SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the \"Agreement\"), dated as of October 31, 2007,
by and among Averion International Corp., a Delaware corporation, with principal
offices located at 000 Xxxxxxxx Xxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxxx 00000 (the
\"Company\"), and the investors listed on the Schedule of Buyers attached hereto
(each, a \"Buyer\" and, collectively, the \"Buyers\"). Capitalized terms used
and not defined elsewhere in this Agreement have the respective meanings
assigned to such terms in the Appendix hereto.
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Rule 506 of
Regulation D (\"Regulation D\") as promulgated by the United States Securities
and Exchange Commission (the \"SEC\") under the Securities Act of 1933, as
amended (the \"1933 Act\").
B. The Buyers, severally and not jointly, desire to purchase from the
Company, and the Company wishes to sell to the Buyers, upon the terms and
conditions stated in this Agreement:
(1) Secured senior notes, in the form attached as Exhibit A, in the
aggregate principal amount of $26,000,000 as follows: (a) $24,000,000 in the
aggregate principal amount of Notes (the \"Initial Notes\") shall be purchased
by the Buyers on the Initial Closing Date (as defined below); and (ii)
$2,000,000 in the aggregate principal amount of Notes (the \"Additional Notes\"
and together with the Initial Notes and with any promissory notes or other
securities issued in exchange or substitution therefor or replacement thereof,
and as any of the same may be amended, supplemented, restated or modified and in
effect from time to time, the \"Notes\") shall be purchased by the Buyers on the
Additional Closing Date (as defined below) for a total aggregate principal
amount of Notes equal to $26,000,000; and
(2) Shares of Common Stock as set forth on the Schedule of Buyers (the
\"Shares\") which shall be issued at the Initial Closing and the Additional
Closing in proportion to the principal amount of Notes purchased at the
applicable Closing.
C. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached as Exhibit B (as the same may be amended, supplemented,
restated or modified and in effect from time to time, the \"Registration Rights
Agreement\"), pursuant to which the Company agrees to provide certain
registration rights under the 1933 Act, with respect to the Shares.
D. Contemporaneously with the execution and delivery of this Agreement, the
Company and its Subsidiaries are executing and delivering a Security Agreement,
in the form attached as Exhibit C (as the same may be amended, supplemented,
restated or modified and in effect from time to time, the \"Security
Agreement\"), in favor of the Collateral Agent (as defined in the Security
Agreement), for the benefit of the Buyers, pursuant to which the Company and its
Subsidiaries will agree to provide the Collateral Agent (as defined in the
Security Agreement), as agent for the Buyers, with security interests in
substantially all of the material assets of the Company and its Subsidiaries.
E. Within fifteen (15) Business Days after the Initial Closing, the Company
will execute and deliver one or more fully executed Deposit Account Control
Agreements, in the form requested by each applicable financial institution and
reasonably acceptable to the Collateral Agent (the \"Account Control
Agreements\"), pursuant to which the Company and each of its Subsidiaries that
maintain bank, brokerage or other similar accounts will agree to provide the
Collateral Agent with \"control\" of such accounts.
F. Contemporaneously with the Initial Closing, each of the Company's
Subsidiaries will execute and deliver a Guaranty, in the form attached hereto as
Exhibit D (as the same may be amended, supplemented, restated or modified and in
effect from time to time, the \"Guaranty\"), pursuant to which the Subsidiaries
will agree to guaranty certain obligations of the Company (the guarantees under
the Guaranty, including any such guarantees added after the Closing, being
referred to herein as the \"Guarantees\").
G. Contemporaneously with the Initial Closing, the Company and each of its
Subsidiaries will each execute and deliver a Pledge Agreement, substantially in
the form attached as Exhibit E (each, a \"Pledge Agreement\"), pursuant to which
the Company and each such Subsidiary will agree to pledge all of the capital
stock or other equity interests in the Subsidiaries and their Affiliates that it
directly owns to the Buyers as collateral for the Notes.
H. Subject to the full execution of this Agreement, the Company and the
holder of all of the issued and outstanding Capital Stock of Hesperion Ltd., a
Swiss corporation (\"Hesperion\") shall, concurrently therewith, enter into a
Securities Purchase Agreement dated October 31, 2007 in substantially the form
attached as Exhibit F hereto (the \"Hesperion Acquisition Agreement\"), pursuant
to which, on the Acquisition Closing Date, the Company will acquire all of the
issued Capital Stock of Hesperion for an aggregate purchase price of
(euro)25,000,000 (the \"Hesperion Acquisition\").
NOW THEREFORE, the Company and each of the Buyers, severally and not jointly,
hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND SHARES.
a. Purchase and Sale of Notes and Shares. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 7 and 8 below, the Company shall
issue and sell to each Buyer and each Buyer each Buyer severally agrees to
purchase from the Company the Notes in two (2) closings as follows:
(i) On the Initial Closing Date, each Buyer shall purchase (a) Initial Notes
in the respective principal amounts set forth opposite such Buyer's name on the
Schedule of Buyers, which Initial Notes shall be issued to the Buyers on the
Initial Closing Date; and (b) the number of Shares next to such Buyer's name on
the Schedule of Buyers, which shall be issued to such Buyer on the Initial
Closing Date. The purchase price (the \"Initial Purchase Price\") for the
Initial Notes and the related Shares purchased by each Buyer shall be as set
forth opposite such Buyer's name on the Schedule of Buyers (representing an
aggregate purchase price of $24,000,000 for the Initial Notes and Shares to be
purchased by the Buyers at the Initial Closing); and
(ii) On the Additional Closing Date, each Buyer shall purchase (a)
Additional Notes in the respective principal amounts set forth opposite such
Buyer's name on the Schedule of Buyers, which Additional Notes shall be issued
to the Buyers on the Additional Closing Date, and (b) the number of Shares next
to such Buyer's name on the Schedule of Buyers, which shall be issued to such
Buyer on the Additional Closing Date. The purchase price (the \"Additional
Purchase Price\" and together with the Initial Purchase Price, the \"Purchase
Price\") for the Additional Notes purchased by each Buyer shall be as set forth
opposite such Buyer's name on the Schedule of Buyers (representing an aggregate
purchase price of $2,000,000 for the Additional Notes to be purchased by the
Buyers at the Additional Closing.
b. Closing Dates.
