Purchase Agreement, dated April 3, 2006, by and among Xethanol Corporation, a Delaware corporation, and the Investors. SECURITIES PURCHASE AGREEMENT
Exhibit
1.1
Purchase
Agreement, dated April 3, 2006, by and among Xethanol Corporation, a Delaware
corporation, and the Investors.
This
Securities Purchase Agreement (this “Agreement”)
is
dated as of April 3, 2006, among Xethanol Corporation, a Delaware corporation
(the “Company”),
and
the investors identified on the signature pages hereto (each, an “Investor”
and
collectively, the “Investors”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated
thereunder, the Company desires to issue and sell to each Investor, and each
Investor, severally and not jointly, desires to purchase from the Company
certain 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 the Investors agree as
follows:
ARTICLE
1.
DEFINITIONS
1.1. Definitions.
In
addition to the terms defined elsewhere in this Agreement, for all purposes
of
this Agreement, the following terms shall have the meanings indicated
in this
Section 1.1:
“Action”
means
any action, suit, inquiry, notice of violation, proceeding (including any
partial proceeding such as a deposition) or investigation pending or threatened
in writing against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state, county, local
or
foreign), stock market, stock exchange or trading facility.
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144.
“Business
Day”
means
any day except Saturday, Sunday and any day which is a federal legal holiday
or
a day on which banking institutions in the State of New York are authorized
or
required by law or other governmental action to close.
“Buy-In”
has
the
meaning set forth in Section 4.1(c).
“Closing”
means
the closing of the purchase and sale of the Securities pursuant to Article
II.
“Closing
Date”
means
the Business Day on which all of the conditions set forth in Sections 5.1 and
5.2 hereof are satisfied, or such other date as the parties may
agree.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $.001 per share, and any securities
into which such common stock may hereafter be reclassified.
“Common
Stock Equivalents”
means
any securities of the Company or any Subsidiary which entitle the holder thereof
to acquire Common Stock at any time, 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 or other securities that entitle the holder
to
receive, directly or indirectly, Common Stock.
“Company
Counsel”
means
Boylan,
Brown, Code, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP.
“Company
Deliverables”
has the
meaning set forth in Section 2.2(a).
“Disclosure
Materials”
has the
meaning set forth in Section 3.1(h).
“Effective
Date”
means
the date that the initial Registration Statement required by Section 2(a) of
the
Registration Rights Agreement is first declared effective by the
Commission.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“GAAP”
means
U.S. generally accepted accounting principles.
“Intellectual
Property Rights”
has the
meaning set forth in Section 3.1(p).
“Investment
Amount”
means,
with respect to each Investor, the Investment Amount indicated on such
Investor’s signature page to this Agreement.
“Investor
Deliverables”
has the
meaning set forth in Section 2.2(b).
“Investor
Party”
has the
meaning set forth in Section 4.7.
“Lien”
means
any lien, charge, encumbrance, security interest, right of first refusal or
other restrictions of any kind.
“Material
Adverse Effect”
means
any of (i) a material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material and adverse effect
on the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
or (iii) an adverse impairment to the Company’s ability to perform on a timely
basis its obligations under any Transaction Document.
“New
York Courts”
means
the state and federal courts sitting in the City of New York, Borough of
Manhattan.
“Outside
Date”
means
April 10, 2006.
“Per
Unit Purchase Price”
equals
$4.50.
“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 as of the date of this Agreement,
among
the Company and the Investors, in the form of Exhibit
C
hereto.
“Registration
Statement”
means a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Investors of the Shares and
the
Warrant Shares.
“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”
has the
meaning set forth in Section 3.1(h).
“Securities”
means
the Shares, the Warrants and the Warrant Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Series
A Warrants” means
the
Common Stock purchase warrants in the form of Exhibit
A.
“Series
B Warrants” means
the
Common Stock purchase warrants in the form of Exhibit
B.
“Share
Delivery Date”
has
the
meaning set forth in Section 4.1(c).
“Shares”
means
the shares of Common Stock issued or issuable to the Investors at the Closing
pursuant to this Agreement.
“Short
Sales”
include,
without limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect
stock
pledges, forward sale contracts, options, puts, calls, swaps and similar
arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated
brokers.
“Subsidiary”
means
any “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X
promulgated by the Commission under the Exchange Act.
“Trading
Day”
means
(i) a day on which the Common Stock is traded on a Trading Market (other than
the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading
Market (other than the OTC Bulletin Board), a day on which the Common Stock
is
traded in the over-the-counter market, as reported by the OTC Bulletin Board,
or
(iii) if the Common Stock is not quoted on any Trading Market, a day on which
the Common Stock is quoted in the over-the-counter market as reported by the
Pink Sheets, LLC (or any similar organization or agency succeeding to its
functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.
