflict with nor constitute a
default (or an event which with notice or lapse of time or both
would become a default) under, nor (iii) result in a violation
of any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to Subscriber or its
properties (except for such conflicts, defaults and violations as
would not, individually or in the aggregate, have a material
adverse effect on Subscriber). Subscriber is not required to obtain
any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it
to execute, deliver or perform any of its obligations under this
Agreement and the other Transaction Documents nor to purchase the
Securities in accordance with the terms hereof, provided that for
purposes of the representation made in this sentence, Subscriber is
assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(d) Information on Company .
Subscriber has been furnished with or has had access at the EDGAR
Website of the Commission to the Company’s Form 10-K filed on
March 30, 2009 for the fiscal year ended December 31,
2008, and the financial statements included therein for the year
ended December 31, 2008, together with the definitive proxy
statement on Schedule 14A filed April 30, 2009 and all filings
made subsequent to the Form 10-K with the Commission available at
the EDGAR website until five days before the Closing Date
(hereinafter referred to collectively as the " Reports
”). In addition, Subscriber has been provided the opportunity
to ask questions of Company management as Subscriber deems
necessary, and Subscriber has considered all factors Subscriber
deems material in deciding on the advisability of investing in the
Securities.
(e) Information on Subscriber .
Subscriber is, and will be at the time of the purchase of the Note
and exercise of the Warrants, an “ accredited investor
”, as such term is defined in Regulation D promulgated
by the Commission under the 1933 Act, is experienced in investments
and business matters, has made investments of a speculative nature
and has purchased securities of United States publicly-owned
companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial,
tax and other business matters as to enable Subscriber to utilize
the information made available by the Company to evaluate the
merits and risks of and to make an informed investment decision
with respect to the proposed purchase, which represents a
speculative investment. Subscriber has the authority and is duly
and legally qualified to purchase and own the Securities.
Subscriber is able to bear the risk of such investment for an
indefinite period and to afford a complete loss thereof. The
information set forth on the signature page hereto regarding
Subscriber is accurate.
(f) Purchase of Note and Warrants .
On the Closing Date, Subscriber will purchase the Note and Warrants
as principal for its own account for investment only and not with a
view toward, or for resale in connection with, the public sale or
any distribution thereof.
(g) Compliance with Securities Act
. Subscriber understands and agrees that the Securities have not
been registered under the 1933 Act or any applicable state
securities laws, by reason of their issuance in a transaction that
does not require registration under the 1933 Act (based in part on
the accuracy of the representations and warranties of the
Subscriber contained herein), and that such Securities must be held
indefinitely unless a subsequent disposition is registered under
the 1933 Act or any applicable state securities laws or is exempt
from such registration. In any event, and subject to compliance
with applicable securities laws, the Subscriber may enter into
lawful hedging transactions in the course of hedging the position
they assume and the Subscriber may also enter into lawful short
positions or other derivative transactions relating to the
Securities, or interests in the Securities, and deliver the
Securities, or interests in the Securities, to close out their
short or other positions or otherwise settle other transactions, or
loan or pledge the Securities, or interests in the Securities, to
third parties who in turn may dispose of these
Securities.
(h) Conversion Shares and Warrant
Shares Legend . The Conversion Shares and Warrant Shares shall
bear the following or similar legend:
" THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
”
(i) Note and Warrant Legend . The Note
and Warrant shall bear the following legend:
” NEITHER THE ISSUANCE AND
SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE] HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES .”
(j) Communication of Offer . The
offer to sell the Securities was directly communicated to
Subscriber by the Company. At no time was Subscriber presented with
or solicited by any leaflet, newspaper or magazine article, radio
or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting
otherwise than in connection and concurrently with such
communicated offer.
(k) Restricted Securities .