(i) The date and time of the initial closing (the \"Initial Closing\") shall
be 10:00 a.m., New York City time, on the Acquisition Closing Date, subject to
the satisfaction (or waiver) of all of the conditions to the Closing set forth
in Sections 7 and 8(a) (or such later or earlier date as is mutually agreed to
by the Company and the Buyers) (the \"Initial Closing Date\"). The Initial
Closing shall occur at the offices of Xxxxx & Xxxxxxx LLP, 000 Xxxx Xxxxxxxx,
Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx 00000, or at such other place as the Company
and Buyers may collectively designate in writing.
(ii) The date and time of the additional closing (the \"Additional
Closing\") shall be 10:00 a.m., New York City time, on the date that is within
thirty (30) calendar days from the Initial Closing Date, subject to the
satisfaction (or waiver) of all of the conditions to the Closing set forth in
Sections 7 and 8(a) (or such later date as is mutually agreed to by the Company
and the Buyers) (the \"Additional Closing Date,\" each of the Initial Closing
Date and the Additional Closing Date being referred to herein as a \"Closing
Date\"). The Additional Closing shall occur at the offices of Xxxxx & Lardner
LLP, 000 Xxxx Xxxxxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx 00000, or at such
other place as the Company and Buyers may collectively designate in writing.
For purposes of this Agreement, each Buyer's \"Allocation Percentage\" shall be
(i) with respect to each Closing Date, the quotient of (a) the total original
aggregate principal amount of Notes purchased by such Buyer at such Closing,
divided by (b) the total original aggregate principal amount of all Notes
purchased at such Closing; and (ii) with respect to all Notes purchased pursuant
to this Agreement, the quotient of (a) the total original aggregate principal
amount of all Notes purchased by such Buyer pursuant to this Agreement, divided
by (b) the total original aggregate principal amount of all Notes purchased
pursuant to this Agreement.
c. Form of Payment and Delivery of Shares. On each Closing Date, (i) each
Buyer shall pay to the Company an amount equal to the principal amount of the
Notes such Buyer is to purchase as of such Closing Date, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions (less any amount deducted and paid in accordance with Section
4(h)), and (ii) the Company shall deliver (or cause its transfer agent to
deliver) to each Buyer (i) a Note (or Notes in the principal amounts as such
Buyer shall request) representing the original principal amount of the Notes
that such Buyer is purchasing hereunder on such Closing Date, and (ii) Share
Certificates for the Shares to be issued to such Buyer on such Closing Date as
provided on the Schedule of Buyers, in each case duly executed on behalf of the
Company and registered in the name of such Buyer or its designee.
d. Fractional Shares. No fractional shares of Common Stock are to be issued
pursuant to this Section 1, but rather the number of shares of Common Stock to
be issued pursuant to this Section 1 shall be rounded up to the nearest whole
number.
e. Currency; Interest. All payments to a Buyer under this Agreement or any
of the other Transaction Documents shall be made in lawful money of the United
States of America, by wire transfer of immediately available funds to such
accounts as such Buyer may from time to time designate by written notice in
accordance with Section 10(f) of this Agreement. All references herein and in
each of the other Transaction Documents to \"dollars\" or \"$\" shall mean the
lawful money of the United States of America. Any amounts payable pursuant to
this Agreement that are not paid when due, after the expiration of all notice
and cure periods set forth herein, shall bear interest at the rate equal to the
lesser of (i) 2.0% per month, prorated for partial months, and (ii) the highest
lawful interest rate.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, as of the date of this Agreement and as of
each Closing Date, with respect to only itself, that:
a. Investment Purpose. Such Buyer is acquiring the Notes (together with the
related Guarantees) and the Shares purchased by such Buyer hereunder (the Notes,
the Guarantees and the Shares being collectively referred to herein as the
\"Securities\"), for such Buyer's own account and not with a view towards, or
for resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered under, or exempted from the registration
requirements of, the 1933 Act; provided, however, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an \"accredited investor\" as
that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of the Securities Laws and that the Company is relying
in part upon the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the Securities.
d. Information. Such Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities that have
been requested by such Buyer. Such Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Sections 3 and 10(l) below or contained in any of the other Transaction
Documents. Such Buyer understands that its investment in the Securities
involves a high degree of risk and that it has reviewed the Company's SEC
Documents and the disclosures contained therein, including, without limitation,
that set forth under the heading \"Risk Factors.\" Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no Governmental
Entity has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of an investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that, except as provided in
the Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the 1933 Act or any other Securities Laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that the
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such Buyer
provides the Company with reasonable assurance that the Securities can be sold,
assigned or transferred pursuant to Rule 144 promulgated under the 1933 Act, as
amended (or a successor rule thereto) (\"Rule 144\"); (ii) any sale of the
Securities made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the Person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 0000 Xxx) may require compliance with some other exemption under the 1933
Act or any other Securities Laws; and (iii) except as set forth in the
Registration Rights Agreement, neither the Company nor any other person is under
any obligation to register the Securities under the 1933 Act or any other
Securities Laws. Notwithstanding the foregoing provisions of this paragraph,
the Securities may be pledged in connection with a bona fide margin account or
other loan or financing arrangement secured by the Securities.
g. Legends. Such Buyer understands that, except as set forth below, the
Share Certificates and the certificates or other instruments representing the
Notes shall bear a restrictive legend in the following form (the \"1933 Act
Legend\") (and a stop-transfer order may be placed against transfer of such
Share Certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN
THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR
(B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS
SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities, if (i) such
Securities are registered for resale under the 1933 Act, (ii) such holder
provides the Company with reasonable assurances that the Securities can be sold
pursuant to Rule 144(k) promulgated under the 1933 Act (or a successor rule
thereto), or (iii) such holder provides the Company reasonable assurances that
the Securities have been or are being sold pursuant to Rule 144.
h. Authorization; Enforcement; Validity. Such Buyer is a validly existing
corporation, partnership, limited liability company or other entity and has the
requisite corporate, partnership, limited liability or other organizational
power and authority to purchase the Securities pursuant to this Agreement. This
Agreement and the Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of such Buyer and are valid and
binding agreements of such Buyer enforceable against such Buyer in accordance
with their respective terms. The Security Agreement and each of the other
agreements entered into by such Buyer in connection with the transactions
contemplated hereby as of the applicable Closing will have been duly and validly
authorized, executed and delivered on behalf of such Buyer as of such Closing
and will be valid and binding agreements of such Buyer, enforceable against such
Buyer in accordance with their respective terms.
