INVESTMENT AGREEMENT BY AND BETWEEN WORLDWATER AND POWER CORP. AND EMCORE CORPORATION Dated as of November 29, 2006
EXHIBIT
10.1
|
BY
AND BETWEEN
WORLDWATER
AND POWER CORP.
AND
EMCORE
CORPORATION
Dated
as of November 29, 2006
|
TABLE
OF CONTENTS
|
1.
|
Definitions
|
|
2.
|
General
Rules of Interpretation
|
|
3.
|
Authorization
of the Shares
|
|
4.
|
Sale
and Purchase
|
|
5.
|
Closing
|
|
6.
|
Representations
and Warranties by the Company
|
|
6.1
|
Organization
|
|
6.2
|
Authorization
and Enforceability
|
|
6.3
|
Capitalization
|
|
6.4
|
Due
Issuance and Authorization of Capital Stock
|
|
6.5
|
Consents
|
|
6.6
|
Financial
Statements
|
|
6.7
|
SEC
Documents.
|
|
6.8
|
No
Conflicts
|
|
6.9
|
Intellectual
Property
|
|
6.10
|
Material
Contracts
|
|
6.11
|
Right
of First Refusal; Voting and Registration Rights
|
|
6.12
|
Intentionally
Omitted
|
|
6.13
|
No
Integrated Offering; Private Placement
|
|
6.14
|
Absence
of Certain Developments
|
|
6.15
|
Undisclosed
Liabilities
|
|
6.16
|
Litigation
|
|
6.17
|
Compliance
with Laws
|
|
6.18
|
Taxes
|
|
6.19
|
Employee
and Benefit Plans
|
|
6.20
|
Brokers
|
|
6.21
|
Related-Party
Transactions
|
|
6.22
|
Insurance
|
|
6.23
|
Title
to Properties
|
|
6.24
|
Environmental
Matters
|
|
6.25
|
Books
and Records
|
|
6.26
|
Listing
and Maintenance Requirements.
|
|
6.27
|
Solvency.
|
|
6.28
|
Foreign
Corrupt Practices
|
|
6.29
|
Business
Practices.
|
|
6.30
|
Disclosure
|
|
7.
|
Representations
and Warranties of the Investor
|
|
7.1
|
Organization
|
|
7.2
|
Authorization;
Enforceability
|
|
7.3
|
No
Conflicts
|
|
7.4
|
Litigation
|
|
7.5
|
Available
Funds
|
|
7.6
|
Brokers
|
|
8.
|
Covenants
|
|
8.1
|
Continuing
Covenants of the Company
|
|
8.2
|
Auditors
|
|
8.3
|
Composition
of Board of Directors; Directors and Officers Insurance
Policy
|
|
8.4
|
Use
of Proceeds
|
|
8.5
|
Reservation
of Common Stock
|
|
8.6
|
Filings
|
|
8.7
|
Financial
Statements and Other Information
|
|
8.8
|
Inspection
of Property
|
|
8.9
|
Further
Assurances
|
|
8.10
|
Financing
for Entech Acquisition
|
|
8.11
|
Strategic
Agreement
|
|
8.12
|
Right
to Participate Pro-Rata in Future Financing
|
|
8.13
|
Restrictive
Legend
|
|
8.14
|
Public
Statements.
|
|
9.
|
Conditions
to the Parties' Obligations
|
|
9.1
|
Conditions
to Each Party's Obligations
|
|
9.2
|
Conditions
to the Investor’s Obligations
|
|
9.3
|
Conditions
to the Company's Obligations
|
|
10.
|
Indemnification
|
|
10.1
|
Survival
of Representations and Warranties
|
|
10.2
|
Indemnification
|
|
10.3
|
Limits
on Indemnification
|
|
10.4
|
Effect
of Investigation
|
|
11.
|
Miscellaneous
|
|
11.1
|
Notices
|
|
11.2
|
Termination
of Agreement
|
|
11.3
|
Effect
of Termination
|
|
11.4
|
Successors
and Assigns
|
|
11.5
|
Headings
|
|
11.6
|
Governing
Law
|
|
11.7
|
Expenses
|
|
11.8
|
Jurisdiction
|
|
11.9
|
Waiver
of Jury Trial
|
|
11.10
|
Counterparts;
Effectiveness
|
|
11.11
|
Entire
Agreement
|
|
11.12
|
Severability
|
|
11.13
|
Change;
Waiver
|
This
INVESTMENT AGREEMENT (this "Agreement"), dated as of November 29, 2006, by
and
between WorldWater and Power Corp., a Delaware corporation (the "Company"),
and
EMCORE Corporation, a New Jersey corporation (the "Investor"). Certain terms
used and not otherwise defined in the text of this Agreement are defined
in
Section 1 of this Agreement.
W
I T
N E S S E T H
WHEREAS,
the Company desires to issue and to sell to the Investor, and the Investor
desires to purchase from the Company, the Securities (as hereinafter defined)
in
accordance with the terms and provisions of this Agreement;
NOW,
THEREFORE, in consideration of the foregoing and the mutual representations,
warranties and covenants herein contained, the parties hereto hereby agree
as
follows:
| 1. |
Definitions
|
.
Unless
the context otherwise requires, the terms defined in this Section 1 shall
have
the meanings specified for all purposes of this Agreement.
"Affiliate"
means, with respect to any Person, any other Person that directly or indirectly,
through one or more intermediaries, controls, or is controlled by or, is
under
common control with, such Person. For purposes of this definition, the term
"control" (including the terms "controlling", "controlled by" and "under
common
control with") as used with respect to any Person means the possession, direct
or indirect, of the power to direct or cause the direction of the management
and/or policies of such Person, whether through ownership of voting securities,
by Contract or otherwise.
"Agreed
Allocation" has the meaning assigned to it in Section 4(c) hereof.
"Balance
Sheet" has the meaning assigned to it in Section 6.6 hereof.
"Benefit
Plans" has the meaning assigned to it in Section 6.19(a) hereof.
"Board
of
Directors" means the board of directors of the Company.
"Business
Day" means any day, except a Saturday or Sunday or legal holiday on which
banking institutions in The City of New York are authorized or obligated
by Law
or executive order to close.
"Business
Premises" has the meaning assigned to it in Section 6.24(c) hereof.
"Certificate
of Designation" has the meaning assigned to it in Section 3 hereof.
"Certificate
of Incorporation" means the Company's Certificate of Incorporation, as
amended.
"Certifications"
has the meaning assigned to it in Section 6.7 hereof.
"Code"
means the Internal Revenue Code of 1986, as amended.
"Common
Stock" means common stock, par value $0.001 per share, of the
Company.
"Company"
has the meaning assigned to it in the introductory paragraph of this
Agreement.
"Company
Loss" has the meaning assigned to it in Section 10.2(b) hereof.
"Company
Permit" means all licenses, registrations, franchises, permits, certificates
and
approvals granted by or obtained from any Governmental Entity and used by
the
Company or any of its Subsidiaries in connection with the conduct of their
businesses.
"Company
Stock Option Plan" has the meaning assigned to it in Section 6.3(b)
hereof.
"Confidentiality
Agreement" means the Confidentiality Agreement dated October 9, 2006 between the
Company and the Investor.
"Contract"
means, with respect to any Person, any agreement, arrangement, undertaking,
contract, commitment, obligation, promise, indenture, deed of trust or other
instrument, document or agreement (whether written or oral) by which that
Person, or any amount of its present or future properties or assets, is bound
or
subject.
"Conversion
Shares" has the meaning assigned to it in Section 3 hereof.
"Disclosure
Schedule" means the disclosure schedule hereto delivered by the Company to
the
Investor.
"Entech"
has the meaning assigned to in Section 8.10 hereof.
"Entech
Financing" has the meaning assigned to it in Section 8.10 hereof.
"Environmental
Condition" means the presence of any Hazardous Material or of any wetland
or
endangered or threatened species or habitat. However, the presence in the
ordinary course of business of solid waste at the location of its generation
pending its proper disposal to an appropriately licensed third-party site
in the
ordinary course of business consistent with all applicable Law does not,
without
more, constitute an "Environmental Condition."
"Environmental
Requirement" means any federal, state, local or foreign statute, treaty,
ordinance, rule, regulation, policy, common Law, permit or order relating
to any
Environmental Subject Matter.
"Environmental
Subject Matter" means (a) any Hazardous Material, (b) any release or threatened
Release of a Hazardous Material from, to or through any location, (c) the
generation, treatment, storage, presence, disposal, use, handling,
manufacturing, transporting or shipment by any Person of any Hazardous Material,
(d) natural resources, (e) wetlands, (f) an endangered or threatened species
or
habitat, (g) odor, noise, air, water or soil or (h) any OSHA and similar
state
Law requirements.
"Environmental
Laws" has the meaning assigned to it in Section 6.24(a) hereof.
"ERISA"
has the meaning assigned to it in Section 6.19(a) hereof.
"ERISA
Affiliate" has the meaning assigned to it in Section 6.19(a)
hereof.
"Exchange
Act" means the Securities Exchange Act of 1934, as amended, and the rules
and
regulations promulgated thereunder.
"Financial
Statement Losses" means any adverse impact to the Investor's financial
statements, including, without limitation, any increase in costs, expenses,
charges, reserves or liabilities or decrease in profits or assets (not giving
effect to any positive impact arising from matters unrelated to the Investor
Losses); it being the intent of the Parties that if an indemnifiable event
occurs which negatively impacts the Company with the result that the financial
statements of the Investor are adversely impacted, the Company shall indemnify
the Investor for such Financial Statement Losses.
"Financial
Statements" has the meaning assigned to it in Section 6.6 hereof.
"Fully-Diluted
Basis" has the meaning assigned to it in Section 8.12(d) hereof.
"GAAP"
means United States generally accepted accounting principles consistently
applied.
"Governmental
Entity" means any national, federal, state, municipal, local, territorial,
foreign or other government or any department, commission, board, bureau,
agency, regulatory authority or instrumentality thereof, or any court, judicial,
administrative or arbitral body or public or private tribunal.
"Hazardous
Material" means any hazardous material, hazardous substance, hazardous waste,
toxic substance, toxic pollutant, contaminant, petroleum (including crude
oil
and any fractions thereof), natural or synthetic gas or any mixture thereof,
asbestos, asbestos containing material, PCB or materials or objects containing
PCB, medical waste, infectious waste, lead containing paint, radioactive
material and any material or substance defined as a "hazardous material"
or
"hazardous substance" or similar term in any Environmental
Requirement.
"Indebtedness"
means, with respect to any Person, without duplication, (i) all obligations
of
such Person for borrowed money (whether or not the recourse of the lender
is to
the whole of the assets of such Person or only to a portion thereof, but
if not
to the whole of the assets, a pro rata amount of such obligations equal to
such
portion thereof); (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments; (iii) all reimbursement
obligations of such Person in respect of letters of credit, letters of guaranty,
bankers' acceptances and similar credit transactions; (iv) all obligations
of
such Person to pay the deferred and unpaid purchase price of property or
services; (v) the capitalized portion of any obligations of such Person to
pay
rent or other amounts under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP, (vi) all obligations
of a
Person other than the Company or one of its Subsidiaries that is secured
by a
Lien on any asset of the Company or one of its Subsidiaries; (vii) all
Indebtedness of others guaranteed by such Person to the extent of such
guarantee; (viii) all obligations of such Person pursuant to hedging agreements,
swap agreements, collar agreements, forward Contracts, commodity swap and
option
agreements; (ix) all obligations of such Person under conditional sale or
other
title retention agreements relating to assets purchased by such Person; and
(x)
any off-balance sheet receivables financing arrangements.
"Indemnified
Party" has the meaning assigned to it in Section 10.2(c) hereof.
"Indemnifying
Party" has the meaning assigned to it in Section 10.2(a) hereof.
"Intellectual
Property" shall mean all intellectual property and industrial property rights
of
any kind or nature, including all U.S. and foreign (i) patents, patent
applications, patent disclosures, and all related continuations,
continuations-in-part, divisionals, reissues, re-examinations, substitutions,
and extensions thereof ("Patents"), (ii) trademarks, service marks, names,
corporate names, trade names, domain names, logos, slogans, trade dress,
and
other similar designations of source or origin, together with the goodwill
symbolized by any of the foregoing ("Trademarks"), (iii) copyrights,
copyrightable subject matter and mask works ("Copyrights"), (iv) rights of
publicity, (v) moral rights and rights of attribution and integrity, (v)
computer programs (whether in source code, object code, or other form),
algorithms, databases, compilations and data, technology supporting the
foregoing, and all documentation, including user manuals and training materials,
related to any of the foregoing ("Software"), (vi) trade secrets and all
other
confidential information, know-how, inventions, proprietary processes, formulae,
models, and methodologies ("Trade Secrets"), (vii) rights of privacy and
rights
to personal information, (viii) telephone numbers and Internet protocol
addresses, (ix) all rights in the foregoing and in other similar intangible
assets, (x) all applications and registrations for the foregoing, and (xi)
all
rights and remedies against past, present, and future infringement,
misappropriation, or other violation thereof.
"Investor"
has the meaning assigned to it in the introductory paragraph of this
Agreement.
"Investor
Loss" has the meaning assigned to it in Section 10.2(a) hereof.
"IP
Contracts" has the meaning assigned to it in Section 6.9(b) hereof.
"Law"
means any law (including common law), ordinance, writ, directive, judgment,
order, decree, injunction, statute, treaty, rule or regulation or determination
of (or an agreement with) an arbitrator or a Governmental Entity.
