Exhibit 10.1
--------------------------------------------------------------------------------
PURCHASE AGREEMENT
BY AND AMONG
IONATRON, INC.
AND
THE PURCHASERS
--------------------------------------------------------------------------------
Dated: October __, 2005
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is made as of the __ day of
October 2005, by and among Ionatron, Inc., a Delaware corporation ("Company"),
and the investors listed on Schedule I (the "Schedule of Purchasers") attached
hereto ("Purchasers").
W I T N E S S E T H:
WHEREAS, pursuant to the provisions of this Agreement, the Company desires
to sell to the Purchasers, and the Purchasers desire to purchase from the
Company, up to 869,560 shares (the "Offered Shares") of the Company's 6.5%
Series A Redeemable Convertible Preferred Shares, par value $.001 per share (the
"Preferred Stock"), to be issued pursuant to the provisions of a Certificate of
Designation (the "Designation") filed by the Company with the Secretary of State
of the State of Delaware on October __, 2005, at a price of $25.00 per Offered
Share; and
WHEREAS, the Company agrees to grant to each Purchaser an option
(collectively, the "Options") to purchase up to 15% of the number of Offered
Shares purchased by such Purchaser (the "Option Shares" and, together with the
Offered Shares, the "Shares") exercisable during the 30-day period following the
Closing Date (as defined in Section 2.1), at an exercise price per Offered Share
equal to $25.00; and
WHEREAS, J Xxxxxxxx Securities Group (the "J Xxxxxxxx") is acting as
placement agent for the Company on a "best efforts" basis with respect to the
offering and sale of the Shares pursuant to the terms of this Agreement; and
WHEREAS, the Shares will be convertible into shares of common stock (the
"Common Stock"), par value $.001 per share, of the Company (the "Conversion
Shares"); and
WHEREAS, the Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"),
and Rule 506 of Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act;
and
WHEREAS, pursuant to the terms of the Preferred Stock and the Designation,
the Shares, the Conversion Shares and the shares of Common Stock issuable as
payment of dividends on the Shares (the "Dividend Shares") may be resold or
otherwise transferred by the Purchasers only if the resale or transfer is
hereinafter registered under the Securities Act or an exemption from
registration under the Securities Act is available; and
WHEREAS, the Purchasers and their permitted transferees will be entitled
to the benefits of a Registration Rights Agreement dated as of the Closing (as
defined herein) by and among the Company and the Purchasers (the "Registration
Rights Agreement"); and
WHEREAS, each Purchaser is an "accredited investor," as such term is
defined in Rule 501 under the Securities Act; and
WHEREAS, in connection with the sale of the Shares, the Company has
prepared a preliminary offering memorandum and, prior to the Closing, will
prepare a final offering memorandum (such final offering memorandum is referred
to as the "Memorandum") including or incorporating by reference a description of
the terms of the Shares and the Conversion Shares, the material terms of the
offering and a description of the Company. As used herein, the term "Memorandum"
shall include the exhibits and annexes thereto and the documents and reports
incorporated by reference therein (including, but not limited to, those reports
filed with the SEC pursuant to the Exchange Act, as hereafter defined) and any
amendment or supplement thereto, as of and after the date thereof. The terms
"supplement", "amendment" and "amend" as used herein with respect to the
Memorandum shall include any supplement or amendment to the Memorandum prior to
the Closing and all documents incorporated by reference in the Memorandum that
are filed, subsequent to the date of the Memorandum and prior to the Closing,
with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:
1. Purchase and Sale of Offered Shares. On the basis of the
representations and warranties contained in this Agreement and subject to its
terms and conditions, the Purchasers hereby agree, severally and not jointly, to
purchase from the Company, and the Company hereby agrees to issue and sell to
the Purchasers, an aggregate of up to 869,560 Offered Shares, for an aggregate
purchase price per Purchaser equal to $25.00 multiplied by the number of Offered
Shares purchased by such Purchaser (the "Purchase Price"), as set forth opposite
such Purchaser's name on the Schedule of Purchasers (the "Purchase").
2. Closings; Payment and Delivery; Option.
2.1 In the event that Purchasers have (a) subscribed for Offered
Shares by executing, completing and delivering their signature pages to this
Agreement indicating such and (b) deposited the Purchase Price for such Offered
Shares into a non-interest bearing escrow account (the "Escrow Account")
maintained for such purpose, on behalf of J Xxxxxxxx as placement agent for the
Company, by Continental Stock Transfer & Trust Company ("Escrow Agent"), all in
accordance with the instructions set forth in the Subscription Instructions
attached hereto as EXHIBIT A (the "Subscription Instructions"), and the Company
and J Xxxxxxxx have accepted, from the Purchasers, subscriptions for the Offered
Shares, the closing of the Purchase (the "Closing") shall occur at the offices
of Blank Rome LLP, The Chrysler Building, 000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000 at 10:00 a.m., on October __, 2005 (the "Closing Date"), at
which time the Company will execute this Agreement and payment for the Offered
Shares being sold at the Closing shall be released to the Company from the
Escrow Account against delivery of certificates representing such Offered
Shares, with any transfer taxes payable in connection with the transfer of the
Offered Shares to the Purchasers duly paid, registered in the names of the
Purchasers as set forth on the Schedule of Purchasers attached as Schedule 1 to
this Agreement to J Xxxxxxxx on behalf of the Purchasers.
