THERMOENERGY CORPORATION Securities Purchase Agreement
Exhibit
10.1
THERMOENERGY
CORPORATION
This
Securities Purchase Agreement (this “Agreement”)
is
dated as of December 18, 2007, by and between ThermoEnergy Corporation, a
Delaware corporation (the “Company”),
and
The Quercus Trust (the “Investor”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated
thereunder, the Company desires to issue and sell to the Investor, and the
Investor desires to purchase from the Company certain securities of the Company,
as more fully described in this Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and the Investor agree as
follows:
ARTICLE
1
Definitions
Section
1.1. Definitions.
In
addition to the terms defined elsewhere in this Agreement, for all purposes
of
this Agreement, the following terms have the meanings indicated in this Section
1.1:
“Action”
means
any action, suit, inquiry, notice of violation, proceeding (including any
partial proceeding such as a deposition) or investigation pending or threatened
in writing against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state, county, local
or
foreign), stock market, stock exchange or trading facility.
“Adjusted
Purchase Price”
has the
meaning set forth in Section 2.2.
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144.
“Board”
means
the
Board of Directors of the Company.
“Business
Day”
means
any day except Saturday, Sunday and any day which is a federal legal holiday
or
a day on which banking institutions in the City of New York are authorized
or
required by law or other governmental action to close.
“Buy-In”
has the
meaning set forth in Section 5.1(c).
“Claim”
has
the
meaning set forth in Section 4.6(c).
“Closing”
means
each closing of the purchase and sale of Shares and a Warrant pursuant to
Article 2.
“Closing
Date”
means
the Initial Closing Date and date on which the Second Closing, if any, occurs
pursuant to Section 2.2 hereof.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $0.001 per share, and any securities
into which such common stock may hereafter be reclassified.
“Common
Stock Equivalents”
means
any securities of the Company or any Subsidiary which entitle the holder thereof
to acquire Common Stock at any time, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder
to
receive, directly or indirectly, Common Stock.
“Company
Counsel”
means
▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP.
“Company
Deliverables”
has the
meaning set forth in Section 2.2(a).
“Company
Stock Options”
has
the
meaning set forth in Section 3.1(g).
“Contingent
Obligations”
has the
meaning set forth in Section 3.1(r).
“Convertible
Securities”
has
the
meaning set forth in Section 3.1(g).
“Cut
Back Shares”
has the
meaning assigned thereto in Section 4.1(a).
“Delaware
Courts”
has the
meaning set forth in Section 7.9.
“Development
Contract” means
a
fully executed contract between the Company and the City of New York, New York
(or any agency thereof) for the development of the 26th
▇▇▇▇
wastewater treatment plant substantially as set forth in the business plan
previously provided by the Company to the Investor.
“Effective
Date”
means
the date that any Registration Statement filed pursuant to Article 4 is first
declared effective by the Commission.
“Effectiveness
Period”
has the
meaning set forth in Section 4.1(b).
“Environmental
Law”
has the
meaning set forth in Section 3.1(aa).
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder.
“ERISA
Affiliate” means
any
trade or business, whether or not incorporated, that together with the Company
would be deemed to be a single employer for purposes of Section 4001 of ERISA
or
Sections 414(b), (c), (m), (n) or (o) of the Internal Revenue Code of 1986,
as
amended.
“Evaluation
Period” has
the
meaning set forth in Section 3.1(r).
“Event”
has the
meaning set forth in Section 4.1(d).
2
“Event
Date”
has the
meaning set forth in Section 4.1(d).
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Exempt
Issuance”
means
the
issuance by the Company (a) to employees, officers, directors of,
and
consultants to, the
Company of shares of Common Stock or options for the purchase of shares of
Common Stock pursuant to stock option or long-term incentive plans approved
by
the Board, (b) of shares of Common Stock upon the exercise of Warrants issued
hereunder, (c) of shares of Common Stock upon conversion of shares of Series
A
Preferred Stock, (d) of shares of Common Stock upon exercise of Prior Warrants
or conversion of Prior Convertible Securities, (e) of securities issued pursuant
to acquisitions, licensing agreements, or
other
strategic transactions, (f) of securities issued in connection with equipment
leases, real
property leases, loans, credit lines, guaranties or similar transactions
approved by the Board,
(g) of
securities issued in connection with join ventures or similar strategic
relationships approved by the Board, (h) of securities in a merger, or (i)
of
securities in a public offering registered under the Securities Act; provided
that in the case of securities issued pursuant clauses (e), (g) and (h), the
purpose of such issuance may not be primarily to obtain cash
financing.
“Filing
Date” means
the
date that is 60 days after the Initial Closing Date.
“Financing
Notice” has
the
meaning set forth in Section 5.5(b).
“First
Closing Unit”
means a
Unit consisting of one Share and a Warrant to purchase one and one-half shares
of Common Stock, issued in combination.
“GAAP”
means
generally accepted accounting principles as in effect from time to time in
the
United States of America.
“Governmental
Authority” has
the
meaning set forth in Section 3.1(e).
“Hazardous
Substance”
has the
meaning set forth in Section 3.1(aa).
“Indebtedness”
has the
meaning set forth in Section 3.1(r).
“Indemnified
Party” has
the
meaning set forth in Section 4.6(c).
“Indemnified
Person”
has the
meaning set forth in Section 4.6(a).
“Indemnifying
Party” has
the
meaning set forth in Section 4.6(c).
“Initial
Closing Date”
means
the Business Day immediately following the date on which all of the conditions
set forth in Sections 6.1 and 6.2 hereof are satisfied, or such other date
as
the parties may agree.
“Initial
Purchase Price” has
the
meaning set forth in Section 2.1.
“Intellectual
Property Rights”
has the
meaning set forth in Section 3.1(o).
“Investor
Deliverables”
has the
meaning set forth in Section 2.2(b).
“Lien”
means
any lien, charge, encumbrance, security interest, right of first refusal or
other restrictions of any kind.
3
“Losses”
has the
meaning set forth in Section 5.7.
“Material
Adverse Effect”
means
any of (i) a material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material and adverse effect
on the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
or (iii) a material impairment of the Company’s ability to perform on a timely
basis its obligations under any Transaction Document.
“NASD
Rules”
has the
meaning set forth in Section 4.3(o).
“OFAC”
has the
meaning set forth in Section 3.1(ee).
“Penalty
Base”
has the
meaning set forth in Section 4.1(d).
“Person”
means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Placement
Agent”
has the
meaning set forth in Section 3.1(s).
“Plan
of Distribution”
has the
meaning set forth in Section 4.2(o).
“Post-Effective
Amendment” means
a
post-effective amendment to the Registration Statement.
“Post-Effective
Amendment Filing Deadline”
means
the seventh Business Day after the Registration Statement ceases to be effective
pursuant to applicable securities laws due to the passage of time or the
occurrence of an event requiring the Company to file a Post-Effective
Amendment.
“Pre-Notice”
has the
meaning set forth in Section 5.5(b).
“Prior
Warrants”
has
the
meaning set forth in Section 3.1(g).
“Proceeding”
means an
action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.
“Prospectus”
has
the
meaning set forth in Section 4.3.
“Proposed
Financing”
has the
meaning set forth in Section 5.5(a).
“Proposed
Financing Notice”
has the
meaning set forth in Section 5.5(b).
“Purchase
Price” means
either the Initial Purchase price or the Adjusted Purchase Price, as the context
indicates.
“Registrable
Securities” means
the
Shares and the Warrant Shares; provided, however, that the Investor shall not
be
required to exercise the Warrants in order to have the Warrant Shares included
in any Registration Statement.
4
“Registration
Period”
means
the period commencing on the date hereof and ending on the date on which all
of
the Registrable Securities may be sold to the public without registration under
the Securities Act in reliance on paragraph (k) of Rule 144.
“Registration
Statement”
means a
registration statement filed on the appropriate Form with, and declared
effective by, the Commission under the Securities Act and covering the resale
by
the Investor of the Registrable Securities.
“Requested
Information”
has the
meaning set forth in Section 4.3(a).
“Required
Effectiveness Date”
means
the earlier of (i) the date that is 150 days after the Initial Closing Date,
or,
in the case of the registration of Cut Back Shares, 120 days after the
Restriction Termination Date or (ii) five Business Days after receipt by the
Company from the Commission of notice of “no review” of the Registration
Statement.
“Restriction
Termination Date”
has the
meaning assigned thereto in Section 4.1(a).
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
“Rule
415 Response Effort”
has the
meaning assigned thereto in Section 4.1(a).
“Second
Closing Unit”
means a
Unit consisting of one Share and a Warrant to purchase one share of Common
Stock, issued in combination.
“SEC
Objection”
has the
meaning assigned thereto in Section 4.1(a).
“SEC
Restrictions”
has the
meaning assigned thereto in Section 4.1(a).
“SEC
Reports”
has the
meaning set forth in Section 3.1(h).