i. Residency. Such Buyer is a resident of that jurisdiction specified below
its address on the Schedule of Buyers.
j. No Other Agreements. As of the applicable Closing Date, such Buyer has
not, directly or indirectly, made any agreements with the Company relating to
the terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants, as of the date of this Agreement as of each
Closing Date, to each Buyer, that except as set forth in the Schedules to this
Agreement delivered by the Company to Buyer:
a. Organization and Qualification; Subsidiaries. The Company was formed on
April 22, 2002. Set forth in Schedule 3(a) is a true and correct list of the
Company's Subsidiaries and the jurisdiction in which each is organized or
incorporated, together with their respective jurisdictions of organization and
the percentage of the outstanding capital stock or other equity interests of
each such entity that is held by the Company or any of its Subsidiaries. Other
than with respect to the entities listed on Schedule 3(a), the Company does not
directly own any security or beneficial ownership interest, in any other Person
(including through joint venture or partnership agreements) or have any interest
in any other Person. Each of the Company and its Subsidiaries is a corporation,
limited liability company, partnership or other entity and is duly organized or
formed and validly existing in good standing under the laws of the jurisdiction
in which it is incorporated or organized and has the requisite corporate,
partnership, limited liability company or other organizational power and
authority to own its properties and to carry on its business as now being
conducted and as proposed to be conducted by the Company and its Subsidiaries.
Each of the Company and its Subsidiaries is duly qualified to do business and is
in good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted or proposed to be conducted by the Company and
its Subsidiaries will make such qualification necessary, except to the extent
that the failure to be so qualified or be in good standing could not have and
could not be, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Except as set forth in Schedule 3(a), the Company
holds all right, title and interest in and to 100% of the capital stock, equity
or similar interests of each of its Subsidiaries, in each case, free and clear
of any Liens (as defined below), including any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of free and
clear ownership by a current holder, and no such Subsidiary owns capital stock
or holds an equity or similar interest in any other Person.
b. Authorization; Enforcement; Validity. Each of the Company and its
Subsidiaries has the requisite corporate or other organizational power and
authority to enter into and perform its obligations under this Agreement and
each of the other Transaction Documents to which such Person is a party and to
issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of the Transaction Documents by the Company and each of
its Subsidiaries and the consummation by the Company and each of its
Subsidiaries of the transactions contemplated hereby and thereby, including the
issuance of the Notes, the Guarantees and the Shares to be issued at each
Closing, have been duly authorized by the respective boards of directors (or a
committee thereof), members, managers, trustees, stockholders, other
equityholders or holders of beneficial interests, as applicable, of the Company
and each of its Subsidiaries and no further consent or authorization is required
by the Company, any of its Subsidiaries or any of their respective boards of
directors, members, managers, trustees, stockholders, other equityholders or
holders of beneficial interests, as applicable. This Agreement and the other
Transaction Documents dated of even date herewith have been duly executed and
delivered by the Company and each of its Subsidiaries that is a party thereto,
and constitute the valid and binding obligations of the Company and each of its
Subsidiaries, enforceable against the Company and each of its Subsidiaries in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors' rights
generally and general principles of equity. As of each Closing, the Transaction
Documents dated after the date of this Agreement shall have been duly executed
and delivered by the Company and each of its Subsidiaries that is a party
thereto and shall constitute the valid and binding obligations of the Company
and each of its Subsidiaries, enforceable against the Company and each of its
Subsidiaries in accordance with their respective terms, except as may be limited
by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditors' rights generally and general principles of equity.
c. Capitalization. The authorized Capital Stock of the Company consists of
750,000,000 shares of Common Stock, of which:
(i) 498,754,329 shares are issued and outstanding; provided, however, that
as of the Initial Closing Date;
(ii) 100,000,000 shares are reserved for issuance pursuant to the Company's
stock option, restricted stock and employee stock purchase plans described in
the SEC Documents (the \"Equity Plans\"), including 40,311,056 shares issuable
pursuant to outstanding awards under the Equity Plans; and
(iii) 3,290,666 shares are reserved for issuance pursuant the Company's
outstanding warrants described on Schedule 3(c)(iii) (the \"Warrants\");
(iv) 125,000 shares of Common Stock reserved for issuance to
Xxxxxxx/Xxxxxxxxx & Associates on December 31, 2007 (subject to
Xxxxxxx/Heilshorn & Associates continuing to provide services to the Company as
its investor relations firm); and
(v) 4,285,714 shares of Common Stock reserved for issuance to Millennix,
Inc. on January 1, 2009 (subject to Xxxx Xxxxxxx remaining an employee through
such issuance date) pursuant to that certain Asset Purchase Agreement dated
November 9, 2005 (as amended on September 6, 2006), related to the purchase of
the assets of Millennix, Inc.
No shares of Common Stock are reserved for issuance under any plan, agreement or
arrangement, other than shares of Common Stock reserved for issuance with
respect to the Warrants and under the Equity Plans; and except as described in
the foregoing provisions of this Section 3(c), there are no shares of Capital
Stock, Options, Convertible Securities or other equity securities of the Company
authorized, issued or outstanding, and the Company is not under any current or
future obligations to issue any such shares of Capital Stock, Options,
Convertible Securities or other equity securities of the Company. All of the
outstanding and issuable shares of Capital Stock have been, or upon issuance
will be, validly issued and are, or upon issuance will be, fully paid and
nonassessable.
Except as set forth on Schedule 3(c):
(1) no shares of the Capital Stock of the Company or any of its Subsidiaries
are subject to preemptive rights or any other similar rights or any Liens
suffered or permitted by the Company or any of its Subsidiaries;
(2) there are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into or exercisable for, any shares of Capital Stock of
the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of Capital Stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exercisable for, any shares of Capital
Stock of the Company or any of its Subsidiaries;
(3) to the Knowledge of the Company, there are no voting trusts, proxies or
other agreements, commitments or understandings of any character with respect to
the voting of any shares of Capital Stock of the Company or any of its
Subsidiaries, and there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights Agreement,
the registration rights set forth in the Company's SEC Documents, including
registration rights agreements entered dated July 31, 2006, November 9, 2005 and
the registration rights given to the investors in the Company's October 17, 2006
financing or such other rights as shall have been waived or terminated prior to
the Closing);
(4) other than the Notes, there are no outstanding securities or instruments
of the Company or any of its Subsidiaries that contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries, and there
are no other stockholder agreements or similar agreements to which the Company,
any of its Subsidiaries or, to the Company's Knowledge, any holder of the
Company's Capital Stock is a party;
(5) there are no securities or instruments containing anti-dilution or
similar provisions that will or may be triggered by the issuance of the
Securities;
(6) the Company does not have any stock appreciation rights or \"phantom
stock\" plans or agreements or any similar plan or agreement; and
(7) to the Company's Knowledge, no officer or director of the Company or
beneficial owner of any of the Company's outstanding Common Stock has pledged
Common Stock in connection with a margin account or other loan secured by such
Common Stock.