“Trading
Market”
means
whichever of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ National Market, the NASDAQ SmallCap Market, OTC Bulletin Board or the
Pink Sheets, as applicable, on which the Common Stock is listed or quoted for
trading on the date in question.
“Transaction
Documents”
means
this Agreement, the Warrants, the Registration Rights Agreement, and any other
documents or agreements executed in connection with the transactions
contemplated hereunder.
“Warrants”
means
collectively, the Series A Warrants and the Series B Warrants.
“Warrant
Shares” means
the
shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE
2.
PURCHASE
AND SALE
2.1. Closing.
Subject
to the terms and conditions set forth in this Agreement, at the Closing the
Company shall issue and sell to each Investor, and each Investor shall,
severally and not jointly, purchase from the Company, the Shares and the
Warrants that are being purchased with such Investor’s Investment Amount. The
Closing shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ on the Closing Date or at such other location
or
time as the parties may agree.
2.2. Closing
Deliveries.
(a)
At the
Closing, the Company shall deliver or cause to be delivered to each Investor
the
following (the “Company
Deliverables”):
(i) a
certificate evidencing a number of Shares equal to such Investor’s Investment
Amount divided by the Per Unit Purchase Price, registered in the name of such
Investor;
(ii) a
Series
A Warrant, registered in the name of such Investor, pursuant to which such
Investor shall have the right to acquire the number of shares of Common Stock
equal to 20% of the number of Shares issuable to such Investor pursuant to
Section 2.2(a)(i);
(iii) a
Series
B Warrant, registered in the name of such Investor, pursuant to which such
Investor shall have the right to acquire the number of shares of Common Stock
equal to 10% of the number of Shares issuable to such Investor pursuant to
Section 2.2(a)(i);
(iv) the
legal
opinion of Company Counsel, in agreed form, addressed to the Investors;
and
(v) the
Registration Rights Agreement, duly executed by the Company.
(b) At
the
Closing, each Investor shall deliver or cause to be delivered to the Company
the
following (the “Investor
Deliverables”):
(i) its
Investment Amount, in United States dollars and in immediately available funds,
by wire transfer to an account designated in writing by the Company for such
purpose; and
(ii) the
Registration Rights Agreement, duly executed by such Investor.
ARTICLE
3.
REPRESENTATIONS
AND WARRANTIES
3.1. Representations
and Warranties of the Company.
The
Company hereby makes the following representations and warranties to each
Investor:
(a) Subsidiaries.
The
Company has no direct or indirect Subsidiaries other than as specified in the
SEC Reports. Except as disclosed in Schedule
3.1(a),
the
Company owns, directly or indirectly, all of the capital stock of each
Subsidiary free and clear of any and all Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar
rights.
(b) Organization
and Qualification.
Each of
the Company and each Subsidiary is duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of
its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of
the
Company and each Subsidiary is duly qualified to conduct its respective
businesses and are in good standing as a foreign corporation or other entity
in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to
be
so qualified or in good standing, as the case may be, could not, individually
or
in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(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. 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 as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
application.
(d) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the 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, 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) result in a violation of any
law,
rule, regulation, order, judgment, injunction, decree or other restriction
of
any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as could not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect.
(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) the filing with the Commission of one
or
more Registration Statements in accordance with the requirements of the
Registration Rights Agreement, (ii) filings required by state securities laws,
(iii) the filing of a Notice of Sale of Securities on Form D with the Commission
under Regulation D of the Securities Act, (iv) the filings required in
accordance with Section 4.5 and (v) those that have been made or obtained prior
to the date of this Agreement.
(f) Issuance
of the Securities.
On or
prior to the Closing Date, the Securities issuable on the Closing Date shall
have been duly authorized and, when issued and paid for in accordance with
the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens. On or prior to the Closing Date,
the
Company shall have reserved from its duly authorized capital stock the shares
of
Common Stock issuable on the Closing Date pursuant to this Agreement and the
Warrants in order to issue the Shares and the Warrant Shares.
(g) Capitalization.
The
number of shares and type of all authorized, issued and outstanding capital
stock of the Company, and all shares of Common Stock reserved for issuance
under
the Company’s various option and incentive plans, is specified in the SEC
Reports. Except as specified in the SEC Reports, no securities of the Company
are entitled to preemptive or similar rights, and 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 specified in the SEC Reports, there are no outstanding options,
warrants, scrip 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 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 issue and sale of the Securities
will not, immediately or with the passage of time, obligate the Company to
issue
shares of Common Stock or other securities to any Person (other than the
Investors) 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.
(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 twelve months preceding the date hereof (or such shorter period as
the
Company was required by law to file such reports) (the foregoing materials
being
collectively referred to herein as the “SEC
Reports”
and,
together with the Schedules to this Agreement (if any), the “Disclosure
Materials”)
on a
timely basis or has timely filed 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 GAAP applied on a consistent basis during the
periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects
the
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Press
Releases.