2
2.2 The Company has the right to reject any subscription for Offered
Shares, in whole or in part, for any reason whatsoever, and to allot to any
Purchaser less than the number of Offered Shares subscribed for by such
Purchaser. In the event that the Company accepts only a portion of a Purchaser's
subscription and reduces the number of Offered Shares to be sold to the
Purchaser hereunder, the Purchase Price deposited into the Escrow Account by the
Purchaser with respect to the unaccepted portion of the subscription shall be
returned to the Purchaser.
2.3 The Offered Shares delivered for the account of each Purchaser
shall be registered in such names and in such denominations as requested in
writing by such Purchaser not later than two full business days prior to the
Closing Date.
2.4 Each Purchaser shall have the Option to purchase up to a number
of Option Shares equal to 15% of the Offered Shares purchased by such Purchaser
at the Closing. Each Purchaser may exercise its Option in whole or in part, from
time to time, at a price of $25.00 per Option Share by delivering a completed
and executed Form of Election to Purchase (in the form attached hereto as
EXHIBIT B) to the Company at its principal executive office, together with
payment of the purchase price of the Option Shares being purchased upon such
exercise, by cash, wire transfer or certified check, on or prior to 5:00 p.m.
New York local time on November [ ], 2005 [30 days after Closing Date]. The
Company will deliver a certificate representing the Option Shares to each
Purchaser exercising its Option, registered in the name such Purchaser as set
forth on the Schedule of Purchasers attached as Schedule 1 to this Agreement,
promptly following such Purchaser's payment of the purchase price for such
Option Shares.
3. Representations and Warranties of the Company. The Company hereby makes
the following representations and warranties to each Purchaser as of the date
hereof and the Closing Date. Each of the representations and warranties are
qualified in their entirety by the information contained in the Disclosure
Schedules and Exhibits hereto.
3.1 As of their respective dates, each document, filed by the
Company with the SEC pursuant to the Exchange Act and incorporated by reference
in the Memorandum, as any of such documents may have been subsequently amended
by filings made by the Company with the SEC prior to the applicable Closing Date
(the "Incorporated Documents"), complied in all material respects with the
requirements of the Exchange Act and the applicable rules and regulations of the
SEC thereunder and none of the Incorporated Documents or the Memorandum
contains, and on the Closing Date, none of the Incorporated Documents or the
Memorandum will contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3.2 The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with full power
and authority, corporate and other to own or lease, as the case may be, and
operate its properties, whether tangible or intangible, and to conduct its
business as described in the Memorandum and is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company.
3
3.3 The Company's subsidiaries are set forth in the Disclosure
Schedules (the "Subsidiaries"). Unless the context requires otherwise, all
references to the Company include the Subsidiaries. Each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation as set forth in the Disclosure Schedules, with
full power and authority, corporate and other, to own or lease, as the case may
be, and operate its properties, whether tangible or intangible, and to conduct
its business as currently conducted. Each Subsidiary is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the ownership or leasing of
property requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a material adverse effect
on the Company or the Subsidiary. The Company owns all of the issued and
outstanding shares of capital stock (or other equity or ownership interests) of
each Subsidiary, such ownership is free and clear of any security interests,
liens, encumbrances, claims and charges, and all of such shares have been duly
authorized and validly issued, and are fully paid and nonassessable.
3.4 The Company does not presently own, directly or indirectly, an
interest in any corporation, association, or other business entity, and is not a
party to any joint venture, partnership, or similar arrangement, other than the
Subsidiaries.
3.5 The authorized capital stock of the Company conforms in all
material respects to the description thereof contained in the Memorandum and
such description conforms in all material respects to the rights in the
instruments defining the same.
3.6 The shares of common stock of the Company outstanding prior to
the issuance of the Shares have been duly authorized and are validly issued,
fully paid and non-assessable.
3.7 The Shares to be sold under this Agreement have been duly
authorized and, when issued and sold and paid for by the Purchasers in
accordance with the terms of this Agreement and the Designation, will be duly
authorized, validly issued, fully paid and non assessable, and the Purchasers
will not be subject to personal liability solely by reason of being such holders
and will not be subject to the preemptive or similar rights of any holders of
any security of the Company.
3.8 The Conversion Shares and Dividend Shares have been duly
authorized and reserved and, when issued upon conversion of the Shares in
accordance with the terms of the Designation, will be validly issued, fully paid
and non-assessable, and the issuance of the Conversion Shares and Dividend
Shares will not be subject to any preemptive or similar rights of any holders of
any security of the Company.
3.9 The Company has not granted or agreed to grant to any person any
rights (including "piggy-back" registration rights) to have any securities of
the Company registered with the SEC or any other governmental authority that
have not been satisfied or waived.