The Company has furnished to each Buyer, or, with respect to (Z) below, will
furnish within five (5) Business Days of the closing of the transaction
contemplated in the Hesperion Transaction Documents, true and correct copies of:
(X) The Company's Certificate of Incorporation, as amended and in effect
(the \"Certificate of Incorporation\");
(Y) The Company's Bylaws, as amended and in effect (the \"Bylaws\"); and
(Z) The Hesperion Transaction Documents, executed by all parties thereto,
and all amendments, modifications or supplements thereto.
All of the equity interests of each of the Subsidiaries are certificated or
otherwise represented in tangible form.
d. Issuance of Securities. The Notes are duly authorized and, upon issuance
in accordance with the terms of this Agreement, shall be free from all taxes and
Liens with respect to the issuance thereof and entitled to the rights set forth
therein. The Shares are duly authorized and, upon issuance in accordance with
the terms of this Agreement, will be validly issued, fully paid and
nonassessable and free from taxes and Liens with respect to the issuance
thereof, with the holders being entitled to all rights accorded to a holder of
Common Stock. The issuance by the Company of the Securities is exempt from
registration under the 1933 Act and any other applicable Securities Laws.
e. No Conflicts. Except as set forth on Schedule 3(e), the execution and
delivery of this Agreement and the other Transaction Documents by the Company
and each of its Subsidiaries, the performance by the Company and each of its
Subsidiaries of its obligations hereunder and thereunder and the consummation by
the Company and each of its Subsidiaries of the transactions contemplated hereby
and thereby (including the reservation for issuance and the issuance of the
Shares) will not:
(i) result in a violation of the certificate or articles of incorporation,
certificate or articles of organization, bylaws, operating agreement,
partnership agreement or any other governing documents, as applicable, of any
such Person;
(ii) conflict with, or constitute a breach or default (or an event which,
with the giving of notice or passage of time or both, constitutes or would
constitute a breach or default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or other remedy with
respect to, any agreement, indenture, instrument or other document to which any
such Person is a party or by which such Person is bound; or
(iii) result in a violation of any Law, rule, regulation, order, judgment or
decree (including Securities Laws and the rules and regulations, if any, of the
Principal Market) applicable to any such Person or by which any property or
asset of any such Person is bound or affected.
Neither the Company nor any of its Subsidiaries is in violation of any term of
its certificate or articles of incorporation, certificate or articles of
organization, bylaws, operating agreement, partnership agreement or any other
governing document, as applicable. Neither the Company nor any of its
Subsidiaries is or has been in violation of any term of or in default under (or
with the giving of notice or passage of time or both would be in violation of or
default under) any contract, agreement, mortgage, indebtedness, indenture,
instrument, document, judgment, decree or order or any Law applicable to the
Company or its Subsidiaries, except where such violation or default could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or to result in the acceleration of any Indebtedness or other
obligation. The business of the Company and its Subsidiaries has not been and
is not being conducted, in violation of any Law of any Governmental Entity
except as could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Except for the filings and listings expressly
contemplated by the Registration Rights Agreement, the filing of instruments to
perfect security interests and as set forth in Schedule 3(e), neither the
Company nor any of its Subsidiaries is, has been, or will be required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or Governmental Entity in order for it to execute, deliver or perform
any of its obligations under or contemplated by the Transaction Documents in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations that the Company or any of its Subsidiaries is
or has been required to obtain as described in the preceding sentence have been
obtained or effected on or prior to the date of this Agreement and prior to the
date of the effectiveness of such requirement.
f. SEC Documents; Financial Statements.
(i) Since December 31, 2006, the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the 1934 Act (all of the foregoing
filed prior to the date this representation is made (including all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein) being referred to herein as the \"SEC
Documents\" and the Company's consolidated balance sheet as of June 30, 2007, as
included in the Company's quarterly report on Form 10-QSB for the period then
ended, as filed with the SEC on August 14, 2007, being referred to herein as the
\"Most Recent Balance Sheet\"). Each of the SEC Documents was filed with the
SEC via the SEC's XXXXX system within the time frames prescribed by the SEC for
the filing of such SEC Documents such that each filing was timely filed with the
SEC (with giving effect to any extensions of time permitted by Rule 12b-25 under
the 1934 Act). As of their respective dates, the SEC Documents complied in all
material respects with the Securities Laws. None of the SEC Documents, at the
time they were filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Since the filing of each of the SEC
Documents, no event has occurred that would require an amendment or supplement
to any such SEC Document and as to which such an amendment or supplement has not
been filed and made publicly available on the SEC's XXXXX system no less than
five (5) Business Days prior to the date this representation is made. Except as
set forth on Schedule 3(f)(i), the Company has not received any written comments
from the SEC staff that have not been resolved to the satisfaction of the SEC
staff.
(ii) As of their respective dates, the consolidated financial statements of
the Company and its Subsidiaries included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
Securities Laws with respect thereto. Such consolidated financial statements
have been prepared in accordance with GAAP, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes) and fairly present in all
material respects the financial position of the Company and its Subsidiaries as
of the dates thereof and the results of their operations and cash flows for the
periods then ended in accordance with GAAP (subject, in the case of unaudited
statements, to normal year-end audit adjustments that are not material
individually or in the aggregate).
(iii) Since December 31, 2006, none of the Company, its Subsidiaries and
their respective officers, directors and Affiliates or, to the Company's
Knowledge, any stockholder of the Company has made any filing with the SEC or
issued any press release on behalf of the Company or any of its Subsidiaries or
otherwise relating to the Company or any of its Subsidiaries that contains any
untrue statement of a material fact or omits any statement of material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they are or were made, not misleading or has provided
any other information to any Buyer, including information referred to in Section
2(d), that, considered in the aggregate, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are or
were made, not misleading.