"Liability"
means any debt, liability, commitment, obligation, claim or cause of action
of
any kind whatsoever, whether due or to become due, known or unknown, accrued
or
fixed, absolute or contingent, or otherwise.
"Lien"
means, with respect to any asset or security, any mortgage, lien, pledge,
charge, understanding or arrangement imposing a restriction on title or use,
security interest, encumbrance or restriction on title or transfer of any
kind
in respect of such asset or security.
"Loss"
has the meaning assigned to it in Section 10.2 (b) hereof.
"Material
Adverse Effect" means, with respect to the Company, any fact, event,
circumstance, change, condition or effect that, individually or together
with
other facts, events, circumstances, changes, conditions or effects (i) has
been
or could reasonably be expected to be material and adverse to the business,
assets, value, properties, liabilities, prospects, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries,
taken
as a whole, whether related specifically to the Company and its Subsidiaries
or
to more generally applicable facts, events, changes or effects or (ii) has
or
could reasonably be expected to materially delay the consummation of the
transactions contemplated hereby or by the Transaction Documents or materially
and adversely affect the ability of the Company and its Subsidiaries, taken
as a
whole, to perform timely its obligations under this Agreement or under any
of
the Transaction Documents.
"Material
Contract" has the meaning assigned to it in Section 6.10(a) hereof.
"Permitted
Transferee" has the meaning assigned to it in Section 11.4 hereof.
"Person"
means any individual, sole proprietorship, partnership, limited liability
company, joint venture, trust, incorporated organization, association,
corporation, institution, Governmental Entity or any other entity.
"Preemptive
Rights Notice" has the meaning assigned to it in Section 8.12(a)
hereof.
"Preemptive
Rights Offer" has the meaning assigned to it in Section 8.12(a)
hereof.
"Preferred
Shares" has the meaning assigned to it in Section 3 hereof.
"Purchase
Price" has the meaning assigned to it in Section 4(b) hereof.
"Real
Property" has the meaning assigned to it in Section 6.23(a) hereof.
"Registration
Rights Agreement" means the Registration Rights Agreement in the form attached
hereto as Exhibit
A.
"Release"
means any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, migration, leaching, placing, discarding, dumping or
disposing of any Hazardous Material into the environment. However, the act
of
disposing of Hazardous Materials in accordance with applicable Environmental
Requirements to a third-party site licensed to accept such Hazardous Materials
for disposal does not, without more, constitute a "Release."
"SEC"
means the U.S. Securities and Exchange Commission.
"SEC
Documents" has the meaning assigned to it in Section 6.7 hereof.
"Securities"
means the Tranche A Securities and the Tranche B Securities.
"Securities
Act" means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
"Series
D
Preferred Stock" means Series D preferred stock, par value $0.01, of the
Company.
"SPV"
has
the meaning assigned to it in Section 8.10 hereof.
"Strategic
Agreement" means the Strategic Agreement to be entered into by the Company
and
the Investor with respect to the matters set forth on Exhibit
B.
"Subsidiary"
means, with respect to any Person, any corporation, association trust, limited
liability company, partnership, joint venture or other business association
or
entity (i) at least 50% of the outstanding voting securities of which are
at the
time owned or controlled directly or indirectly by such Person or (ii) with
respect to which the Company possesses, directly or indirectly, the power
to
direct or cause the direction of the affairs or management of such
Person.
"Tax"
or
"Taxes" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code §59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest, penalties
or additions thereto, whether disputed or not and including any obligations
to
indemnify or otherwise assume or succeed to the Tax liability of any other
Person.
"Tax
Return" means any return, declaration, report, claim for refund or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
"Third
Party Claims" has the meaning assigned to it in Section 10.2(c) hereof.
"Trading
Day" means a day on which the Common Stock is traded on a Trading Market.
"Trading
Market" means the following markets or exchanges on which the Common Stock
is
listed or quoted for trading on the date in question: the Nasdaq SmallCap
Market, the American Stock Exchange, the New York Stock Exchange, the Nasdaq
National Market or the OTC Bulletin Board.
"Tranche
A Closing" has the meaning assigned to it in Section 5(a) hereof.
"Tranche
A Closing Date" has the meaning assigned to it in Section 5(b)
hereof.
"Tranche
A Purchase Price" has the meaning assigned to it in Section 4(a)
hereof.
"Tranche
A Securities" has the meaning assigned to it in Section 4(a)
hereof.
"Tranche
A Shares" has the meaning assigned to it in Section 4(a) hereof.
"Tranche
A Warrants" has the meaning assigned to it in Section 4(a) hereof.
"Tranche
B Closing" has the meaning assigned to it in Section 5(a) hereof.
"Tranche
B Closing Date" has the meaning assigned to it in Section 6 hereof.
"Tranche
B Purchase Price" has the meaning assigned to it in Section 4(b)
hereof.
"Tranche
B Securities" has the meaning assigned to it in Section 4(b)
hereof.
"Tranche
B Shares" has the meaning assigned to it in Section 4(b) hereof.
"Tranche
B Warrants" has the meaning assigned to it in Section 4(b) hereof.
"Transaction
Documents" means this Agreement, the Warrant Instrument, the Registration
Rights
Agreement, and the Strategic Agreement.
"Unaudited
Balance Sheets" has
the meaning assigned to it in Section 6.6 hereof.
"Unaudited
Financial Statements" has the meaning assigned to it in Section 6.6 hereof.
"Underlying
Shares" means the shares of Common Stock issuable upon conversion of the
shares
of Series D Preferred Stock.
"VWAP"
means, for any date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a Trading
Market, the daily volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the primary Trading Market on which
the
Common Stock is then listed or quoted as reported by Bloomberg Financial
L.P.
(based on a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using
the
VAP function; (b) if the Common Stock is not then listed or quoted on the
Trading Market and if prices for the Common Stock are then reported in the
"Pink
Sheets" published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price
per
share of the Common Stock so reported; or (c) in all other cases, the fair
market value of a share of Common Stock as determined by a nationally
recognized-independent appraiser selected in good faith by the
Investor.
"Warrant
Instrument" has the meaning assigned to it in Section 3 hereof.
"Warrants"
has the meaning assigned to it in Section 3 hereof.
| 2. |
General
Rules of Interpretation
|
(a) When
a
reference is made in this Agreement to “recitals,” “Sections,” “Exhibits” or
“Disclosure Schedule,” such reference shall be to a recital or Section of, or
Exhibits or Disclosure Schedule to, this Agreement unless otherwise
indicated.
(b) Whenever
the words “include,” “includes” or “including” are used in this Agreement, they
shall be deemed followed by the words “without limitation.”
(c) References
herein to “transactions contemplated by this Agreement” or to “transactions
contemplated hereby” shall be deemed to include a reference to each transaction
contemplated by or provided for in this Agreement and any instruments,
certificates, documents or agreements, including the Transaction Documents,
entered into or contemplated to be entered into in connection
herewith.
(d) Except
as
otherwise expressly provided, all accounting terms used in this Agreement
shall
be construed in accordance with GAAP.
(e) The
Company and the Investor acknowledge that they have been represented by counsel
in connection with this Agreement and the transactions contemplated by this
Agreement. Accordingly, any rule of Law, or any legal decision that would
require interpretation of any claimed ambiguities in this Agreement against
the
party that drafted it, has no application and is expressly waived. The
provisions of this Agreement shall be interpreted in a reasonable manner
to
affect the intent of the Investor and the Company.
(f) Whenever
this Agreement shall require a party to take an action, such requirement
shall
be deemed to include an undertaking by such party to use its reasonable best
efforts to cause its representatives to take all necessary and appropriate
action in connection therewith.
(g) A
reference to a statute, listing rule, rule, standard, regulation or other
Law
includes a reference to the corresponding rules and regulations and includes
a
reference to each of them as amended, consolidated, replaced or rewritten
from
time to time.
(h) The
singular includes the plural and conversely.
(i) If
a word
or phrase is defined, its other grammatical forms have a corresponding
meaning.
(j) A
reference to a party to this Agreement or another agreement or document includes
the party’s successors, permitted substitutes and permitted assigns (and, where
applicable, the party’s legal personal representatives).
(k) A
reference to the “knowledge” of Investor means the actual knowledge of any of
the "officers" (as such term is defined in Rule 16(a)-1(f) promulgated under
the
Exchange Act) or directors of the Investor. A reference to the “knowledge” of
the Company means the actual knowledge that was or would reasonably be expected
to be obtained after due inquiry of any employees, officers or directors
of the
Company.
(l) The
use
of “or” is not intended to be exclusive unless expressly so
indicated.
| 3. |
Authorization
of the Shares
|
.
On or
prior to the Tranche A Closing, the Company shall have authorized (a) the
initial sale and issuance to the Investor of six million, five hundred and
twenty-three thousand, eight hundred and ten (6,523,810) shares of Series
D
Preferred Stock (the "Preferred Shares"), (b) the issuance of six hundred
and
sixty-eight thousand, one hundred and thirty-nine (668,139) warrants to purchase
an aggregate of up to six hundred and sixty-eight thousand, one hundred and
thirty-nine (668,139) shares of Series D Preferred Stock (the "Warrants")
and
(c) the reservation for issuance of shares of Common Stock upon exercise
and
conversion of the Warrants and conversion of the Preferred Shares of up to
seventy-one million, nine hundred and nineteen thousand, four hundred and
ninety
(71,919,490) shares of Common Stock (the "Conversion Shares") based on the
current conversion ratio of 10 shares of Common Stock for each share of Series
D
Preferred Stock. The Preferred Shares shall have the rights, preferences,
privileges and restrictions set forth in the Certificate of Designation of
the
Series D Preferred Stock of the Company in the form attached hereto as
Exhibit
C
(the
"Certificate of Designation"). The Warrants shall have the rights, preferences,
privileges and restrictions set forth in the form attached hereto as
Exhibit
D
(the
"Warrant Instrument"). The Conversion Shares shall have the rights, preferences,
privileges and restrictions set forth in the Certificate of
Incorporation.
| 4. |
Sale
and Purchase
|
(a) Subject
to the terms and conditions hereof, at the Tranche A Closing the Company
shall
issue and sell to the Investor, and the Investor shall purchase from the
Company
four million, eight hundred and ninety two thousand, eight hundred and fifty
seven (4,892,857) shares of Series D Preferred Stock (the "Tranche A Shares")
at
a price of $2.76 per share and five hundred and five thousand and forty-four
(505,044) Warrants (the "Tranche A Warrants", and together with the Tranche
A
Shares, the "Tranche A Securities") for no additional consideration for an
aggregate consideration of thirteen million five hundred thousand dollars
($13,500,000) (the "Tranche A Purchase Price"). The parties agree that five
hundred thousand dollars ($500,000) of the Tranche Purchase Price has already
been paid by the Investor to the Company. As such at the Tranche A Closing
the
Investor needs to deliver thirteen million dollars ($13,000,000) (the "Remaining
Tranche A Purchase Price").
(b) Subject
to the terms and conditions hereof, at the Tranche B Closing the Company
shall
issue and sell to the Investor and the Investor shall purchase from the Company
one million, six hundred and thirty thousand, nine hundred and fifty-two
(1,630,952) shares of Series D Preferred Stock (the "Tranche B Shares") at
a
price per share of $2.76 per share and one hundred and sixty-three thousand
and
ninety-five (163,095) Warrants (the "Tranche B Warrants", and together with
the
Tranche B Shares, the "Tranche B Securities") for no additional consideration
for an aggregate consideration of four million five hundred thousand dollars
($4,500,000) (the "Tranche B Purchase Price", and together with the Tranche
A
Purchase Price, the "Purchase Price").
(c) The
Company will not make any allocation of the Purchase Price paid by the Investor
between the Preferred Shares and the Warrants without the Investor's concurrence
thereto in writing (the "Agreed Allocation") and shall prepare and file all
Tax
Returns on a basis consistent with the Agreed Allocation and shall take no
position inconsistent with the Agreed Allocation in any proceeding before
any
taxing authority or for any other Tax purpose, unless otherwise required
to do
so by applicable Law.
| 5. |
Closing
|
(a) Closing.
The
delivery of the certificates representing the Tranche A Securities, payment
by
the Investor of the Remaining Tranche A Purchase Price and all other instruments
required by this Agreement (the "Tranche A Closing") shall take place at
10:00
a.m. on the date of execution of the Agreement at the offices of Skadden,
Arps,
Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, Four Times Square, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, or at such
other time or place as the Company and the Investor may mutually agree. The
delivery of the certificates representing the Tranche B Securities, payment
by
the Investor of the Tranche B Purchase Price and all other instruments required
by this Agreement (the "Tranche B Closing") will occur on the second Business
Day following the satisfaction or waiver of the conditions set forth in Section
9 hereof or such other date as is mutually agreed upon by the parties at
the
offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, Four Times Square, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇, or at such other time or place as the Company and the Investor
may mutually agree.