Subscriber understands that the Securities have not been registered
under the 1933 Act and Subscriber will not sell, offer to sell,
assign, pledge, hypothecate or otherwise transfer any of the
Securities unless pursuant to an effective registration statement
under the 1933 Act, or unless an exemption from registration is
available. Notwithstanding anything to the contrary contained in
this Agreement, Subscriber may transfer (without restriction and
without the need for an opinion of counsel) the Securities to its
Affiliates (as defined below) provided that each such Affiliate is
an “accredited investor” under Regulation D and
such Affiliate agrees in writing to be bound by the terms and
conditions of this Agreement. For the purposes of this Agreement,
an “ Affiliate ” of any person or entity means
any other person or entity directly or indirectly controlling,
controlled by or under direct or indirect common control with such
person or entity. Affiliate includes each Subsidiary of the
Subscriber. For purposes of this definition, “ control
” means the power to direct the management and policies of
such person or firm, directly or indirectly, whether through the
ownership of voting securities, by contract or
otherwise.
(l) No Governmental Review .
Subscriber understands that no United States federal or state
agency or any other governmental or state agency has passed on or
made recommendations or endorsement of the Securities or the
suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of
the Securities.
(m) Correctness of Representations
. Subscriber represents that the foregoing representations and
warranties are true and correct as of the date hereof and, unless
Subscriber otherwise notifies the Company prior to the Closing Date
shall be true and correct as of the Closing Date.
(n) Survival . The foregoing
representations and warranties shall survive the Closing
Date.
5. Company Representations and
Warranties . The Company represents and warrants to and agrees
with each Subscriber that:
(a) Due Incorporation . The Company
is a corporation or other entity duly incorporated or organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has the
requisite corporate power to own its properties and to carry on its
business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted or property
owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a
Material Adverse Effect. For purposes of this Agreement, a “
Material Adverse Effect ” shall mean a material
adverse effect on the financial condition, results of operations,
prospects, properties or business of the Company and its
Subsidiaries taken as a whole, other than as a result of changes
resulting from the execution by the Company of the Transaction
Documents. For purposes of this Agreement, “
Subsidiary ” means, with respect to any entity at any
date, any corporation, limited or general partnership, limited
liability company, trust, estate, association, joint venture or
other business entity of which more than 30% of (i) the
outstanding capital stock having (in the absence of contingencies)
ordinary voting power to elect a majority of the board of directors
or other managing body of such entity, (ii) in the case of a
partnership or limited liability company, the interest in the
capital or profits of such partnership or limited liability company
or (iii) in the case of a trust, estate, association, joint
venture or other entity, the beneficial interest in such trust,
estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through
one or more intermediaries, by such entity. As of the Closing Date,
all of the Company’s Subsidiaries and the Company’s
ownership interest thereof is set forth on ;Schedule 5(a)
.
(b) Outstanding Stock . All issued
and outstanding shares of capital stock and equity interests in the
Company have been duly authorized and validly issued and are fully
paid and non-assessable.
(c) Authority; Enforceability .
This Agreement, the Note, Warrant, the Security Agreement,
Subsidiary Guaranty, the Escrow Agreement, and any other agreements
delivered together with this Agreement or in connection herewith
(collectively “ Transaction Documents ”) have
been duly authorized, executed and delivered by the Company and are
valid and binding agreements of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’
rights generally and to general principles of equity. The Company
has full corporate power and authority necessary to enter into and
deliver the Transaction Documents and to perform its obligations
thereunder.
(d) Capitalization and Additional
Issuances . The authorized and outstanding capital stock of the
Company and Subsidiaries on a fully diluted basis as of the date of
this Agreement and the Closing Date (not including the Securities)
are set forth on Schedule 5(d) . Except as set forth on
Schedule 5(d) , there are no options, warrants, or
rights to subscribe to, securities, rights, understandings or
obligations convertible into or exchangeable for or giving any
right to subscribe for any shares of capital stock or other equity
interest of the Company or any of the Subsidiaries. The only
officer, director, employee and consultant stock option or stock
incentive plan or similar plan currently in effect or contemplated
by the Company is described on Schedule 5(d) . There are no
outstanding agreements for preemptive or similar rights affecting
the Company’s Common Stock.