(iv) Except as set forth in Schedule 3(f)(iv), the Company is not required
to file and will not be required to file any agreement, note, lease, mortgage,
deed or other instrument entered into prior to the date this representation is
made and in effect on the date this representation is made and to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
is bound that has not been previously filed as an exhibit (including by way of
incorporation by reference) to its reports filed or made with the SEC under the
1934 Act.
(v) The accounting firm that has expressed its opinion with respect to the
consolidated financial statements included in the Company's most recently filed
annual report on Form 10-KSB (the \"Audit Opinion\") is independent of the
Company pursuant to the standards set forth in Rule 2-01 of Regulation S-X
promulgated by the SEC and such firm was otherwise qualified to render the Audit
Opinion under applicable Securities Laws. Each accounting firm that since such
filing has conducted or will conduct a review or audit of any of the Company's
consolidated financial statements is independent of the Company pursuant to the
standards set forth in Rule 2-01 of Regulation S-X promulgated by the SEC and is
otherwise qualified to conduct such review or audit and render an audit opinion
under applicable Securities Laws.
(vi) There is no transaction, arrangement or other relationship between the
Company and an unconsolidated or other off-balance-sheet entity that is required
to be disclosed by the Company in its reports pursuant to the 1934 Act that has
not been so disclosed in the SEC Documents at least five (5) Business Days prior
to the date of this Agreement.
(vii) Since December 31, 2006, there have been no internal or SEC inquiries
or investigations (formal or informal) regarding accounting or revenue
recognition discussed with, reviewed by or initiated at the direction of any
executive officer, board of directors or any committee thereof of the Company or
any of its Subsidiaries.
(viii) The Company is not a \"shell company\" (as defined in Rule 12b-2
under the 1934 Act).
(ix) A pro forma consolidated balance sheet of the Company and its
Subsidiaries and the pro forma capitalization of the Company, in each case as of
the Most Recent Balance Sheet, and giving effect to the transactions
contemplated by this Agreement and each of the other Transaction Documents as if
they occurred on the Initial Closing Date will be filed with the SEC in an
amendment to the Announcing Form 8-K (defined below) within seventy five (75)
days following the Initial Closing Date, the applicable time period given by the
SEC to file such information (collectively, the \"Pro Forma Financial
Information\"). The Pro Forma Financial Information (i) will be prepared based
upon assumptions that provide a reasonable basis for presenting the effects of
such transactions, and the pro forma adjustments shall give appropriate effect
to such assumptions, (ii) will be based upon financial information prepared in
accordance with GAAP, (iii) will be consistent with the books and records of the
Company and its Subsidiaries (which are true, accurate and complete), and (iv)
will fairly present such information as of the dates presented in accordance
with GAAP.
x. Xxxxxxxx-Xxxxx Compliance; Internal Accounting Controls; Disclosure
Controls and Procedures; Books and Records.
(i) Except for as set forth in the SEC Documents, the Company and its
Subsidiaries are in all material respects in compliance with the applicable
provisions of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules and
regulations thereunder (collectively, \"Xxxxxxxx-Xxxxx\").
(ii) Since December 31, 2006, except as set forth on Schedule 3(g)(ii),
neither the Company nor any of its Subsidiaries nor any director or officer, of
the Company or any of its Subsidiaries has received or otherwise had or obtained
Knowledge of any complaint, allegation, assertion or claim, whether written or
oral, regarding the accounting or auditing practices, procedures, methodologies
or methods of the Company or any of its Subsidiaries or its internal accounting
controls, including any complaint, allegation, assertion or claim that the
Company or any of its Subsidiaries has engaged in questionable accounting or
auditing practices.
(iii) No attorney representing the Company or any of its Subsidiaries,
whether or not employed by the Company or any of its Subsidiaries, has reported
evidence of a material violation of Securities Laws, breach of fiduciary duty or
similar violation by the Company or any of its Subsidiaries or any of their
respective officers, directors, employees or agents to their respective boards
of directors or any committee thereof or pursuant to Section 307 of
Xxxxxxxx-Xxxxx.
(iv) Except as set forth in the SEC Documents, the Company has, and has
caused each of its Subsidiaries to, at all times keep books, records and
accounts with respect to all of such Person's business activities, in accordance
with sound accounting practices and GAAP consistently applied. Except as set
forth in the SEC Documents, The Company and each of its Subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (A) transactions are executed in accordance with management's
general or specific authorizations, (B) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset and liability
accountability, (C) access to assets or incurrence of liability is permitted
only in accordance with management's general or specific authorization and (D)
the recorded accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and appropriate action
is taken with respect to any differences.
(v) The Company has timely filed and made publicly available on the SEC's
XXXXX system no less than five (5) Business Days prior to the date of this
representation, all certifications and statements required by (A) Rule 13a-14 or
Rule 15d-14 under the 1934 Act and (B) Section 906 of Xxxxxxxx-Xxxxx with
respect to any Company SEC Documents.
(vi) Except as set forth in the SEC Documents, the Company maintains
disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under
the 1934 Act. Except as set forth in the SEC Documents, such disclosure
controls and procedures are effective to ensure that the information required to
be disclosed by the Company in the reports that it files with or submits to the
SEC (A) is recorded, processed, summarized and reported accurately within the
time periods specified in the SEC's rules and forms and (B) is accumulated and
communicated to the Company's management, including its principal executive
officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.