(b) Delivery.
| (1) |
At
the Tranche A Closing, subject to the terms and conditions hereof,
the
Company will deliver to the Investor the Tranche A Securities, by
delivery
of a certificate or certificates evidencing the Tranche A Shares
and
Tranche A Warrants, free and clear of any Liens, and the Investor
will
make payment to the Company of the Remaining Tranche A Purchase Price
by
wire transfer of immediately available funds to an account designated
by
the Company.
|
| (2) |
At
the Tranche A Closing the Company shall also deliver to the Investor
(i) a
true and complete copy, certified by the Secretary of the Company,
of the
resolutions duly and validly adopted by the Board of Directors evidencing
its authorization of the execution and delivery of this Agreement,
the
Transaction Documents and the consummation of the transactions
contemplated hereby and thereby, including the filing of the Certificate
of Designation with the Secretary of State of the State of Delaware
and
the issuance of the Securities, (ii) a duly executed copy of the
Registration Rights Agreement, (iii) a duly executed copy of the
Certificate of Designation filed with and certified by the Secretary
of
State of the State of Delaware, (iv) a good standing certificate
from the
Secretary of State of the state of Delaware and each state in which
the
Company is qualified as a foreign corporation to do business, (v)
a legal
opinion from Salvo, Landau, Gruen & ▇▇▇▇▇▇ in the form attached hereto
as Exhibit
H
and (vi) an officer's certificate executed by its chief executive
officer
certifying that (a) the Company shall have performed in all material
respects each of its obligations hereunder and under each of the
Transaction Documents required to be performed by it at or prior
to the
date of the Tranche A Closing (the "Tranche A Closing Date"), and
shall
have obtained all consents and approvals required for the consummation
of
the transactions contemplated to be consummated at the Tranche A
Closing,
and (b) the representations and warranties of the Company contained
in
this Agreement and in any certificate or other writing delivered
by the
Company pursuant hereto shall be true and correct (without giving
effect
to any limitation as to "materiality" or “Material Adverse Effect” set
forth therein) at and as of the Tranche A Closing Date as if made
at and
as of the Tranche A Closing Date, except where the failure of such
representations and warranties to be true and correct (without giving
effect to any limitation as to "materiality" or “Material Adverse Effect”
set forth therein) would not, individually or in the aggregate, have
a
Material Adverse Effect.
|
| (3) |
At
the Tranche A Closing the Investor shall also deliver to the Company
a
duly executed copy of the Registration Rights
Agreement.
|
| (4) |
At
the Tranche B Closing, subject to the terms and conditions hereof,
the
Company will deliver to the Investor the Tranche B Securities, by
delivery
of a certificate or certificates evidencing the Tranche B Shares
and the
Tranche B Warrants, free and clear of any Liens, and the Investor
will
make payment to the Company of the Tranche B Purchase Price by wire
transfer of immediately available funds to an account designated
by the
Company.
|
| (5) |
At
the Tranche B Closing the Company shall also deliver to the Investor
(i) a
duly executed copy of the Strategic Agreement, (ii) a good standing
certificate from the Secretary of State of the state of Delaware
and each
state in which the Company is qualified as a foreign corporation
to do
business, (iii) a legal opinion from Salvo, Landau, Gruen & ▇▇▇▇▇▇ in
the form attached hereto as Exhibit
I
and (iv) the certificate referred to in Section 9.2(c)
hereof.
|
| (6) |
At
the Tranche B Closing the Investor shall also deliver to the Company
a
duly executed copy of the Strategic Agreement and the certificate
referred
to in Section 9.3(b) hereof.
|
| 6. |
Representations
and Warranties by the Company
|
.
Except
as specifically set forth in the Disclosure Schedule, the Company represents
and
warrants to the Investor that all of the statements contained in this Section
6
are true and complete as of the date of this Agreement and that all of the
statements contained in this Section 6 will be true and complete as of the
date
of the Tranche B Closing (the "Tranche B Closing Date") as though made on
the
Tranche B Closing Date (except to the extent expressly made only as of the
earlier date, in which case as of such earlier date).
6.1 Organization
.
The
Company and each of its Subsidiaries (a) is a corporation, limited liability
company or other legal entity duly organized, validly existing and in good
standing under the Laws of its jurisdiction of organization or formation,
(b) is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the nature of the property owned or leased by
it or
the nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing would not,
individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect, (c) has its principal place of business and chief executive
office at ▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and (d) has
the
requisite corporate power and authority to own or lease and operate its assets
and carry on its business as presently being conducted.
6.2 Authorization
and Enforceability
.
The
Company has all requisite corporate power and authority to enter into this
Agreement, the Transaction Documents and to consummate all of the transactions
contemplated hereby and thereby. The execution, delivery and performance
by the
Company of this Agreement and each of the other Transaction Documents to
which
it is a party, and the consummation by the Company of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
and
validly executed and delivered by the Company and, when executed, each other
Transaction Document to which it is a party will be duly and validly executed
and delivered by the Company, and, assuming due and valid execution and delivery
by the Investor, will constitute the legal, valid and binding obligation
of the
Company, each enforceable against the Company in accordance with their
respective terms, subject to Laws of general application relating to bankruptcy,
insolvency, and the relief of debtors and other Laws of general application
affecting enforcement of creditors' rights generally, rules of Law governing
specific performance, injunctive relief and other equitable remedies. The
execution, delivery and performance of this Agreement, and the Transaction
Documents to which the Company is a party and all other instruments, agreements,
certificates and documents contemplated hereby and thereby by the Company
and
the performance of the transactions contemplated hereby and thereby will
not
result in the creation or imposition of any Lien upon the Common Stock, the
Securities or any other security of the Company or any of its
Subsidiaries.
6.3 Capitalization
(a) The
authorized capital of the Company consists of (i) two hundred seventy-five
million (275,000,000) shares of Common Stock, $.001 par value per share;
(ii)
ten million (10,000,000) shares of Preferred Stock, $.01 par value per share,
of
which (A) no shares are designated Series A Preferred Stock, (B) six hundred
eleven thousand, one hundred and eleven (611,111) shares are designated Series
B
Convertible Preferred Stock and (C) seven hundred fifty thousand (750,000)
shares are designated Series C Convertible Preferred Stock. As of the date
hereof, without giving effect to the consummation of the transactions
contemplated herein, there are outstanding one hundred forty-six million,
five
hundred forty-seven thousand, two hundred seventy-five (146,547,275) shares
of
Common Stock, zero (0) shares of Series A Preferred Stock, six hundred eleven
thousand, one hundred and eleven (611,111) shares of Series B Preferred Stock
and seven hundred fifty thousand (750,000) shares of Series C Preferred Stock,
and the Company has no other shares of capital stock authorized, issued or
outstanding.
(b) As
of
close of business on the date prior to the date hereof: (i) thirteen million,
three hundred thirty-nine thousand, three hundred thirty-one (13,339,331)
shares
of Common Stock are issuable upon the exercise of outstanding options to
purchase Common Stock under the 1999 Incentive Stock Option Plan, as amended
(the "Company Stock Option Plan", each option a "Company Option"), (ii) eleven
million, four hundred seventy-nine thousand, five hundred and fifty (11,479,550)
shares of Common Stock are vested and exercisable as of the date hereof,
(iii)
six million, nine hundred sixty-five thousand, two hundred ninety-two
(6,965,292) shares of Common Stock are available for future grants under
the
Company Stock Option Plan, (iv) twenty-one million, six hundred eighty thousand,
seven hundred four (21,680,704) shares of Common Stock are issuable upon
the
exercise of any company warrants (each a "Company Warrant"), and (v) five
million, six hundred eighty-eight thousand, one hundred thirty-six (5,688,136)
shares of Common Stock are issuable upon the exercise of convertible loans
or
other debts or similar instruments (each, a "Company Debt Instrument"). Section
6.3(b) of the Company Disclosure Schedule sets forth a list of each outstanding
Company Option, Company Warrant and Company Debt Instrument, stating: (a)
the
name of the holder of such Company Option, Company Warrant or Company Debt
Instrument, (b)
the
number of shares of Common Stock subject to such Company Option, Company
Warrant
or Company Debt Instrument, (c) the exercise price of such Company Option,
Company Warrant or Company Debt Instrument, (d) the date on which such Company
Option, Company Warrant or Company Debt Instrument was granted or issued,
(e)
the extent to which such Company Option, Company Warrant or Company Debt
Instrument is vested and exercisable as of the date hereof, and (f) the
date on which such Company Option, Company Warrant or Company Debt Instrument
expires.
(c) A
correct
and complete list of all Subsidiaries of the Company, their respective
jurisdictions of organization and the jurisdictions in which each is qualified
and is required to be qualified to do business is set forth in Section 6.3
(c)
of the Disclosure Schedule. Except as set forth in Section 6.3 (c) of the
Disclosure Schedule, (a) each of the Subsidiaries of the Company is wholly-owned
by the Company, directly or indirectly, free and clear of any Liens and
(b) the Company does not own, directly or indirectly, any capital stock of,
or any other securities convertible or exchangeable into or exercisable for
capital stock of, any Person other than the Subsidiaries of the
Company.
(d) Except
as
set forth in Section 6.3(b) of the Disclosure Schedule, (i) there are no
outstanding options, warrants, convertible loans, debt or similar instruments,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exercisable or
exchangeable for, any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries
is
or may become bound to issue additional shares of capital stock, nor are
any
such issuances or arrangements contemplated, (ii) there are no securities
or
instruments containing antidilution or similar provisions that will be triggered
by the issuance of the Securities in accordance with the terms of this Agreement
or the issuance of the Warrant Shares in accordance with the Warrants, (iii)
neither the Company nor any of its Subsidiaries has any obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof and (iv) neither the Company nor any of its
Subsidiaries has reserved any shares of capital stock for issuance pursuant
to
any stock option plan or similar arrangement. The capitalization of the Company,
including, without limitation, the authorized capital stock, the number of
shares issued and outstanding, the number of shares issuable and reserved
for
issuance pursuant to the Company's stock option plans, the number of shares
issuable and reserved for issuance pursuant to securities (other than the
Tranche A Securities and the Tranche B Securities) exercisable for, or
convertible into or exchangeable for any shares of capital stock and the
number
of shares that have been reserved for issuance at the Tranche A Closing and
the
Tranche B Closing is set forth in Section 6.3(b) of the Disclosure Schedule.
Except as set forth in Section 6.3(b) of the Disclosure Schedule, there are
no
voting trusts, stockholder agreements, proxies or other agreements or
understandings in effect with respect to the voting or transfer of any of
the
issued and outstanding securities of the Company or any of its
Subsidiaries.
(e) As
of the
date hereof, no Indebtedness or other equity of the Company is senior to,
or
pari passu with, the Securities in right of payment, whether with respect
to
interest or upon liquidation or dissolution, or otherwise, other than
Indebtedness secured by purchase money security interests (which is senior
only
as to underlying assets covered thereby) and capital lease obligations (which
is
senior only as to the property covered thereby).
(f) Except
as
provided in the final sentence of this subparagraph (f), since January 1,
2003,
the exercise price of each Company Option has been no less than the fair
market
value of a share of Common Stock as determined on the date of grant of such
Company Option. Since January 1, 2003, all grants of Company Options were
validly issued and properly approved by the Board of Directors (or a duly
authorized committee or subcommittee thereof) in compliance with all applicable
legal requirements and recorded on the Financial Statements (as defined in
Section 6.6) in accordance with GAAP, and to the extent any such grants involved
any "back dating," "forward dating" or similar practices with respect to
the
effective date of grant (collectively "Violative Actions"), such Violative
Actions were unintentional and are not material in the aggregate. As of the
date
hereof, each Company Option has the exercise price and is held by the holder
set
forth on Section 6.3(f) of the Disclosure Schedule.
(g) All
of
the holders of the Series B Convertible Preferred Stock have failed to convert
such shares of preferred stock into shares of Common Stock in accordance
with
the terms of their issuance. The right to convert the shares of Series B
Convertible Preferred Stock into shares of Common Stock expired on September
8,
2003. The total amount payable by the Company with respect to the Series
B
Convertible Preferred Stock is six hundred and seventy-four thousand and
forty-four dollars ($674,044), which includes accrued dividends as of the
date
hereof of one hundred and twenty-four thousand and forty-four dollars
($124,044).
6.4 Due
Issuance and Authorization of Capital Stock
.
All of
the outstanding shares of capital stock of the Company and each of its
Subsidiaries have been duly authorized, validly issued and are fully paid
and
nonassessable. The Securities have been duly authorized and upon issuance
in
accordance with the terms of this Agreement or the Warrants (as applicable),
all
such Securities will be duly authorized, validly issued, fully paid and
nonassessable. The sale and delivery of the Preferred Shares and the Warrants
to
the Investor pursuant to the terms hereof, and the issuance of the shares
of
Series D Preferred Stock to the Investor upon exercise of the Warrants, will
vest in the Investor legal and valid title to such securities, free and clear
of
any Lien.
6.5 Consents
.
Neither
the execution, delivery or performance of this Agreement or any other
Transaction Document by the Company, nor the consummation by it of the
obligations and transactions contemplated hereby or thereby (including, without
limitation, the issuance, the reservation for issuance and the delivery of
the
Securities and the Conversion Shares) requires any consent of, authorization
by,
exemption from, filing with or notice to any Governmental Entity, the
shareholders of the Company or any other Person, other than the filings under
applicable securities Laws required to comply with the Company's registration
obligations under the Registration Rights Agreement.
6.6 Financial
Statements
.
The
audited consolidated balance sheet of the Company as of December 31, 2005
(the
"Balance Sheet"), and audited consolidated statements of income and retained
earnings and cash flows of the Company for the year ended December 31, 2005
(collectively with the Balance Sheet, the "Financial Statements"), together
with
an unqualified opinion thereon from the Company's independent accountants,
are
contained in the Company's SEC Documents (as defined below). The Company
has
caused to be delivered to the Investor unaudited consolidated balance sheets
of
the Company as of March 31, 2006, as of June 30, 2006 and as of September
30,
2006 (the "Unaudited Balance Sheets") and unaudited consolidated statements
of
income and retained earnings and cash flows of the Company for the three
months
ended March 31, 2006, the six months ended June 30, 2006 and the nine months
ended September 30, 2006 (collectively with the Unaudited Balance Sheet,
the
"Unaudited Financial Statements"). The Financial Statements and Unaudited
Financial Statements have been prepared from, are in accordance with and
accurately reflect, the books and records of the Company and have been prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except (x) as may be otherwise indicated in such financial statements
or the notes thereto, or (y) in the case of unaudited interim statements,
to the
extent they may not include footnotes or may be condensed or summary statements)
and fairly present in all material respects the consolidated financial position
of the Company as of the dates thereof and its consolidated results of
operations and cash flows for the periods then ended (subject, in the case
of
Unaudited Financial Statements, to immaterial year-end audit
adjustments).