(e) Consents . No consent,
approval, authorization or order of any court, governmental agency
or body or arbitrator having jurisdiction over the Company, or any
of its Affiliates, the Nasdaq Capital Market (the “ Nasdaq
Capital Market ”) or the Company’s shareholders is
required for the execution by the Company of the Transaction
Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without
limitation, the issuance and sale of the Securities, provided that
the Company will be required to submit a Listing of Additional
Shares application to the Nasdaq Stock Market in connection with
the shares underlying the Warrant. The Transaction Documents and
the Company’s performance of its obligations thereunder has
been unanimously approved by the Company’s Board of
Directors. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing
with, any governmental authority in the world, including without
limitation, the United States, or to the knowledge of the Company
elsewhere is required by the Company or any Affiliate of the
Company in connection with the consummation of the transactions
contemplated by this Agreement, except as would not otherwise have
a Material Adverse Effect or the consummation of any of the other
agreements, covenants or commitments of the Company or any
Subsidiary contemplated by the other Transaction Documents. Any
such qualifications and filings will, in the case of
qualifications, be effective on the Closing and will, in the case
of filings, be made within the time prescribed by law.
(f) No Violation or Conflict .
Assuming the representations and warranties of the Subscriber in
Section 4 are true and correct, neither the issuance and sale
of the Securities nor the performance of the Company’s
obligations under this Agreement and all other agreements entered
into by the Company relating thereto by the Company
will:
(i) violate, conflict with, result in a
breach of, or constitute a default (or an event which with the
giving of notice or the lapse of time or both would be reasonably
likely to constitute a default) under (A) the articles or
certificate of incorporation, charter or bylaws of the Company,
(B) to the Company’s knowledge, any decree, judgment,
order, law, treaty, rule, regulation or determination applicable to
the Company of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or over the
properties or assets of the Company or any of its Affiliates,
(C) the terms of any bond, debenture, note or any other
evidence of indebtedness, or any agreement, stock option or other
similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company or any of its Affiliates is a
party, by which the Company or any of its Affiliates is bound, or
to which any of the properties of the Company or any of its
Affiliates is subject, or (D) the terms of any
“lock-up” or similar provision of any underwriting or
similar agreement to which the Company, or any of its Affiliates is
a party, except with respect to each of the foregoing the
violation, conflict, breach, or default of which would not have a
Material Adverse Effect and except for such agreements for which
the Company is required to obtain consent to complete the Offering,
provided the Company actually obtains such consent prior to the
Closing; or
(ii) result in the creation or imposition
of any lien, charge or encumbrance upon the Securities or any of
the assets of the Company or any of its Affiliates except in favor
of Subscriber as described herein; or
(iii) result in the activation of any
anti-dilution rights or a reset or repricing of any debt, equity or
security instrument of any creditor or equity holder of the
Company, or the holder of the right to receive any debt, equity or
security instrument of the Company nor result in the acceleration
of the due date of any obligation of the Company; or
(iv) result in the triggering of any
piggy-back or other registration rights of any person or entity
holding securities of the Company or having the right to receive
securities of the Company.
(g) The Securities . The
Securities upon issuance:
(i) are, or will be, free and clear of any
security interests, liens, claims or other encumbrances, subject
only to restrictions upon transfer under the 1933 Act and any
applicable state securities laws;
(ii) have been, or will be, duly and
validly authorized and on the dates of issuance of the Conversion
Shares upon conversion of the Notes, and Warrant Shares upon
exercise of the Warrant, such Conversion Shares and Warrant Shares
will be duly and validly issued, fully paid and non-assessable and
if registered pursuant to the 1933 Act and resold pursuant to an
effective registration statement or if resold pursuant to an
exemption from registration, upon such sale the shares will be free
trading, unrestricted and unlegended;
(iii) will not have been issued or sold in
violation of any preemptive or other similar rights of the holders
of any securities of the Company or rights to acquire securities of
the Company;
(iv) will not subject the holders thereof
to personal liability by reason of being such holders;
and
(v) assuming the representations warranties
of the Subscribers as set forth in Section 4 hereof are true
and correct, will not result in a violation of Section 5 under
the 1933 Act.