“Securities”
means
the Shares, the Warrant, and the Warrant Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Series
A Preferred Stock”
means
the shares of the preferred stock of the Company, par value $0.01 per share,
that have been designated as “Series A Convertible Preferred
Stock.”
“Shares”
means
the shares of Common Stock issuable to the Investor at the
Closings.
“Subsidiary”
means
any “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X
promulgated by the Commission under the Exchange Act.
“Trading
Day”
means
(i) a day on which the Common Stock is traded on a Trading Market, or (ii)
if
the Common Stock is not listed on a Trading Market, a day on which the Common
Stock is traded in the over-the-counter market, as reported by the OTC Bulletin
Board, or (iii) if the Common Stock is not then
listed or quoted on the OTC Bulletin Board, a
day on
which the Common Stock is quoted in the over-the-counter market as reported
by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding to its functions of reporting prices); provided, that in
the
event that the Common Stock is not listed or quoted as set forth in (i), (ii)
and (iii) hereof, then Trading Day shall mean a Business Day.
5
“Trading
Market”
means
whichever of the New York Stock Exchange, the American Stock Exchange, the
Nasdaq National Market, or the Nasdaq Over-the-Counter Market on which the
Common Stock is listed or traded on the date in question.
“Transfer
Agent”
has the
meaning set forth in Section 5.1(c).
“Transaction
Documents”
means
this Agreement, the Warrant and any other documents or agreements executed
in
connection with the transactions contemplated hereunder.
“Unit”
means
a
First Closing Unit or a Second Closing Unit, as the context
indicates.
“Warrant”
means
any of the Common Stock Purchase Warrants, in the form of Exhibit A,
which
are issuable to the Investor at the Closings.
“Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of the
Warrants.
ARTICLE
2
Purchase
and Sale
Section
2.1. Issuance
of Securities at the Initial Closing.
Upon
the
terms and subject to the conditions set forth in this Agreement, and in
accordance with applicable law, the Company agrees to sell to the Investor,
and
the Investor agrees to purchase from the Company, for the purchase price of
$0.75 per Unit (the “Initial
Purchase Price”),
on the
Initial Closing Date, 6,666,667 First Closing Units, each Unit to consist of
(i)
one Share and (ii) a Warrant to purchase 1.5 shares of Common Stock.
Section
2.2. Issuance
of Securities at the Second Closings.
If but
only if the Development Contract is executed and delivered on or before the
Outside Date, on the fifth Business Day following the filing by the Company
with
the Commission of a Current Report on Form 8-K reporting the execution and
delivery of the Development Contract, the Company will sell to the Investor,
and
the Investor will purchase from the Company, at the purchase price per Unit
determined in accordance with the following sentence (the “Adjusted
Purchase Price”),
9,333,334
Second Closing Units, each Unit to consist of (i) one Share and (ii) a Warrant
to purchase one share of Common Stock. The purchase price per Unit payable
for
the Second Closing Units shall be as set forth below:
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If
the Development Contract is executed and delivered on or
before:
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Adjusted Purchase Price
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60
days after the Initial Closing Date
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$
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0.91072
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90
days after the Initial Closing Date
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$
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0.83036
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120
days after the Initial Closing Date
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$
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0.77679
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More
than 120 days after the Initial Closing Date
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$
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0.75
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6
Section
2.3. Payment
of Purchase Price.
As
consideration for the issuance of the Securities being purchased at each
Closing, the
Investor
shall on the respective Closing Date pay to the Company, by wire transfer or
other form of immediately available funds, an amount equal to applicable
aggregate Purchase Price for the Securities being purchased at such
Closing.
Section
2.4. Delivery
of Securities.
At each
Closing, the Company shall,
against payment by the Investor of the applicable Purchase Price, (i) issue
to
the Investor the Warrants included in the Units being purchased at such Closing
and (ii) execute and deliver to the transfer agent for the Common Stock
irrevocable instructions to issue to the Investor the number of Shares included
in the Units being purchased at such Closing.
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(i)
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The
legal opinion of Company Counsel, in substantially the form of
Exhibit
B
hereto, addressed to the Investor;
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(ii)
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The
Certificate of Incorporation of the Company, together with all amendments
thereto, certified by the Secretary of State of the State of Delaware
as
of a date not more than five Business Days prior to the Closing Date;
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(iii)
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Copies
of each of the following documents, in each case certified by the
Secretary of the Company to be in full force and effect on the Closing
Date:
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(A)
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resolutions
of the board of directors of the Company approving the execution,
delivery
and performance of the Transaction Documents and the transactions
contemplated thereby;
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(B)
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the
By-laws of the Company; and
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(C)
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irrevocable
instructions to the Company’s transfer agent as to the reservation and
issuance of the Warrant Shares; and
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(iv)
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A
good standing certificate of the Company issued by the Secretary
of State
of the State of Delaware dated as of a date no earlier than five
Business
Days prior to the Closing Date.
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ARTICLE
3
Representations
and Warranties
Section
3.1. Representations
and Warranties of the Company.
The
Company hereby makes the following representations and warranties to the
Investor:
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(a)
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Subsidiaries.
The Company has no direct or indirect Subsidiaries other than as
specified
in the SEC Reports. Except as disclosed in the SEC Reports, the Company
owns, directly or indirectly, all of the capital stock of each Subsidiary
free and clear of any and all Liens other than Liens disclosed in
the SEC
Reports, and all the issued and outstanding shares of capital stock
of
each Subsidiary are validly issued and are fully paid, non-assessable
and
free of preemptive and similar
rights.
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7
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(c)
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Authorization;
Enforcement.
The Company has the requisite corporate power and authority to enter
into
and to consummate the transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations thereunder.
The
execution and delivery of each of the Transaction Documents by the
Company
and the consummation by it of the transactions contemplated thereby
have
been duly authorized by all necessary action on the part of the Company
and no further action is required by the Company in connection therewith.
Each Transaction Document has been (or upon delivery will have been)
duly
executed by the Company and, when delivered in accordance with the
terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except
as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or
affecting generally the enforcement of, creditors’ rights and remedies or
by other equitable principles of general
application.
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(d)
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No
Conflicts.
The execution, delivery and performance of the Transaction Documents
by
the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not (i) conflict with or violate
any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents,
or
(ii) conflict with, or constitute a default (or an event that with
notice
or lapse of time or both would become a default) under, or give to
others
any rights of termination, amendment, acceleration or cancellation
(with
or without notice, lapse of time or both) of, or result in the imposition
of any Lien upon any of the material properties or assets of the
Company
or of any Subsidiary pursuant to, any agreement, credit facility,
debt or
other instrument (evidencing a Company or Subsidiary debt or otherwise)
or
other understanding to which the Company or any Subsidiary is a party
or
by which any property or asset of the Company or any Subsidiary is
bound
or affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court
or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or
by which
any property or asset of the Company or a Subsidiary is bound or
affected;
except in the case of each of clauses (ii) and (iii), such as could
not,
individually or in the aggregate, have or reasonably be expected
to result
in a Material Adverse Effect.
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8
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(e)
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Filings,
Consents and Approvals.
The Company is not required to obtain any consent, waiver, authorization
or order of, give any notice to, or make any filing or registration
with,
any court or other federal, state, local or other governmental authority
(a “Governmental
Authority”)
or other Person in connection with the execution, delivery and performance
by the Company of the Transaction Documents and the consummation
of the
transactions contemplated thereby, other than (i) the filing of a
Notice
of Sale of Securities on Form D with the Commission under Regulation
D of
the Securities Act (ii) filings required under applicable state securities
laws, and (iii) the filing with the Commission of one or more Registration
Statements in accordance with the requirements of Article 4 of
this
Agreement,.
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(f)
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Issuance
of the Securities.
The Securities have been duly authorized. Each Share, when issued
and paid
for in accordance with this Agreement, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens. Each Warrant,
when issued and paid for in accordance with this Agreement, will
be duly
and validly issued. The Company has reserved and set aside from its
duly
authorized capital stock a sufficient number of shares of Common
Stock to
satisfy in full the Company’s obligations to issue the Warrant Shares upon
exercise of the Warrants. The Warrants Shares, when issued and paid
for
upon exercise of the Warrants in accordance with their terms, will
be duly
and validly issued, fully paid and nonassessable, free and clear
of all
Liens.
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(g)
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Capitalization.