6.7 SEC
Documents.
(a) Except
as
set forth in Section 6.7 of the Disclosure Schedule, since January 1, 2003,
the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act (all of the foregoing filed prior to the
date
hereof and after January 1, 2003, and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein, being hereinafter referred to herein as the "SEC Documents").
The Company has delivered or otherwise made available to the Investor true
and
complete copies of the SEC Documents, except the exhibits and schedules thereto
and the documents incorporated therein. As of their respective dates, the
SEC
Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as the case may be, applicable to the
SEC
Documents, and none of the SEC Documents, at the time they were filed with
the
SEC, 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 chief executive officer and the chief financial officer
of
the Company has each signed, and the Company has furnished to the SEC, all
certifications required by Sections 302 and 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
of
2002 (the "Certifications"). Such Certifications contain no qualifications
or
exceptions to the matters certified therein and have not been modified or
withdrawn, and neither the Company nor any of its officers have received
notice
from any Governmental Entity questioning or challenging the accuracy,
completeness, content, form or manner of filing or submission of such
Certifications. Since the adoption of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, the Company
has
complied in all material respects with the Laws, rules and regulations
thereunder. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules
and
regulations of the SEC applicable with respect thereto.
(b) The
Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient to comply with all legal and accounting requirements
applicable to the Company and such Subsidiary. The Company has disclosed
in the
SEC Documents, based on its most recent evaluation thereof, any significant
deficiencies in its internal accounting controls which would reasonably be
expected to adversely affect in any material respect the Company’s ability to
record, process, summarize and report financial data and neither the Company
nor
any of its Subsidiaries nor, to the knowledge of the Company, any representative
of the Company or any of its Subsidiaries has received or otherwise had or
obtained knowledge of any material complaint, allegation, assertion or claim,
whether written or oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of the Company or any of its Subsidiaries
or their respective internal accounting controls, including any material
complaint, allegation, assertion or claim that the Company or any of its
Subsidiaries has engaged in questionable accounting or auditing
practices.
6.8 No
Conflicts
.
The
execution, delivery and performance of this Agreement and each other Transaction
Document, and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the issuance and reservation for
issuance, as applicable, of the Securities and the Conversion Shares) will
not
(a) result in a violation of the certificate of incorporation or by-laws
of the
Company or any of its Subsidiaries, (b) except as set forth in Section 6.8
of
the Disclosure Schedule, materially conflict with or result in the material
breach of the terms, conditions or provisions of or constitute a material
default (or an event which with notice or lapse of time or both would become
a
material default) under, or give rise to any right of termination, acceleration
or cancellation under, any Contract to which the Company or any of its
Subsidiaries is a party, (c) result in a material violation of any Law, rule,
regulation, order, judgment or decree (including, without limitation, U.S.
federal and state securities Laws and regulations) applicable to the Company
or
any of its Subsidiaries or by which any property or asset of the Company
or any
of its Subsidiaries is bound or affected, or (d) result in the creation of
any
material Lien upon any of the assets of the Company or any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries is in violation of the
certificate of incorporation or by-laws, and neither the Company nor any
of its
Subsidiaries is in default (and no event has occurred which, with notice
or
lapse of time or both, would cause the Company or any of its Subsidiaries
to be
in material default) under, nor has there occurred any event giving others
(with
notice or lapse of time or both) any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or any of its Subsidiaries is a party.
6.9 Intellectual
Property
(a) Section
6.9(a) of the Disclosure Schedule sets forth a true, correct, and complete
list
of all U.S. and foreign (i) issued Patents and Patent applications, (ii)
Trademark registrations and applications and material unregistered trademarks,
(iii) copyright registrations and applications and material unregistered
copyrights, and (iv) material Software, in each case which is owned or purported
to be owned by the Company or any of its Subsidiaries. The Company or one
of its
Subsidiaries is the sole and exclusive beneficial and record owner of all
of the
Intellectual Property items set forth in Section 6.9(a) of the Disclosure
Schedule, and all such Intellectual Property is subsisting, valid, and
enforceable.
(b) Section
6.9(b) of the Disclosure Schedule sets forth a true, correct, and complete
list
of all Contracts to which the Company or one of its Subsidiaries is a party
or
otherwise bound (i) granting or obtaining any right to use any material
Intellectual Property (other than Contracts granting rights to use readily
available commercial Software that is generally available on nondiscriminatory
pricing terms and having an acquisition price of less than $20,000 in the
aggregate for all such related Contracts) or (ii) restricting the Company's
or its Subsidiaries' rights, or permitting other Persons, to use or register
any
material Intellectual Property (collectively, the "IP Contracts"). Each IP
Contract is valid, binding upon, and enforceable by or against the parties
thereto in accordance with its terms. The Company and its Subsidiaries have
complied in all material respects with, and is not in breach nor has received
any asserted or threatened claim of breach of, any IP Contract, and the Company
has no knowledge of any breach or anticipated breach by any other Person
to any
IP Contract.
(c) Except
as
set forth in Section 6.9(c) of the Disclosure Schedule: (i) the Company or
one
of its Subsidiaries owns, or has a valid right to use, free and clear of
all
Liens, all Intellectual Property used or held for use in, or necessary to
conduct, the business of the Company or its Subsidiaries as currently conducted
and as currently proposed to be conducted, (ii) the conduct of the business
of
the Company or its Subsidiaries (including the products and services of the
Company) to the knowledge of the Company does not infringe, misappropriate,
or
otherwise violate any Person's Intellectual Property rights, and the Company
has
not had such a claim asserted or threatened against it in the past three
years
and (iii) to the knowledge of the Company, no Person is infringing,
misappropriating, or otherwise violating any Intellectual Property owned,
used,
or held for use by the Company in the conduct of the business of the Company
or
its Subsidiaries, and no such claims have been asserted or threatened against
any Person by the Company in the past three years.
(d) The
Company and its Subsidiaries take reasonable measures to protect the
confidentiality of Trade Secrets, including requiring all Persons having
access
thereto to execute written non-disclosure agreements. Such Persons who have
not
executed a non-disclosure agreement shall, prior to the Tranche B Closing,
do
so, in a form reasonably acceptable to the Investor. Prior to the Tranche
B
Closing, all such persons have or will have executed a proprietary rights
assignment, in a form reasonably acceptable to the Investor.
(e) No
Affiliate or current or former partner, director, stockholder, officer, or
employee of the Company owns or retains any rights to use any of the
Intellectual Property owned, used, or held for use by the Company in the
conduct
of the business of the Company or any of its Subsidiaries.
(f) No
funding, facilities or personnel of any Governmental Entity were used, directly
or indirectly, to develop or create, in whole or in part, any Intellectual
Property rights of the Company.
6.10 Material
Contracts
(a) Sections
6.10(a)(i) through (ix) of the Disclosure Schedule contains lists of each
of the
following types of Contracts (such Contracts, "Material Contracts"):
(i) each
Contract that involved aggregate payments by or to the Company or one of
its
Subsidiaries of more than $100,000 during the year ended September 30, 2006
and
that is not cancelable by the Company without liability on thirty (30) or
less
days' notice to the other party thereto;
(ii) each
Contract for the lease of personal property by or from the Company or one
of its
Subsidiaries that involved payments in excess of $100,000 during the year
ended
September 30, 2006 and that is not cancelable by the Company or one of its
Subsidiaries without liability on thirty (30) or less days' notice to the
other
party thereto;
(iii) each
Contract that by its express terms limits the ability of Company or one of
its
Subsidiaries to engage in any line of business or compete with any Person
or
otherwise conduct its business in any geographic area or during any period
of
time;
(iv) all
Contracts of the Company or one of its Subsidiaries evidencing
Indebtedness;
(v) all
Contracts under which any Person has directly or indirectly guaranteed the
Indebtedness, liabilities or obligations of the Company or one of its
Subsidiaries, or the Company or one of its Subsidiaries has directly or
indirectly guaranteed the Indebtedness, liabilities or obligations of any
Person;
(vi) all
Contracts of the Company or one of its Subsidiaries which are joint venture
or
partnership agreements;
(vii) all
Contracts granting or obtaining Intellectual Property rights that are material
to the Company or one of its Subsidiaries, other than Contracts relating
to
computer software, systems or equipment that involved payments by or to the
Company or one of its Subsidiaries of less than $100,000 during the year
ended
September 30, 2006;
(viii) all
Contracts between the Company or one of its Subsidiaries and the officers
or
directors of the Company; and
(ix) all
Contracts of the Company or one of its Subsidiaries with any Governmental
Entity.
(b) Each
such
Contract is a legal, valid and binding obligation of the Company, enforceable
against the Company and/or such Subsidiary, as the case may be, in accordance
with its terms, subject to Laws of general application relating to bankruptcy,
insolvency, and the relief of debtors and other Laws of general application
affecting enforcement of creditors' rights generally, rules of Law governing
specific performance, injunctive relief and other equitable remedies. There
has
not occurred any breach, violation or default or any event that, with the
lapse
of time, the giving of notice or the election of any Person, or any combination
thereof, would constitute a material breach, violation or default by the
Company
or a Subsidiary, as the case may be, under any such Contract or, to the
knowledge of the Company, by any other Person to any such Contract. Neither
the
Company nor any of its Subsidiaries has been notified that any party to any
Material Contract intends to cancel, terminate, not renew or exercise an
option
under any Material Contract, whether in connection with the transactions
contemplated hereby or otherwise.
6.11 Right
of First Refusal; Voting and Registration Rights
.
Other
than as provided for herein or in any other of the Transaction Documents,
no
Person has any right of first refusal, preemptive right, right of first offer,
right of co-sale or other similar right regarding any of the Company's
securities or those of any of its Subsidiaries. There are no provisions in
the
certificate of incorporation or the by-laws of the Company or any of its
Subsidiaries, no agreements to which the Company or any of its Subsidiaries
is a
party and no agreements by which the Company, any of its Subsidiaries or
the
Securities are bound, which (i) may affect or restrict the voting rights
of the
Investor with respect to the Securities in its capacity as a stockholder
of the
Company, (ii) restrict the ability of the Investor, or any successor thereto
or
assignee or transferee thereof, to transfer the Securities, (iii) require
the
vote of more than a majority of the Company's issued and outstanding Common
Stock, voting together as a single class, to take or prevent any corporate
action, other than those matters requiring a class vote under Delaware Law,
or
(iv) entitle any party to nominate or elect any director of the Company or
require any of the Company's stockholders to vote for any such nominee or
other
Person as a director of the Company in each case, except as provided for
in or
contemplated by this Agreement. Except as disclosed on Section 6.11 of the
Disclosure Schedule or pursuant to the Registration Rights Agreement, the
Company is not under any obligation, contractual or otherwise, to register
for
sale any of its securities under the Securities Act.
The
Company has complied with its obligations under Section 4.16 of the Securities
Purchase Agreement (the "Camofi Agreement") dated as of July 21, 2005 between
the Company and Camofi Master LDC ("Camofi")
by
giving notice to Camofi of the transactions contemplated hereby. Camofi has,
in
writing, fully waived its right to participate in the transactions contemplated
hereby pursuant to Section 4.16 of the Camofi Agreement.
6.12 Intentionally
Omitted
6.13 No
Integrated Offering;
Private
Placement
.
Neither
the Company, nor any of its Affiliates or any other Person acting on the
Company's behalf, has directly or indirectly engaged in any form of general
solicitation or general advertising with respect to the Securities nor have
any
of such Persons made any offers or sales of any security or solicited any
offers
to buy any security under circumstances that would require registration of
the
Securities under the Securities Act or cause this offering of Securities
to be
integrated with any prior offering of securities of the Company for purposes
of
the Securities Act or any applicable stockholder approval provisions. No
registration under the Securities Act is required for the offer and sale
of the
Securities by the Company to the Investor as contemplated hereby. The issuance
and sale of the Securities hereunder does not contravene the rules and
regulations of any trading market in which the Company's securities trade..
6.14 Absence
of Certain Developments
.
Except
as disclosed in Section 6.14 of the Disclosure Schedule, since December 31,
2005, (a) each of the Company and its Subsidiaries has conducted its business
and operations consistent with past practice only in the ordinary and usual
course thereof, (b) there has not occurred any facts, events, circumstances,
changes, conditions or effects (including the incurrence of any Liabilities
of
any nature, whether or not accrued, contingent or otherwise) that have had,
or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, (c) neither the Company nor any of its Subsidiaries
has
made any material change in its accounting methods, principles or practices,
(d)
neither the Company nor any of its Subsidiaries has declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares
of
its capital stock and (v) neither the Company nor any of its Subsidiaries
has
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans
6.15 Undisclosed
Liabilities
.