(h) Litigation . Except as
disclosed in the Reports, there is no pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its
Affiliates that would affect the execution by the Company or the
complete and timely performance by the Company of its obligations
under the Transaction Documents. Except as disclosed in the
Reports, there is no pending or, to the best knowledge of the
Company, basis for or threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its
Affiliates which litigation if adversely determined would have a
Material Adverse Effect.
(i) No Market Manipulation . The
Company and its Affiliates have not taken, and will not take,
directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the
sale or resale of the Securities or affect the price at which the
Securities may be issued or resold.
(j) Information Concerning Company
. The Reports contain all material information relating to the
Company and its operations and financial condition as of their
respective dates which information is required to be disclosed
therein. Since December 31, 2008 and except as disclosed in
the Reports or modified in the Schedules hereto, there has been no
Material Adverse Event relating to the Company’s business,
financial condition or affairs. The Reports including the financial
statements included therein do not contain any untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, taken
as a whole, not misleading in light of the circumstances and when
made.
(k) Solvency . Based on the
financial condition of the Company as of the Closing Date,
(i) the Company’s book value of its assets exceeds the
amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including
known contingent liabilities); and (ii) the current cash flow
of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets at book value,
after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when
such amounts are required to be paid.
(l) Defaults . The Company is not
in violation of its articles of incorporation or bylaws. Except as
set forth in the Reports and identified as events that could
adversely effect the Company in the Reports, the Company is
(i) not in default under or in violation of any other material
agreement or instrument to which it is a party or by which it or
any of its properties are bound or affected, which default or
violation would have a Material Adverse Effect, (ii) not in
default with respect to any order of any court, arbitrator or
governmental body or subject to or party to any order of any court
or governmental authority arising out of any action, suit or
proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar
matters, or (iii) not in violation of any statute, rule or
regulation of any governmental authority which violation would have
a Material Adverse Effect.
(m) No Integrated Offering. Neither
the Company, nor any of its Affiliates, nor any person acting on
its or their behalf, has directly or indirectly made any offers or
sales of any security of the Company nor solicited any offers to
buy any security of the Company under circumstances that would
cause the offer of the Securities pursuant to this Agreement to be
integrated with prior offerings by the Company for purposes of the
1933 Act, except for such offers which would not result in a
violation of the 1933 Act if such offers were integrated with the
offer of the Securities, or any applicable stockholder approval
provisions, including, without limitation, under the rules and
regulations of the Bulletin Board. No prior offering will impair
the exemptions relied upon in this Offering or the Company’s
ability to timely comply with its obligations hereunder. Neither
the Company nor any of its Affiliates will take any action or steps
that would cause the offer or issuance of the Securities to be
integrated with other offerings which would impair the exemptions
relied upon in this Offering or the Company’s ability to
timely comply with its obligations hereunder.
(n) No General Solicitation .
Neither the Company, nor any of its Affiliates, nor to its
knowledge, any person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising (within the
meaning of Regulation D under the 1933 Act) in connection with
the offer or sale of the Securities.
(o) No Undisclosed Liabilities .
The Company has no liabilities or obligations which are material,
individually or in the aggregate, other than those incurred in the
ordinary course of the Company’s business since June 30,
2009 and which, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect, except as disclosed
in the Reports or on Schedule 5(o) .
(p) No Undisclosed Events or
Circumstances . Since June 30, 2009, except as disclosed
in the Reports, no event or circumstance has occurred or exists
with respect to the Company or its businesses, properties,
operations or financial condition, that, under applicable law, rule
or regulation, requires public disclosure or announcement prior to
the date hereof by the Company but which has not been so publicly
announced or disclosed in the Reports.