The authorized capital stock of the Company consists of 150,000,000
shares
of Common Stock and 20,000,000 shares of Preferred Stock, par value
$0.01,
of which 10,000,000 shares have been designed Series A Preferred
Stock and
10,000,000 shares are undesignated. As of the close of business on
the
Business Day immediately prior to the date hereof, (i) 5,306,670
shares of
Series A Preferred Stock were issued and outstanding, all of which
are
validly issued, fully-paid and non-assessable, (ii) 34,062,552 shares
of
Common Stock were issued and outstanding, all of which are validly
issued,
fully-paid and non-assessable, (iii) 83,797 shares of Common Stock
were
held by the Company in Treasury, (iv) 6,516,900 shares of Common
Stock
were reserved for issuance upon exercise of outstanding options granted
to
employees, directors, and consultants of the Company (the
“Company
Stock Options”);
(v) 15,916,616 shares of Common Stock were reserved for issuance
upon
exercise of outstanding warrants to purchase Common Stock (the
“Prior
Warrants”);
(vi) 5,306,670 shares of Common Stock were reserved for issuance
upon
conversion of outstanding shares of Series A Preferred Stock, and
(vii)
10,206,253 shares of Common Stock were reserved for issuance upon
conversion of other convertible notes, debentures or securities
(“Prior
Convertible Securities”).
No
Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except pursuant to (i)
the outstanding shares of Series A Preferred Stock, (ii) the Company
Stock
Options, (iii) the Prior Warrants or (iv) the Prior Convertible
Securities, or as a result of the purchase and sale of the Securities
as
contemplated by this Agreement, there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of
any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right
to
subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company
or any
Subsidiary is or may become bound to issue additional shares of Common
Stock or Common Stock Equivalents. The issue and sale of the
Securities will not obligate the Company to issue shares of Common
Stock
or other securities to any Person (other than the Investor) and will
not
result in a right of any holder of Company securities to adjust the
exercise or conversion price under such securities. No further approval
or
authorization of any stockholder, the Board of Directors of the Company
or
any other Person is required for the issuance and sale of the
Securities. There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s capital stock to
which the Company is a party or, to the knowledge of the Company,
between
or among any of the Company’s
stockholders.
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(i)
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Financial
Statements and Material Changes.
Except as set forth in the SEC Reports (including the financial statements
included therein), (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a
Material
Adverse Effect, (ii) the Company has not incurred any liabilities
or
obligations (contingent or otherwise) other than (A) trade payables,
accrued expenses and other liabilities incurred in the ordinary course
of
business consistent with past practice and (B) liabilities incurred
in the
ordinary course of business not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed
in
filings made with the Commission, (iii) the Company has not altered
its
method of accounting or the identity of its auditors, (iv) the Company
has
not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements
to purchase or redeem any shares of its capital stock, and (v) the
Company
has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option plans.
The
Company does not have pending before the Commission any request for
confidential treatment of information.
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(j)
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Litigation
and Investigations.
There is no Action which (i) adversely affects or challenges the
legality,
validity or enforceability of any of the Transaction Documents or
the
Securities or (ii) except as specifically disclosed in the SEC Reports,
could, if there were an unfavorable decision, individually or in
the
aggregate, have or reasonably be expected to result in a Material
Adverse
Effect. Neither the Company nor any Subsidiary, nor any director
or
officer thereof (in his capacity as such), is or has been the subject
of
any Action involving a claim of violation of or liability under federal
or
state securities laws or a claim of breach of fiduciary duty, except
as
specifically disclosed in the SEC Reports. There has not been, and
to the
knowledge of the Company, there is not pending any investigation
by the
Commission involving the Company or any current or former director
or
officer of the Company (in his or her capacity as such). The Commission
has not issued any stop order or other order suspending the effectiveness
of any registration statement filed by the Company or any Subsidiary
under
the Exchange Act or the Securities Act. There are no outstanding
comments
by the Staff of the Commission on any filing by the Company or any
Subsidiary under the Exchange Act or the Securities
Act.
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10
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(k)
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Labor
Relations.
No
material labor dispute exists or, to the knowledge of the Company,
is
imminent with respect to any of the employees of the
Company.
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(l)
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Compliance.
Neither the Company nor any Subsidiary (i) is in default under or
in
violation of (and no event has occurred that has not been waived
that,
with notice or lapse of time or both, would result in a default by
the
Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it
is in
violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or
any of
its properties is bound (whether or not such default or violation
has been
waived), (ii) is in violation of any order of any court, arbitrator
or
governmental body, or (iii) is or has been in violation of any statute,
rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to
taxes,
environmental protection, occupational health and safety, product
quality
and safety and employment and labor matters, except in each case
as could
not, individually or in the aggregate, have or reasonably be expected
to
result in a Material Adverse
Effect.
|
|
(m)
|
Regulatory
Permits.
The Company and the Subsidiaries possess all certificates, authorizations
and permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective businesses
as
described in the SEC Reports, except where the failure to possess
such
permits could not, individually or in the aggregate, have or reasonably
be
expected to result in a Material Adverse Effect, and neither the
Company
nor any Subsidiary has received any notice of proceedings relating
to the
revocation or modification of any such
permits.
|
|
(n)
|
Title
to Assets.
The Company and the Subsidiaries have good and marketable title in
fee
simple to all real property owned by them that is material to their
respective businesses and good and marketable title in all personal
property owned by them that is material to their respective businesses,
in
each case free and clear of all Liens, except for Liens that do not
materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property
by
the Company and the Subsidiaries. All real property and facilities
held
under lease by the Company and the Subsidiaries are held by them
under
valid, subsisting and enforceable leases of which the Company and
the
Subsidiaries are in material compliance, except as could not, individually
or in the aggregate, have or reasonably be expected to result in
a
Material Adverse Effect.
|
|
(o)
|
Patents
and Trademarks.
The Company and the Subsidiaries have, or have rights to use, all
patents,
patent applications, trademarks, trademark applications, service
marks,
trade names, copyrights, licenses and other similar rights that are
necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure
to so
have could, individually or in the aggregate, have or reasonably
be
expected to result in a Material Adverse Effect (collectively,
the “Intellectual
Property Rights”).
No claims or Actions have been made or filed by any Person against
the
Company to the effect that Intellectual Property Rights used by the
Company or any Subsidiary violate or infringe upon the rights of
such
claimant. To the knowledge of the Company, after commercially reasonable
investigation, all of the Intellectual Property Rights are enforceable
and
there is no existing infringement by another Person of any of the
Intellectual Property Rights.
|
11
|
(p)
|
Insurance.
The Company and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts
as are prudent and customary in the businesses in which the Company
and
the Subsidiaries are engaged. The Company has no reason to believe
that it
will not be able to renew its and the Subsidiaries’ existing insurance
coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business
on
terms consistent with the market for the Company’s and such Subsidiaries’
respective lines of business.
|
|
(q)
|
Transactions
With Affiliates and Employees.
Except as set forth in the SEC Reports, none of the officers or directors
of the Company and, to the knowledge of the Company, none of the
employees
of the Company is a party to any transaction with the Company or
any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing
for the
furnishing of services to or by, providing for rental of real or
personal
property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company,
any entity in which any officer, director, or any such employee has
a
substantial interest or is an officer, director, trustee or
partner.
|
|
(r)
|
▇▇▇▇▇▇▇▇-▇▇▇▇▇;
Internal Accounting Controls.
The Company is in material compliance with all provisions of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (including the rules and regulations of
the
Commission adopted thereunder) which are applicable to it as of the
Closing Date. The Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures as of the filing
date of the most recently filed periodic report under the Exchange
Act
(such date, the “Evaluation
Date”).
The Company presented in its most recently filed periodic report
under the
Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on
their
evaluations as of the Evaluation Date. Since the Evaluation Date,
there have been no significant changes in the Company’s internal controls
(as such term is defined in Item 307(b) of Regulation S-K under the
Exchange Act) or, to the Company’s knowledge, in other factors that could
significantly affect the Company’s internal controls. The
Company maintains a standard system of accounting established and
administered in accordance with
GAAP.
|
|
Certain
Fees.
No
brokerage or finder’s fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement except to ▇▇▇▇▇▇▇▇ Curhan
Ford
& Co. (the “Placement
Agent”).
The Investor shall have no obligation with respect to any fees or
with
respect to any claims (other than such fees or commissions owed by
the
Investor pursuant to written agreements executed by the Investor
which
fees or commissions shall be the sole responsibility of the Investor)
made
by or on behalf of the Placement Agent or any other Persons for fees
of a
type contemplated in this Section that may be due in connection with
the
transactions contemplated by this
Agreement.
|
12
|
(t)
|
Certain
Registration Matters.
Assuming the accuracy of the Investor’s representations and warranties set
forth in Section 3.2(b)-(e), no registration under the Securities
Act is
required for the offer and sale of the Securities by the Company
to the
Investor under the Transaction Documents.
|
|
Investment
Company.
The Company is not, and is not an Affiliate of, and immediately following
the Closing will not have become, an “investment company” within the
meaning of the Investment Company Act of 1940, as
amended.
|
|
(v)
|
No
Additional Agreements.
The Company does not have any agreement or understanding with the
Investor
with respect to the transactions contemplated by the Transaction
Documents
other than as specified in the Transaction
Documents.
|
|
(w)
|
Full
Disclosure.