Except
as set forth in Section 6.15 of the Disclosure Schedule, neither the Company
nor
any of its Subsidiaries has any Liabilities other than (a) set forth on the
Financial Statements, (b) Liabilities incurred in the ordinary course of
business consistent with past practice since December 31, 2005, (c) any
Liabilities incurred other than in the ordinary course of business not in
excess
of $100,000 individually or (d) Liabilities incurred in connection with this
Agreement or the Transaction Documents or the transactions contemplated hereby
or thereby
6.16 Litigation
.
Except
as set forth on Section 6.16 of the Disclosure Schedule and except as would
not
be material to the Company or any of its Subsidiaries as of the date hereof,
there is no action, suit, claim or proceeding pending or to the knowledge
of the
Company, threatened or reasonably anticipated against the Company or any
of its
Subsidiaries. As of the date hereof, there is no material investigation or
other
proceeding pending or, to the knowledge of the Company or threatened or
reasonably anticipated against the Company, any of its Subsidiaries or any
of
their respective properties (tangible or intangible) by or before any
Governmental Entity. There has not been since January 1, 2003, nor are there
currently, any internal investigations or inquiries being conducted by the
Company or any of its Subsidiaries, the Company's Board of Directors (or
any
committee thereof) or any third party, either at the request of any of the
foregoing or otherwise concerning any financial, accounting, tax, conflicts
of
interest, illegal activity, fraudulent or deceptive conduct or other misfeasance
or malfeasance issues. As of the date hereof, there is no action, suit,
proceeding, arbitration or, to the knowledge of the Company, investigation
involving the Company or any of its Subsidiaries or that the Company or any
of
its Subsidiaries presently intends to initiate.
6.17 Compliance
with Laws
.
Neither
the Company nor any of its Subsidiaries has received notification from any
Governmental Entity (a) asserting a material violation of any Law or the
terms
of any judgment, order, decree, injunction or writ applicable to the conduct
of
its business, (b) threatening to revoke any material, Company Permit, or
(c)
restricting or in any way limiting its business as currently conducted. The
Company and each of its Subsidiaries has in all material respects been operated
since January 1, 2003 in compliance with all Laws. The Company and each of
its
Subsidiaries is in compliance in all material respects with all Company Permits
and each material Company Permit is in full force and effect.
6.18 Taxes
(a) Filing
of Tax Returns and Payment of Taxes.
The
Company and each of its Subsidiaries has duly and timely filed (or has had
duly
and timely filed on its behalf) with the appropriate taxing authorities all
Tax
Returns required to be filed under applicable law and regulations through
the
date hereof, and all such Tax Returns are true, correct and complete in all
respects. The Company and each of its Subsidiaries have paid on a timely
basis
all Taxes due and payable (whether or not shown on any Tax Return). Neither
the
Company nor any of its Subsidiaries is currently the beneficiary of any
extension of time within which to file any Tax Return, and no written claim
has
been made by an authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no Liens for Taxes (other than Taxes not
yet due
and payable) upon any of the assets of The Company or any of its
subsidiaries.
(b) Audits,
Investigations, Disputes or Claims.
No
deficiencies for Taxes of the Company or any of its Subsidiaries have been
claimed, proposed or assessed in writing against the Company or any of its
Subsidiaries by any taxing or other governmental authority that have not
been
fully paid or finally settled. No Seller or director or officer (or employee
responsible for Tax matters) of the Company or any of its Subsidiaries expects
any authority to assess any additional Taxes for any period for which Tax
Returns have been filed. An adequate reserve in accordance with GAAP has
been
established in the books of the Company and its Subsidiaries with respect
to any
unpaid Taxes. No foreign, federal, state, or local tax audits, investigations,
disputes or claims relating to the Taxes or Tax Returns of the Company or
any of
its Subsidiaries or administrative or judicial Tax proceedings currently
are
pending or being conducted with respect to the Company or any of its
Subsidiaries.
(c) No
Waiver of Statute of Limitations.
Neither
the Company nor any of its Subsidiaries has executed a waiver with respect
to
any statute of limitations relating to the assessment or collection of any
Taxes.
(d) Tax
Sharing Agreements.
Neither
the Company nor any of its Subsidiaries is a party to any Tax sharing
agreements, or similar arrangements (including indemnity arrangements), or
contracts or plans.
(e) No
Withholding.
The
Company and each of its Subsidiaries has, in all respects, withheld and paid
all
Taxes required to have been withheld and paid in connection with any amounts
paid or owing to any employee, independent contractor, creditor, stockholder
or
other third party and has filed all Tax Returns required to be filed with
respect thereto.
(f) Net
Operating Losses.
As of
the date hereof, the Company and each of its Subsidiaries has net operating
losses of approximately US$ fifty-six million ($56,000,000) and no net capital
losses and is not subject to limitation under § 3382 (or any other provision of
state, local or foreign Tax law.
(g) Inclusion
of Income.
Neither
the Company nor any of its Subsidiaries will be required to include any material
item of income in, or exclude any material item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing
Date
that arises as a result of a transaction that occurred prior to the Closing
Date.
(h) Stock
Distributions.
Neither
the Company nor any of its Subsidiaries has distributed stock of another
Person,
or has had its stock distributed by another Person, in a transaction that
was
purported or intended to be governed in whole or in part by Code §355 or Code
§361.
6.19 Employee
and Benefit Plans
(a) "Benefit
Plan" means each deferred compensation and each incentive compensation, stock
purchase, stock option and other equity compensation plan, program, agreement
or
arrangement; each severance or termination pay, medical, surgical,
hospitalization, life insurance and other "welfare" plan, fund or program
(within the meaning of section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")); each profit-sharing, stock bonus or other
"pension" plan, fund or pro-gram
(within the meaning of section 3(2) of ERISA);
employment, termination or severance agreement; and each other material employee
benefit plan, fund, program, agreement or arrangement, in each case, that
is
sponsored, maintained or contributed to or required to be contributed to
by the
Company, any of its Subsidiaries or by any trade or business, whether or
not
incorporated (an "ERISA Affiliate"), that together with the Company or any
of
its Subsidiaries would be deemed a "single employer" within the meaning of
Section 4001(b) of ERISA, or to which the Company, any of its Subsidiaries
or an
ERISA Affiliate would reasonably be expected to have any liability, for the
benefit of any current or former employee or director of the Company or any
of
its Subsidiaries. Each
Benefit Plan is sponsored or maintained in the United States.
No
Benefit Plan has terms requiring assumption or any guarantee by the
Investor.
(b) Each
Benefit Plan intended to be "qualified" within the meaning of Section 401(a)
of
the Code has received a favorable determination letter from the Internal
Revenue
Service that it is so qualified and the trust maintained thereunder is exempt
from taxation under Section 501(a) of the Code and to the Company's knowledge
no
event has occurred that could reasonably be expected to cause a loss of such
qualification.
(c) Each
Benefit Plan has been operated and administered in all material respects
in
accordance with the terms of such Benefit Plan and with applicable Laws,
including but not limited to ERISA and the Code.
(d) No
Benefit Plan is subject to Title IV or Section 302 of ERISA and, in the last
six
years immediately preceding each Closing Date, none of the Company, any of
its
subsidiaries or any ERISA Affiliates has sponsored, maintained, contributed
or
been required to contribute to any employee benefit plan which was subject
to
Title IV of ERISA.
(e) There
are
no pending, threatened or anticipated material claims by or on behalf of
any
Benefit Plan, by any employee or beneficiary covered under any such Benefit
Plan, or otherwise involving any such Benefit Plan (other than routine claims
for benefits).
(f) The
consummation of the transactions contemplated by this Agreement will not,
either
alone or in combination with any other event, (i) entitle any current or
former
employee, officer, director or consultant of the Company, any of its
Subsidiaries or any ERISA Affiliate to severance pay, unemployment compensation
or any other similar termination payment, or (ii) accelerate the time of
payment
or vesting, or increase the amount of, or otherwise enhance, any benefit
due to
any such employee, officer, director or consultant.
(g) The
Company and its Subsidiaries are in material compliance with all applicable
U.S.
federal, state and local and foreign Laws, rules and regulations respecting
employment and employment practices, labor, terms and conditions of employment,
wages, hours of work and occupational safety and health, and are not engaged
in
any unfair labor practices as defined in the National Labor Relations Act
or
other applicable Law. Neither the Company nor any of its Subsidiaries is
bound
by or subject to any written or oral, express or implied, commitment or
arrangement, collective bargaining or similar agreement with any labor union,
and, to the knowledge of the Company, no labor union has requested or has
sought
to represent any of the employees, representatives or agents of the Company
or
any of its Subsidiaries and to the knowledge of the Company, there is no
current
union organizing activities among such employees, representatives or
agents.
(h) No
Benefit Plan provides medical, surgical, hospitalization, death or similar
bene-fits (whether or not insured) for employees or former employees of the
Company or any of its Subsidiaries for periods extending beyond their retirement
or other termination of service, other than (i) coverage mandated by applicable
law, (ii) death benefits under any "pen-sion plan," or (iii) benefits the
full
cost of which is borne by the current or former employee (or his
beneficiary).
6.20 Brokers
.
Except
as set forth in Section 6.20 of the Disclosure Schedule, no broker, investment
banker, financial advisor, finder or other Person has been retained by or
is
authorized to act on behalf of the Company who might be entitled to any fee
or
commission in connection with this Agreement or any of the Transaction
Documents.
6.21 Related-Party
Transactions
.
Except
as set forth in Section 6.21 of the Disclosure Schedule, no employee, officer,
director, or Affiliate of the Company or any of its Subsidiaries or member
of
his or her immediate family is currently indebted to the Company or any of
its
Subsidiaries, nor is the Company or any of its Subsidiaries indebted (or
committed to make loans or extend or guarantee credit) to any of such
individuals. Except as set forth in Section 6.21 of the Disclosure Schedule,
none of such Persons has any direct or indirect ownership interest in any
firm
or corporation which is an Affiliate of the Company or with which the Company
or
any of its Subsidiaries has a business relationship, or any firm or corporation
that competes with the Company, except that employees, officers, or directors
of
the Company and members of their immediate families may own stock in an amount
not to exceed 5% of the outstanding capital stock of publicly traded companies
that may compete with the Company or with which the Company or one of its
Subsidiaries may have a business relationship.
6.22 Insurance
(a)
Except as set forth in Section 6.22 of the Disclosure Schedule, the Company
and
its Subsidiaries have policies of property and casualty insurance and bonds
of
the type and in amounts customarily carried by persons conducting business
or
owning assets similar to those of the Company and its Subsidiaries. There
is no
material claim pending under any of such policies or bonds as to which coverage
has been, nor any basis for the Company to reasonably believe that a material
claim will be, questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such policies and
bonds have been paid and the Company and its Subsidiaries are otherwise in
compliance in all material respects with the terms of such policies and
bonds.
(b)
The
Company has a directors' and officers' liability insurance policy that is
in
full force and effect in the amount of $3,000,000.
6.23 Title
to Properties
(a)
Neither the Company nor any of its Subsidiaries owns or has owned any real
property. Section 6.23(a) of the Disclosure Schedule sets forth a list of
all
material real property currently leased, licensed or subleased by the Company
or
any of its Subsidiaries or otherwise used or occupied by the Company or any
of
its Subsidiaries (the "Real Property"). All current leases set forth in Section
6.23(a) of the Disclosure Schedule are in full force and effect, are valid
and
effective in accordance with their respective terms there is not, under any
of
such leases, any existing material breach, default or event of default (or
event
which with notice or lapse of time, or both, would constitute a material
default) by the Company or its Subsidiaries or, to the knowledge of the Company,
any third Person under such leases, in each case subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other Laws relating
to or
affecting the rights and remedies of creditors generally. To the knowledge
of
the Company, no parties other than the Company or any of its Subsidiaries
have a
right to occupy any material Real Property and the Real Property is used
only
for the operation of the business of the Company or its Subsidiaries.
(b)The
Company and each of its Subsidiaries have good and valid leasehold interests
in,
all of their material tangible properties and assets, real, personal and
mixed,
used or held for use in its business, free and clear of any Liens except
(i) Liens for Taxes not yet due and payable and (ii) such
imperfections of title and Liens, if any, which do not in any material respect
detract from the value or interfere with the present use of the property
subject
thereto or affected thereby. The rights, properties and assets presently
owned,
leased or licensed by the Company and its Subsidiaries include all rights,
properties and assets necessary to permit the Company and its Subsidiaries
to
conduct their business in all material respects in the same manner as their
businesses have been conducted prior to the date hereof.
6.24 Environmental
Matters
(a) The
Company and each of its Subsidiaries is, and has been since January 1, 2003,
in
compliance in all material respects with all applicable federal, state and
local
Laws relating to protection of the environment (collectively, "Environmental
Laws").
(b) Since
January 1, 2003 neither the Company nor any of its Subsidiaries has received
written notice of, and, to the knowledge of the Company, it is not subject
of,
any actions, claims, investigations, demands, or notices by any Person alleging
liability under or non-compliance with any Environmental Law.
(c) To
the
knowledge of the Company, there has not been, and there is no Environmental
Condition, on or under the Business Premises. As to each location where the
Company or any of its Subsidiaries conducts its business or performs services
(collectively, the "Business Premises"), (i) no Hazardous Materials have
been
Released in, on, under, from, to or through the Business Premises, either
by the
Company or one of its Subsidiaries or at the request of the Company or one
of
its Subsidiaries, or by an agent, employee or contractor of the Company or
one
of its Subsidiaries, except in accordance with applicable Law; (ii) none
of the
Material Contracts, directly or indirectly, requires the Company or one of
its
Subsidiaries to conduct environmental remediation or to remove Hazardous
Materials from the Business Premises in connection with any such environmental
remediation; and (iii) to the knowledge of the Company each Business Premises
is
in compliance with all health and safety Environmental Requirements pertaining
to employee safety at job sites and otherwise.