(q) Banking .
Schedule 5(q) contains a list of all financial
institutions at which the Company and Subsidiaries maintains
deposit, checking and other accounts. The list includes the
accurate addresses of such financial institution.
(r) Dilution . The Company’s
executive officers and directors understand the nature of the
Securities being sold hereby and recognize that the issuance of the
Securities will have a potential dilutive effect on the equity
holdings of other holders of the Company’s equity or rights
to receive equity of the Company. The board of directors of the
Company has concluded, in its good faith business judgment that the
issuance of the Securities is in the best interests of the Company.
The Company specifically acknowledges that its obligation to issue
the Warrant Shares upon exercise of the Warrant is binding upon the
Company and enforceable regardless of the dilution such issuance
may have on the ownership interests of other shareholders of the
Company or parties entitled to receive equity of the
Company.
(s) No Disagreements with Accountants
and Lawyers. There are no material disagreements of any kind
presently existing, or reasonably anticipated by the Company to
arise between the Company and the accountants and lawyers
previously and presently employed by the Company, including but not
limited to disputes or conflicts over payment owed to such
accountants and lawyers, nor have there been any such disagreements
during the two years prior to the Closing Date.
(t) Investment Company . Neither
the Company nor any Affiliate of the Company is an
“investment company” within the meaning of the
Investment Company Act of 1940, as amended.
(u) Foreign Corrupt Practices.
Neither the Company, nor to the knowledge of the Company, any agent
or other person acting on behalf of the Company, has
(i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made
any unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully
any contribution made by the Company (or made by any person acting
on its behalf of which the Company is aware) which is in violation
of law, or (iv) violated in any material respect any provision
of the Foreign Corrupt Practices Act of 1977, as
amended.
(v) Reporting Company/Shell Company
. The Company is a publicly-held company subject to reporting
obligations pursuant to Section 13 of the Securities Exchange
Act of 1934, as amended (the “ 1934 Act ”) and
has a class of Common Stock registered pursuant to Section 12(b) of
the 1934 Act. Pursuant to the provisions of the 1934 Act, the
Company has filed all reports and other materials required to be
filed thereunder with the Commission during the preceding twelve
months. As of the Closing Date, the Company is not a “shell
company” as that term are employed in Rule 144 under the
1933 Act.
(w) Listing . The Company’s
Common Stock is quoted on the Nasdaq Capital Market under the
symbol COIN. The Company has not received any oral or written
notice that its Common Stock is not eligible nor will become
ineligible for quotation on the Nasdaq Capital Market nor that its
Common Stock does not meet all requirements for the continuation of
such quotation.
(x) DTC Status . The
Company’s transfer agent is a participant in, and the Common
Stock is eligible for transfer pursuant to, the Depository Trust
Company Automated Securities Transfer Program. The name, address,
telephone number, fax number, contact person and email address of
the Company transfer agent is set forth on
Schedule 5(x) hereto.
(y) Company Predecessor and
Subsidiaries . The Company makes each of the representations
contained in Sections 5(a), (b), (c), (d), (e), (f), (h), (l),
(o), (p), (q), (s), (t) and (u) of this Agreement, as
same relate or could be applicable to each Subsidiary. All
representations made by or relating to the Company of a historical
or prospective nature and all undertakings described in Sections
9(g) through 9(l) shall relate, apply and refer to the Company and
its predecessors and successors. The Company represents that it
owns all of the equity of the Subsidiaries and rights to receive
equity of the Subsidiaries identified on Schedule 5(a)
, free and clear of all liens, encumbrances and claims, except as
set forth on Schedule 5(a) . Except as set for on
Schedule 5(a), no person or entity other than the Company has
the right to receive any equity interest in the
Subsidiaries.
(z) Correctness of Representations
. The Company represents that the foregoing representations and
warranties are true and correct as