4
3.10 Each of this Agreement, the Registration Rights Agreement and
the Escrow Agreement (the "Transaction Documents") has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company
enforceable in accordance with its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting creditors'
rights generally (including, without limitation, statutory or other laws
regarding fraudulent preferential transfers) and equitable principles of general
applicability and except as rights to indemnification and contribution under the
Registration Rights Agreement may be limited under applicable law and by public
policy.
3.11 The execution and delivery by the Company, and the performance
by the Company of its obligations under the Transaction Documents will not
conflict with or contravene in any material respect, cause a breach or violation
of or default under, any provision of applicable law or the certificate of
incorporation or by-laws of the Company or any agreement or other instrument
binding upon the Company or any Subsidiary that is material to the Company and
the Subsidiaries, taken as a whole, for which a waiver or consent has not been
obtained, or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company, or any Subsidiary, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its obligations
under the Transaction Documents, except such as may be required by the
securities or Blue Sky laws of the various states in connection with the offer
and sale of the Shares and by Federal and state securities laws with respect to
the obligations of the Company under the Registration Rights Agreement or as may
be required by the National Association of Securities Dealers, Inc. or such the
failure of which to obtain would not have a material adverse effect on the
Company and the Subsidiaries taken as a whole.
3.12 There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business, operations or prospects of
the Company and the Subsidiaries, taken as a whole, whether or not arising in
the ordinary course of business from that set forth in the Memorandum. Except as
disclosed in the Memorandum, since July 1, 2005, there have been no transactions
entered into by the Company or any Subsidiary, other than those in the ordinary
course of business, which are material with respect to the Company and the
Subsidiaries, taken as a whole. Except as set forth in the Memorandum, since
July 1, 2005, there has been no obligation, contingent or otherwise, directly or
indirectly incurred by the Company or any Subsidiary material to the Company and
the Subsidiaries taken as a whole.
3.13 None of the Company nor any Subsidiary is in violation of its
charter or by-laws or in default in the performance of any obligation,
agreement, covenant or condition contained in any indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to the Company
and the Subsidiaries taken as a whole to which the Company or any Subsidiary is
a party or by which the Company or any Subsidiary or any of their properties is
bound, except for such defaults that would not, singly or in the aggregate, have
a material adverse effect on the Company and the Subsidiaries taken as a whole.
3.14 There are no legal or governmental proceedings, orders,
judgments, writs, injunctions, decrees or demands pending or, to the Company's
knowledge, threatened to which the Company or any Subsidiary is a party or to
which any of the properties of the Company or any Subsidiary is subject other
than proceedings, orders, judgments, writs, injunctions, decrees or demands
accurately described in all material respects in the Memorandum and proceedings,
orders, judgments, writs, injunctions, decrees or demands that would not have a
material adverse effect on the Company and the Subsidiaries taken as a whole or
on the power or ability of the Company to perform its obligations under the
Transaction Documents or to consummate the transactions contemplated by the
Memorandum.
5
3.15 The Company and each Subsidiary (a) is in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (b) has received all permits, licenses or other
approvals required of it under applicable Environmental Laws to conduct its
business, (c) is in compliance with all material terms and conditions of any
such permit, license or approval, (d) is in compliance with any provisions of
the employee Retirement Income Security Act of 1974, as amended, ("ERISA") or
the rules and regulations promulgated thereunder and (e) is in compliance with
any provisions of the Foreign Corrupt Practice Act or the rules and regulations
promulgated thereunder, except, with respect to clauses (a) through (e), where
such noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals, or noncompliance with ERISA or the Foreign Corrupt
Practices Act or failure to comply with the terms and conditions of such
permits, licenses or approvals, would not, singly or in the aggregate, have a
material adverse effect on the Company and the Subsidiaries, taken as a whole.
3.16 There are no costs or liabilities to the Company or any
Subsidiary associated with Environmental Laws (including, without limitation,
any capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, have a
material adverse effect on the Company and the Subsidiaries taken as a whole.
3.17 None of the Company nor any Subsidiary is, and giving effect to
the offering and sale of the Shares and the application of the proceeds thereof
as described in the Memorandum will be, required to register as an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended.
3.18 None of the Company, any Subsidiary nor any of its affiliates
(as defined in Rule 501(b) of Regulation D, each an "Affiliate") has directly,
or through any agent, (a) sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as defined in the Securities
Act) which is or will be integrated with the sale of the Shares in a manner that
would require the registration under the Securities Act of the Shares or (b)
offered, solicited offers to buy or sold the Shares by any form of general
solicitation or general advertising (as those terms are used in Regulation D) or
in any manner involving a public offering within the meaning of Section 4(2) of
the Securities Act.