The
press releases disseminated by the Company during the twelve months preceding
the date of this Agreement taken as a whole do not contain any untrue statement
of a material fact or omit 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 and when made, not
misleading.
(j) Material
Changes.
Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in the SEC Reports and as disclosed
in
this Section 3.1(j), (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 material liabilities (contingent
or otherwise) other than (A) trade payables, accrued expenses and other
liabilities 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 required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared
or
made any dividend or distribution of cash or other property to its shareholders
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. As of December 31, 2005,
the
Company elected to write off its intangible assets and goodwill in a non-cash
transaction. The value of its intangible assets and goodwill included in its
September 30, 2005 balance sheet was $3,687,081. Also, from January 3 through
March 24 of 2006, the Company raised additional equity from the sales of its
Common Stock for an aggregate purchase price of $3,818,001, the exercise of
warrants to purchase shares of its common stock for aggregate exercise amounts
of $410,000 and the issuance of shares valued at $432,000 as partial redemption
of a mortgage payable. As a result, the Company’s financial statements as of
December 31, 2006 will not have a “going concern opinion”.
(k) Litigation.
There
is no Action which (i) adversely affects or challenges the legality, validity
or
enforceability of any of the Transaction Documents or the Securities or (ii)
except as specifically disclosed in the SEC Reports, could, if there were an
unfavorable decision, individually or in the aggregate, have or reasonably
be
expected to result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof (in his or her capacity as
such), is or has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or involving a claim
of
breach of fiduciary duty, except as specifically disclosed in the SEC Reports.
There has not been, and to the knowledge of the Company, there is not pending
any investigation by the Commission involving the Company or any current or
former director or officer of the Company (in his or her capacity as such).
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.
(l) 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.
(m) 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 relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect. The Company is in compliance with all effective
requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended, and the rules and
regulations thereunder, that are applicable to it, except where such
noncompliance could not have or reasonably be expected to result in a Material
Adverse Effect.
(n) 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,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect, and neither the Company nor any Subsidiary has received
any notice of proceedings relating to the revocation or modification of any
such
permits.
(o) Title
to Assets.
Except
as set forth in the SEC Reports, the Company and the Subsidiaries have good
and
marketable title in fee simple to all real property owned by them that is
material to their respective businesses and good and marketable title in all
personal property owned by them that is material to their respective businesses,
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. 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, except
as
could not, individually or in the aggregate, have or reasonably be expected
to
result in a Material Adverse Effect.
(p) 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 that are 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, individually or in the
aggregate, have or reasonably be expected to result in 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. Except as set forth in the SEC Reports,
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.
(q) 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. The Company has no reason to believe that it will not be able to renew
its and the Subsidiaries’ 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 on terms consistent with market for the Company’s and
such Subsidiaries’ respective lines of business.
(r) 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.
(s) Internal
Accounting Controls.
The
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with 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 and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company’s Form 10-KSB or
10-QSB, as the case may be, is being prepared. The Company’s certifying officers
have evaluated the effectiveness of the Company’s controls and procedures in
accordance with Item 307 of Regulation S-K under the Exchange Act for the
Company’s most recently ended fiscal quarter or fiscal year-end (such date, the
“Evaluation
Date”).
The
Company presented in its most recently filed Form 10-KSB or Form 10-QSB the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in the
Company’s internal controls (as such term is defined in Item 308(c) of
Regulation S-K under the Exchange Act) or, to the Company’s knowledge, in other
factors that could significantly affect the Company’s internal
controls.
(t) Solvency.
Based
on the financial condition of the Company as of the Closing Date (and assuming
that the Closing shall have occurred), (i) the Company’s fair saleable 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) as they mature, (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate
all
of its assets, 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. The Company does not intend to incur debts beyond
its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).
(u) Certain
Fees.
Except
as described in Schedule
3.1(u),
no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Investors shall have no obligation with
respect to any fees or with respect to any claims (other than such fees or
commissions owed by an Investor pursuant to written agreements executed by
such
Investor which fees or commissions shall be the sole responsibility of such
Investor) made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.
(v) Certain
Registration Matters.
Assuming the accuracy of the Investors’ representations and warranties set forth
in Section 3.2(b)-(e), no registration under the Securities Act is required
for
the offer and sale of the Shares and Warrant Shares by the Company to the
Investors under the Transaction Documents. The Company is eligible to register
its Common Stock for resale by the Investors under Form SB-2 promulgated under
the Securities Act. Except as specified in Schedule
3.1(v),
the
Company has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have
not
been satisfied.
(w) Listing
and Maintenance Requirements.