All
disclosures provided to the Investor regarding the Company, its business
and the transactions contemplated hereby, furnished by or on behalf
of the
Company (including the Company’s representations and warranties set forth
in this Agreement) are true and correct in all material respects
and do
not contain any untrue statement of a material fact or omit to state
any
material fact necessary in order to make the statements made therein,
in
light of the circumstances under which they were made, not
misleading.
|
|
(x)
|
Environmental
Matters.
To
the Company’s knowledge, after commercially reasonable investigation: (i)
the Company and its Subsidiaries have complied with all applicable
Environmental Laws; (ii) the properties currently owned or operated
by
Company (including soils, groundwater, surface water, buildings or
other
structures) are not contaminated with any Hazardous Substances; (iii)
the
properties formerly owned or operated by Company or its Subsidiaries
were
not contaminated with Hazardous Substances during the period of ownership
or operation by Company and its Subsidiaries; (iv) Company and its
Subsidiaries are not subject to liability for any Hazardous Substance
disposal or contamination on any third party property; (v) Company
and its
Subsidiaries have not been associated with any release or threat
of
release of any Hazardous Substance; (vi) Company and its Subsidiaries
have
not received any notice, demand, letter, claim or request for information
alleging that Company and its Subsidiaries may be in violation of
or
liable under any Environmental Law; and (vii) Company and its Subsidiaries
are not subject to any orders, decrees, injunctions or other arrangements
with any Governmental Authority or subject to any indemnity or other
agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous
Substances.
|
As
used
in this Agreement, the term “Environmental
Law”
means any federal, state, local or foreign law, regulation, order, decree,
permit, authorization, opinion, common law or agency requirement relating to:
(A) the protection, investigation or restoration of the environment, health
and
safety, or natural resources; (B) the handling, use, presence, disposal, release
or threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property.
As
used
in this Agreement, the term “Hazardous
Substance”
means any substance that is: (i) listed, classified or regulated pursuant to
any
Environmental Law; (ii) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (iii) any other substance which is the
subject of regulatory action by any Governmental Authority pursuant to any
Environmental Law.
13
| (y) |
Taxes.
The Company and its Subsidiaries have filed all necessary federal,
state
and foreign income and franchise tax returns when due (or obtained
appropriate extensions for filing) and have paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency
which has been or might be asserted or threatened against it or any
Subsidiary which would have a Material Adverse
Effect.
|
| (z) |
Private
Offering.
Assuming the correctness of the representations and warranties of
the
Investors set forth in this Agreement, the offer and sale of the
Convertible Notes and the Warrants hereunder are, and upon (i) exercise
of
the Warrants, the issuance of the Warrant Shares and (ii) upon conversion
of the Convertible Notes, the issuance of the Conversion Shares will
be,
exempt from registration under the Securities Act. The Company has
offered
the Convertible Notes and the Warrants for sale only to the
Investor.
|
| (aa) |
ERISA.
Neither the Company nor any ERISA Affiliate maintains, contributes
to or
has any liability or contingent liability with respect to any employee
benefit plan subject to ERISA.
|
| (bb) |
Foreign
Assets Control Regulations and Anti-Money
Laundering.
|
(i)
OFAC.
Neither
the issuance of the Convertible Note and Warrant to the Investor, nor the use
of
the respective proceeds thereof, shall cause the Investor to violate the U.S.
Bank Secrecy Act, as amended, and any applicable regulations thereunder or
any
of the sanctions programs administered by the U.S. Department of the Treasury’s
Office of Foreign Assets Control (“OFAC”)
of the United States Department of Treasury, any regulations promulgated
thereunder by OFAC or under any affiliated or successor governmental or
quasi-governmental office, bureau or agency and any enabling legislation or
executive order relating thereto. Without limiting the foregoing, neither the
Company nor any Subsidiary (i) is a person whose property or interests in
property are blocked or subject to blocking pursuant to Section 1 of
Executive Order 13224 of September 23, 200l Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism
(66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions
prohibited by Section 2 of such executive order, or is otherwise associated
with any such person in any manner violative of Section 2, or (iii) is a
person on the list of Specially Designated Nationals and Blocked Persons or
subject to the limitations or prohibitions under any other OFAC regulation
or
executive order.
(ii)
Patriot
Act.
The
Company and each of its Subsidiaries are in compliance, in all material
respects, with the USA PATRIOT Act. No part of the proceeds of the sale of
the
Shares and the Warrants hereunder will be used, directly or indirectly, for
any
payments to any governmental official or employee, political party, official
of
a political party, candidate for political office, or anyone else acting in
an
official capacity, in order to obtain, retain or direct business or obtain
any
improper advantage, in violation of the United States Foreign Corrupt Practices
Act of 1977, as amended.
14
Section
3.2. Representations
and Warranties of the Investor.
The
Investor hereby represents and warrants to the Company as follows:
|
(a)
|
Authority.
This Agreement has been duly executed by the Investor, and when delivered
by the Investor in accordance with terms hereof, will constitute
the valid
and legally binding obligation of the Investor, enforceable against
him in
accordance with its terms, except as such enforceability may be limited
by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally the enforcement
of,
creditors’ rights and remedies or by other equitable principles of general
application.
|
|
(b)
|
Investment
Intent.
The Investor is acquiring the Securities as principal for its own
account
for investment purposes only and not with a view to or for distributing
or
reselling such Securities or any part thereof, without prejudice,
however,
to the Investor’s right at all times to sell or otherwise dispose of all
or any part of such Securities in compliance with applicable federal
and
state securities laws. The Investor does not have any agreement or
understanding, directly or indirectly, with any Person to distribute
any
of the Securities.
|
|
(c)
|
Investor
Status.
The Investor is an “accredited investor” as defined in Rule 501(a) under
the Securities Act and a “qualified institutional buyer” as defined in
Rule 144A under the Securities Act. The Investor is not a registered
broker-dealer under Section 15 of the Exchange
Act.
|
|
(d)
|
Access
to Information.
The Investor acknowledges that he has reviewed the SEC Reports and
has
been afforded (i) the opportunity to ask such questions as he has deemed
necessary of, and to receive answers from, representatives of the
Company
concerning the terms and conditions of the offering of the Securities
and
the merits and risks of investing in the Securities; (ii) access
to
information about the Company and the Subsidiaries and their respective
financial condition, results of operations, business, properties,
management and prospects sufficient to enable him to evaluate his
investment; and (iii) the opportunity to obtain such additional
information that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment
decision with respect to the
investment.
|
|
(e)
|
General
Solicitation.
The
Investor is not purchasing the Securities as a result of any
advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media
or
broadcast over television or radio or presented at any seminar or
any
other general solicitation or general
advertisement.
|
|
(f)
|
Disclosure.
The Investor acknowledges and agrees that the Company neither makes
nor
has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set
forth
in Section
3.1.
|
15
ARTICLE
4
Registration
Rights
Section
4.1. Shelf
Registration.
(a)
As
promptly as possible, and in any event on or prior to the Filing Date, the
Company shall prepare and file with the Commission a “shelf” Registration
Statement covering the resale of all Registrable Securities for an offering
to
be made on a continuous basis pursuant to Rule 415. The Registration Statement
shall be on a Form S-3; in the event Form S-3 is not available for the
registration of the resale of Registrable Securities hereunder, the Company
shall (i) register the resale of the Registrable Securities on another
appropriate form in accordance herewith and (ii) attempt to register the
Registrable Securities on Form S-3 as soon as such form is available, provided
that the Company shall maintain the effectiveness of the Registration Statements
then in effect until such time as a Registration Statement on Form S-3 covering
the Registrable Securities has been declared effective by the Commission. If
at
any time the staff of the Commission takes the position that the offering of
some or all of the Registrable Securities in a Registration Statement is not
eligible to be made on a delayed or continuous basis under the provisions of
Rule 415 under the Securities Act or requires any Investor to be named as an
“underwriter” (an “SEC
Objection”),
the Company shall promptly notify the Investor of such SEC Objection and if
the
Investor shall request, the Company shall use its commercially reasonable
efforts to persuade the staff of the Commission that the offering contemplated
by the Registration Statement is a valid secondary offering and not an offering
“by or on behalf of the issuer” as defined in Rule 415 and that the Investor is
not an “underwriter” (a “Rule
415 Response Effort”).
The Investor shall have the right to participate or have its counsel participate
in any meetings or discussions with the staff of the Commission regarding such
position and to comment or have its counsel comment on any written submission
made to the staff of the Commission with respect thereto, and to have such
comments relayed to the staff of the Commission with the consent of the Company,
not to be unreasonably withheld. No such written submission shall be made to
the
staff of the Commission to which the Investor’s counsel reasonably objects. In
the event that, despite the Company’s commercially reasonable efforts and
compliance with the terms of this Section 4.1(a), the staff of the Commission
refuses to alter its position, the Company shall (i) remove from the
Registration Statement such portion of the Registrable Securities (the
“Cut
Back Shares”)
and/or (ii) agree to such restrictions and limitations on the registration
and
resale of the Registrable Securities as the staff of the Commission may require
to assure the Company’s compliance with the requirements of Rule 415; provided,
however, that the Company shall not agree to name any Investor as an
“underwriter” in such Registration Statement without the prior written consent
of such Investor (collectively, the “SEC
Restrictions”).