3.19 The books, records and accounts of the Company in all material
respects accurately and fairly reflect, in reasonable detail, the transactions
in, and Designation of, the assets of, and the results of operations of, the
Company. The Company maintains a system of accounting controls sufficient to
provide reasonable assurances that (a) transactions are executed in accordance
with management's general or specific authorization, (b) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets, (c) access to assets is permitted only in accordance
with management's general or specific authorization and (d) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
6
3.20 Each of the Company and each Subsidiary owns or possesses, or
has the right to use, all material patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names currently employed or required by it
in connection with the business currently conducted by it as described in the
Memorandum, except such as the failure to so own or possess or have the right to
use would not have, singly or in the aggregate, a material adverse affect on the
Company and the Subsidiaries taken as a whole. To the Company's knowledge, there
are no valid and enforceable United States patents that are infringed by the
business currently conducted by the Company or any Subsidiary, or as currently
proposed to be conducted by the Company or any Subsidiary, as described in the
Memorandum and which infringement would have a material adverse effect on the
Company and the Subsidiaries taken as a whole. The Company is not aware of any
basis for a finding that the Company does not have valid title or license rights
to the patents and patent applications referenced in the Memorandum as owned or
licensed by the Company or any Subsidiary, and, to the Company's knowledge, none
of the Company nor any Subsidiary is subject to any judgment, order, writ,
injunction or decree of any court or any Federal, state, local, foreign or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or any arbitrator, nor has it entered into or is it a party
to any contract, which restricts or impairs the use of any of the foregoing
which would have a material adverse effect on the Company and the Subsidiaries
taken as a whole. Neither the Company nor any Subsidiary has received any
written notice of infringement of or conflict with asserted rights of any third
party with respect to the business currently conducted by it as described in the
Memorandum and which would have a material adverse effect on the Company and the
Subsidiaries taken as a whole and the Company has no knowledge of any facts or
circumstances that would serve as a reasonable basis for any such claims.
3.21 Other than with respect to Environmental Laws and ERISA (which
are governed by Section 3.15 above) each of the Company and each Subsidiary has
such permits, licenses, consents, exemptions, franchises, authorizations and
other approvals (each, an "Authorization") of, and has made all filings with and
notices to, all appropriate federal, state, local or foreign governmental or
regulatory authorities and self regulatory organizations and all courts and
other tribunals, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except to the extent the
failure to have any such Authorization or to make any such filing or notice
would not, singly or in the aggregate, have a material adverse effect on the
Company and the Subsidiaries taken as a whole. Each such Authorization is valid
and in full force and effect and the Company and each Subsidiary is in
compliance with all the material terms and conditions thereof and with the rules
and regulations of the authorities and governing bodies having jurisdiction with
respect thereto, and no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which allows or,
7
after notice or lapse of time or both, would allow, revocation, suspension or
termination of any such Authorization or results or, after notice or lapse of
time or both, would result in any other impairment of the rights of the holder
of any such Authorization except to the extent such failure to be valid and in
full force and effect or to be in compliance, the occurrence of any such event
or the presence of any such restriction would not, singly or in the aggregate,
have a material adverse effect on the Company and the Subsidiaries taken as a
whole.
3.22 There are no outstanding rights, warrants, options, convertible
securities or commitments to sell granted or issued by the Company entitling any
person to purchase or otherwise acquire any shares of the capital stock of the
Company, except as otherwise disclosed in the Memorandum and the Incorporated
Documents and except for options granted to directors and employees of the
Company in the ordinary course of business since June 30, 2005.
3.23 The financial statements included or incorporated by reference
in the Memorandum as the same may have been amended prior to the date of the
Memorandum, together with related schedules and notes, present fairly in all
material respects the financial position, results of operations and changes in
financial position of the Company and its consolidated subsidiaries on the basis
stated therein at the respective dates or for the respective periods to which
they apply; such statements and related schedules and notes have been prepared
in accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data set forth in the Memorandum are,
in all material respects, accurately presented and prepared on a basis
consistent with such financial statements and the books and records of the
Company. The financial information set forth under the captions "Summary
Financial Data" and "Capitalization" in the Memorandum are derived from the
accounting records of the Company and its subsidiaries, have been computed on a
basis consistent with the audited financial statements in the Memorandum and
fairly present in all material respects, on the basis stated in the Memorandum,
the information included therein.
3.24 There are no existing or, to the Company's knowledge,
threatened labor disputes with the employees of the Company or any Subsidiary
which would have a material adverse effect on the Company and the Subsidiaries
taken as a whole.
3.25 The Company's and the Subsidiaries' manufacturing, distribution
and marketing practices are in compliance with all applicable laws, rules,
regulations, orders, licenses, judgments, writs, injunctions and decrees in each
country in which the Company's and the Subsidiaries' products are marketed,
except for such noncompliances that would not have a material adverse effect on
the Company and the Subsidiaries taken as a whole.
3.26 None of the Company nor any Subsidiary has received any written
communication notifying the Company or such Subsidiary as to the termination or
threatened termination or modification or threatened modification of any
consulting, licensing, marketing, research and development, cooperative or any
similar agreement described in the Memorandum.
3.27 The statements relating to legal matters, documents or
proceedings included in the Memorandum under the captions "Description of
Capital Stock" and "Notice to Investors" and in "Item 3 - Legal Proceedings" of
the Company's most recent annual report on Form 10-K and in "Item 1 - Legal
Proceedings" of the Company's quarterly reports on Form 10-Q included or
incorporated by reference in the Memorandum fairly summarize in all material
respects such matters, documents or proceedings.