Except
as specified in the SEC Reports, the Company has not, in the two years preceding
the date hereof, received notice from any Trading Market to the effect that
the
Company is not in compliance with the listing or maintenance requirements
thereof. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with the listing and
maintenance requirements for continued listing of the Common Stock on the
Trading Market on which the Common Stock is currently listed or quoted. The
issuance and sale of the Securities under the Transaction Documents does not
contravene the rules and regulations of the Trading Market on which the Common
Stock is currently listed or quoted, and no approval of the shareholders of
the
Company thereunder is required for the Company to issue and deliver to the
Investors the Securities contemplated by Transaction Documents.
(x) Investment
Company.
The
Company is not, and is not an Affiliate of, and immediately following the
Closing will not have become, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.
(y) Application
of Takeover Protections.
The
Company has taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill (including
any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s Certificate of Incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable
to
the Investors as a result of the Investors and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation the Company’s issuance of the Securities and the
Investors’ ownership of the Securities.
(z) No
Additional Agreements.
The
Company does not have any agreement or understanding with any Investor with
respect to the transactions contemplated by the Transaction Documents other
than
as specified in the Transaction Documents.
(aa) Disclosure.
The
Company confirms that neither it nor any Person acting on its behalf has
provided any Investor or its respective agents or counsel with any information
that the Company believes constitutes material, non-public information except
insofar as the existence and terms of the proposed transactions hereunder may
constitute such information. The Company understands and confirms that the
Investors will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All disclosure provided to the
Investors regarding the Company, its business and the transactions contemplated
hereby, furnished by or on behalf of the Company (including the Company’s
representations and warranties set forth in this Agreement) are true and correct
and do not contain any untrue statement of a material fact or omit to state
any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
3.2. Representations
and Warranties of the Investors.
Each
Investor hereby, for itself and for no other Investor, represents and warrants
to the Company as follows:
(a) Organization;
Authority.
Such
Investor is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with the requisite
corporate or partnership power and authority to enter into and to consummate
the
transactions contemplated by the applicable Transaction Documents and otherwise
to carry out its obligations thereunder. The execution, delivery and performance
by such Investor of the transactions contemplated by this Agreement has been
duly authorized by all necessary corporate or, if such Investor is not a
corporation, such partnership, limited liability company or other applicable
like action, on the part of such Investor. Each of this Agreement and the
Registration Rights Agreement has been duly executed by such Investor, and
when
delivered by such Investor in accordance with the terms hereof, will constitute
the valid and legally binding obligation of such Investor, enforceable against
it in accordance with its terms, except as such enforceability may be limited
by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
application.
(b) Investment
Intent.
Such
Investor is acquiring the Securities as principal for its own account for
investment purposes only and not with a view to or for distributing or reselling
such Securities or any part thereof, without prejudice, however, to such
Investor’s right at all times to sell or otherwise dispose of all or any part of
such Securities in compliance with applicable federal and state securities
laws.
Subject to the immediately preceding sentence, nothing contained herein shall
be
deemed a representation or warranty by such Investor to hold the Securities
for
any period of time. Such Investor is acquiring the Securities hereunder in
the
ordinary course of its business. Such Investor does not have any agreement
or
understanding, directly or indirectly, with any Person to distribute any of
the
Securities.
(c) Investor
Status.
At the
time such Investor was offered the Securities, it was, and at the date hereof
it
is, and on each date on which it exercises Warrants it will be, an “accredited
investor” as defined in Rule 501(a) under the Securities Act. Such Investor is
not a registered broker-dealer under Section 15 of the Exchange
Act.
(d) General
Solicitation.
Such
Investor is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
(e) Access
to Information.
Such
Investor acknowledges that it has reviewed the Disclosure Materials and has
been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning
the
terms and conditions of the offering of the Shares and the merits and risks
of
investing in the Securities; (ii) access to information about the Company and
the Subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Investor or its representatives
or counsel shall modify, amend or affect such Investor’s right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company’s
representations and warranties contained in the Transaction
Documents.
(f) Certain
Trading Activities.
Neither
such Investor, any Affiliate of such Investor, nor any Person acting on behalf
of or pursuant to any understanding with such Investor, has engaged, directly
or
indirectly, in any transactions in the securities of the Company (including,
without limitations, any Short Sales involving the Company’s securities) since
the earlier to occur of (1) the time that such Investor was first contacted
by
the Company or Northeast Securities, LLC regarding an investment in the Company
and (2) the 30th
day
prior to the date of this Agreement. Such Investor covenants that neither it
nor
any Person acting on its behalf or pursuant to any understanding with it will
engage in any transactions in the securities of the Company (including Short
Sales) prior to the time that the transactions contemplated by this Agreement
are publicly disclosed.
(g) Independent
Investment Decision.