Notwithstanding any other provision of this Agreement to the contrary, no
liquidated damages shall accrue pursuant to Section 4.1(d) (i) during the
pendency of a Rule 415 Response Effort or (ii) on or as to any Cut Back Shares
until such time as the Company is able, using commercially reasonable efforts,
to effect the filing of an additional Registration Statement with respect to
the
Cut Back Shares in accordance with any SEC Restrictions (such date, the
“Restriction
Termination Date”).
From and after the Restriction Termination Date, all of the provisions of this
Article 4 (including the liquidated damages provisions) shall again be
applicable to the Cut Back Shares; provided, however, that for such purposes,
references to the Filing Date shall be deemed to be the date that is 30 days
after the Restriction Termination Date.
(b)
The
Company shall use its best efforts to cause each Registration Statement filed
hereunder to be declared effective by the Commission as promptly as possible
after the filing thereof, but in any event prior to the Required Effectiveness
Date, and shall use its best efforts to keep the Registration Statement
continuously effective under the Securities Act until the earlier of (i) the
fifth anniversary of the Effective Date, (ii) the date when all Registrable
Securities covered by such Registration Statement have been sold publicly,
or
(iii) the date on which the Registrable Securities are eligible
for sale without volume limitation pursuant to subparagraph (k) of Rule 144
(the
“Effectiveness
Period”).
The
Company shall notify the Investor in writing promptly (and in any event within
one Business Day) after receiving notification from the Commission that the
Registration Statement has been declared effective.
16
(c)
As
promptly as possible, and in any event no later than the Post-Effective
Amendment Filing Deadline, the Company shall prepare and file with the
Commission a Post-Effective Amendment. The Company shall use its best efforts
to
cause the Post-Effective Amendment to be declared effective by the Commission
as
promptly as possible after the filing thereof. The Company shall notify the
investor in writing promptly (and in any event within one Business Day) after
receiving notification from the Commission that the Post-Effective Amendment
has
been declared effective.
(d)
If:
(i)
any Registration Statement is not filed on or prior to the Filing Date (or
the
Restriction Termination Date, as applicable) or a Post-Effective Amendment
is
not filed on or prior to the Post-Effective Amendment Filing Deadline, or (ii)
the Company fails to file with the Commission a request for acceleration of
effectiveness in accordance with Rule 461 promulgated under the Securities
Act,
within five Business Days after the date that the Company is notified (orally
or
in writing, whichever is earlier) by the Commission that a Registration
Statement will not be “reviewed,” or will not be subject to further review, or
(iii) the Company fails to respond to any comments made by the Commission within
15 Business Days after the receipt of such comments, or (iv) a Registration
Statement filed hereunder is not declared effective by the Commission by the
Required Effectiveness Date (which date shall be extended by 30 days in the
case
of a comment regarding Rule 415), or a Post-Effective Amendment is not declared
effective on or prior to the fifteenth Business Day following the Post-Effective
Amendment Filing Deadline, or (v) after a Registration Statement is filed with
and declared effective by the Commission, such Registration Statement ceases
to
be effective as to all Registrable Securities to which it is required to relate
at any time prior to the expiration of the Effectiveness Period for a period
of
more than 60 days without being succeeded by an amendment to such Registration
Statement or by a subsequent Registration Statement filed with and declared
effective by the Commission, or (vi) an amendment to a Registration Statement
is
not filed by the Company with the Commission within 15 Business Days after
the
Commission’s having notified the Company that such amendment is required in
order for such Registration Statement to be declared effective (any such failure
or breach being referred to as an “Event”
and the
date on which such Event occurs being referred to as “Event
Date”),
then:
(x) on each such Event Date the Company shall pay to the Investor an amount
in
cash, as liquidated damages and not as a penalty, equal to 1% of the aggregate
Purchase Price paid by the Investor pursuant to this Agreement for the
Registrable Securities covered by such Registration Statement (the “Penalty
Base”);
and
(y) on the same day of each successive month following such Event Date (so
long
as the applicable Event shall not have been cured by such date) until the
applicable Event is cured, the Company shall pay to the Investor an amount
in
cash, as liquidated damages and not as a penalty, equal to 1% of the Penalty
Base. Such payments shall be the Investor’s sole and exclusive remedy for such
Events. If the Company fails to pay any liquidated damages pursuant to this
Section in full within seven Business Days after the date payable, the Company
will pay interest thereon at a rate of 18% per annum (or such lesser maximum
amount that is permitted to be paid by applicable law) to the Investor, accruing
daily from the date such liquidated damages are due until such amounts, plus
all
such interest thereon, are paid in full.
(e)
The
Company shall not, prior to the Effective Date of the Registration Statement,
prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities
Act
of any of its equity securities.
(f)
If
the Company issues to the Investor any Common Stock pursuant to the Transaction
Documents that is not included in the initial Registration Statement, then
the
Company shall file an additional Registration Statement covering such number
of
shares of Common Stock on or prior to the Filing Date and shall use it best
efforts, but in no event later than the Required Effectiveness Date, to cause
such additional Registration Statement to be declared effective by the
Commission.
17
Section
4.2. Registration
Process.
In
connection with the registration of the Registrable
Securities pursuant to Section 4.1, the Company shall:
(a)
Prepare
and file
with the
Commission the
Registration Statement
and such
amendments (including post-effective amendments) to the Registration Statement
and supplements to the prospectus included therein (a
“Prospectus”)
as the
Company may deem necessary or appropriate and take all lawful action such that
the Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state
a
material fact required to be stated therein or necessary to make the statements
therein, not misleading and that the Prospectus forming part of the Registration
Statement, and any amendment or supplement thereto, does not at any time during
the Registration
Period include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.;
(b)
Comply
with the provisions of the Securities Act with respect to the Registrable
Securities covered by the Registration Statement until the earlier of (i) such
time as all of such Registrable Securities have been disposed of in accordance
with the intended methods of disposition by the Investor as set forth in the
Prospectus forming part of the Registration Statement or (ii) the date on which
the Registration Statement is withdrawn;
(c)
Prior
to
the filing with the Commission of the
Registration Statement (including any amendments thereto) and the distribution
or delivery of any Prospectus (including any supplements thereto), provide
draft
copies thereof to the Investor and reflect in such documents all such comments
as the Investor (and its counsel) reasonably may propose and furnish to the
Investor and its legal counsel identified to the Company (i) promptly after
the same is prepared and publicly distributed, filed with the Commission, or
received by the Company, one copy of the Registration Statement, each
Prospectus, and each amendment or supplement thereto, and (ii) such number
of copies of the Prospectus and all amendments and supplements thereto and
such
other documents, as the Investor may reasonably request in order to facilitate
the disposition of the Registrable
Securities;
(d)
(i) register
or qualify the Registrable Securities covered by the Registration Statement
under such securities or “blue sky” laws of such jurisdictions as the Investors
reasonably
request, (ii) prepare and file in such jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations
and
qualifications as may be necessary to maintain the effectiveness thereof at
all
times during the Registration Period, (iii) take all such other lawful
actions as may be necessary to maintain such registrations and qualifications
in
effect at all times during the Registration Period, and (iv) take all such
other lawful actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided,
however,
that the
Company shall not be required in connection therewith or as a condition thereto
to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify, (B) subject itself to general taxation in
any such jurisdiction or (C) file a general consent to service of process
in any such jurisdiction;
18
(e)
As
promptly as practicable after becoming aware of such event, notify the Investor
of the occurrence of any event, as a result of which the Prospectus included
in
the Registration Statement, as then in effect, includes an untrue statement
of a
material fact or omits to state a material fact required to be stated therein
or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and promptly prepare an amendment to
the
Registration Statement and supplement to the Prospectus to correct such untrue
statement or omission, and deliver a number of copies of such supplement and
amendment to each Investor as such Investor may reasonably request;
(f)
As
promptly as practicable after becoming aware of such event, notify the Investor
(or, in the event of an underwritten offering, the managing underwriters) of
the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement and take all lawful action to effect
the withdrawal, rescission
or
removal of such stop order or other suspension;
(g)
Take
all
such other lawful actions reasonably necessary to expedite and facilitate the
disposition by the Investor of his Registrable Securities in accordance with
the
intended methods therefor provided in the Prospectus which are customary under
the circumstances;
(h)
Make
generally available to its security holders as soon as practicable, but in
any
event not later than 18
months
after the Effective Date of the Registration Statement, an earnings
statement of the Company and its subsidiaries complying with Section 11(a)
of the Securities Act and the rules and regulations of the Commission
thereunder;
(i)
In
the
event of an underwritten offering, promptly include or incorporate in a
Prospectus supplement or post-effective amendment to the Registration Statement
such information as the underwriters reasonably agree should be included therein
and to which the Company does not reasonably object and make all required
filings of such Prospectus supplement or post-effective amendment as soon as
practicable after it is notified of the matters to be included or incorporated
in such Prospectus supplement or post-effective amendment;
(j)
Make