(vii) Except as set forth in the SEC Documents, the Company maintains
internal control over financial reporting required by Rule 13a-14 or Rule 15d-14
under the 1934 Act. As set forth in the SEC Documents, such internal control
over financial reporting contains material weaknesses.
h. Absence of Certain Changes. Since December 31, 2006, neither the Company
nor any of its Subsidiaries has taken any steps, and neither the Company nor any
of its Subsidiaries currently expects to take any steps to seek protection
pursuant to any bankruptcy law nor does the Company or any of its Subsidiaries
have any Knowledge or reason to believe that the creditors of such Person intend
to initiate involuntary bankruptcy proceedings or any knowledge of any fact that
would reasonably lead a creditor to do so. Neither the Company nor any of its
Subsidiaries is as of the date this representation is made, nor after giving
effect to the transactions contemplated hereby or by any of the other
Transaction Documents will be, Insolvent. Except as set forth in the SEC
Documents, since December 31, 2006, neither the Company nor any of its
Subsidiaries has declared or paid any dividends or sold any assets outside of
the ordinary course of business. Except as set forth in the SEC Documents,
since December 31, 2006, neither the Company nor any of its Subsidiaries has had
any capital expenditures outside the ordinary course of its business.
i. Absence of Litigation. Except as set forth on Schedule 3(i), (i) there
has at no time been any action, suit, proceeding, inquiry or investigation
(\"Litigation\") before or by any court, public board, Governmental Entity,
self-regulatory organization or body pending or, to the Company's Knowledge,
threatened against or affecting the Company or any of its Subsidiaries or any of
their assets, and (ii) to the Company's Knowledge, no director or officer of the
Company or any of its Subsidiaries has been involved in securities-related
Litigation during the past five (5) years. No Litigation disclosed on Schedule
3(i) has had or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
j. Full Disclosure; No Undisclosed Events, Liabilities, Developments or
Circumstances. Since December 31, 2006, there has been no Material Adverse
Effect and no circumstances exist that, individually or in the aggregate, could
reasonably be expected to be, cause or have a Material Adverse Effect. Except
(A) as and to the extent disclosed or reserved against on the Most Recent
Balance Sheet, (B) as incurred since the date thereof in the ordinary course of
business consistent with past practice, (C) as incurred at the applicable
Closing Date under the Notes and the other Transaction Documents, or (D) as set
forth on Schedule 3(j), neither the Company, nor any of its Subsidiaries has any
material liabilities or obligations of any nature, whether fixed or unfixed,
known or unknown, secured or unsecured, absolute, accrued, contingent or
otherwise and whether due or to become due. No representation or warranty or
other statement made by the Company in this Agreement or any of the other
Transaction Documents, the Schedules hereto or any certificate or instrument
delivered pursuant to this Agreement contains any untrue statement or omits to
state a material fact necessary to make any such statement, in light of the
circumstances in which it was made, not misleading.
k. Acknowledgment Regarding Buyers' Purchase of Notes and Shares. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm's length purchaser with respect to the Company in connection with this
Agreement and the other Transaction Documents and the transactions contemplated
hereby and thereby. The Company further acknowledges that no Buyer is acting as
a financial advisor or fiduciary of any party to this Agreement or any of the
other Transaction Documents (or in any similar capacity) with respect to this
Agreement and the other Transaction Documents and the transactions contemplated
hereby and thereby, and any advice given by any Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to each
Buyer that the decision of the Company and each of its Subsidiaries to enter
into the Transaction Documents has been based solely on the independent
evaluation by such Person and its representatives.
l. No General Solicitation. Neither the Company nor any of its Affiliates,
nor any Person acting on the behalf of any of the foregoing, has engaged or will
engage in any form of general solicitation or general advertising (within the
meaning of Regulation D under the 1933 Act), including advertisements, articles,
notices, or other communications published in any newspaper, magazine or similar
media or broadcast over radio, television or internet or any seminar or meeting
whose attendees have been invited by general solicitation or general
advertising, in connection with the offer or sale of the Securities.
m. No Integrated Offering. Neither the Company nor any of its Affiliates,
nor any Person acting on the behalf of any of the foregoing, has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
purchase any security, under circumstances that would require registration of
any of the Securities under the 1933 Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the 1933 Act or any other regulatory or self-regulatory authority.
n. Employee Relations. Except as set forth on Schedule 3(n), neither the
Company nor any of its Subsidiaries is involved in any labor union dispute nor,
to the Knowledge of the Company, is any such dispute threatened. To the
Knowledge of the Company, none of the employees of either the Company or any of
its Subsidiaries is or has been a member of a union that relates, or following
the Initial Closing will relate, to such employee's relationship with the
Company and neither the Company nor any of its Subsidiaries is or following the
Initial Closing will be, a party to a collective bargaining agreement. No
executive officer (as defined in Rule 3b-7 under the 1934 Act), nor any other
individual whose termination would be required to be disclosed on a Current
Report on Form 8-K, has notified the Company that such individual intends to
leave the Company or otherwise terminate such individual's employment with the
Company. Such individuals constitute all of the employees necessary to conduct
the Company's business as presently conducted and as proposed to be conducted
(as described to Buyers prior to the date hereof). Except as set forth on
Schedule 3(n), to the Knowledge of the Company no such individual is, has been,
or is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the employment of each such individual does not, has not and will
not subject the Company or any of its Subsidiaries to any liability with respect
to any of the foregoing matters that would, individually or in the aggregate,
have a Material Adverse Effect. Except as set forth in Schedule 3(n), to the
Company's Knowledge the Company and each of its Subsidiaries is in compliance in
all material respects with all Laws relating to employment and employment
practices, terms and conditions of employment and wages and hours. Except as
set forth in Schedule 3(n), the Company and each of its Subsidiaries is in
compliance in all material respects with all Laws relating to employee benefits
and employee benefit plans (as such terms are defined in ERISA).
o. Intellectual Property Rights. Except as set forth on Schedule 3(o), the
Company and its Subsidiaries own or possess adequate rights or licenses to use
all trademarks, trademark applications and registrations, trade names, service
marks, service xxxx registrations, service names, patents, patent rights, patent
applications, copyrights (whether or not registered), inventions, licenses,
approvals, governmental authorizations, trade secrets and other intellectual
property rights (collectively, \"Intellectual Property\") necessary to conduct
their respective businesses as conducted as of the date this representation is
made. Except as set forth in Schedule 3(o), to the Company's Knowledge (i) none
of the rights of the Company or any of its Subsidiaries in its Intellectual
Property have expired or terminated, or are expected to expire or terminate
within five (5) years from the date of this Agreement, except to the extent such
termination could not and could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect, (ii) there has been no
infringement by the Company or any of its Subsidiaries or any of the Company's
or any of its Subsidiaries' licensors or licensees of any Intellectual Property
rights of others, (iii) there has been no infringement by any third parties of
any Intellectual Property owned or licensed by the Company or any of its
Subsidiaries, or of any development of similar or identical trade secrets or
technical information by others, (iv) there is no claim, action or proceeding
against or being threatened against, the Company, any of its Subsidiaries or any
of their respective licensors regarding their Intellectual Property or
infringement of other Intellectual Property rights and there is no claim, action
or proceeding against or being threatened against the Company, any of its
Subsidiaries or any of their respective licensors regarding their Intellectual
Property or infringement of other Intellectual Property rights, (v) there are no
facts or circumstances that could reasonably be expected to give rise to any of
the foregoing, (vi) there is no patent or patent application which contains
claims that interfere with the issued or pending claims of any of the
Intellectual Property owned or licensed by the Company or any of its
Subsidiaries, and (vii) none of the technology employed by the Company or any of
its Subsidiaries has been obtained or is being used by the Company or any of its
Subsidiaries in violation of any material contractual obligation binding on the
Company or any of its Subsidiaries or is being used by any of the officers,
directors or employees of the Company or of its Subsidiaries on behalf of the
Company or any of its Subsidiaries in violation of the rights of any Person or
Persons. The Company and its Subsidiaries have taken commercially reasonable
security measures to protect the secrecy, confidentiality and the value of all
of their material Intellectual Property.