Such
Investor has independently evaluated the merits of its decision to purchase
Securities pursuant to the Transaction Documents, and such Investor confirms
that it has not relied on the advice of any other Investor’s business and/or
legal counsel in making such decision. Such Investor has not relied on the
business or legal advice of Northeast Securities, LLC or any of its agents,
counsel or Affiliates in making its investment decision hereunder, and confirms
that none of such Persons has made any representations or warranties to such
Investor in connection with the transactions contemplated by the Transaction
Documents.
The
Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE
4.
OTHER
AGREEMENTS OF THE PARTIES
4.1. (a)
Securities
may only be disposed of in compliance with state and federal securities laws.
In
connection with any transfer of the Securities other than pursuant to an
effective registration statement, to the Company, to an Affiliate of an Investor
or in connection with a pledge as contemplated in Section 4.1(b), the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor and reasonably satisfactory to the Company,
the form and substance of which opinion shall be reasonably satisfactory to
the
Company, to the effect that such transfer does not require registration of
such
transferred Securities under the Securities Act.
(b) Certificates
evidencing the Securities will contain the following legend, until such time
as
they are not required under Section
4.1(c):
[NEITHER
THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED] WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
TO
THE TRANSFEROR REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. [THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES] [THESE
SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED
BY SUCH SECURITIES.
The
Company acknowledges and agrees that an Investor may from time to time pledge,
and/or grant a security interest in some or all of the Securities pursuant
to a
bona fide margin agreement in connection with a bona fide margin account and,
if
required under the terms of such agreement or account, such Investor may
transfer pledged or secured Securities to the pledgees or secured parties.
Such
a pledge or transfer would not be subject to approval or consent of the Company
and no legal opinion of legal counsel to the pledgee, secured party or pledgor
shall be required in connection with the pledge, but such legal opinion may
be
required in connection with a subsequent transfer following default by the
Investor transferee of the pledge. No notice shall be required of such pledge.
At the appropriate Investor’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities
including the preparation and filing of any required prospectus supplement
under
Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders
thereunder.
(c) Certificates
evidencing Shares shall not contain any legend (including the legend set forth
in Section 4.1(b)): (i) following a sale or transfer of such Shares pursuant
to
an effective registration statement (including a Registration Statement), or
(ii) following a sale or transfer of such Shares pursuant to Rule 144 (assuming
the transferee is not an Affiliate of the Company). If an Investor shall make
a
sale or transfer of Shares either (x) pursuant to Rule 144 or (y) pursuant
to a
registration statement and in each case shall have delivered to the Company
or
the Company’s transfer agent the certificate representing Shares containing a
restrictive legend which are the subject of such sale or transfer
and a representation letter in customary form (the
date of
such sale or transfer and Share delivery being the “Share
Delivery Date”)
and (1)
the Company shall fail to deliver or cause to be delivered to such Investor
a
certificate representing such Shares that is free from all restrictive or other
legends by the third Trading Day following the Share Delivery Date and (2)
following such third Trading Day after the Share Delivery Date and prior to
the
time such Shares are received free from restrictive legends, the Investor,
or
any third party on behalf of such Investor, purchases (in an open market
transaction) shares of Common Stock to deliver in satisfaction of a sale by
the
Investor of such Shares (a "Buy-In"),
then
the Company shall pay in cash to the Investor (for costs incurred either
directly by such Investor or on behalf of a third party) the amount by which
the
total purchase price paid for Common Stock as a result of the Buy-In (including
brokerage commissions, if any) exceed the proceeds received by such Investor
as
a result of the sale to which such Buy-In relates. The Investor shall provide
the Company written notice indicating the amounts payable to the Investor in
respect of the Buy-In.
4.2. Furnishing
of Information.
As long
as any Investor owns the Securities, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. As long as any Investor owns Securities, if the
Company is not required to file reports pursuant to such laws, it will prepare
and furnish to the Investors and make publicly available in accordance with
Rule
144(c) such information as is required for the Investors to sell the Shares
and
Warrant Shares under Rule 144. The Company further covenants that it will take
such further action as any holder of Securities may reasonably request, all
to
the extent required from time to time to enable such Person to sell the Shares
and Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
4.3. Integration.
The
Company shall not, and shall use its best efforts to ensure that no Affiliate
of
the Company shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate 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 Investors, or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market in a manner that would require shareholder approval of the sale
of the securities to the Investors, other than as contemplated by this
Agreement.
4.4. Subsequent
Registrations.
Other
than pursuant to the Registration Statement, prior to the Effective Date of
the
Registration Statement covering the resale by the Investors of the Securities,
the Company may not file any registration statement (other than on Form S-8)
with the Commission with respect to any securities of the Company.
4.5. Securities
Laws Disclosure; Publicity.