reasonably available for inspection by the Investor, any underwriter
participating in any disposition pursuant to the Registration Statement, and
any
attorney, accountant or other agent retained by such Investors or any such
underwriter all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
Company’s officers, directors and employees to supply all information reasonably
requested by the Investor or any such underwriter, attorney, accountant or
agent
in connection with the Registration Statement, in each case, as is customary
for
similar due diligence examinations; provided,
however,
that all
records, information and documents that are designated in writing by the
Company, in good faith, as confidential, proprietary or containing any nonpublic
information shall be kept confidential by such Investors and any such
underwriter, attorney, accountant or agent (pursuant to an appropriate
confidentiality agreement in the case of any such holder or agent), unless
such
disclosure is made pursuant to judicial process in a court proceeding (after
first giving the Company an opportunity promptly to seek a protective order
or
otherwise limit the scope of the information sought to be disclosed) or is
required by law, or such records, information or documents become available
to
the public generally or through a third party not in violation of an
accompanying obligation of confidentiality; and provided,
further,
that, if
the foregoing inspection and information gathering would otherwise disrupt
the
Company’s conduct of its business, such inspection and information gathering
shall, to the maximum extent possible, be coordinated on behalf of the Investors
and the other parties entitled thereto by one firm of counsel designated
by and
on behalf of the majority in interest of Investors and other
parties;
19
(k)
In
connection with any offering,
make such representations and warranties to the Investor and to the underwriters
if an underwritten offering,
in
form, substance and scope as are customarily made by a company to underwriters
in secondary underwritten offerings;
(l)
In
connection with any underwritten offering, deliver such documents and
certificates as may be reasonably required by the underwriters;
(m)
Cooperate
with the Investor to facilitate the timely preparation and delivery of
certificates representing Registrable
Securities
to be
sold pursuant to the Registration Statement, which certificates shall, if
required under the terms of this Agreement, be free of all restrictive legends,
and to enable such Registrable
Securities
to be in
such denominations and registered in such names as any Investor may request
and
maintain a transfer agent for the Common Stock;
(n)
Use
its
commercially reasonable efforts to cause all Registrable
Securities
covered
by the Registration Statement to be listed or qualified for trading on the
principal Trading Market, if any, on which the Common Stock is traded or listed
on the Effective Date of the Registration Statement; and
(o)
Include
in each Prospectus and Registration the Plan of Distribution attached hereto
as
Exhibit
C
(the
“Plan
of Distribution”),
unless and to the extent that such Plan of Distribution requires modification
due to inaccuracy or due to a change in the Commission’s rules and regulations
under the Securities Act.
Section
4.3. Obligations
and Acknowledgements of the Investor.
In
connection with the registration of the Registrable
Securities, the Investor shall have the following obligations and hereby make
the following acknowledgements:
(a)
It
shall
be a condition precedent to the obligations of the Company to include
the
Registrable Securities in
the
Registration Statement
that the
Investor (i) shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and
(ii) shall execute such documents in connection with such registration as
the Company may reasonably request. At least five Business Days prior to the
first anticipated filing date of a Registration Statement, the Company shall
notify the Investor of the information the Company requires from the Investor
(the “Requested
Information”)
if the
Investor elects to have any of its Registrable Securities included in the
Registration Statement. If at least two Business Days prior to the anticipated
filing date the Company has not received the Requested Information from the
Investor, then the Company may file the Registration Statement without including
any Registrable Securities of the Investor and the Company shall have no further
obligations under this Article 4 to the Investor
after
such Registration Statement has been declared effective. If the Investor
notifies the Company and provides the Company the information required hereby
prior to the time the Registration Statement is declared effective, the Company
will file an amendment to the Registration Statement that includes the
Registrable Securities of the Investor;
provided,
however,
that the
Company shall not be required to file such amendment to the Registration
Statement at any time less than 5 Business Days prior to the Effectiveness
Date.
20
(b)
The
Investor agrees to cooperate with the Company in connection with the preparation
and filing of a Registration Statement hereunder, unless the Investor has
notified the Company in writing of its election to exclude all of its
Registrable Securities from such Registration Statement;
(c)
The
Investor agrees that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in Section 4.2(e) or 4.2(f),
the Investor shall immediately discontinue its disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until the Investor’s receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 4.2(e) and, if so directed by
the Company, the Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in the Investor’s possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice;
and
(d)
The
Investor acknowledges that it may be deemed to be a statutory underwriter within
the meaning of the Securities Act with respect to the Registrable Securities
being registered for resale by it, and if the Investor includes Registrable
Securities for offer and sale within a Registration Statement the Investor
hereby consents to the inclusion in such Registration Statement of a disclosure
to such effect.
Section
4.4. Expenses
of Registration.
All
expenses (other than underwriting discounts and commissions and the fees an
expenses of the Investor’s counsel) incurred in connection with registrations,
filings or qualifications pursuant to this Article 4, including, without
limitation, all registration, listing, and qualifications fees, printing and
engraving fees, accounting fees, and the fees and disbursements of counsel
for
the Company, shall be borne by the Company.
Section
4.5 Accountant’s
Letter.
If
the
Investor proposes to engage in an underwritten offering of any Registrable
Shares, the Company shall deliver to the Investor, at the Company’s expense, a
letter dated as of the effective date of each Registration Statement or
Post-Effective Amendment thereto, from the independent public accountants
retained by the Company, addressed to the underwriters and to the Investor,
in
form and substance as is customarily given in an underwritten public offering,
provided that the Investor has made such representations and furnished such
undertakings as the independent public accountants may reasonably
require;
Section
4.6. Indemnification
and Contribution
(a)
Indemnification
by the Company.
The
Company shall indemnify and hold harmless the Investor and each underwriter,
if
any, which facilitates the disposition of Registrable Securities, and each
of
their respective officers and directors and each Person who controls such
underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (each such Person being sometimes
hereinafter referred to as an “Indemnified
Person”)
from
and against any losses, claims, damages or liabilities, joint or several, to
which such Indemnified Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
or
an omission or alleged omission to state therein a material fact required to
be
stated therein or necessary to make the statements therein, not misleading,
or
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided,
however, that
the
Company shall not be liable to any such Indemnified Person in any such case
to
the extent that any such loss, claim, damage or liability arises out of or
is
based upon (i) an untrue statement or alleged untrue statement made in, or
an omission or alleged omission from, such Registration Statement or Prospectus
in reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the
case of the occurrence of an event of the type specified in Section 4.3(e),
the use by the Indemnified Person of an outdated or defective Prospectus after
the Company has provided to such Indemnified Person an updated Prospectus
correcting the untrue statement or alleged untrue statement or omission or
alleged omission giving rise to such loss, claim, damage or
liability.
21
(b)
Indemnification
by the Investor and Underwriters.
The
Investor agrees, as
a
consequence of the inclusion of any of its Registrable Securities in a
Registration Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, severally
and not jointly, as
a
consequence of facilitating such disposition of Registrable Securities to
(i) indemnify and hold harmless the Company, its directors (including any
person who, with his or her consent, is named in the Registration Statement
as a
director nominee of the Company), its officers who sign any Registration
Statement and each Person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act
or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement
or
Prospectus or arise out of or are based upon the omission or alleged omission
to
state therein a material fact required to be stated therein or necessary to
make
the statements therein (in light of the circumstances under which they were
made, in the case of the Prospectus), not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by the Investor
or
underwriter expressly for use therein,
and
(ii) reimburse the Company for any legal or other expenses incurred by the
Company in connection with investigating or defending any such action or claim
as such expenses are incurred;
provided,
however,
that the
Investor shall not be liable under this Section 4.5(b) for any amount in
excess of the net proceeds paid to the Investor in respect of Registrable
Securities sold by it.
(c)
Notice
of Claims, etc.
Promptly
after receipt by a Person seeking indemnification pursuant to this
Section 4.5 (an “Indemnified
Party”)
of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a “Claim”),
the
Indemnified Party promptly shall notify the Person against whom indemnification
pursuant to this Section 4.5 is being sought (the“Indemnifying
Party”)
of the
commencement thereof; but the omission to so notify the Indemnifying Party
shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of
any
Claim by the Indemnifying Party, the Indemnified Party shall have the right
to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (i) the Indemnifying Party shall have agreed to pay such fees,
costs and expenses, (ii) the Indemnified Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available
to
the Indemnifying Party, or (iii) the Indemnifying Party shall have failed
to employ legal counsel reasonably satisfactory to the Indemnified Party within
a reasonable period of time after notice of the commencement of such Claim.