(d) True
and
complete copies of material reports and investigations (including sample
reports
or similar information) conducted at the request of the Company or one of
its
Subsidiaries with respect to any Environmental Subject Matter that relates
to
the Business Premises, including those related to the emission or disposition
of
radioactive materials used in connection with the practice of dentistry,
have
been provided to the Investor.
6.25 Books
and Records
(a) The
books
of account, minute books, shareholder record books, and other records of
the
Company, all of which have been made available to the Investor, are complete
and
correct and have been maintained in accordance with sound business practices.
The minute books of the Company contain accurate and complete records of
all
meetings held of and corporate action taken by the shareholders of the Company,
the Board of Directors and the committees of the Board of
Directors.
6.26 Listing
and Maintenance Requirements.
(a) The
Company's Common Stock is registered pursuant
to
Section 12(g) of the Exchange Act, and the Company has taken no action designed
to, or which to its knowledge is likely to have the effect of, terminating
the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the SEC is contemplating terminating such
registration. The Company has not, in the 12 months preceding the date hereof,
received notice from any trading market on which the Common Stock is or has
been
listed or quoted to the effect that the Company is not in compliance with
the
listing or maintenance requirements of such trading market. The Company is,
and
has no reason to believe that it will not in the foreseeable future continue
to
be, in compliance with all such listing and maintenance requirements.
6.27 Solvency.
(a)
On and
as of the date hereof, on a pro forma basis after giving effect to the
transactions contemplated by this Agreement occurring on the date hereof,
(x)
the sum of the assets, at a fair valuation, of the Company and its Subsidiaries
(on a consolidated basis) will exceed its debts, (y) the Company (on a
consolidated basis) has not incurred and does not intend to incur, and does
not
believe that it will incur, debts beyond its ability to pay such debts as
such
debts mature and (z) the Company (on a consolidated basis) has sufficient
capital with which to conduct its business. For purposes of this Section
6.27,
"debt" means any liability on a claim, and "claim" means any (i) right to
payment whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured or (ii) any right to an equitable
remedy
for breach of performance if such breach gives rise to a payment, whether
or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured.
6.28 Foreign
Corrupt Practices
(a) .
Neither
the Company nor any of its Subsidiaries, 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 corrupt 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 any of its Subsidiaries (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
6.29 Business
Practices.
(a)
No
officer, director, employee, agent or representative of the Company nor any
of
its Subsidiaries or Affiliates has engaged in any financial, accounting,
tax,
conflicts of interest, illegal or unethical activity, fraudulent or deceptive
conduct on behalf of, or for the benefit of, the Company or any of its
Subsidiaries or Affiliates. None of the Company nor any of its Subsidiaries
or
Affiliates, nor any of their respective officers, directors, employees, agents
or representatives on behalf of, or for the benefit of, the Company or any
of
its Subsidiaries or Affiliates, has used any corporate or other funds for
unlawful contributions, payments, gifts, or entertainment, or made any unlawful
expenditures relating to political or business activity or established or
maintained any unlawful or unrecorded funds in violation of applicable Law.
None
of the Company nor any of its Subsidiaries or Affiliates, nor any of their
respective officers, director, employees, agents or representatives on behalf
of
the Company or any of its Subsidiaries or Affiliates, has accepted or received
any unlawful contributions, payments, gifts, or expenditures in violation
of
applicable Law.
6.30 Disclosure
(a)
The
Company has not failed to disclose to the Investor any facts material to
the
business, results of operations, assets, Liabilities, financial condition
or
prospects of the Company or any of its Subsidiaries. No representation or
warranty by the Company or any of its Subsidiaries contained in this Agreement
or the Transaction Documents and no statement contained in any document
(including financial statements and the Disclosure Schedule), certificate,
or
other writing furnished or to be furnished by the Company or any of its
Subsidiaries to the Investor or any of its representatives pursuant to the
provisions hereof or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of material fact of omits or
will
omit to state any material fact necessary, in light of the circumstances
under
which it was made, in order to make the statements herein or therein not
misleading.
| 7. |
Representations
and Warranties of the Investor
|
.
The
Investor represents and warrants to the Company as follows:
7.1 Organization
The
Investor is a corporation duly organized, validly existing and in good standing
under the Laws of the State of New Jersey and has its principal place of
business and chief executive office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇.
7.2 Authorization;
Enforceability
The
Investor has the requisite corporate power and authority to enter into this
Agreement and the other Transaction Documents to which it is a party. The
execution, delivery and performance by the Investor of this Agreement and
each
of the other Transaction Documents to which it is a party, and the consummation
by the Investor of the transactions contemplated hereby and thereby, have
been
duly authorized by all necessary corporate action on the part of the Investor.
This Agreement has been duly and validly executed and delivered by the Investor
and, each other Transaction Document to which it is a party will be duly
and
validly executed and delivered, on Closing, by the Investor, and, assuming
due
and valid execution and delivery by the Company, constitute valid and binding
obligations of the Investor, enforceable against the Investor in accordance
with
their respective terms, subject to Laws of general application relating to
bankruptcy, insolvency, and the relief of debtors and other Laws of general
application affecting enforcement of creditors' rights generally, rules of
Law
governing specific performance, injunctive relief and other equitable
remedies.
7.3 No
Conflicts
The
execution, delivery and performance of this Agreement and each of the
Transaction Documents, when executed and delivered at Closing or thereafter
as
specified herein, and the consummation of the transactions contemplated hereby
and thereby will not (a) violate or conflict with any Law that is applicable
to
or binding on the Investor or (b) violate or conflict with, or result in
a
material breach of, or constitute a material default (or an event which with
notice or lapse of time or both would become a material default) under, or
permit cancellation of any material Contract to which the Investor is a party
or
by which the Investor is bound.
7.4 Litigation
There
are
no actions, suits, claims or legal, administrative or arbitratorial proceedings
pending against, or, to the Investor's knowledge, threatened against the
Investor which would adversely affect the Investor's performance under this
Agreement or the Transaction Documents or the consummation of the transactions
contemplated hereby or thereby.
7.5 Available
Funds
Investor
has the funds on hand necessary to satisfy its obligation to pay for the
Tranche
A Securities on the date hereof. Investor has, or will have on the Tranche
B
Closing Date, the funds on hand necessary to satisfy its obligation to pay
for
the Tranche B Securities on the Tranche B Closing Date.
7.6 Brokers
No
broker, investment banker, financial advisor, finder or other Person was
retained by or is authorized to act on behalf of the Investor who is entitled
to
any fee or commission in connection with the execution of this
Agreement.
| 8. |
Covenants
|
8.1 Continuing
Covenants of the Company
The
Company (and each of its Subsidiaries) hereby covenants from the date of
this
Agreement until the Tranche B Closing or the termination of this Agreement
in
accordance with its terms, except to the extent expressly permitted by this
Agreement or otherwise consented to by an instrument in writing signed by
the
Investor, the Company shall (i) keep the Company's business, as it is currently
being conducted, and organization intact and shall not take or permit to
be
taken or do or suffer to be done anything other than in the ordinary course
of
its business as the same is currently being conducted, (ii) use its reasonable
best efforts to keep available the services of its directors, officers,
employees, independent contractors and agents and retain and maintain good
relationships with its clients and maintain its facilities in good condition
and
(iii) maintain the goodwill and reputation associated with its business,
as it
is currently being conducted.
8.2 Auditors
The
Company shall have as its auditors an accounting firm of national reputation.
The parties hereto acknowledge and agree that, for purposes of this Section
8.2,
Amper, Politziner & ▇▇▇▇▇▇ is an accounting firm of national
reputation.
8.3 Composition
of Board of Directors; Directors and Officers Insurance Policy
(a) No
later
than fifteen days from the date hereof, the Company shall increase the size
of
the Board of Directors by two directors designated by the Investor (the
"Investor Directors"). The Board of Directors may, without the consent of
the
Investor, appoint one additional director by majority vote so that upon such
increase the Board shall consist of seven directors. Other than with respect
to
vacancies in the positions in the Board of Directors held by either of the
Investor Directors or their successors, vacancies on the Board of Directors
shall be filled by a majority vote of the Board of Directors. Vacancies in
the
positions in the Board of Directors held by either of the Investor Directors
or
their successors shall be filled at the sole discretion of the Investor.
The
Board of Directors shall meet at least once every fiscal quarter, unless
otherwise agreed to by a majority of directors.
(b) If
the
Company desires to increase the number of directors to more than seven, the
Company shall (i) obtain the Investor's consent to any such increase in the
Board of Directors, and (ii) present any proposed director to the Investor
for
approval, with respect to (ii) hereto such approval not to be unreasonably
withheld.
(c) The
Investor shall have rights with respect to representation on the Board of
Directors as set forth in the Certificate of Designation.
(d) Promptly
following the date hereof, the Company shall appoint at least one of the
directors designated by the Investor to the compensation committee of the
Board
of Directors.
(e) The
Company shall maintain in full force and effect a policy or policies of
insurance, including, without limitation, a directors and officers liability
insurance policy, issued by insurers of recognized responsibility, insuring
it,
its directors and officers, its properties and its business against such
losses
and risks, and in such amounts, as are customary in the case of corporations
of
established reputation engaged in the same or a similar business and in an
amount acceptable to the Board of Directors.
(f) In
the
event that the Company or any of its respective successors or assigns (i)
consolidates with or merges into any other Person and is not the continuing
or
surviving corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all its properties and assets to
any
Person, then, and in each such case, the Company shall cause proper provisions
to be made so that the successors and assigns of the Company, may assume
the
obligations set forth in this Section 8.3. The obligations of the Company
under
this Section 8.3 shall not be terminated or modified in such a manner as
to
adversely affect any indemnitee to whom this Section 8.3 applies without
the
express written consent of such affected indemnitee (it being expressly agreed
that the indemnitees to whom this Section 8.3 applies shall be third party
beneficiaries of this Section 8.3).
8.4 Use
of
Proceeds
The
Company shall use the proceeds from the transaction contemplated hereby solely
to pay off certain obligations relating to its securities as set forth on
Exhibit E hereof, to fund the Company's working capital needs as set forth
on
Exhibit F hereof and to pay $1.2 million dollars of existing accounts payable
of
the Company as set forth on Exhibit G hereof. THE COMPANY EXPRESSLY AGREES
THAT
NONE OF THE PROCEEDS FROM THE TRANSACTION CONTEMPLATED HEREBY SHALL BE USED
TO
FINANCE THE COMPANY'S PENDING ACQUISITION OF ENTECH.
8.5 Reservation
of Common Stock
The
Company will at all times reserve and keep available out of its authorized
Common Stock, solely for the purpose of issuance upon the conversion of Series
D
Preferred Stock as provided in the Certificate of Designation and the issuance
and conversion of Warrants as provided in the form of Warrant, such number
of
shares of Common Stock as shall then be issuable upon the conversion of all
outstanding shares of Series D Preferred Stock and the issuance and conversion
of the Warrants. The Company covenants that all shares of Common Stock which
shall be so issued shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, Liens and charges with respect to
the
issue thereof. The Company will use its best efforts to assure that all such
shares of Common Stock may be so issued without violation of any applicable
Law
or regulation, or of any requirement of any national securities exchange
or
other market upon which the Common Stock may be listed. The Board of Directors
agrees to submit for shareholder approval at the next meeting of the
shareholders of the Company a proposal to increase the number of authorized
shares of Common Stock of the Company to at least 300,000,000 . The Board
of
Directors agrees to recommend shareholder approval of such proposal.
8.6 Filings
The
Company shall promptly provide to the Investor (or its counsel) copies of
all
filings made by the Company or any Affiliate with any Governmental Entity
in
connection with this Agreement, the Transaction Documents and the transactions
contemplated hereby and thereby.
8.7 Financial
Statements and Other Information
The
reports required to be prepared pursuant to this Section 8.7 are to be prepared
solely for internal purposes and are independent of any reports that must
be
prepared to satisfy any legal requirements or obligations of the Company
or its
Subsidiaries.
(a) Quarterly
Reports.
The
Company shall deliver to the Investor, as soon as available but in any event
within forty-five (45) days after the end of each quarterly accounting period
in
each fiscal year, unaudited consolidating and consolidated statements of
income
and cash flows of the Company and its Subsidiaries for such quarterly period
and
for the period from the beginning of the fiscal year to the end of such quarter,
and unaudited consolidating and consolidated balance sheets of the Company
and
its Subsidiaries as of the end of such quarterly period, setting forth in
each
case comparisons to the Company's annual budget and to the corresponding
period
in the preceding fiscal year, and all such statements shall be prepared in
accordance with GAAP, consistently applied, subject to the absence of footnote
disclosures and to normal year-end adjustments for recurring accruals, and
shall
be certified by the Company's chief financial officer. The Company shall
include
with each such report an up-to-date capitalization table, certified by Company’s
chief financial officer. Additionally, the Company shall include a brief
summary
of any significant events, developments or trends that transpired during
the
quarterly period.
(b) Fiscal
Reports.
The
Company shall deliver to the Investor within ninety (90) days after the end
of
each fiscal year, statements of income and cash flows for the Company and
its
Subsidiaries for such fiscal year, and audited consolidating and audited
consolidated balance sheets of the Company and its Subsidiaries as of the
end of
such fiscal year, together with, in each case, comparisons to the Company's
annual budget and to the preceding fiscal year, all prepared in accordance
with
GAAP, consistently applied, and accompanied by (i) with respect to consolidated
portion of such statements, an audit opinion containing no exceptions or
qualifications (except for qualifications regarding specified contingent
liabilities and except as set forth on Section 8.7(b) of the Disclosure
Schedule) of the Company's auditors or another independent auditing firm
of
recognized national standing and (ii) a copy of such firm's annual management
letter, if any, to the Board of Directors.