By 9:00
a.m. (New York time) on the Trading Day following the execution of this
Agreement, and by 9:00 a.m. (New York time) on the Trading Day following the
Closing Date, the Company shall issue press releases disclosing the transactions
contemplated hereby and the Closing. On or before the fourth Trading Day
following the execution of this Agreement the Company will file a Current Report
on Form 8-K disclosing the material terms of the Transaction Documents (and
attach as exhibits thereto the Transaction Documents), and on or before the
fourth Trading Day following the Closing Date the Company will file an
additional Current Report on Form 8-K to disclose the Closing. In addition,
the
Company will make such other filings and notices in the manner and time required
by the Commission and the Trading Market on which the Common Stock is listed.
Notwithstanding the foregoing, the Company shall not publicly disclose the
name
of any Investor, or include the name of any Investor in any filing with the
Commission (other than the Registration Statement and any exhibits to filings
made in respect of this transaction in accordance with periodic filing
requirements under the Exchange Act) or any regulatory agency or Trading Market,
without the prior written consent of such Investor, except to the extent such
disclosure is required by law or Trading Market regulations.
4.6. Limitation
on Issuance of Future Priced Securities.
During
the six months following the Closing Date, the Company shall not issue any
“Future Priced Securities” as such term is described by NASD
IM-4350-1.
4.7. Indemnification
of Investors.
In
addition to the indemnity provided in the Registration Rights Agreement, the
Company will indemnify and hold the Investors and their directors, officers,
shareholders, partners, employees and agents (each, an “Investor
Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation (collectively, “Losses”)
that
any such Investor Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.
4.8. Non-Public
Information.
The
Company covenants and agrees that neither it nor any other Person acting on
its
behalf will provide any Investor or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Investor shall have executed a written agreement regarding
the confidentiality and use of such information. The Company understands and
confirms that each Investor shall be relying on the foregoing representations
in
effecting transactions in securities of the Company.
4.9. Listing
of Securities.
The
Company agrees, (i) if the Company applies to have the Common Stock traded
on
any Trading Market other than the Trading Market on which it is listed or quoted
on the date of this Agreement, it will include in such application the Shares
and Warrant Shares, and will take such other action as is necessary or desirable
to cause the Shares and Warrant Shares to be listed on such other Trading Market
as promptly as possible, and (ii) it will take all action reasonably necessary
to continue the listing and trading of its Common Stock on a Trading Market
and
will comply in all material respects with the Company’s reporting, filing and
other obligations under the bylaws or rules of the Trading Market.
4.10. Use
of
Proceeds.
The
Company will use the net proceeds from the sale of the Securities hereunder
for
working capital purposes and not for the satisfaction of any portion of the
Company’s debt (other than payment of trade payables and accrued expenses in the
ordinary course of the Company’s business and consistent with prior practices),
or to redeem any Common Stock or Common Stock Equivalents.
4.11. Additional
Indemnification.
If any
Investor becomes involved in any capacity in any Proceeding brought by any
Person who is a stockholder of the Company (except as a result of sales,
pledges, margin sales and similar transactions by such Investor to or with
any
other stockholder), solely as a result of such Investor’s acquisition of the
Securities under this Agreement (except to the extent that such Proceeding
arises from (a) a breach of such Investor’s representations, warranties or
covenants under the Transaction Documents, (b) any agreements or understandings
such Investor may have with any such stockholder, (c) any violations by such
Investor of state or federal securities laws or (d) any conduct by such Investor
which constitutes fraud, gross negligence, willful misconduct or malfeasance),
the Company will reimburse such Investor for its reasonable legal and other
expenses (including the cost of any investigation preparation and travel in
connection therewith) incurred in connection therewith. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same
terms
and conditions to any Affiliates of the Investors who are actually named in
such
action, proceeding or investigation, and partners, directors, agents, employees
and controlling persons (if any), as the case may be, of the Investors and
any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, the
Investors and any such Affiliate and any such Person. The Company also
agrees that neither the Investors nor any such Affiliates, partners, directors,
agents, employees or controlling persons shall have any liability to the Company
or any Person asserting claims on behalf of or in right of the Company solely
as
a result of acquiring the Securities under this Agreement, except if such claim
arises primarily from a breach of such Investor’s representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Investor may have with any such stockholder or any violations by the
Investor of state or federal securities laws or any conduct by such Investor
which constitutes fraud, gross negligence, willful misconduct or
malfeasance.
ARTICLE
5.
CONDITIONS
PRECEDENT TO THE CLOSING
5.1. Conditions
Precedent to the Obligations of the Investors to Purchase
Securities.
The
obligation of each Investor to acquire Securities at the Closing is subject
to
the satisfaction or waiver by such Investor, at or before the Closing, of each
of the following conditions:
(a) Representations
and Warranties.
The
representations and warranties of the Company contained herein shall be true
and
correct in all material respects as of the date when made and as of the Closing
as though made on and as of such date;
(b) Performance.
The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to
the
Closing;
(c) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any
of
the transactions contemplated by the Transaction Documents;
(d) Adverse
Changes.