If
the Indemnified Party employs separate legal counsel in circumstances other
than
as described in the preceding sentence, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than
one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior written consent
of
the Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that
does
not include an unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment
or
contain any admission of wrongdoing.
22
(d)
Contribution.
If the
indemnification provided for in this Section 4.5 is unavailable to or
insufficient to hold harmless an Indemnified Party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages
or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party and the Indemnified
Party in connection with the statements or omissions or
alleged statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Party shall be determined
by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
relates to information supplied by such Indemnifying Party or by such
Indemnified Party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 4.5(d) were determined by pro rata allocation
(even if the Investors or any underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the
equitable considerations referred to in this Section 4.5(d). The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above shall
be deemed to include any legal or other fees or expenses reasonably incurred
by
such Indemnified Party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e)
Limitation
on Investor’s and Underwriters’ Obligations.
Notwithstanding any other provision of this Section 4.5, in no event shall
(i) the Investor have
any
liability under
this Section 4.5 for any amounts in excess of the dollar amount of the
proceeds actually
received
by the Investor from the sale of Registrable Securities (after deducting any
fees, discounts and commissions applicable thereto) pursuant to any Registration
Statement under which such Registrable Securities are
registered under the Securities Act and (ii) any underwriter be required to
undertake liability to any Person hereunder for any amounts in excess of the
aggregate discount, commission or other compensation payable to such underwriter
with respect to the Registrable Securities underwritten by it and distributed
pursuant to the Registration Statement.
(f)
Other
Liabilities.
The
obligations of the Company under this Section 4.5 shall be in addition to
any liability which the Company may otherwise have to any Indemnified Person
and
the obligations of any Indemnified Person under this Section 4.5 shall be
in addition to any liability which such Indemnified Person may otherwise have
to
the Company. The remedies provided in this Section 4.5 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to
an
indemnified party at law or in equity.
23
Section
4.6. Rule
144.
With a
view to making available to the Investor the benefits of Rule 144, the
Company agrees to use its best efforts to:
(i)
comply
with the provisions of paragraph (c)(1) of Rule 144; and
(ii)
file
with
the Commission in a timely manner all reports and other documents required
to be
filed by the Company pursuant to Section 13 or 15(d) under the Exchange
Act; and, if at any time it is not required to file such reports but in the
past
had been required to or did file such reports, it will, upon the request of
any
Investor, make available other information as required by, and so long as
necessary to permit sales of, its Registrable Securities pursuant to
Rule 144.
Section 4.7.
Common
Stock Issued Upon Stock Split, etc.
The
provisions of this Article 4 shall apply to any shares of Common Stock or
any other securities issued as a dividend or distribution in respect of the
Shares or the Warrant Shares.
ARTICLE
5
Other
Agreements of the Parties
Section
5.1. Certificates;
Legends.
(a)
The
Securities may only be transferred in compliance with state and federal
securities laws. In connection with any transfer of the Securities other than
(i) pursuant to an effective registration statement, (ii) to the Company, or
(iii) to an Affiliate of the Investor, the Company may require the transferor
thereof
to
provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under
the
Securities Act. In the event of a private transfer of the Securities, the
transferee shall be required to execute a counterpart to this Agreement,
agreeing to be bound by (and shall have the benefits of) the terms hereof other
than those set forth in Article 2 hereof, and such transferee shall be deemed
to
be an “Investor” for purposes of this Agreement.
(b)
The
certificates representing the Shares and the Warrants to be delivered at the
Closings and the certificates evidencing the Warrant Shares to be delivered
upon
exercise of the Warrants will contain appropriate legends referring to
restrictions on transfer relating to the registration requirements of the
Securities Act and applicable state securities laws.
24
(c) In
connection with any sale or disposition of the Securities by the Investor
pursuant to Rule 144 or pursuant to any other exemption under the Securities
Act
such that the purchaser acquires freely tradable shares and upon compliance
by
the Investor with the requirements of this Agreement, the Company shall, or,
in
the case of Common Stock, shall cause the transfer agent for the Common Stock
(the “Transfer
Agent”)
to, issue replacement certificates representing the Securities sold or disposed
of without restrictive legends. Upon the earlier of (i) registration of any
Securities for resale pursuant Article 4 or (ii) Rule 144(k) becoming available
with respect to any Securities, the Company shall (A) deliver to the Transfer
Agent irrevocable instructions that the Transfer Agent shall reissue a
certificate representing such Securities without legends upon receipt by such
Transfer Agent of the legended certificates, together with either (1) a
customary representation by the Investor that Rule 144(k) applies to the shares
of Common Stock represented thereby or (2) a statement by the Investor that
the
Investor has sold the shares of Common Stock represented thereby in accordance
with the Plan of Distribution contained in the Registration Statement, and
(B)
cause its counsel to deliver to the Transfer Agent one or more blanket opinions
to the effect that the removal of such legends in such circumstances may be
effected under the Securities Act. From and after the earlier of such dates,
upon the Investor’s written request, the Company shall promptly cause
certificates evidencing the Investor’s Securities to be replaced with
certificates which do not bear such restrictive legends, and Warrant Shares
subsequently issued upon due exercise of the Warrants shall not bear such
restrictive legends provided the provisions of either clause (i) or clause
(ii)
above, as applicable, are satisfied with respect to such Warrant Shares. When
the Company is required to cause an unlegended certificate to replace a
previously issued legended certificate, if: (1) the unlegended certificate
is
not delivered to an Investor within five Business Days after submission by
the
Investor of a legended certificate and supporting documentation to the Transfer
Agent as provided above and (2) prior to the time such unlegended certificate
is
received by the Investor, the Investor, or any third party on behalf of such
Investor or for the Investor’s account, purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by
the
Investor of shares represented by such certificate (a
“Buy-In”),
then the Company shall pay in cash to the Investor (for costs incurred either
directly by such Purchaser or on behalf of a third party) the amount by which
the total purchase price paid for Common Stock as a result of the Buy-In
(including brokerage commissions, if any) exceeds the proceeds received by
such
Investor as a result of the sale to which such Buy-In relates. The Investor
shall provide the Company written notice indicating the amounts payable to
the
Investor in respect of the Buy-In.
Section
5.2. Integration.
The
Company has not and shall not, and shall use its best efforts to ensure that
no
Affiliate of the Company shall, sell, offer for sale or solicit offers to buy
or
otherwise negotiate in respect of any security (as defined in Section 2 of
the
Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Investor, or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market in a manner that would require stockholder
approval of the sale of the securities to the Investor.
Section
5.3. Securities
Laws Disclosure; Publicity.
By 9:00
a.m. (New York time) on the Trading Day following the execution of this
Agreement, and by 5:00 p.m. (New York time) on the Initial Closing Date, the
Company shall issue press releases disclosing the transactions contemplated
hereby and the Closing. On the Trading Day following the execution of this
Agreement the Company will file a Current Report on Form 8-K disclosing the
material terms of the Transaction Documents (and attach the Transaction
Documents as exhibits thereto), and on each Closing Date the Company will file
an additional Current Report on Form 8-K to disclose the Closing. In addition,
the Company will make such other filings and notices in the manner and time
required by the Commission and the Trading Market on which the Common Stock
is
listed.
Section
5.4. Use
of Proceeds.
The
Company
shall use the net proceeds from the sale of the Securities hereunder (i) for
working capital purposes, (ii) to purchase fixed assets used in the development
or production of the Company’s products or (iii) for investment in new
technologies related to the Company’s business (including without limitation
through the acquisition of other companies).
25
Section
5.5. Right
of First Refusal
(a)
Proposed
Financings.
In the
event that, during the period commencing on the Initial Closing Date and
continuing to the earlier of (i) the second anniversary of the Second Closing
Date or (ii) the second anniversary of the Outside Date, the Company seeks
to
raise additional funds through a private placement of its securities (a
“Proposed
Financing”),
other
than Exempt Issuances, the Investor shall have the right to participate in
the
Proposed Financing on a pro rata basis, based on the percentage that (a) the
number of shares of Common Stock then held by the Investor plus
the
number of shares of Common Stock issuable upon conversion of the Warrants bears
to (b) the total number of shares of Common Stock outstanding plus
the
number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock and the Prior Convertible Securities and exercise of the Company
Stock Options, the Warrants and the Prior Warrants.
(b)
Pre-Notice
of Proposed Financings.
At least
15 Business Days prior to the closing of any Proposed Financing, the Company
shall deliver to each Investor a written notice of its intention to effect
a
Proposed Financing (“Pre-Notice”).