8
3.28 Neither the Company nor any Subsidiary, nor to the Company's
knowledge, any of its officers, directors or Affiliates has taken, directly or
indirectly, any action designed to or which has constituted the stabilization or
manipulation of the price of the common stock of the Company or any security
convertible into or exchangeable for common stock of the Company to facilitate
the sale or resale of any of the Preferred Stock.
3.29 Each of the Company and each Subsidiary has filed all Federal,
state, local and foreign tax returns which are required to be filed through the
date hereof (except where the failure to so file would not have a material
adverse effect on the Company and the Subsidiaries taken as a whole), which
returns are true and correct in all material respects, or have received
extensions thereof, and have paid all taxes shown on such returns and all
assessments received by them to the extent that the same are material and have
become due. All tax liabilities are adequately provided for on the books of the
Company and the Subsidiaries. To the Company's knowledge, there are no tax
audits or investigations pending, which if adversely determined, would have a
material adverse effect on the Company and the Subsidiaries taken as a whole.
3.30 Each of the Company and each Subsidiary is insured against such
losses and risks and in such amounts as are customary in the businesses in which
it is engaged, including but not limited to, insurance covering product
liability and real or personal property owned or leased against theft, damage,
destruction, act of vandalism and all other risks customarily insured against.
All policies of insurance and fidelity or surety bonds insuring the Company, any
Subsidiary or the Company's or any Subsidiary's businesses, assets, employees,
officers and directors are in full force and effect. The Company and each
Subsidiary is in compliance with the terms of such policies and instruments in
all material respects. The Company has no reason to believe that it and the
Subsidiaries will not be able to renew their 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 have a
material adverse effect on the Company and the Subsidiaries taken as a whole.
Since January 1, 2004, neither the Company nor any Subsidiary has been denied
any insurance coverage which it has sought or for which it has applied.
3.31 The Company and each Subsidiary has good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by it, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Memorandum or such as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company or
such Subsidiary. Any real property and buildings held under lease by the Company
and each Subsidiary is held by it under valid, subsisting and enforceable leases
with such exceptions as are not material and do not materially interfere with
the use made and proposed to be made of such property and buildings by the
Company or such Subsidiary.
9
3.32 The Company is subject to the reporting requirements of Section
13 or Section 15(d) of the Exchange Act. Since January 1, 2004, the Company has
timely filed with the SEC all reports required to be filed under the Exchange
Act and the Company is and, as of the time of each Closing will be, current in
its reporting obligations under the Exchange Act. To the Company's knowledge,
the Company has responded to all comments raised by the SEC with respect to the
Company's reports, registration statements and other filings made with the SEC
to the SEC's satisfaction, and no comments which could have an adverse effect on
the Company's consolidated financial condition or results of operations (past or
future) or could require a restatement of previously filed financial statements
remained unresolved with the SEC.
3.33 There is and there has been no failure on the part of the
Company and the Subsidiaries or, to the Company's knowledge, any of the officers
or directors of the Company or any Subsidiary to comply in all material respects
with the Xxxxxxxx-Xxxxx Act of 2002 and the rules and regulations promulgated in
connection therewith.
3.34 The Company has not distributed and, prior to the exercise or
expiration of all the Options, will not distribute any offering material in
connection with the offering and sale of the Shares other than the Memorandum.
3.35 Neither the Company nor any of its Affiliates has directly or
indirectly, solicited any offer to buy, sold or offered to sell or otherwise
negotiated in respect of, or will solicit an offer to buy, sell or offer to
sell, or otherwise negotiate in respect of any security which might be
integrated with the sale of the Shares or the Conversion Shares in a manner that
would require the Shares to be registered under the Securities Act. Except as
set forth in the Memorandum, there are no persons with registration rights or
similar rights to have any securities registered by the Company under the
Securities Act. No registration under the Securities Act of the Shares or the
Conversion Shares is required for the sale of the Shares and Conversion Shares
to the Purchasers under this Agreement and the Memorandum, assuming the accuracy
of the Purchasers' representations, warranties and agreements set forth in
Section 4.
3.36 The Company has established and maintains disclosure controls
and procedures (as such term in defined in Rule 13a-14 and 15d-14 under the
Exchange Act); such disclosure controls and procedures are designed to ensure
that material information relating to the Company, including its consolidated
subsidiaries, is made known to the Company's Chief Executive Officer and its
Chief Financial Officer by others within those entities, and such disclosure
controls and procedures are reasonably effective to perform the functions for
which they were established, subject to the limitation of any such control
system; the Company's auditors and the Audit Committee of the Board of Directors
of the Company have been advised of: (A) any significant deficiencies in the
Company's ability to record, process, summarize, and report financial data; and
(B) any fraud, whether or not material, that involves management or other
employees who have a role in the Company's internal controls; any material
weaknesses in internal controls have been identified for the Company's auditors;
and since the date of the most recent evaluation of such disclosure controls and
procedures, there have been no significant changes in internal controls or in
other factors that could significantly affect internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
3.37 The Company acknowledges that it has engaged J Xxxxxxxx as
placement agent in connection with the Purchase. Neither the Company nor, based
on the representations of J Xxxxxxxx to the Company, any of its agents has
engaged or will engage in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the
Purchase.