(c) Additional
Accountants' Reports.
As
determined by the Board of Directors, the Company shall deliver to the Investor
promptly upon receipt thereof, any additional reports, management letters
or
other detailed information concerning significant aspects of the Company's
operations or financial affairs given to the Company by its independent
accountants (and not otherwise contained in other materials provided hereunder
).
(d) Annual
Budget.
For
2007 the Company shall deliver to the Investor no later than December 15,
2006
and thereafter the Company shall deliver to the Investor at least thirty
(30)
days prior to the beginning of each fiscal year, an annual budget for the
Company and its Subsidiaries for such fiscal year and, promptly upon preparation
thereof, any other significant budgets prepared by the Company and any revisions
of such annual or other budgets, and, within forty-five (45) days after any
quarterly period in which there is a material adverse deviation from the
annual
budget, a letter from the Company's chief financial officer explaining the
deviation and what actions the Company has taken and proposes to take with
respect thereto. Each annual budget delivered pursuant to this Section 8.7
shall
be prepared in a manner that is consistent with GAAP.
(e) Other
Matters.
The
Company shall deliver to the Investor promptly (but in any event within five
(5)
Business Days) after the discovery or receipt of (i) notice of any default
under
any material Contract to which it or any of its Subsidiaries is a party or
any
other material adverse change, event or circumstance affecting the Company
or
any Subsidiary thereof (including, without limitation, the filing of any
material litigation against the Company or any Subsidiary thereof or the
existence of any dispute with any Person which involves a reasonable likelihood
of such litigation being commenced). The Company shall deliver to the Investor
with reasonable promptness, such other information and financial data concerning
the Company and its Subsidiaries as it may reasonably request.
8.8 Inspection
of Property
The
Company and its Subsidiaries shall permit any authorized representative of
the
Investor upon reasonable notice and during normal business hours to (a) visit
and inspect any of the properties or operations of the Company and its
Subsidiaries, (b) examine the corporate and financial records of the Company
and
its Subsidiaries and make copies thereof and (c) discuss the affairs, finances
and accounts with the directors, officers, key employees and independent
accountants of the Company and its Subsidiaries.
8.9 Further
Assurances
The
Company will cure promptly any defects in the creation and issuance of the
Securities and the execution and delivery of the Transaction Documents. The
Company at its expense will promptly execute and deliver to the Investor,
upon
request, all such other documents, agreements and instruments to correct
any
omissions in the Transaction Documents or to make any recordings, to file
any
notices or obtain any consents, all as may reasonably be necessary or
appropriate in connection therewith.
8.10 Financing
for Entech Acquisition
The
Company shall raise all the financing (the "Entech Financing") for the
acquisition of Entech Environmental Technologies, Inc. ("Entech") through
a
special purpose vehicle (the "SPV"). None of the securities issued by the
SPV in
connection with such acquisition shall be convertible into either the Company's
Common Stock, Series B Preferred Stock, Series C Preferred Stock, Series
D
Preferred Stock or any other class of capital stock which the Company may
authorize or issue in the future. The Company further agrees not to provide
any
form of guarantee or surety to the SPV in relation to the Entech Financing
or to
secure the Entech Financing with any of its assets or capital
stock.
8.11 Strategic
Agreement
Between
the date hereof and the Tranche B Closing Date, the Company and the Investor
shall negotiate in good faith and use commercially reasonable efforts to
enter
into the Strategic Agreement as soon as practicable, but no later than January
31, 2007.
8.12 Right
to Participate Pro-Rata in Future Financing
(a) The
Company hereby grants to the Investor a right of first refusal to purchase,
with
respect to the issuance by the Company of new or additional debt or equity
securities for cash, that portion of such new or additional debt or equity
securities as may be necessary in order to permit the Investor to maintain
its
relative ownership of the aggregate amount of the Company's total common
equity
(calculated on a Fully-Diluted Basis). Such right shall be offered to the
Investor (such offer, the "Preemptive Rights Offer") pursuant to a written
notice from the Company offering the Investor such securities on the same
terms
and conditions as offered to the other Offeree(s) (such written notice, the
"Preemptive Rights Notice"). The Investor shall have 20 days from the date
of
the Company's delivery of the Preemptive Rights Notice to notify the Company
in
writing of its binding acceptance of such Preemptive Rights Offer with respect
some or all of the debt or equity securities which are offered to the Investor
pursuant to such Preemptive Rights Offer.
(b) If
the
Investor accepts the Preemptive Rights Offer in accordance with the provisions
of the preceding sentence, the Company and the Investor shall have 30 days
in
which to consummate such binding agreement. In the event that the Investor
does
not accept the Preemptive Rights Offer within such 20 day period in accordance
with the provisions of the preceding sentence or fails to consummate any
such
purchase within such 30 day period, the Company would have the right, but
not
the obligation, to issue such securities on terms and conditions in the
aggregate no more favorable to the other offeree(s) than those set forth
in the
Preemptive Rights Notice, pursuant to a definitive agreement to be entered
into
no later than 90 days after such date.
(c) Notwithstanding
anything to the contrary contained herein, no rights of first refusal pursuant
to this Section 8.12 would apply in the event of (i) the exercise of any
employee or director options or the exercise or conversion of any options,
warrants or convertible securities in existence as of the date hereof, (ii)
an
issuance of Common Stock by the Company in connection with a registered public
offering, or (iii) the distribution by the Company of its securities to all
of
its stockholders on a pro rata basis.
(d) "Fully-Diluted
Basis" shall mean, with respect to any calculation of the outstanding number
of
shares of the Company's capital stock or the outstanding amount of common
equity
of the Company (as the case may be pursuant to this Section 8.12), an amount
equal to the total outstanding number of shares of Company capital stock,
calculated without duplication and assuming the conversion of all outstanding
shares of convertible stock and securities of the Company and the exercise
of
all warrants, options and other rights to purchase Common Stock.
8.13 Restrictive
Legend
(a) The
Investor acknowledges that each certificate evidencing the Securities shall
be
stamped or otherwise imprinted with a legend in substantially the following
form, unless prior to exercise of the Warrants or the Series D Preferred
Stock,
the Common Stock issuable upon conversion or exercise thereof shall have
been
registered under the Securities Act:
"THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE
OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT."
(b) Certificates
evidencing the Underlying Shares shall not contain any legend (including
the
legend set forth in Section 8.13(a) hereof): (i) while a registration statement
covering the resale of such security is effective under the Securities Act,
or
(ii) following any sale of such Underlying Shares pursuant to Rule 144, or
(iii)
if such Underlying Shares are eligible for sale under Rule 144(k), or (iv)
if
such legend is not required under applicable requirements of the Securities
Act.
The Company agrees that at such time as such legend is no longer required
under
this Section 8.13(b), it will, no later than three Trading Days following
the
delivery by a Investor to the Company or the Company's transfer agent of
a
certificate representing Underlying Shares, as applicable, issued with a
restrictive legend (such third Trading Day, the "Legend Removal Date"), deliver
or cause to be delivered to the Investor a certificate representing such
shares
that is free from all restrictive and other legends.
(c) In
addition to the Investor's other available remedies, the Company shall pay
to
the Investor, in cash, as partial liquidated damages and not as a penalty,
for
each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on
the
date such Securities are submitted to the Company's transfer agent) delivered
for removal of the restrictive legend and subject to Section 8.13(b), $5
per
Trading Day (increasing to $10 per Trading Day 5 Trading Days after such
damages
have begun to accrue) for each Trading Day after the Legend Removal Date
until
such certificate is delivered without a legend. Such liquidated damages shall
not be incurred during any period in which the delay is occasioned by the
Company's transfer agent or other independent party not acting at the Company's
direction to delay the issuance and not as a result of an negligence or
wrongdoing on the Company's part. Nothing herein shall limit the Investor's
right to pursue actual damages for the Company's failure to deliver certificates
representing any Securities as required by the Transaction Documents, and
the
Investor shall have the right to pursue all remedies available to it at law
or
in equity including, without limitation, a decree of specific performance
and/or
injunctive relief.
8.14 Public
Statements.
8.15 The
initial press release with respect to this Agreement, the Transaction Documents
and the transactions contemplated hereby and thereby shall be agreed upon
by the
Company and the Investor. Thereafter, the Company shall consult with the
Investor before issuing any press release or making any public statement
(including any filing with the SEC) with respect to this Agreement, the
Transaction Documents and the transactions contemplated hereby and thereby
and
shall not issue any such press release or make any such public statement
without
the prior consent of the Investor.
| 9. |
Conditions
to the Parties' Obligations
|
9.1 Conditions
to Each Party's Obligations
The
respective obligations of each party to consummate the transactions contemplated
hereunder to be consummated at the Tranche B Closing are subject to the
fulfillment prior to or on the Tranche B Closing Date of all of the following
conditions, which may be waived in whole or in part by the Investor to the
extent permitted by Law:
(a) No
Statute, Etc.
No
statute, rule, regulation, executive or other order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits, restrains, enjoins or restricts the
transactions contemplated by this Agreement or any of the Transaction Documents.
9.2 Conditions
to the Investor’s Obligations
The
obligations of the Investor to consummate the transactions contemplated
hereunder to be consummated at the Tranche B Closing are subject to the
fulfillment prior to or on the Tranche B Closing Date of all of the following
conditions, which may be waived in whole or in part by the Investor to the
extent permitted by Law:
(a) Covenants;
Representations and Warranties.
(i) The Company shall have performed in all material respects each of its
obligations hereunder and under each of the Transaction Documents required
to be
performed by it at or prior to the Tranche B Closing Date, and shall have
obtained all consents and approvals required for the consummation of the
transactions contemplated hereby and by each of the Transaction Documents,
and
(ii) the representations and warranties of the Company contained in this
Agreement and in any certificate or other writing delivered by the Company
pursuant hereto shall be true and correct (without giving effect to any
limitation as to "materiality" or “Material Adverse Effect” set forth therein)
at and as of the Tranche B Closing Date as if made at and as of the Tranche
B
Closing Date, except where the failure of such representations and warranties
to
be true and correct (without giving effect to any limitation as to "materiality"
or “Material Adverse Effect” set forth therein) would not, individually or in
the aggregate, have a Material Adverse Effect.
(b) Laws;
Injunctions.
No
statute, rule, regulation, executive or other order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
Governmental Entity that would, or would reasonably be likely to, have a
Material Adverse Effect.
(c) Certificate
of Officer.
The
Company shall have delivered to the Investor a certificate dated the date
of the
Tranche B Closing Date, executed by its chief executive officer, certifying
the
satisfaction of the conditions specified in paragraph (a) of this Section
9.2.
(d) Strategic
Agreement.
The
Company shall have executed and delivered the Strategic Agreement.
(e) No
Material Adverse Effect.
There
shall have been no Material Adverse Effect from and after the date of this
Agreement.
(f) Default.
The
Company shall not be in default in any material respect under any Contract
evidencing Indebtedness of the Company.
(g) Legal
Opinion.
The
Investor shall have received the legal opinion from Salvo, Landau, Gruen
&
▇▇▇▇▇▇ in the form attached hereto as Exhibit
I.
9.3 Conditions
to the Company's Obligations
The
obligations of the Company to consummate the transactions contemplated hereunder
to be consummated at the Tranche B Closing are subject to the fulfillment
prior
to or on the Tranche B Closing Date of all of the following conditions, which
may be waived in whole or in part by the Company to the extent permitted
by
Law:
(a) Covenants;
Representations and Warranties.
(i) The
Investor shall have performed in all material respects each of its obligations
hereunder and under each of the Transaction Documents required to be performed
by it at or prior to the Tranche B Closing Date, and shall have obtained
all
consents and approvals required for the consummation of the transactions
contemplated hereby and by each of the Transaction Documents, and (ii) the
representations and warranties of the Investor contained in this Agreement
and
in any certificate or other writing delivered by the Investor pursuant hereto
shall be true and correct (without giving effect to any limitation as to
"materiality" set forth therein) at and as of the Tranche B Closing Date
as if
made at and as of the Tranche B Closing Date, except where the failure of
such
representations and warranties to be true and correct (without giving effect
to
any limitation as to "materiality" or “Material Adverse Effect” set forth
therein) would not, individually or in the aggregate, have a material adverse
effect on the ability of the Investor to perform its obligations under this
Agreement and the Transaction Documents.
(b) Certificate
of Officer.
The
Investor shall have delivered to the Company a certificate dated as of the
date
of such Closing Date, executed by an authorized officer of the Investor ,
certifying the satisfaction of the conditions specified in paragraph (a)
of this
Section 9.3.
(c) Strategic
Agreement.