If within 10 Business Days after receipt of the Pre-Notice, the Investor
delivers to the Company a written request for detailed information regarding
the
Proposed Financing, the Company shall promptly, but no later than the Business
Day immediately following its receipt of such request, deliver to the Investor
a
notice (a “Proposed
Financing Notice”)
which shall describe in reasonable detail the proposed terms of such Proposed
Financing, the amount of proceeds intended to be raised thereunder, and the
Person with whom such Proposed Financing is proposed to be effected, and shall
have attached thereto be a term sheet or similar document relating to the
Proposed Financing. The Investor shall notify the Company no later than 6:30
p.m. (Little Rock time) on the fifth Business Day after receipt of the Proposed
Financing Notice of its willingness to participate in the Proposed Financing
on
the terms described in the Proposed Financing Notice, subject to completion
of
mutually acceptable documentation and diligence investigation. The Company
shall
promptly provide to the Investor such diligence materials as it may reasonably
request, subject to execution of a non-disclosure agreement, in reasonable
form,
mutually acceptable to the parties.
(c)
Investment
Terms.
The
terms
on which the Investor shall purchase securities pursuant to the Proposed
Financing shall be the same as such securities are purchased by other investors
in such Proposed Financing. In the event that the terms of the Proposed
Financing are changed, the Borrower shall provide the Investor with the same
notice of the revised terms that is provided to the other investors in such
Proposed Financing in reasonably sufficient time to allow the Investor to review
the Proposed Financing and the Company’s financial condition and prospects in
light of the changed terms.
(d)
Financings.
In
the
event that the Investor does not exercise, within 12 Business Days after receipt
of the Financing Notice, its right to participate in the Proposed Financing,
the
Company may sell the securities in the Proposed Financing at a price and on
terms which are no more favorable to the investors in such Proposed Financing
than the terms offered to the Investor. If the Company subsequently changes
the
price or terms so that the terms are at a price or more favorable to the
investors in the Proposed Financing, the Company shall re-offer the securities
to the Investor as provided in this Section 5.5.
Section
5.6. No
Disclosure of Material Non-Public Information.
The
Company will not disclose to the Investor any material non-public information
concerning the Company except (a) with the consent of the Investor and (b)
if
such consent is given, pursuant to a non-disclosure agreement which provides,
among other things, that the Investor will not disclose the material non-public
information to any person and the Investor or the Agent will not engage in
any
transactions involving the Company’s securities while in possession of material
non-public information.
26
ARTICLE
6
Conditions
Precedent to Closing
Section
6.1. Conditions
Precedent to the Obligations of the Investor to Purchase
Securities.
The
obligation of the Investor to acquire Securities at any Closing is subject
to
the satisfaction or waiver by the Investor, at or before the Closing, of each
of
the following conditions:
|
(a)
|
Representations
and Warranties.
The Company shall have delivered a certificate of the Company’s Chief
Executive Officer certifying that the representations and warranties
of
the Company contained herein are true and correct in all material
respects
as of the date when made and as of the Closing Date as though made
on and
as of such Closing Date;
|
|
(b)
|
Performance.
The Company shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by
the
Transaction Documents to be performed, satisfied or complied with
by it at
or prior to the Closing;
|
|
(c)
|
No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any
court or
governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents;
|
|
(d)
|
No
Adverse Changes.
Since the date of execution of this Agreement, no event or series
of
events shall have occurred that reasonably could have or result in
a
Material Adverse Effect;
|
|
(e)
|
Company
Deliverables.
The Company shall have delivered the Company Deliverables in accordance
with Section 2.2(a).
|
|
(a)
|
Representations
and Warranties.
The representations and warranties of the Investor contained herein
shall
be true and correct in all material respects as of the date when
made and
as of the Closing Date as though made on and as of such
date;
|
|
(b)
|
Performance.
The Investor shall have performed, satisfied and complied in all
material
respects with all covenants, agreements and conditions required by
the
Transaction Documents to be performed, satisfied or complied with
by such
Investor at or prior to the Closing;
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(c)
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No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any
court or
governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents; and
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(d)
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Purchase
Price.
The Investor shall have paid the Purchase Price payable at such Closing
in
accordance with Section 2.3.
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27
ARTICLE
7
Miscellaneous
Section
7.1. Fees
and Expenses.
Each
party shall pay the fees and expenses of its advisers, counsel, accountants
and
other experts, if any, and all other expenses incurred by such party incident
to
the negotiation, preparation, execution, delivery and performance of the
Transaction Documents; provided,
however,
that,
if but only if Securities are sold hereunder at the Initial Closing, the Company
shall, at the Initial Closing, reimburse the Investor for its reasonable legal
fees and expenses of its legal counsel, up to a maximum of $30,000, incurred
in
connection with the Investor’s due diligence and the negotiation and preparation
of the Agreement. The Company shall pay all stamp and other taxes and duties
levied in connection with the sale of the Shares.
Section
7.2. Entire
Agreement.
The
Transaction Documents, together with the Exhibits thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings, discussions and representations,
oral or written, with respect to such matters, which the parties acknowledge
have been merged into such documents and exhibits.
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If
to the Company:
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ThermoEnergy
Corporation
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Attn.:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
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▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
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Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
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Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
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With
a copy to:
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▇▇▇▇▇
Peabody, LLP
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Attn.:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
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Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
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Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
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If
to the Investor:
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The
Quercus Trust
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▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
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A109
- PMB ▇▇▇
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▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
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Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
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Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
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28
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With
a copy to:
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▇▇▇▇▇▇▇▇▇
Glusker Fields Claman & Machtinger, LLP
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Attn.:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
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▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
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▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
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Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇;
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or
such
other address as may be designated in writing hereafter, in the same manner,
by
such Person.
Section
7.4. Amendments;
Waivers; No Additional Consideration.
No
provision of this Agreement may be waived or amended except in a written
instrument signed by the Company and the Investor. No waiver of any default
with
respect to any provision, condition or requirement of this Agreement shall
be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof,
nor
shall any delay or omission of either party to exercise any right hereunder
in
any manner impair the exercise of any such right.
Section
7.5 Termination.
This
Agreement may be terminated prior to Initial Closing:
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(a)
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by
written agreement of the Investor and the Company;
or
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by
the Company or the Investor, upon written notice to the other, if
the
Closing shall not have taken place by 6:30 p.m., Little Rock time,
on the
Outside Date; provided,
that the right to terminate this Agreement under this Section 7.5(b)
shall
not be available to any Person whose failure to comply with its
obligations under this Agreement has been the cause of or resulted
in the
failure of the Closing to occur on or before such time, to the extent
such
delay is caused by such Person.
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Upon
a
termination in accordance with this Section 7.5, the Company and the Investor
shall have no further obligation or liability (including as arising from such
termination) to the other, provided that any liabilities arising prior to such
termination shall not be affected by the termination.
Section
7.6. Construction.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party. This Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden
of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement or any of the Transaction
Documents.
Section
7.7. Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. Neither party may assign this Agreement
or any rights or obligations hereunder without the prior written consent of
the
other party.
Section
7.8. No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Section 4.6 (with respect to rights to indemnification and
contribution).
29
Section
7.9. Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Delaware, without regard to the
principles of conflicts of law thereof. Each party agrees that all Proceedings
concerning the interpretations, enforcement and of the transactions contemplated
by this Agreement and any other Transaction Documents (whether brought against
a
party hereto or its respective Affiliates,
employees or agents) shall be commenced exclusively in the state or federal
courts sitting in, or having jurisdiction over, the State of Delaware (the
“Delaware
Courts”).
Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the
Delaware Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
Proceeding, any claim that it is not personally subject to the jurisdiction
of
any such Delaware Court, or that such Proceeding has been commenced in an
improper or inconvenient forum. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address
in
effect for notices to it under this Agreement and agrees that such service
shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives,
to
the fullest extent permitted by applicable law, any and all right to trial
by
jury in any legal proceeding arising out of or relating to this Agreement or
the
transactions contemplated hereby. If either party shall commence a Proceeding
to
enforce any provisions of a Transaction Document, then the prevailing party
in
such Proceeding shall be reimbursed by the other party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.
Section
7.10. Survival.
The
representations, warranties, agreements and covenants contained herein shall
survive the Closings and the delivery of the Securities.
Section
7.11. Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof,
notwithstanding any subsequent failure or refusal of the signatory to deliver
an
original executed in ink.
Section
7.12. Severability.
If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
Section
7.13. Replacement
of Securities.
If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement Securities.
If a replacement certificate or instrument evidencing any Securities is
requested due to a mutilation thereof, the Company may require delivery of
such
mutilated certificate or instrument as a condition precedent to any issuance
of
a replacement.
30
Section
7.14. Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each of the Investors and the Company will
be entitled to specific performance under the Transaction Documents. The parties
agree that, except as expressly set forth herein with respect to liquidated
damages, monetary damages may not be adequate compensation for any loss incurred
by reason of any breach of obligations described in the foregoing sentence
and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
Section
7.15 Attorney’s
Fees.
If any
action at law or in equity (including arbitration) is necessary to enforce
or
interpret the terms of any of the Transaction Documents, the prevailing party
shall be entitled to reasonable attorney’s fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as
of
the date first indicated above.
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THE
QUERCUS
TRUST
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THERMOENERGY
CORPORATION
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By:
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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By:
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/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Trustee
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Executive
Vice President and CFO
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31