Since
the date of execution of this Agreement, no event or series of events shall
have
occurred that reasonably could have or result in a Material Adverse
Effect;
(e) No
Suspensions of Trading in Common Stock; Listing.
Trading
in the Common Stock shall not have been suspended by the Commission or any
Trading Market (except for any suspensions of trading of not more than one
Trading Day solely to permit dissemination of material information regarding
the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for trading
on
a Trading Market; and
(f) Company
Deliverables.
The
Company shall have delivered the Company Deliverables in accordance with Section
2.2(a).
5.2. Conditions
Precedent to the Obligations of the Company to sell Securities.
The
obligation of the Company to sell Securities at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of
the
following conditions:
(a) Representations
and Warranties.
The
representations and warranties of each Investor contained herein shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made on and as of such date;
(b) Performance.
Each
Investor shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at or
prior to the Closing;
(c) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any
of
the transactions contemplated by the Transaction Documents; and
(d) Investors
Deliverables.
Each
Investor shall have delivered its Investors Deliverables in accordance with
Section 2.2(b).
ARTICLE
6.
MISCELLANEOUS
6.1. Fees
and Expenses.
Each
party shall pay the fees and expenses of its advisers, counsel, accountants
and
other experts, if any, and all other expenses incurred by such party incident
to
the negotiation, preparation, execution, delivery and performance of the
Transaction Documents. The Company shall pay all stamp and other taxes and
duties levied in connection with the sale of the Shares.
6.2. Entire
Agreement.
The
Transaction Documents, together with the Exhibits and Schedules thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements, understandings, discussions and
representations, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules.
6.3. Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile (provided the sender receives a machine-generated
confirmation of successful transmission) at the facsimile number specified
in
this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b)
the
next Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this Section
on
a day that is not a Trading Day or later than 6:30 p.m. (New York City time)
on
any Trading Day, (c) the Trading Day following the date of mailing, if sent
by
U.S. nationally recognized overnight courier service, or (d) upon actual receipt
by the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
| If to the Company: |
Xethanol Corporation
▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
President
|
||
| With a copy to: |
Boylan,
Brown, Code, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇)
▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
|
||
| If to an Investor: | To the address set forth under such Investor’s name on the signature pages hereof; |
or
such
other address as may be designated in writing hereafter, in the same manner,
by
such Person.
6.4. Amendments;
Waivers; No Additional Consideration. No
provision of this Agreement may be waived or amended except in a written
instrument signed by the Company and the Investors holding a majority of the
Shares then outstanding and held by the Investors. No waiver of any default
with
respect to any provision, condition or requirement of this Agreement shall
be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof,
nor
shall any delay or omission of either party to exercise any right hereunder
in
any manner impair the exercise of any such right. No consideration shall be
offered or paid to any Investor to amend or consent to a waiver or modification
of any provision of any Transaction Document unless the same consideration
is
also offered to all Investors who then hold Shares.
6.5. Termination.
This
Agreement may be terminated prior to the Closing:
(a) by
written agreement of the Investors and the Company; and
(b) by
the
Company or an Investor (as to itself but no other Investor) upon written notice
to the other, if the Closing shall not have taken place by 6:30 p.m. Eastern
time on the Outside Date; provided,
that
the right to terminate this Agreement under this Section 6.5(b) shall not
be available to any Person whose failure to comply with its obligations under
this Agreement has been the cause of or resulted in the failure of the Closing
to occur on or before such time.
In
the
event of a termination pursuant to this Section, the Company shall promptly
notify all non-terminating Investors. Upon a termination in accordance with
this
Section 6.5, the Company and the terminating Investor(s) shall not have any
further obligation or liability (including as arising from such termination)
to
the other and no Investor will have any liability to any other Investor under
the Transaction Documents as a result therefrom.
6.6. Construction.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party. This Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden
of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement or any of the Transaction
Documents.
6.7. Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Investors. Any Investor may assign any or all of its rights
under
this Agreement to any Person to whom such Investor assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions hereof that apply to the
“Investors.”
6.8. No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Section 4.7 (as to each Investor Party).
6.9. Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all Proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective Affiliates, employees or
agents) shall be commenced exclusively in the New York Courts. Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
for the adjudication of any dispute hereunder or in connection herewith or
with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of the any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any Proceeding, any claim that
it is not personally subject to the jurisdiction of any such New York Court,
or
that such Proceeding has been commenced in an improper or inconvenient forum.
Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence
of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party hereto hereby irrevocably waives, to the fullest extent permitted
by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence a Proceeding to enforce any provisions
of
a Transaction Document, then the prevailing party in such Proceeding shall
be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such Proceeding.
6.10. Survival.
The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and each delivery of the Securities.
6.11. Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original
thereof.