The
Investor shall have executed and delivered the Strategic Agreement.
| 10. |
Indemnification
|
10.1 Survival
of Representations and Warranties
The
representations and
warranties of the Company and the Investor contained in this Agreement shall
survive until 18 months after the date hereof, except that (i) all
representations and warranties contained in Sections 6.1, 6.2, 6.3, and 6.4
shall survive indefinitely; and (ii) all representations and warranties of
the
Company set forth in Section 6.18 and 6.24 shall survive until ninety (90)
days
after their applicable statutes of limitation (taking into account any
applicable waivers or extensions). The covenants and agreements of the Investor
and the Company contained in this Agreement and the Transaction Documents
or in
any certificate or other writing delivered pursuant hereto or thereto or
in
connection herewith or therewith shall survive indefinitely unless otherwise
set
forth herein or therein. The covenants and agreements of the Company contained
in Sections 8.1, 8.3, 8.6, 8.7, 8.8 and 8.12 of this Agreement shall terminate
if the Investor's beneficial ownership of the Company's capital stock on
a
fully-diluted basis falls below five percent (5%) of the then outstanding
shares
of Common Stock. If written notice of a claim has been given prior to the
expiration of the applicable representations and warranties by the Company
or
the Investor, then the relevant representations and warranties of the other
party shall survive as to such claim, until such claim has been finally
resolved.
10.2 Indemnification
.
(a)
The
Investor, its Affiliates and its successors and assigns and the officers,
directors, employees and agents of the Investor, its Affiliates and its
successors and assigns shall be indemnified and held harmless by the Company
for
any and all Liabilities, Financial Statement Losses, losses, damages, claims,
costs and expenses, interest, awards, judgments and penalties (including,
without limitation, reasonable attorneys' fees and expenses) actually suffered
or incurred by them (including, without limitation, any action, claim or
proceeding brought or otherwise initiated by any of them) (hereinafter, an
"Investor Loss") arising out of, or resulting from or based upon:
(i) the
breach of any representation or warranty made by the Company contained in
this
Agreement or in any Transaction Document provided,
however,
that,
in the case of any representation or warranty that is limited by “knowledge,”
“material” "Material Adverse Effect" or by any similar term or limitation, the
occurrence of a breach or inaccuracy of such representation or warranty,
as the
case may be, and the amount of Losses shall be determined as if “knowledge,”
“material” "Material Adverse Effect" or by any similar term or limitation were
not included therein;
(ii) the
breach of or failure to perform any covenant or agreement by the Company
contained in this Agreement or in any Transaction Document;
(iii)
any
action instituted against the Investor, or any of its Affiliates, by any
shareholder of the Company who is not an Affiliate of the Investor, with
respect
to any of the transactions contemplated by this Agreement or any of the
Transaction Documents; or
(iv) any
Violative Actions.
The
amounts of any indemnification pursuant to this Section 10.2(a) shall be
increased by an additional amount to reflect an appropriate gross-up to
compensate the Investor for its indirect participation as a holder of capital
stock of the Company in any indemnification payment made pursuant to this
Section 10.2(a).
(b) The
Company, its Affiliates and its successors and assigns and the officers,
directors, employees and agents of the Company, its Affiliates and its
successors and assigns shall be indemnified and held harmless by the Investor
for any and all Liabilities, losses, damages, claims, costs and expenses,
interest, awards, judgments and penalties (including, without limitation,
reasonable attorneys' fees and expenses) actually suffered or incurred by
them
(including, without limitation, any action, claim or proceeding brought or
otherwise initiated by any of them) (hereinafter, a "Company Loss", and each
of
a Company Loss and an Investor Loss is hereinafter referred to as a "Loss"
with
respect to such party) arising out of, resulting from or based
upon:
(i) the
breach of any representation or warranty made by the Investor contained in
this
Agreement or in any Transaction Document provided,
however,
that,
in the case of any representation or warranty that is limited by “knowledge,”
“material” "Material Adverse Effect" or by any similar term or limitation, the
occurrence of a breach or inaccuracy of such representation or warranty,
as the
case may be, and the amount of Losses shall be determined as if “knowledge,”
“material” "Material Adverse Effect" or by any similar term or limitation were
not included therein; or
(ii) the
breach of or any failure to perform any covenant or agreement by the Investor
contained in this Agreement or in any Transaction Document.
(c) Whenever
a claim shall arise for indemnification under this Section 10, the party
entitled to indemnification (the "Indemnified Party") shall give notice to
the
other party (the "Indemnifying Party") of any matter that the Indemnified
Party
has determined has given or could give rise to a right of indemnification
under
this Agreement promptly stating the amount of the Loss, if known. The
obligations and Liabilities of the Indemnifying Party under this Section
10 with
respect to Losses arising from claims of any third party which are subject
to
the indemnification provided for in this Section 10 ("Third Party Claims")
shall
be governed by and contingent upon the following additional terms and
conditions: if an Indemnified Party shall receive notice of any Third Party
Claim, the Indemnified Party shall give the Indemnifying Party notice of
such
Third Party Claim following receipt by the Indemnified Party of such notice
in
the time frame provided above; provided,
however,
that
the failure to provide such notice shall not release the Indemnifying Party
from
any of its obligations under this Section 10 and shall not relieve the
Indemnifying Party from any other obligation or Liability that it may have
to
any Indemnified Party otherwise than under this Section 10. The Indemnifying
Party shall be entitled to assume and control the defense of such Third Party
Claim at its expense and through counsel of its choice if it gives notice
of its
intention to do so to the Indemnified Party within ten days of the receipt
of
such notice from the Indemnified Party; provided,
however,
that,
if in the opinion of the Indemnified Party there exists or is reasonably
likely
to exist a conflict of interest that would prevent the same counsel from
representing both the Indemnified Party and the Indemnifying Party, then
the
Indemnified Party shall be entitled to retain its own counsel at the expense
of
the Indemnifying Party. In the event the Indemnifying Party exercises the
right
to undertake any such defense against any such Third Party Claim as provided
above, the Indemnified Party shall cooperate with the Indemnifying Party
in such
defense and make available to the Indemnifying Party, at the Indemnifying
Party's expense, all witnesses, pertinent records, materials and information
in
the Indemnified Party's possession or under the Indemnified Party's control
relating thereto as is reasonably required by the Indemnifying Party. Similarly,
in the event the Indemnified Party is, directly or indirectly, conducting
the
defense against any such Third Party Claim, the Indemnifying Party shall
cooperate with the Indemnified Party in such defense and make available to
the
Indemnified Party, at the Indemnifying Party's expense, all such witnesses,
records, materials and information in the Indemnifying Party's possession
or
under the Indemnifying Party's control relating thereto as is reasonably
required by the Indemnified Party. No such Third Party Claim may be settled
by
the Indemnifying Party without the prior written consent of the Indemnified
Party. No party shall be entitled to indemnification under this Section 10.2
if
such party receives reasonable express written notice of a breach of any
representation, warranty, covenant or agreement and such party would be entitled
to terminate this Agreement pursuant to the terms hereof in respect of such
breach and fails to do so.
10.3 Limits
on Indemnification
Notwithstanding
anything to the
contrary contained in this Agreement, no claim may be made against the Company
for indemnification unless the aggregate of all Investor Losses shall exceed
$250,000 (the "Basket"), in which case the Company shall then be required
to pay
or be liable for the full amount of Investor Losses; provided,
however,
that
the Basket shall not apply to or limit Investor Losses relating to breaches
of
the representations contained in Sections 6.1, 6.2, 6.3, 6.4, 6.11, 6.12,
6.20,
6.28 and 6.29 or to any Violative Actions.
10.4 Effect
of Investigation
The
right
to indemnification and all other remedies based on any representation, warranty,
covenant or obligation contained in or made pursuant to this Agreement shall
not
be affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after
the
date hereof or the Tranche B Closing Date, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant
or
obligation.
| 11. |
Miscellaneous
|
11.1 Notices
All
notices, requests, consents and other communications required or permitted
hereunder shall be in writing and shall be hand delivered or mailed postage
prepaid by registered or certified mail or transmitted by facsimile transmission
(with immediate telephonic confirmation thereafter),
(a) If
to the
Investor:
EMCORE
Corporation
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to (which shall not constitute notice):
Skadden,
Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇, Esq.
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If
to the
Company:
WorldWater
and Power Corp.
Pennington
Business Park
▇▇
▇▇▇▇▇
▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
with
a copy to (which
shall not constitute notice):
Salvo
Landau Gruen
& ▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, Esq.
Facsimile
No.: (▇▇▇)
▇▇▇-▇▇▇▇
or
at
such other address as the Company or the Investor may specify by written
notice
to the other, and each such notice, request, consent and other communication
shall for all purposes of the Agreement be treated as being effective or
having
been given when delivered if delivered personally, upon receipt of facsimile
confirmation if transmitted by facsimile, or, if sent by mail, at the earlier
of
its receipt or 72 hours after the same has been deposited in a regularly
maintained receptacle for the deposit of United States mail, addressed and
postage prepaid as aforesaid.
11.2 Termination
of Agreement
This
Agreement may be terminated as follows:
(a) by
mutual
written consent of the Investor and the Company;
(b) by
the
Investor, if the Company has breached any representation, warranty, covenant
or
agreement contained in this Agreement such that the condition set forth in
Section 9.2(a) hereof is not capable of being fulfilled; provided,
that if
such breach is capable of being cured, the Company has not cured such breach
within twenty (20) Business Days after notice by the Investor to the Company
thereof;
(c) by
the
Company, if the Investor has breached any representation, warranty, covenant
or
agreement contained in this Agreement such that the condition set forth in
Section 9.3(a) hereof is not capable of being fulfilled; provided,
that if
such breach is capable of being cured, the Investor has not cured such breach
within twenty (20) Business Days after notice by the Company to the Investor
thereof; or
(d) by
the
Investor, if the Tranche B Closing have not occurred by February 1,
2007.
11.3 Effect
of Termination
In
the
event of the termination and abandonment of this Agreement pursuant to Section
11.2, this Agreement shall forthwith become void and have no effect, without
any
liability on the part of either party hereto other than the provisions of
this
Section 11.3 and Sections 8.1 through 8.14; provided,
however,
that
such termination and abandonment shall not result in the prior sale of any
Securities hereunder being rescinded; provided,
further,
that a
party that has committed fraud or willfully breached its representations,
warranties, covenants or agreements shall be liable for such fraud or
breach.
11.4 Successors
and Assigns
This
Agreement shall inure to the benefit of and be binding upon the successors
and
assigns of each of the parties. The Investor's rights under this Agreement
may
be assigned, in whole or in part, to any Permitted Transferee, and any Permitted
Transferee shall be deemed to be a Investor for all purposes hereunder. A
"Permitted Transferee" is (i) any Affiliate of the Investor, including, without
limitation, directors, executives and officers of the Investor, (ii) any
member
of the family of any Affiliate of the Investor, including any such Person's
spouse and descendants and any trust, partnership, corporation, limited
liability company or other entity for the benefit of such spouse and/or
descendants to whom or which any of the Securities have been transferred
by any
such Person for estate or tax planning purposes, (iii) any charity or foundation
to which the Securities have been transferred by the Investor or any Person
or
entity described in clause (i) or (ii) above for estate or tax planning or
charitable purposes, or (iv) the beneficiary of any bona fide pledge by the
Investor of any of the Securities. Other than Sections 8.3(d) and 8.3(e)
hereof,
neither this Agreement nor any provision hereof is intended to confer upon
any
Person other than the parties hereto and any Permitted Transferee any rights
or
remedies hereunder.
11.5 Headings
The
headings of the Sections and paragraphs of this Agreement have been inserted
for
convenience of reference only and do not constitute a part of this
Agreement.
11.6 Governing
Law
This
Agreement, including all matters of construction, validity and performance,
shall be construed in accordance with and governed by the Laws of the State
of
New York (without regard to principles of conflicts of Laws).
11.7 Expenses
Other
than as required by applicable Law, all costs and expenses incurred in
connection with this Agreement, the Transactions Documents and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
costs
or expenses.
11.8 Jurisdiction
Each
of
the parties hereto: (a) irrevocably consents to submit itself to the exclusive
jurisdiction and venue of the state courts located in New York County, in
the
State of New York and the Federal courts located in the Southern District
of the
State of New York, for the purpose of any action or proceeding arising out
of
this Agreement or any of the transactions contemplated by this Agreement,
(b)
agrees that it will not attempt to deny or defeat such personal jurisdiction
by
motion or other request for leave from any such court and (c) agrees that
it
will not bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a state or federal court of
competent jurisdiction located in New York, New York, except for the purpose
of
enforcing any award or decision.
11.9 Waiver
of Jury Trial
EACH
OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
11.10 Counterparts;
Effectiveness
This
Agreement may be executed in any number of counterparts and by a different
party
hereto in separate counterparts, with the same effect as if each party had
signed the same document. All such counterparts shall be deemed an original,
shall be construed together and shall constitute one and the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by each of the parties hereto.
11.11 Entire
Agreement
This
Agreement, the Transaction Documents, and the Confidentiality Agreement contain
the entire agreement among the parties hereto with respect to the subject
matter
hereof and supersede and replace all other prior agreements, written or oral,
among the parties hereto with respect to the subject matter hereof.
11.12 Severability
If
any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such a determi-nation, the parties shall negotiate
in
good faith to modify this Agreement so as to effect the original intent of
the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated
to
the fullest extent possible.
11.13 Change;
Waiver
No
change
or modification of this Agreement shall be valid unless the same is in writing
and signed by all of the parties hereto. No waiver of any provision of this
Agreement shall be valid unless in writing and signed by the party waiving
its
rights. No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single
or
partial exercise thereof preclude any other or further exercise thereof or
the
exercise of any other right, power or privilege. The rights and remedies
herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by Law.
[Execution
Page Follows]
51
IN
WITNESS WHEREOF, the parties hereto have caused this Investment Agreement
to be
duly executed as of the day and year first above written.
WorldWater
and Power Corp.
By:
/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:
Chairman
EMCORE
Corporation
By:_/s/_Howard
W. Brodie_________
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
Chief Legal Officer and Executive
Vice President