p. Environmental Laws. Except as set forth on Schedule 3(p), each of the
Company and its Subsidiaries (i) is, and has at all times been, in compliance in
all material respects with any and all, and has not violated any, Environmental
Laws (as defined below), (ii) has no, and has never had any, liability for
failure to comply with any Environmental Law, (iii) has received all permits,
licenses or other approvals required of it under applicable Environmental Laws
to conduct its business as presently conducted, and (iv) is in compliance with
all terms and conditions of any such permit, license or approval.
q. Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as is prudent and customary in the businesses in which the
Company and its Subsidiaries are engaged. All of the Company's insurance
policies are in full force and effect and are valid, outstanding and
enforceable, and all premiums with respect thereto are currently paid and no
basis exists for early termination of any of such insurance policies on the part
of the insurer thereunder. None of Company or its Subsidiaries has failed to
give any notice or present any claim under any such insurance policies in due
and timely fashion, and there are no outstanding unpaid claims under any such
insurance policies. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for, and neither the Company
nor any such Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not reasonably be expected to result in a
material increase in the Company's current cost of such insurance.
r. Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations, approvals, licenses and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses as conducted at the time this representation
is made (\"Permits\"), and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such Permit. The Company and its Subsidiaries have no Knowledge that they
will not be able to obtain necessary Permits as and when necessary to enable the
Company and its Subsidiaries to conduct their respective businesses.
s. Principal Market. The Company is not in violation of any of the rules,
regulations or requirements of the OTC Bulletin Board (the \"Principal Market;\"
provided however, that, if after the date of this Agreement the Common Stock is
listed on a national securities exchange or automated quotation system, the
\"Principal Market\" shall mean such national securities exchange) and has no
Knowledge of any facts or circumstances which would reasonably lead to
suspension or termination of the trading of the Common Stock on the Principal
Market in the foreseeable future. Since December 31, 2006, (i) the Company's
Common Stock has been quoted on the Principal Market, (ii) trading in the Common
Stock has not been suspended by the SEC or on the Principal Market and (iii) the
Company has received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or termination of the trading of the
Common Stock on the Principal Market.
t. Tax Status. The Company and each of its Subsidiaries (i) has made or
filed all federal, state and foreign income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject, (ii) has
paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and for which the Company has made appropriate
reserves on its books, and (iii) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations (referred to in clause
(i) above) apply. There are no unpaid taxes claimed in writing to be due from
the Company or any of its Subsidiaries by the taxing authority of any
jurisdiction which, individually or in the aggregate, is expected to have a
Material Adverse Effect, and there is no basis for any such claim. Neither the
Company nor any of its Subsidiaries is a \"United States real property holding
corporation\" (\"USRPHC\") as that term is defined in Section 897(c)(2) of the
Internal Revenue Code of 1986, as amended, and the Treasury Regulations
promulgated thereunder.
u. Transactions With Affiliates. Except as set forth on Schedule 3(u) or in
the SEC Documents, no Related Party of the Company or any of its Subsidiaries,
nor any Affiliate thereof, is presently, has been within the past three years,
or will be as a result of the transactions contemplated by this Agreement and
the other Transaction Documents, a party to any transaction, contract,
agreement, instrument, commitment, understanding or other arrangement or
relationship with the Company or any of its Subsidiaries, whether for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments or consideration to or from
any such Related Party. No Related Party of the Company or any of its
Subsidiaries, or any of their respective Affiliates, has any direct or indirect
ownership interest in any Person (other than ownership of less than 2% of the
outstanding common stock of a publicly traded corporation) in which the Company
or any of its Subsidiaries has any direct or indirect ownership interest or with
which the Company or any of its Subsidiaries competes or has a business
relationship.
v. Application of Takeover Protections; Rights Agreement. The Company and
its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, or
other similar anti-takeover provision under the Certificate of Incorporation or
any certificates of designations or the laws of the State of Delaware to the
transactions contemplated by this Agreement, the Company's issuance of the
Securities in accordance with the terms hereof and any Buyer's ownership and
voting (in the case of the Shares) of the Securities. The Company has not
adopted a stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control of
the Company.
w. Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
x. Outstanding Indebtedness; Liens. Payments of principal and other
payments due under the Notes will, upon issuance at the Closings, rank senior to
all other Indebtedness of the Company or any of its Subsidiaries (in right of
payment, whether with respect of payment of redemptions, interest or damages or
upon liquidation or dissolution or otherwise) and, by virtue of their secured
position, to all trade account payables of the Company or any of its
Subsidiaries. Except as set forth on Schedule 3(x), (i) neither the Company nor
any of its Subsidiaries has, and upon consummation of the transactions
contemplated hereby and by the other Transaction Documents will not have, any
outstanding Indebtedness other than Permitted Indebtedness (as defined below),
(ii) there are no, and upon consummation of the transactions contemplated hereby
and by the other Transaction Documents there will not be any, Liens on any of
the assets of the Company and its Subsidiaries other than the Permitted Liens
and that created by the Security Agreement, and (iii) there are no, and upon
consummation of the transactions contemplated hereby and by the other
Transaction Documents there will not be any, financing statements securing
obligations of any amounts filed against the Company or any of its Subsidiaries
or any of their respective assets, other than under the Security Agreement.