10
3.38 The Company has caused or will cause to be timely filed with
each applicable jurisdiction corresponding to the principal place of business of
each Purchaser (as same has been provided by such Purchasers) all appropriate
documentation required for the registration of the Purchase under applicable
state law or required to secure an exemption from such registration
requirements.
4. Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as of the date hereof as to itself that:
4.1 Authorization. The Transaction Documents to which such Purchaser
is a signatory constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their respective terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (b) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (c) to the
extent the indemnification provisions contained in the Transaction Documents may
be limited by applicable federal or state laws.
4.2 Purchase Entirely for Own Account. The Shares acquired by each
Purchaser will be acquired for investment for such Purchaser's own account. Each
Purchaser has full power and authority to enter into this Agreement. 4.3
Disclosure of Information. It acknowledges that it has received and reviewed the
Memorandum. It acknowledges that it has received all the information that it has
requested relating to the Company and the purchase of the Shares and further
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the Purchase. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 3 of this Agreement or the right of the Purchaser to
rely thereon.
4.4 Restricted Securities. It understands that the Shares and the
Conversion Shares are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering, and that under such laws and
applicable regulations such securities may be resold without registration under
the Act, only in certain limited circumstances. In this connection, it
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act. The transfer
restrictions and other provisions set forth in the Memorandum under the caption
"Notice to Investors," including the legend required thereby, shall apply to the
Shares and Conversion Shares.
4.5 Accredited Investor. It is an "accredited investor" within the
meaning of Regulation D under the Securities Act.
11
4.6 Release of Funds. It hereby acknowledges and agrees that the
Purchase Price for the Offered Shares being purchased by it hereunder, has been
previously (or prior to the Closing will be) wired by the Purchaser to the
Escrow Agent, and that, upon the Escrow Agent's receipt of executed (by the
Company and such Purchaser) copies of this Agreement, the deliverables set forth
in Section 5 below and a joint disbursement instruction from the Company and J
Xxxxxxxx covering such Purchase Price funds ("Disbursement Letter"), the Escrow
Agent will wire transfer such Purchase Price funds in accordance with the
Disbursement Letter, provided, however, that if no Disbursement Letter is
received by the Escrow Agent on or prior to October __, 2005 with respect to
such Purchaser's funds, such funds shall be returned without interest to the
Purchaser.
4.7 Purchasers' Indemnification of the Company. Each Purchaser
hereby indemnifies and holds the Company and its officers, directors and agents
free from any liability they may incur (including the costs of defending any
legal action brought against any of the foregoing parties) as a result of any
breach by such Purchaser of the representations of the Purchaser set forth in
this Section 4.
4.8 J Xxxxxxxx Fees. The Purchasers acknowledge that J Xxxxxxxx is
acting as placement agent in connection with the Purchase and will receive a fee
from the Company for such services equal to 7.0% of the aggregate Purchase Price
paid by the Purchasers for the Shares and will receive a warrant to purchase a
number of shares of Common Stock equal to 7.0% of the number of shares of Common
Stock issuable upon conversion of Shares sold to and paid for by the Purchasers
(in each case, including Option Shares sold to and paid for by the Purchasers).
In addition, if within twelve (12) months following the Closing the Company
sells, directly or indirectly, securities to any Purchaser (other than
securities in connection with a working capital loan or facility or project debt
financing), J Xxxxxxxx will be entitled to receive the same compensation with
respect to such sale of securities as it will receive in connection with the
Purchase.
5. Conditions to the Purchasers' Obligations. The obligations of each
Purchaser to purchase and pay for the Offered Shares set forth opposite its name
on the Schedule of Purchasers on the Closing Date are subject to the accuracy of
the representations and warranties of the Company contained in this Agreement or
in any certificate of any officer of the Company delivered pursuant to this
Agreement and to the following further conditions:
5.1 Officer's Certificate. The Company shall have delivered to J
Xxxxxxxx, on behalf of the Purchasers, on the Closing Date a certificate, dated
the Closing Date and signed by an executive officer of the Company, to the
effect that the representations and warranties of the Company contained in this
Agreement are true and correct as of the Closing Date and that the Company has
complied with all of the agreements and satisfied all of the conditions on its
part to be performed or satisfied hereunder on or before such Closing Date.
5.2 Opinion of Counsel. The Company shall have delivered to J
Xxxxxxxx, on behalf of the Purchasers, on the Closing Date the opinion of Blank
Rome LLP, counsel for the Company, dated such Closing Date, to the effect set
forth in EXHIBIT C attached hereto. Such opinion shall be rendered to the
Purchasers at the request of the Company and shall so state therein.
12
5.3 Accountant's Consent. The Company shall have delivered to J
Xxxxxxxx, on behalf of the Purchasers, on the Closing Date a copy of the letter,
dated as of the date of the Memorandum, from BDO Xxxxxxx, LLP, independent
public accountants, to the Company consenting to the Company's incorporation in
the Memorandum of its report in the Company's Annual Report on Form 10-K for the
year ended December 31, 2004.
5.4 Good Standing Certificate. The Company shall have delivered to J
Xxxxxxxx, on behalf of the Purchasers, on the Closing Date a certificate, dated
as of a reasonably current date prior to such Closing, issued by the proper
authority in Delaware to the effect that the Company is legally existing and in
good standing.
5.5 Secretary's Certificate. The Company shall have delivered to J
Xxxxxxxx, on behalf of the Purchasers, on the Closing Date a certificate, dated
as of the Closing Date, executed by the Secretary of the Company certifying the
resolutions adopted by the Company's board of directors relating to the
transactions contemplated by this Agreement.
5.6 Registration Rights Agreement. The Company shall have duly
executed the Registration Rights Agreement in the form attached hereto as
EXHIBIT D.
6. Covenants of the Company. In further consideration of the agreements of
the Purchasers contained in this Agreement, the Company covenants with each
Purchaser as follows:
6.1 The Company will not solicit any offer to buy or offer or sell
the Shares or the Conversion Shares by means of any form of general solicitation
or general advertising (as those terms are used in Regulation D) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Securities Act.
6.2 The Company will use its commercially reasonable efforts to
assist J Xxxxxxxx to apply for quotation of the Preferred Stock on the OTC
Bulletin Board.
6.3 Neither the Company nor any of its Affiliates will take any
action prohibited by Regulation M under the Exchange Act in connection with the
sale and distribution of the Shares contemplated hereby.
6.4 Until the date on which the Purchasers shall have sold all the
Conversion Shares held by them and none of the Preferred Stock are outstanding,
the Company shall use its best efforts timely file all reports required to be
filed with the SEC pursuant to the Exchange Act, and the Company shall not
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
otherwise permit such termination.
6.5 The Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, the number of shares of
Common Stock issuable as Conversion Shares.
6.6 The Company will take such actions as may be reasonably required
or desirable to carry out the provisions of this Agreement and the other
Transaction Documents.
13
6.7 The Company shall maintain such controls and other procedures,
including without limitation those required by Section 302 of the Xxxxxxxx-Xxxxx
Act and the applicable regulations thereunder, that are reasonably designed to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms, including without limitation, controls and procedures reasonably designed
to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the Company's management, including its Chief Executive Officer
and its Principal Financial Officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure, to ensure
that material information relating to the Company, including its Subsidiaries,
is made known to them by others within those entities.
6.8 Notwithstanding anything herein to the contrary, the Company may
not elect to make all or a portion of a dividend payment in shares of Common
Stock or issue shares of Common Stock as payment of the purchase price of a
Change of Control (as defined in the Designation) to the extent such issuance of
Common Stock (when added to the Common Stock issued or issuable upon conversion
of the Preferred Stock) requires stockholder approval under Nasdaq Marketplace
Rule 4350(i) and such stockholder approval had not been obtained. The Company
will use its best efforts to obtain stockholder approval for any such issuance,
if necessary, prior to the time of issuance.
7. Indemnification.
7.1 The Company agrees to indemnify and hold harmless each
Purchaser, each person, if any, who controls any Purchaser within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, and
each Affiliate of any Purchaser (individually, the "Indemnified Person" or
collectively the "Indemnified Person") from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred in connection with defending or investigating
any such action or claim) (a) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Memorandum (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), (b) caused by any omission or alleged omission to state in the
Memorandum a material fact necessary to make the statements therein in the light
of the circumstances under which they were made not misleading or (c) that arise
out of or are based upon any material breach of any representation, warranty,
agreement obligation or covenant of the Company contained herein.
7.2 Promptly after receipt of notice of the commencement of any
action in respect of which indemnity may be sought against the Company under
this Section 7, the Indemnified Person will notify the Company in writing of the
commencement thereof, and the Company will, subject the provisions hereinafter
stated, assume the defense of such action (including the employment of counsel
reasonably satisfactory to the Indemnified Person and the payment of expenses in
connection with such defense) insofar as such action relates to an alleged
liability in respect of which indemnity may be sought against the Company under
this Section. After notice from the Company of its election to assume the
defense of such claim or action, and provided it continues to meet its
obligations hereunder, the Company shall no longer be liable to the Indemnified
Person under this Section for any legal or other expenses subsequently incurred
by the Indemnified Person in connection with the defense thereof other than
reasonable costs incurred prior to the Company assuming the defense of such
action; provided, however, that if in the reasonable good faith judgment of the
Indemnified Person or Persons, because of a conflict of interest of the counsel
employed by Company, to be represented by separate counsel, the Indemnified
14
Person or Persons shall have the right to employ separate counsel to represent
the Indemnified Persons who may be subject to liability arising out of any claim
in respect of which indemnity may be sought by the Indemnified Persons thereof
against the Company, in which event the reasonable fees and expenses of one such
separate counsel to represent all of the Indemnified Persons shall be borne by
the Company.
8. Miscellaneous.
8.1 Survival of Warranties. All of the representations and
warranties made herein shall survive the execution and delivery of this
Agreement. The Purchasers are entitled to rely, and the parties hereby
acknowledge that the Purchasers have so relied, upon the truth, accuracy and
completeness of each of the representations and warranties of the Company
contained herein, irrespective of any independent investigation made by
Purchasers. The Company is entitled to rely, and the parties hereby acknowledge
that the Company has so relied, upon the truth, accuracy and completeness of
each of the representations and warranties of the Purchasers contained herein,
irrespective of any independent investigation made by the Company.
8.2 Right of Placement Agent to Rely on Representations. J Xxxxxxxx
shall be entitled to rely upon the representations and warranties made by the
Company and the Purchasers in this Agreement and shall be a third party
beneficiary for such purpose.
8.3 Successors and Assigns. This Agreement is personal to each of
the parties and may not be assigned without the written consent of the other
parties; provided, however, that any of the Purchasers shall be permitted to
assign its rights under this Agreement and the Transaction Documents to any
Affiliate of such Purchaser.
8.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws -------------- of the State of New York.
8.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
8.6 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.7 Notices. Unless otherwise provided, any notice, authorization,
request or demand required or permitted to be given under this Agreement shall
be given in writing and shall be deemed effectively given upon personal delivery
to the party to be notified or three (3) days following deposit with the United
States Post Office, by registered or certified mail, postage prepaid, or two
days after it is sent by an overnight delivery service, or when sent by
facsimile with machine confirmation of delivery addressed as follows:
15
If to the Purchasers to:
The address set forth opposite their name on the Schedule of
Purchasers.
If to Company:
Ionatron, Inc.
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, President, Chief Executive Officer
and Chief Financial Officer
(email: xxxxxxxx@xxxxxxxx.xxx)
In either case, with copies to:
Blank Rome LLP
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
(email: xxxxxxxx@xxxxxxxxx.xxx)
Any party may change its address for such communications by giving notice
thereof to the other parties in conformity with this Section.
8.8 Certain Fees and Reimbursements. Each party represents that it
neither is nor will be obligated for any finders' or brokers' fee or commission
in connection with this transaction; provided, however, that the Company is
obligated to pay certain compensation upon consummation of the transactions
contemplated hereby to J Xxxxxxxx.
8.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Purchasers
holding Shares evidencing, in the aggregate, an amount equal to not less than
50.1% of the aggregate number of Shares then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any securities purchased under this Agreement at the time outstanding
(including securities into which such securities are convertible), each future
holder of all such securities, and the Company.
8.10 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
16
8.11 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
IN WITNESS WHEREOF, the parties have executed this Purchase Agreement as
of the date first above written.
IONATRON, INC.
By:
---------------------------------
Name:
Title:
[Signature pages of Purchasers follow]
17
[Purchaser signature page with respect to Purchase Agreement between Ionatron,
Inc. and the several Purchasers dated October __, 2005]
PURCHASER:
----------------------------
By:_________________________
Name:________________
Title:_________________
Address and phone number of Purchaser:
Principal Contact at Purchaser:
------------------------------------------
Telephone Number of Principal Contact:
------------------------------------------
Email of Principal Contact:
------------------------------------------
Tax ID No. of Purchaser:
------------------------------------------
Dollar Amount of Subscription subscribed for by the Purchaser: $ ______
Number of Offered Shares subscribed for by the Purchaser: ______
18
SCHEDULE I
SCHEDULE OF PURCHASERS
Number of Offered Shares Aggregate Purchase
Name and Address Purchased Price
---------------- --------- -----
19
DISCLOSURE
SCHEDULES TO
PURCHASE AGREEMENT
DATED OCTOBER , 2005
20
SCHEDULE 3.3
Ionatron Technology, Inc. Delaware
North Star Power Engineering, Inc. Delaware
SCHEDULE 3.9
Piggyback registration rights were granted to with respect to 199,063
shares of common stock issued pursuant to the Asset Purchase Agreement by and
among North Star Research Acquisition Corp., Ionatron, Inc., North Star Research
Corporation and the Principal Stockholders Named therein dated September 16,
2004. Of these shares, 165,000 shares of common stock have been sold pursuant to
rule 144 promulgated under the Securities Act of 1933.
EXHIBIT A
SUBSCRIPTION INSTRUCTIONS
EXHIBIT B
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Option, to purchase ______ shares of the Common Stock of
Ionatron, Inc. (the "Corporation") and herewith tenders, in payment for such
shares, a wire transfer, cash or a certified check payable to the order of
Ionatron, Inc., in the amount of $_________________, all in accordance with the
terms hereof. The undersigned requests that a certificate for such shares be
registered in the name of ______________________ whose address is
__________________________, and that such certificate be delivered to
_________________, whose address is ____________________________.
Dated: Signature:___________________
(Signature must conform in all
respects to name of Purchaser as
set forth on Schedule I of the
Purchase Agreement between Ionatron,
Inc. and the Purchasers set
forth on such schedule dated
October __, 2005.)
-------------------------------
-------------------------------
(Insert Social Security or other
Identifying number of Purchaser)
EXHIBIT C
FORM OF LEGAL OPINION
EXHIBIT D
FORM OF REGISTRATION RIGHTS AGREEMENT