6.12. Severability.
If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
6.13. Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever any Investor
exercises a right, election, demand or option under a Transaction Document
and
the Company does not timely perform its related obligations within the periods
therein provided, then such Investor may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to its future
actions and rights.
6.14. Replacement
of Securities.
If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement Securities
and indemnity. If a replacement certificate or instrument evidencing any
Securities is requested due to a mutilation thereof, the Company may require
delivery of such mutilated certificate or instrument as a condition precedent
to
any issuance of a replacement.
6.15. Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each of the Investors and the Company will
be entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of
any such obligation the defense that a remedy at law would be
adequate.
6.16. Payment
Set Aside.
To the
extent that the Company makes a payment or payments to any Investor pursuant
to
any Transaction Document or an Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement
or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation,
any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
6.17. Independent
Nature of Investors’ Obligations and Rights.
The
obligations of each Investor under any Transaction Document are several and
not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by
such
Investor independently of any other Investor. Nothing contained herein or in
any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents.
Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
6.18. Limitation
of Liability.
Notwithstanding anything herein to the contrary, the Company acknowledges and
agrees that the liability of an Investor arising directly or indirectly, under
any Transaction Document of any and every nature whatsoever shall be satisfied
solely out of the assets of such Investor, and that no trustee, officer, other
investment vehicle or any other Affiliate of such Investor or any investor,
shareholder or holder of shares of beneficial interest of such a Investor shall
be personally liable for any liabilities of such Investor.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES FOLLOW]
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as
of
the date first indicated above.
| XETHANOL CORPORATION | ||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES FOR INVESTORS FOLLOW]
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as
of
the date first indicated above.
| NAME OF INVESTOR | ||
| By: | ||
|
Name:
Title:
|
||
| Investment Amount: ________________________________________________ | ||
| Tax ID No.: | ______________________________________________________ | |
|
ADDRESS
FOR NOTICE
|
||
| |
|
|
| c/o: | ______________________________________________________ | |
| Street: | ______________________________________________________ | |
| City/State/Zip: | ______________________________________________________ | |
| Attention: | ______________________________________________________ | |
| Tel: | ||
| Fax: | ______________________________________________________ | |
|
DELIVERY
INSTRUCTIONS
(if different from above)
|
||
| |
|
|
| c/o: | ______________________________________________________ | |
| Street: | ______________________________________________________ | |
| City/State/Zip: | ______________________________________________________ | |
| Attention: | ______________________________________________________ | |
| Tel: | ||
Exhibit
A
Form
of Series A Warrant to be issued by Xethanol Corporation to the Investors and
to
▇▇▇▇▇▇▇
Intentionally
Omitted. Please See Exhibit 1.3 to this Form 8-K
Exhibit
B
Form
of Series B Warrant to be issued by Xethanol Corporation to the Investors and
to
▇▇▇▇▇▇▇
Intentionally
Omitted. Please See Exhibit 1.4 to this Form 8-K
Exhibit
C
Registration
Rights Agreement dated April 3, 2006 by and among Xethanol Corporation
and
the Investors.
Intentionally
Omitted. Please See Exhibit 1.2 to this Form 8-K
Schedule
3.1(a)
|
NAME
OF SUBSIDIARY
|
NAME
OF PARENT COMPANY
|
FORMATION
|
OWNERSHIP
|
|||
|
Xylose
Technologies, Inc
|
Xethanol
Corporation
|
Florida
|
100%
|
|||
|
Xethanol
BioEnergy, Inc.
|
Xethanol
Corporation
|
Delaware
|
100%
|
|||
|
Superior
Separation Technologies, Inc
|
Xethanol
Corporation
|
Florida
|
100%
|
|||
|
DDS-Xethanol,
LLC
|
Xethanol
Bio-Energy, Inc.
|
Nevada
|
100%
|
|||
|
Advanced
Bioethanol Technologies, Inc
|
Xethanol
Bio-Energy, Inc.
|
Florida
|
100%
|
|||
|
Permeate
Refining, Inc.
|
Xethanol
Bio-Energy, Inc.
|
Iowa
|
100%
|
|||
|
Xethanol
BioFuels, LLC
|
Xethanol
Bio-Energy, Inc.
|
Delaware
|
100%
|
|||
|
Xethanol
One, LLC
|
Xethanol
Bio-Energy, Inc.
|
Delaware
|
100%
|
|||
|
Ethanol
Extraction Technologies, Inc.
|
Xethanol
Bio-Energy, Inc.
|
Florida
|
100%
|
Schedule
3.1(u)
On
February 22, 2006, the Company entered into an agreement with Northeast
Securities, Inc. (“Northeast”), pursuant to which Northeast agreed to render
certain services to the Company in connection with its capital raising
activities and the Company agreed to paid Northeast certain compensation for
those services. A copy of that agreement has been made available to the
Investors.
Schedule
3.1(v)
None.