y. Real Property. Neither the Company nor any of its Subsidiaries owns any
real property. Schedule 3(y) contains a complete and correct list of all the
real property, facilities and fixtures that (i) are leased or, in the case of
fixtures, otherwise owned or possessed by the Company or any of its
Subsidiaries, (ii) in connection with which the Company or any of its
Subsidiaries has entered into an option agreement, participation agreement or
acquisition agreement or (iii) the Company or any of its Subsidiaries has agreed
to lease or otherwise acquire or may be obligated to lease or otherwise acquire
in connection with the conduct of its business (collectively, including any of
the foregoing acquired after the date of this Agreement, the \"Real Property\"),
which list identifies all of the Real Property and specifies which of the
Company and its Subsidiaries leases, owns or possesses each item of the Real
Property. Schedule 3(y) also contains a complete and correct list of all leases
and other agreements with respect to which the Company or any of its
Subsidiaries is a party or otherwise bound or affected with respect to the Real
Property, except master leases affiliated with any sub leases, easements, rights
of way, access agreements, surface damage agreements, surface use agreements or
similar agreements that pertain to Real Property that is contained wholly within
the boundaries of any leased Real Property otherwise described on Schedule 3(y)
(the \"Real Property Leases\"). Except as set forth in Schedule 3(y), all of
the Real Property Leases are valid and in full force and effect and are
enforceable against all parties thereto. Except as set forth in Schedule 3(y),
neither the Company nor any of its Subsidiaries nor, to the Company's Knowledge,
any other party thereto is in default in any material respect under any of such
Real Property Leases and no event has occurred which with the giving of notice
or the passage of time or both would constitute a default under, or otherwise
give any party the right to terminate, any of such Real Property Leases, or
could adversely affect the Company's or any of its Subsidiaries' interest in and
title to the Real Property subject to any of such Real Property Leases. No Real
Property Lease is subject to termination, modification or acceleration as a
result of the transactions contemplated hereby.
z. Tangible Assets. The Company and its Subsidiaries have good and
marketable title to all of the tangible assets that are material to their
businesses (the \"Assets\"), in each case free and clear of any Lien, other than
Permitted Liens. The Assets include all tangible assets necessary for the
conduct of the Company's and its Subsidiaries businesses as presently proposed
to be conducted. The Assets that are facilities, fixtures, equipment, and other
personal property have been maintained in accordance with normal industry
practice, and are in good operating condition and repair (subject to normal wear
and tear), and are suitable for the purposes for which they are now used and
proposed to be used. There are no existing agreements, options, commitments or
rights with, of or to any Person to acquire any such Assets, or any interests
therein.
aa. No Materially Adverse Contracts, Etc. The Company is not subject to any
charter, contract, agreement, instrument, corporate or other legal restriction,
or any judgment, decree, order, rule, regulation or other Law that has, has had,
or could reasonably be expected in the future to have, a Material Adverse
Effect.
bb. Investment Company. The Company is not, and upon each Closing will not
be, an \"investment company,\" a company controlled by an \"investment
company,\" or an \"affiliated person\" of, or \"promoter\" or \"principal
underwriter\" for, an \"investment company,\" as such terms are defined in the
Investment Company Act.
cc. Stock Options. Except as set forth on Schedule 3(cc), every Option
issued by the Company pursuant to the Equity Plans (i) has (or, if no longer
outstanding, had), with respect to each share of Common Stock into which it is
convertible or for which it is exercisable or exchangeable, an exercise price
equal to or greater than the fair market value per share of Common Stock on the
date of grant of such Option, (ii) was issued in compliance with the terms of
the plan under which it was issued and in compliance with applicable Laws, rules
and regulations, including the rules and regulations of the Principal Market,
and (iii) has been accounted for in accordance with GAAP and otherwise been
disclosed accurately and completely and in accordance with the requirements of
the Securities Laws, including Rule 402 of Regulation S-K promulgated by the
SEC, and the Company has paid, or properly reserved for, all taxes payable with
respect to each such Option (including with respect to the issuance and exercise
thereof), and has not deducted any amounts from its taxable income that it is
not entitled to deduct with respect to any such stock option (including the
issuance and exercise thereof).
dd. Clinical Services. The contract research services provided by each of
the Company and its Subsidiaries is provided in compliance in all material
respects with all applicable Laws, including, without limitation, all applicable
FDA rules, regulations and requirements and all rules, regulations and
requirements of comparable foreign Governmental Entities.
4. AFFIRMATIVE COVENANTS.
a. Best Efforts. Each party shall use its reasonable best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Sections 7
and 8 of this Agreement.
b. Form D and Blue Sky. The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D. The Company shall, on
or before each Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to the Buyers at the Closing to occur on such Closing Date
pursuant to this Agreement under applicable Securities Laws of the states of the
United States, and shall provide to each Buyer evidence of any such action so
taken on or prior to the applicable Closing Date. The Company shall make all
filings and reports relating to the offer and sale of the Securities required
under applicable Securities Laws of the states of the United States.
c. Reporting Status. During the period commencing on the date of this
Agreement and ending on the first date after the Initial Closing Date that is
the latest of (i) the date that is two years after the date as of which the
Investors (as that term is defined in the Registration Rights Agreement) may
sell all of the Shares without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto), and (ii) the date on which no Notes
remain outstanding, (iii) the date that is the last day on which any Shares may
be issued hereunder, and (iv) the date on which the Security Agreement has been
terminated (the period ending on such latest date, the \"Reporting Period\"),
the Company shall timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the Securities Laws
otherwise would permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the sale of the
Notes and the Shares first, to pay expenses and commissions related to the sale
of the Securities, second, to fund the Hesperion Acquisition, and third, for
general working capital needs.
e. Financial Information. The Company agrees to send the following to each
Investor (as defined in the Registration Rights Agreement) during the Reporting
Period (i) unless the following are filed with the SEC through XXXXX and are
immediately available to the public through the XXXXX system, within one
Business Day after the filing thereof with the SEC, a copy of each of its
quarterly reports on Form 10-QSB or 10-Q and annual reports on Form 10-KSB or
10-K, as the case may be (each, a \"Periodic Report\"), Current Reports on Form
8-K, registration statements (other than on Form S-8) and amendments and
supplements to each of the foregoing, (ii) unless immediately available through
Bloomberg or other nationally recognized media outlet, facsimile copies of all
press releases issued by the Company or any of its Subsidiaries,
contemporaneously with the issuance thereof, and (iii) copies of any notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.
f. Internal Accounting Controls. During the Reporting Period, the Company
shall, and, shall cause each of its Subsidiaries to:
