ThermoEnergy Corporation Securities Purchase Agreement
Exhibit
4.1
ThermoEnergy
Corporation
This
Securities Purchase Agreement (this“Agreement”)
is
dated as of March 21, 2007, by and between ThermoEnergy Corporation, an Arkansas
corporation (the“Company”),
and
Xxxxxx X. Xxxxxxx (the“Investor”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated
thereunder, the Company desires to issue and sell to the Investor, and the
Investor desires to purchase from the Company certain securities of the Company,
as more fully described in this Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and the Investor agree as
follows:
ARTICLE
1
Definitions
Section
1.1. Definitions.
In
addition to the terms defined elsewhere in this Agreement, for all purposes
of
this Agreement, the following terms have the meanings indicated in this Section
1.1:
“Action”
means
any action, suit, inquiry, notice of violation, proceeding (including any
partial proceeding such as a deposition) or investigation pending or threatened
in writing against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state, county, local
or
foreign), stock market, stock exchange or trading facility.
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144.
“Business
Day”
means
any day except Saturday, Sunday and any day which is a federal legal holiday
or
a day on which banking institutions in the City of New York are authorized
or
required by law or other governmental action to close.
“Claim”
has
the
meaning set forth in Section 4.6(c).
“Closing”
means
each closing of the purchase and sale of a Convertible Note and a Warrant
pursuant to Article 2.
“Closing
Date”
means
the Initial Closing Date and date on which each subsequent Closing occurs
pursuant to Section 2.2 hereof.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $0.001 per share, and any securities
into which such common stock may hereafter be reclassified.
“Common
Stock Equivalents”
means
any securities of the Company or any Subsidiary which entitle the holder thereof
to acquire Common Stock at any time, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder
to
receive, directly or indirectly, Common Stock.
“Company
Counsel”
means
Xxxxx Peabody, LLP.
“Company
Deliverables”
has the
meaning set forth in Section 2.2(a).
“Company
Stock Options”
has
the
meaning set forth in Section 3.1(g).
“Contingent
Obligations”
has the
meaning set forth in Section 3.1(r).
“Conversion
Shares”
means
the shares of Common Stock issuable upon conversion of the Convertible Note.
“Convertible
Note”
means
the 5% Convertible Promissory Note in the form of Exhibit A,
which
is issuable to the Investor at the Closing.
“Convertible
Securities”
has
the
meaning set forth in Section 3.1(g).
“Disclosure
Materials”
has the
meaning set forth in Section 3.1(h).
“Effective
Date”
means
the date that any Registration Statement filed pursuant to Article 4 is first
declared effective by the Commission.
“Effectiveness
Date”
has the
meaning set forth in Section 4.1.
“Environmental
Law”
has the
meaning set forth in Section 3.1(aa).
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder.
“ERISA
Affiliate” means
any
trade or business, whether or not incorporated, that together with the Company
would be deemed to be a single employer for purposes of Section 4001 of ERISA
or
Sections 414(b), (c), (m), (n) or (o) of the Internal Revenue Code of 1986,
as
amended.
“Evaluation
Date” has
the
meaning set forth in Section 3.1(r).
“Event”
has the
meaning set forth in Section 4.8.
“Event
Date”
has the
meaning set forth in Section 4.8.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Exercise
Price”
has the
meaning set forth in Section 4.8.
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“Filing
Date” has
the
meaning set forth in Section 4.1.
“GAAP”
means
generally accepted accounting principles as in effect from time to time in
the
United States of America.
“Governmental
Authority” has
the
meaning set forth in Section 3.1(e).
“Hazardous
Substance”
has the
meaning set forth in Section 3.1(aa).
“Indebtedness”
has the
meaning set forth in Section 3.1(r).
“Indemnified
Party” has
the
meaning set forth in Section 4.6(c).
“Indemnified
Person”
has the
meaning set forth in Section 4.6(a).
“Indemnifying
Party” has
the
meaning set forth in Section 4.6(c).
“Initial
Closing Date”
means
the Business Day immediately following the date on which all of the conditions
set forth in Sections 6.1 and 6.2 hereof are satisfied, or such other date
as
the parties may agree.
“Intellectual
Property Rights”
has the
meaning set forth in Section 3.1(o).
“Investor
Deliverables”
has the
meaning set forth in Section 2.2(b).
“Legend
Removal Date” has
the
meaning set forth in Section 5.1(a).
“Lien”
means
any lien, charge, encumbrance, security interest, right of first refusal or
other restrictions of any kind.
“Losses”
has the
meaning set forth in Section 5.7.
“Material
Adverse Effect”
means
any of (i) a material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material and adverse effect
on the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
or (iii) a material impairment of the Company’s ability to perform on a timely
basis its obligations under any Transaction Document.
“NASD
Rules”
has the
meaning set forth in Section 4.3(o).
“OFAC”
has the
meaning set forth in Section 3.1(ee).
“Person”
means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Prior
Warrants”
has
the
meaning set forth in Section 3.1(g).
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“Proceeding”
means an
action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.
“Prospectus”
has
the
meaning set forth in Section 4.3.
“Purchase
Price” has
the
meaning set forth in Section 2.1.
“Registrable
Securities” means
the
Conversion Shares and the Warrant Shares; provided, however, that the Investor
shall not be required to convert the Convertible Note or to exercise the Warrant
in order to have the Conversion Shares issuable upon conversion of the
Convertible Note or the Warrant Shares issuable upon exercise of the Warrant
included in any Registration Statement.
“Registration
Period”
means
the period commencing on the date hereof and ending on the date on which all
of
the Registrable Securities may be sold to the public without registration under
the Securities Act in reliance on paragraph (k) of Rule 144.
“Registration
Statement”
means a
registration statement filed on the appropriate Form with, and declared
effective by, the Commission under the Securities Act and covering the resale
by
the Investor of the Registrable Securities.
“Requested
Information”
has the
meaning set forth in Section 4.4(a).
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
“SEC
Reports”
has the
meaning set forth in Section 3.1(h).
“Securities”
means
the Convertible Note, the Warrant, the Conversion Shares and the Warrant
Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Series
A Preferred Stock”
means
the shares of the preferred stock of the Company, par value $1.00 per share,
that have been designated as “Series A Convertible Preferred
Stock.”
“Subsidiary”
means
any “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X
promulgated by the Commission under the Exchange Act.
“Trading
Day”
means
(i) a day on which the Common Stock is traded on a Trading Market, or (ii)
if
the Common Stock is not listed on a Trading Market, a day on which the Common
Stock is traded in the over-the-counter market, as reported by the OTC Bulletin
Board, or (iii) if the Common Stock is not then
listed or quoted on the OTC Bulletin Board, a
day on
which the Common Stock is quoted in the over-the-counter market as reported
by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding to its functions of reporting prices); provided, that in
the
event that the Common Stock is not listed or quoted as set forth in (i), (ii)
and (iii) hereof, then Trading Day shall mean a Business Day.
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“Trading
Market”
means
whichever of the New York Stock Exchange, the American Stock Exchange, the
Nasdaq National Market, or the Nasdaq Small Cap Market on which the Common
Stock
is listed or quoted for trading on the date in question.
“Transaction
Documents”
means
this Agreement, the Convertible Note, the Warrant and any other documents or
agreements executed in connection with the transactions contemplated
hereunder.
“Courts”
means
the state and federal courts sitting in the State of New York.
“Warrant”
means
the Common Stock Purchase Warrant in the form of Exhibit B,
which
is issuable to the Investor at the Closing.
“Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of the Warrant.
ARTICLE
2
Purchase
and Sale
Section
2.1. Issuance
of Securities.
Upon
the
terms and subject to the conditions set forth in this Agreement, and in
accordance with applicable law, the Company agrees to sell to the Investor,
and
the Investor agrees to purchase from the Company, on the Initial Closing Date
(i) a Convertible Note in the principal amount of $750,000 and (ii) a Warrant
to
purchase 750,000 shares of Common Stock.
Section
2.2. Subsequent
Closings.
From
time to time on or before March 21, 2008, at the written election of the
Investor, the Company will sell to the Investor, and the Investor will (but
only
if the Investor so elects) purchase from the Company, one or more additional
Convertible Notes in an aggregate principal amount not to exceed $750,000,
upon
the
terms and subject to the conditions set forth in this Agreement. At each such
subsequent Closing, the Company will issue to the Investor an additional Warrant
(having the same exercise price and expiration date as the Warrant issued on
the
Initial Closing Date) to purchase that number of shares of Common Stock
determined by dividing (i) the principal amount of the Convertible Note issued
at such Closing by (ii) $1.00.
Section
2.3. Payment
of Purchase Price.
As
consideration for the issuance of the Convertible Note and Warrant being
purchased at each Closing, the
Investor
shall on the Closing Date pay to the Company, by a wire transfer or check,
an
amount equal to the principal amount of the Convertible Note being purchased
on
such Closing Date (the “Purchase
Price”).
Section
2.4. Delivery
of Securities.
At each
Closing, the Company shall
cause the Convertible Note and Warrant being purchased at such Closing to be
issued to the Investor upon payment of the Purchase Price.
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(i)
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The
legal opinion of Company Counsel, in agreed form, addressed to the
Investor;
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| (ii) |
The
Articles of Incorporation of the Company, together with all amendments
thereto, certified by the Secretary of State of the State of Arkansas
as
of a date not more than five Business Days prior to the Closing Date;
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| (iii) |
Copies
of each of the following documents, in each case certified by the
Secretary of the Company to be in full force and effect on the Closing
Date:
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| (A) |
resolutions
of the board of directors of the Company approving the execution, delivery
and performance of the Transaction Documents and the transactions
contemplated thereby;
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| (B) |
the
By-laws of the Company; and
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| (C) |
irrevocable
instructions to the Company’s transfer agent as to the reservation and
issuance of the Conversion Shares and the Warrant Shares;
and
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(iv)
|
A
good standing certificate of the Company issued by the Secretary
of State
of the State of Arkansas dated as of a date no earlier than five
Business
Days prior to the Closing Date;
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ARTICLE
3
Representations
and Warranties
Section
3.1. Representations
and Warranties of the Company.
The
Company hereby makes the following representations and warranties to the
Investor:
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(a)
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Subsidiaries.
The Company has no direct or indirect Subsidiaries other than as
specified
in the SEC Reports. Except as disclosed in the SEC Reports, the Company
owns, directly or indirectly, all of the capital stock of each Subsidiary
free and clear of any and all Liens, and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and
are
fully paid, non-assessable and free of preemptive and similar
rights.
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(c)
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Authorization;
Enforcement.
The Company has the requisite corporate power and authority to enter
into
and to consummate the transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations thereunder.
The
execution and delivery of each of the Transaction Documents by the
Company
and the consummation by it of the transactions contemplated thereby
have
been duly authorized by all necessary action on the part of the Company
and no further action is required by the Company in connection therewith.
Each Transaction Document has been (or upon delivery will have been)
duly
executed by the Company and, when delivered in accordance with the
terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except
as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or
affecting generally the enforcement of, creditors’ rights and remedies or
by other equitable principles of general
application.
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(d)
|
No
Conflicts.
The execution, delivery and performance of the Transaction Documents
by
the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not (i) conflict with or violate
any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents,
or
(ii) conflict with, or constitute a default (or an event that with
notice
or lapse of time or both would become a default) under, or give to
others
any rights of termination, amendment, acceleration or cancellation
(with
or without notice, lapse of time or both) of, or result in the imposition
of any Lien upon any of the material properties or assets of the
Company
or of any Subsidiary pursuant to, any agreement, credit facility,
debt or
other instrument (evidencing a Company or Subsidiary debt or otherwise)
or
other understanding to which the Company or any Subsidiary is a party
or
by which any property or asset of the Company or any Subsidiary is
bound
or affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court
or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or
by which
any property or asset of the Company or a Subsidiary is bound or
affected;
except in the case of each of clauses (ii) and (iii), such as could
not,
individually or in the aggregate, have or reasonably be expected
to result
in a Material Adverse Effect.
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(e)
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Filings,
Consents and Approvals.
The Company is not required to obtain any consent, waiver, authorization
or order of, give any notice to, or make any filing or registration
with,
any court or other federal, state, local or other governmental authority
(a “Governmental
Authority”)
or other Person in connection with the execution, delivery and performance
by the Company of the Transaction Documents and the consummation
of the
transactions contemplated thereby, other than (i) the filing with
the
Secretary of State of the State of Arkansas, on or prior to the Initial
Closing Date, of the Certificate of Amendment, (ii) the filing with
the
Commission of one or more Registration Statements in accordance with
the
requirements of Article 4 of this
Agreement, (iii) filings required by state securities laws, (iv)
the
filing of a Notice of Sale of Securities on Form D with the Commission
under Regulation D of the Securities Act (v) any filings required
in
accordance with Section 4.3(d), and (vi) those that have been made
or
obtained prior to the date of this
Agreement.
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(f)
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Issuance
of the Securities.
The Securities have been duly authorized. Each Convertible Note and
Warrant, when issued and paid for in accordance with this Agreement,
will
be duly and validly issued. The Company has reserved and set aside
from
its duly authorized capital stock a sufficient number of shares of
Common
Stock to satisfy in full the Company’s obligations (i) to issue the
Warrant Shares upon exercise of the Warrants and (ii) to issue the
Conversion Shares upon conversion of the Convertible Notes. The Warrants
Shares, when issued and paid for upon exercise of the Warrants in
accordance with their terms, and the Conversion Shares, when issued
upon
conversion of the Convertible Notes in accordance with their terms,
will
be duly and validly issued, fully paid and nonassessable, free and
clear
of all Liens.
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(g)
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Capitalization.
The authorized capital stock of the Company consists of 75,000,000
shares
of Common Stock and 10,000,000 shares of Series A Preferred Stock.
As of
the close of business on the Business Day immediately prior to the
date
hereof, (i) 5,956,671 shares of Series A Preferred Stock were issued
and
outstanding, all of which are validly issued, fully-paid and
non-assessable, (ii) 24,701,874 shares of Common Stock were issued
and
outstanding, all of which are validly issued, fully-paid and
non-assessable, (iii) 83,797 shares of Common Stock were held by
the
Company in Treasury, (iv) 5,755,600 shares of Common Stock were reserved
for issuance upon exercise of outstanding options granted to employees,
directors, and consultants of the Company (the “Company
Stock Options”);
(v) 8,219,189 shares of Common Stock were reserved for issuance upon
exercise of outstanding warrants to purchase Common Stock (the
“Prior
Warrants”);
(vi) 5,956,671 shares of Common Stock were reserved for issuance
upon
conversion of outstanding shares of Series A Preferred Stock, and
(vii) no
shares of Common Stock were reserved for issuance upon conversion
of any
other convertible notes, debentures or securities (“Convertible
Securities”).
No
Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except pursuant to (i)
the outstanding shares of Series A Preferred Stock, (ii) the Company
Stock
Options or (iii) the Prior Warrants or as a result of the purchase
and
sale of the Securities as contemplated by this Agreement, there are
no
outstanding options, warrants, script rights to subscribe to, calls
or
commitments of any character whatsoever relating to, or securities,
rights
or obligations convertible into or exchangeable for, or giving any
Person
any right to subscribe for or acquire, any shares of Common Stock,
or
contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional
shares of Common Stock or Common Stock Equivalents. The issue and
sale of the Securities will not obligate the Company to issue shares
of
Common Stock or other securities to any Person (other than the Investor)
and will not result in a right of any holder of Company securities
to
adjust the exercise, conversion, exchange or reset price under such
securities. All of the outstanding shares of capital stock of the
Company
are validly issued, fully paid and nonassessable, have been issued
in
compliance with all federal and state securities laws, and none of
such
outstanding shares was issued in violation of any preemptive rights
or
similar rights to subscribe for or purchase securities. No further
approval or authorization of any stockholder, the Board of Directors
of
the Company or others is required for the issuance and sale of the
Securities. There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s capital stock to
which the Company is a party or, to the knowledge of the Company,
between
or among any of the Company’s
stockholders.
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(h)
|
SEC
Reports; Financial Statements.
The Company has filed all reports required to be filed by it under
the
Securities Act and the Exchange Act, including pursuant to Section
13(a)
or 15(d) thereof, for the twelve months preceding the date hereof
(or such
shorter period as the Company was required by law to file such reports)
(the foregoing materials, being collectively referred to herein as
the“SEC
Reports”
and, together with the Private Placement Memorandum, the“Disclosure
Materials”)
on a timely basis or has timely filed a valid extension of such time
of
filing and has filed any such SEC Reports prior to the expiration
of any
such extension. As of their respective dates, the SEC Reports complied
in
all material respects with the requirements of the Securities Act
and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any
untrue
statement of a material fact or omitted to state a material fact
required
to be stated therein or necessary in order to make the statements
therein,
in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the
rules
and regulations of the Commission with respect thereto as in effect
at the
time of filing. Such financial statements have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements
or the
notes thereto, and fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of and
for
the dates thereof and the results of operations and cash flows for
the
periods then ended, subject, in the case of unaudited statements,
to
normal, immaterial, year-end audit
adjustments.
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(i)
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Material
Changes.
Since the date of the latest audited financial statements included
within
the SEC Reports, except as specifically disclosed in the SEC Reports,
(i)
there has been no event, occurrence or development that has had or
that
could reasonably be expected to result in a Material Adverse Effect,
(ii)
the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables, accrued expenses and other liabilities
incurred in the ordinary course of business consistent with past
practice
and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed
in
filings made with the Commission, (iii) the Company has not altered
its
method of accounting or the identity of its auditors, (iv) the Company
has
not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements
to purchase or redeem any shares of its capital stock, and (v) the
Company
has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option plans.
The
Company does not have pending before the Commission any request for
confidential treatment of
information.
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(j)
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Litigation.
There is no Action which (i) adversely affects or challenges the
legality,
validity or enforceability of any of the Transaction Documents or
the
Securities or (ii) except as specifically disclosed in the SEC Reports,
could, if there were an unfavorable decision, individually or in
the
aggregate, have or reasonably be expected to result in a Material
Adverse
Effect. Neither the Company nor any Subsidiary, nor any director
or
officer thereof (in his or her capacity as such), is or has been
the
subject of any Action involving a claim of violation of or liability
under
federal or state securities laws or a claim of breach of fiduciary
duty,
except as specifically disclosed in the SEC Reports. There has not
been,
and to the knowledge of the Company, there is not pending any
investigation by the Commission involving the Company or any current
or
former director or officer of the Company (in his or her capacity
as
such). The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed
by the
Company or any Subsidiary under the Exchange Act or the Securities
Act.
There are no outstanding comments by the Staff of the Commission
on any
filing by the Company or any Subsidiary under the Exchange Act or
the
Securities Act.
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(k)
|
Labor
Relations.
No
material labor dispute exists or, to the knowledge of the Company,
is
imminent with respect to any of the employees of the
Company.
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(l)
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Compliance.
Neither the Company nor any Subsidiary (i) is in default under or
in
violation of (and no event has occurred that has not been waived
that,
with notice or lapse of time or both, would result in a default by
the
Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it
is in
violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or
any of
its properties is bound (whether or not such default or violation
has been
waived), (ii) is in violation of any order of any court, arbitrator
or
governmental body, or (iii) is or has been in violation of any statute,
rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to
taxes,
environmental protection, occupational health and safety, product
quality
and safety and employment and labor matters, except in each case
as could
not, individually or in the aggregate, have or reasonably be expected
to
result in a Material Adverse
Effect.
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(m)
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Regulatory
Permits.
The Company and the Subsidiaries possess all certificates, authorizations
and permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective businesses
as
described in the SEC Reports, except where the failure to possess
such
permits could not, individually or in the aggregate, have or reasonably
be
expected to result in a Material Adverse Effect, and neither the
Company
nor any Subsidiary has received any notice of proceedings relating
to the
revocation or modification of any such
permits.
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(n)
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Title
to Assets.
The Company and the Subsidiaries have good and marketable title in
fee
simple to all real property owned by them that is material to their
respective businesses and good and marketable title in all personal
property owned by them that is material to their respective businesses,
in
each case free and clear of all Liens, except for Liens as do not
materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property
by
the Company and the Subsidiaries. Any real property and facilities
held
under lease by the Company and the Subsidiaries are held by them
under
valid, subsisting and enforceable leases of which the Company and
the
Subsidiaries are in compliance, except as could not, individually
or in
the aggregate, have or reasonably be expected to result in a Material
Adverse Effect.
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(o)
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Patents
and Trademarks.
The Company and the Subsidiaries have, or have rights to use, all
patents,
patent applications, trademarks, trademark applications, service
marks,
trade names, copyrights, licenses and other similar rights that are
necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure
to so
have could, individually or in the aggregate, have or reasonably
be
expected to result in a Material Adverse Effect (collectively,
the“Intellectual
Property Rights”).
The SEC Reports describe all claims and Actions made or filed by
others
against the Company deemed material by the Company to the effect
that
Intellectual Property Rights used by the Company or any Subsidiary
violate
or infringe upon the rights of such claimant. Except as set forth
in
the
SEC Reports, to the knowledge of the Company, all of the Intellectual
Property Rights are enforceable and there is no existing infringement
by
another Person of any of the Intellectual Property
Rights.
|
-10-
|
(p)
|
Insurance.
The Company and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts
as are prudent and customary in the businesses in which the Company
and
the Subsidiaries are engaged. The Company has no reason to believe
that it
will not be able to renew its and the Subsidiaries’ existing insurance
coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business
on
terms consistent with the market for the Company’s and such Subsidiaries’
respective lines of business.
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(q)
|
Transactions
With Affiliates and Employees.
Except as set forth in the SEC Reports, none of the officers or directors
of the Company and, to the knowledge of the Company, none of the
employees
of the Company is a party to any transaction with the Company or
any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing
for the
furnishing of services to or by, providing for rental of real or
personal
property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company,
any entity in which any officer, director, or any such employee has
a
substantial interest or is an officer, director, trustee or
partner.
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|
(r)
|
Xxxxxxxx-Xxxxx;
Internal Accounting Controls.
The Company is in material compliance with all provisions of the
Xxxxxxxx-Xxxxx Act of 2002 (including the rules and regulations of
the
Commission adopted thereunder) which are applicable to it as of the
Closing Date. The Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures as of November 14,
2006, the filing date of the most recently filed periodic report
under the
Exchange Act (such date, the “Evaluation
Date”).
The Company presented in its most recently filed periodic report
under the
Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on
their
evaluations as of the Evaluation Date. Since the Evaluation Date,
there have been no significant changes in the Company’s internal controls
(as such term is defined in Item 307(b) of Regulation S-K under the
Exchange Act) or, to the Company’s knowledge, in other factors that could
significantly affect the Company’s internal
controls.
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|
Solvency.
Based on the financial condition of the Company as of the Closing
Date
(and assuming that the Closing shall have occurred), (i) the Company’s
assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed
to
be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the
Company,
and projected capital requirements and capital availability thereof;
and
(ii) the current cash flow of the Company, together with the proceeds
the
Company would receive, were it to liquidate all of its assets, after
taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its debt when such amounts
are
required to be paid. The Company does not intend to incur indebtedness
beyond its ability to pay such debts as they mature (taking into
account
the timing and amounts of cash to be payable on or in respect of
its
debt).
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-11-
|
(t)
|
Certain
Fees.
No
brokerage or finder’s fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Investor shall have
no
obligation with respect to any fees or with respect to any claims
(other
than such fees or commissions owed by the Investor pursuant to written
agreements executed by the Investor which fees or commissions shall
be the
sole responsibility of the Investor) made by or on behalf of other
Persons
for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this
Agreement.
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|
(u)
|
Certain
Registration Matters.
Assuming the accuracy of the Investor’s representations and warranties set
forth in Section 3.2(b)-(e), no registration under the Securities
Act is
required for the offer and sale of the Securities by the Company
to the
Investor under the Transaction Documents.
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|
Investment
Company.
The Company is not, and is not an Affiliate of, and immediately following
the Closing will not have become, an “investment company” within the
meaning of the Investment Company Act of 1940, as
amended.
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|
(w)
|
Application
of Anti-Takeover Protections.
The Company has taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination,
poison
pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s Articles of
Incorporation or the laws of its state of incorporation that is or
could
become applicable to the Investors as a result of the Investors and
the
Company fulfilling their obligations or exercising their rights under
the
Transaction Documents, including without limitation the Company’s issuance
of the Securities and the Investor’s ownership of the
Securities.
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|
(x)
|
No
Additional Agreements.
The Company does not have any agreement or understanding with the
Investor
with respect to the transactions contemplated by the Transaction
Documents
other than as specified in the Transaction
Documents.
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(y)
|
Full
Disclosure.
All
disclosures provided to the Investors regarding the Company, its
business
and the transactions contemplated hereby, furnished by or on behalf
of the
Company (including the Company’s representations and warranties set forth
in this Agreement) are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the
circumstances under which they were made, not
misleading.
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| (z) |
Environmental
Matters.
To
the Company’s knowledge: (i) the Company and its Subsidiaries have
complied with all applicable Environmental Laws; (ii) the properties
currently owned or operated by Company (including soils, groundwater,
surface water, buildings or other structures) are not contaminated
with
any Hazardous Substances; (iii) the properties formerly owned or
operated
by Company or its Subsidiaries were not contaminated with Hazardous
Substances during the period of ownership or operation by Company
and its
Subsidiaries; (iv) Company and its Subsidiaries are not subject to
liability for any Hazardous Substance disposal or contamination on
any
third party property; (v) Company and its Subsidiaries have not been
associated with any release or threat of release of any Hazardous
Substance; (vi) Company and its Subsidiaries have not received any
notice,
demand, letter, claim or request for information alleging that Company
and
its Subsidiaries may be in violation of or liable under any Environmental
Law; and (vii) Company and its Subsidiaries are not subject to any
orders,
decrees, injunctions or other arrangements with any Governmental
Authority
or subject to any indemnity or other agreement with any third party
relating to liability under any Environmental Law or relating to
Hazardous
Substances.
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-12-
As
used
in this Agreement, the term “Environmental
Law”
means
any federal, state, local or foreign law, regulation, order, decree, permit,
authorization, opinion, common law or agency requirement relating to: (A) the
protection, investigation or restoration of the environment, health and safety,
or natural resources; (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property.
As
used
in this Agreement, the term “Hazardous
Substance”
means
any substance that is: (i) listed, classified or regulated pursuant to any
Environmental Law; (ii) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (iii) any other substance which is the
subject of regulatory action by any Governmental Authority pursuant to any
Environmental Law.
(aa)Taxes.
The
Company and its Subsidiaries have filed all necessary federal, state and foreign
income and franchise tax returns when due (or obtained appropriate extensions
for filing) and have paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of a tax deficiency which has been or might be asserted
or threatened against it or any Subsidiary which would have a Material Adverse
Effect.
(bb)Private
Offering.
Assuming
the correctness of the representations and warranties of the Investors set
forth
in this Agreement, the offer and sale of the Convertible Notes and the Warrants
hereunder are, and upon (i) exercise of the Warrants, the issuance of the
Warrant Shares and (ii) upon conversion of the Convertible Notes, the issuance
of the Conversion Shares will be, exempt from registration under the Securities
Act. The Company has offered the Convertible Notes and the Warrants for sale
only to the Investor.
(cc)ERISA.
Neither
the Company nor any ERISA Affiliate maintains, contributes to or has any
liability or contingent liability with respect to any employee benefit plan
subject to ERISA.
(dd)Foreign
Assets Control Regulations and Anti-Money Laundering.
(i)OFAC.
Neither
the issuance of the Convertible Note and Warrant to the Investor, nor the use
of
the respective proceeds thereof, shall cause the Investor to violate the U.S.
Bank Secrecy Act, as amended, and any applicable regulations thereunder or
any
of the sanctions programs administered by the U.S. Department of the Treasury’s
Office of Foreign Assets Control (“OFAC”)
of the
United States Department of Treasury, any regulations promulgated thereunder
by
OFAC or under any affiliated or successor governmental or quasi-governmental
office, bureau or agency and any enabling legislation or executive order
relating thereto. Without limiting the foregoing, neither the Company nor any
Subsidiary (i) is a person whose property or interests in property are blocked
or subject to blocking pursuant to Section 1 of Executive Order 13224 of
September 23, 200l Blocking Property and Prohibiting Transactions With Persons
Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079
(2001)), (ii) engages in any dealings or transactions prohibited by
Section 2 of such executive order, or is otherwise associated with any such
person in any manner violative of Section 2, or (iii) is a person on the
list of Specially Designated Nationals and Blocked Persons or subject to the
limitations or prohibitions under any other OFAC regulation or executive
order.
-13-
(ii)Patriot
Act.
The
Company and each of its Subsidiaries are in compliance, in all material
respects, with the USA PATRIOT Act. No part of the proceeds of the sale of
the
Shares and the Warrants hereunder will be used, directly or indirectly, for
any
payments to any governmental official or employee, political party, official
of
a political party, candidate for political office, or anyone else acting in
an
official capacity, in order to obtain, retain or direct business or obtain
any
improper advantage, in violation of the United States Foreign Corrupt Practices
Act of 1977, as amended.
Section
3.2. Representations
and Warranties of the Investor.
The
Investor hereby represents and warrants to the Company as follows:
|
(a)
|
Authority.
This Agreement has been duly executed by the Investor, and when delivered
by the Investor in accordance with terms hereof, will constitute
the valid
and legally binding obligation of the Investor, enforceable against
him in
accordance with its terms, except as such enforceability may be limited
by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally the enforcement
of,
creditors’ rights and remedies or by other equitable principles of general
application.
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(b)
|
Investment
Intent.
The Investor is acquiring the Securities as principal for his own
account
for investment purposes only and not with a view to or for distributing
or
reselling such Securities or any part thereof, without prejudice,
however,
to the Investor’s right at all times to sell or otherwise dispose of all
or any part of such Securities in compliance with applicable federal
and
state securities laws. The Investor does not have any agreement or
understanding, directly or indirectly, with any Person to distribute
any
of the Securities.
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(c)
|
Investor
Status.
The Investor is an “accredited investor” as defined in Rule 501(a) under
the Securities Act.
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(d)
|
Access
to Information.
The Investor acknowledges that he has reviewed the Disclosure Materials
and has been afforded (i) the opportunity to ask such questions as
he has
deemed necessary of, and to receive answers from, representatives
of the
Company concerning the terms and conditions of the offering of the
Securities and the merits and risks of investing in the Securities;
(ii)
access to information about the Company and the Subsidiaries and
their
respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable him to
evaluate
his investment; and (iii) the opportunity to obtain such additional
information that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment
decision with respect to the
investment.
|
-14-
ARTICLE
4
Registration
Rights
Section
4.1. Piggy-Back
Registration
(a)
Piggy-Back
Registration. If
(but
without any obligation to do so) the Company proposes, at any time during the
Registration Period, to register (including for this purpose a registration
effected by the Company for stockholders other than the Investor) any shares
of
Common Stock under the Securities Act in connection with the public offering
of
such securities solely for cash other than (a) a registration statement relating
to (i) the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or (ii) a SEC Rule 145 transaction or
(b)
a registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities, the Company shall, at such
time, promptly give the Investor written notice of such registration. Upon
the
written request of the Investor given within twenty (20) days after delivery
of
such notice, the Company shall, subject to the provisions of
Section 4.1(b), cause to be registered under the Securities Act all of the
Registrable Securities that the Investor has requested to be registered. The
Company shall have the right to terminate or withdraw any registration initiated
by it under this Section 4.1 prior to the effectiveness of such
registration whether or not the Investor has elected to include Registrable
Securities in such registration; provided, however, that if, after a
Registration Statement covering Registrable Securities has become effective
and
so long as any registrable Securities covered thereby have not been sold, the
Company will not withdraw such Registration Statement without giving the
Investor notice of its intention to withdraw such Registration Statement at
least ten Trading Days prior to the date of withdrawal.
(b)
Priority
In Incidental Registrations.
If the
managing underwriter of an underwritten offering contemplated by this Article
4
shall inform the Company and the Investor of its belief that the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, then the Company will include in such
registration, to the extent of the number which the Company is so advised can
be
sold in such offering, (i) first, securities proposed by the Company to be
sold
for its own account, and (ii) second, securities to be sold by holders of
securities having demand registration rights and exercising such rights in
connection with such registration statement (iii) third, Registrable Securities
proposed to be sold by the Investor and (iv) fourth, securities to be sold
by
other selling security holders.
Section
4.2. Registration
Process.
In
connection with the registration of the Registrable
Securities pursuant to Section 4.1, the Company shall:
(a)Prepare
and file
with the
Commission the
Registration Statement
and such
amendments (including post-effective amendments) to the Registration Statement
and supplements to the prospectus included therein (a “Prospectus”)
as the
Company may deem necessary or appropriate and take all lawful action such that
the Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state
a
material fact required to be stated therein or necessary to make the statements
therein, not misleading and that the Prospectus forming part of the Registration
Statement, and any amendment or supplement thereto, does not at any time during
the Registration
Period include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.;
-15-
(b)Comply
with the provisions of the Securities Act with respect to the Registrable
Securities covered by the Registration Statement until the earlier of (i) such
time as all of such Registrable Securities have been disposed of in accordance
with the intended methods of disposition by the Investor as set forth in the
Prospectus forming part of the Registration Statement or (ii) the date on which
the Registration Statement is withdrawn;
(c)Prior
to
the filing with the Commission of the
Registration Statement (including any amendments thereto) and the distribution
or delivery of any Prospectus (including any supplements thereto), provide
draft
copies thereof to the Investors and reflect in such documents all such comments
as the Investor (and his counsel) reasonably may propose and furnish to the
Investor and his legal counsel identified to the Company, (i) promptly
after the same is prepared and publicly distributed, filed with the Commission,
or received by the Company, one copy of the Registration Statement, each
Prospectus, and each amendment or supplement thereto, and (ii) such number
of copies of the Prospectus and all amendments and supplements thereto and
such
other documents, as the Investor may reasonably request in order to facilitate
the disposition of the Registrable
Securities owned by the Investor;
(d)(i) register
or qualify the Registrable Securities covered by the Registration Statement
under such securities or “blue sky” laws of such jurisdictions as the Investors
reasonably
request, (ii) prepare and file in such jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations
and
qualifications as may be necessary to maintain the effectiveness thereof at
all
times during the Registration Period, (iii) take all such other lawful
actions as may be necessary to maintain such registrations and qualifications
in
effect at all times during the Registration Period, and (iv) take all such
other lawful actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided,
however,
that the
Company shall not be required in connection therewith or as a condition thereto
to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify, (B) subject itself to general taxation in
any such jurisdiction or (C) file a general consent to service of process
in any such jurisdiction;
(e)As
promptly as practicable after becoming aware of such event, notify the Investor
of the occurrence of any event, as a result of which the Prospectus included
in
the Registration Statement, as then in effect, includes an untrue statement
of a
material fact or omits to state a material fact required to be stated therein
or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and promptly prepare an amendment to
the
Registration Statement and supplement to the Prospectus to correct such untrue
statement or omission, and deliver a number of copies of such supplement and
amendment to each Investor as such Investor may reasonably request;
(f)As
promptly as practicable after becoming aware of such event, notify the Investor
(or, in the event of an underwritten offering, the managing underwriters) of
the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement and take all lawful action to effect
the withdrawal, rescission
or
removal of such stop order or other suspension;
(g)Take
all
such other lawful actions reasonably necessary to expedite and facilitate the
disposition by the Investor of his Registrable Securities in accordance with
the
intended methods therefor provided in the Prospectus which are customary under
the circumstances;
-16-
(h)Make
generally available to its security holders as soon as practicable, but in
any
event not later than eighteen
(18)
months
after the Effective Date of the Registration Statement, an earnings
statement of the Company and its subsidiaries complying with Section 11(a)
of the Securities Act and the rules and regulations of the Commission
thereunder;
(i)In
the
event of an underwritten offering, promptly include or incorporate in a
Prospectus supplement or post-effective amendment to the Registration Statement
such information as the underwriters reasonably agree should be included therein
and to which the Company does not reasonably object and make all required
filings of such Prospectus supplement or post-effective amendment as soon as
practicable after it is notified of the matters to be included or incorporated
in such Prospectus supplement or post-effective amendment;
(j)Make
reasonably available for inspection by the Investor, any underwriter
participating in any disposition pursuant to the Registration Statement, and
any
attorney, accountant or other agent retained by such Investors or any such
underwriter all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
Company’s officers, directors and employees to supply all information reasonably
requested by such Investors or any such underwriter, attorney, accountant or
agent in connection with the Registration Statement, in each case, as is
customary for similar due diligence examinations; provided,
however,
that all
records, information and documents that are designated in writing by the
Company, in good faith, as confidential, proprietary or containing any nonpublic
information shall be kept confidential by such Investors and any such
underwriter, attorney, accountant or agent (pursuant to an appropriate
confidentiality agreement in the case of any such holder or agent), unless
such
disclosure is made pursuant to judicial process in a court proceeding (after
first giving the Company an opportunity promptly to seek a protective order
or
otherwise limit the scope of the information sought to be disclosed) or is
required by law, or such records, information or documents become available
to
the public generally or through a third party not in violation of an
accompanying obligation of confidentiality; and provided,
further,
that, if
the foregoing inspection and information gathering would otherwise disrupt
the
Company’s conduct of its business, such inspection and information gathering
shall, to the maximum extent possible, be coordinated on behalf of the Investors
and the other parties entitled thereto by one firm of counsel designated
by and
on behalf of the majority in interest of Investors and other
parties;
(k)In
connection with any offering,
make such representations and warranties to the Investor and to the underwriters
if an underwritten offering,
in
form, substance and scope as are customarily made by a company to underwriters
in secondary underwritten offerings;
(l)In
connection with any underwritten offering, deliver such documents and
certificates as may be reasonably required by the underwriters;
(m)Cooperate
with the Investor to facilitate the timely preparation and delivery of
certificates representing Registrable
Securities
to be
sold pursuant to the Registration Statement, which certificates shall, if
required under the terms of this Agreement, be free of all restrictive legends,
and to enable such Registrable
Securities
to be in
such denominations and registered in such names as any Investor may request
and
maintain a transfer agent for the Common Stock; and
(n)Use
its
commercially reasonable efforts to cause all Registrable
Securities
covered
by the Registration Statement to be listed or qualified for trading on the
principal Trading Market, if any, on which the Common Stock is traded or listed
on the Effective Date of the Registration Statement.
-17-
Section
4.3.Obligations
and Acknowledgements of the Investor.
In
connection with the registration of the Registrable
Securities, the Investor shall have the following obligations and hereby make
the following acknowledgements:
(a)It
shall
be a condition precedent to the obligations of the Company to include
the
Registrable Securities in
the
Registration Statement
that the
Investor (i) shall furnish to the Company such information regarding
itself, the Registrable Securities held by him and the intended method of
disposition of the Registrable Securities held by him as shall be reasonably
required to effect the registration of such Registrable Securities and
(ii) shall execute such documents in connection with such registration as
the Company may reasonably request. At least five (5) Business Days prior to
the
first anticipated filing date of a Registration Statement, the Company shall
notify the Investor of the information the Company requires from the Investor
(the “Requested
Information”)
if the
Investor elects to have any of his Registrable Securities included in the
Registration Statement. If at least two Business Days prior to the anticipated
filing date the Company has not received the Requested Information from the
Investor, then the Company may file the Registration Statement without including
any Registrable Securities of the Investor and the Company shall have no further
obligations under this Article 4 to the Investor
after
such Registration Statement has been declared effective. If the Investor
notifies the Company and provides the Company the information required hereby
prior to the time the Registration Statement is declared effective, the Company
will file an amendment to the Registration Statement that includes the
Registrable Securities of the Investor;
provided,
however,
that the
Company shall not be required to file such amendment to the Registration
Statement at any time less than five (5) Business Days prior to the
Effectiveness Date.
(b)The
Investor agrees to cooperate with the Company in connection with the preparation
and filing of a Registration Statement hereunder, unless the Investor has
notified the Company in writing of his election to exclude all of his
Registrable Securities from such Registration Statement;
(c)The
Investor agrees that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in Section 4.2(e) or 4.2(f),
he shall immediately discontinue its disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until the Investor’s receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 4.2(e) and, if so directed by the
Company, the Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in the Investor’s possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice;
and
(d)The
Investor acknowledges that he may be deemed to be a statutory underwriter within
the meaning of the Securities Act with respect to the Registrable Securities
being registered for resale by him, and if the Investor includes Registrable
Securities for offer and sale within a Registration Statement he hereby consents
to the inclusion in such Registration Statement of a disclosure to such
effect.
Section
4.4.Expenses
of Registration.
All
expenses (other than underwriting discounts and commissions and the fees an
expenses of the Investor’s counsel) incurred in connection with registrations,
filings or qualifications pursuant to this Article 4, including, without
limitation, all registration, listing, and qualifications fees, printing and
engraving fees, accounting fees, and the fees and disbursements of counsel
for
the Company, shall be borne by the Company.
-18-
Section
4.6.Indemnification
and Contribution
(a)Indemnification
by the Company.
The
Company shall indemnify and hold harmless the Investor and each underwriter,
if
any, which facilitates the disposition of Registrable Securities, and each
of
their respective officers and directors and each Person who controls such
underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (each such Person being sometimes
hereinafter referred to as an“Indemnified
Person”)
from
and against any losses, claims, damages or liabilities, joint or several, to
which such Indemnified Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
or
an omission or alleged omission to state therein a material fact required to
be
stated therein or necessary to make the statements therein, not misleading,
or
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided,
however, that
the
Company shall not be liable to any such Indemnified Person in any such case
to
the extent that any such loss, claim, damage or liability arises out of or
is
based upon (i) an untrue statement or alleged untrue statement made in, or
an omission or alleged omission from, such Registration Statement or Prospectus
in reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the
case of the occurrence of an event of the type specified in Section 4.3(e),
the use by the Indemnified Person of an outdated or defective Prospectus after
the Company has provided to such Indemnified Person an updated Prospectus
correcting the untrue statement or alleged untrue statement or omission or
alleged omission giving rise to such loss, claim, damage or
liability.
(b)Indemnification
by the Investors and Underwriters.
The
Investor agrees, as
a
consequence of the inclusion of any of his Registrable Securities in a
Registration Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, severally
and not jointly, as
a
consequence of facilitating such disposition of Registrable Securities to
(i) indemnify and hold harmless the Company, its directors (including any
person who, with his or her consent, is named in the Registration Statement
as a
director nominee of the Company), its officers who sign any Registration
Statement and each Person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act
or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement
or
Prospectus or arise out of or are based upon the omission or alleged omission
to
state therein a material fact required to be stated therein or necessary to
make
the statements therein (in light of the circumstances under which they were
made, in the case of the Prospectus), not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by the Investor
or
underwriter expressly for use therein,
and
(ii) reimburse the Company for any legal or other expenses incurred by the
Company in connection with investigating or defending any such action or claim
as such expenses are incurred;
provided,
however,
that the
Investor shall not be liable under this Section 4.5(b) for any amount in
excess of the net proceeds paid to the Investor in respect of Registrable
Securities sold by him.
-19-
(c)Notice
of Claims, etc.
Promptly
after receipt by a Person seeking indemnification pursuant to this
Section 4.5 (an “Indemnified
Party”)
of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a “Claim”),
the
Indemnified Party promptly shall notify the Person against whom indemnification
pursuant to this Section 4.5 is being sought (the“Indemnifying
Party”)
of the
commencement thereof; but the omission to so notify the Indemnifying Party
shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of
any
Claim by the Indemnifying Party, the Indemnified Party shall have the right
to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (i) the Indemnifying Party shall have agreed to pay such fees,
costs and expenses, (ii) the Indemnified Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available
to
the Indemnifying Party, or (iii) the Indemnifying Party shall have failed
to employ legal counsel reasonably satisfactory to the Indemnified Party within
a reasonable period of time after notice of the commencement of such Claim.
If
the Indemnified Party employs separate legal counsel in circumstances other
than
as described in the preceding sentence, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than
one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior written consent
of
the Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that
does
not include an unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment
or
contain any admission of wrongdoing.
(d)Contribution.
If the
indemnification provided for in this Section 4.5 is unavailable to or
insufficient to hold harmless an Indemnified Party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages
or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party and the Indemnified
Party in connection with the statements or omissions or
alleged statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Party shall be determined
by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
relates to information supplied by such Indemnifying Party or by such
Indemnified Party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 4.5(d) were determined by pro rata allocation
(even if the Investors or any underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the
equitable considerations referred to in this Section 4.5(d). The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above shall
be deemed to include any legal or other fees or expenses reasonably incurred
by
such Indemnified Party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
-20-
(e)Limitation
on Investor’s and Underwriters’ Obligations.
Notwithstanding any other provision of this Section 4.5, in no event shall
(i) the Investor have
any
liability under
this Section 4.5 for any amounts in excess of the dollar amount of the
proceeds actually
received
by the Investor from the sale of Registrable Securities (after deducting any
fees, discounts and commissions applicable thereto) pursuant to any Registration
Statement under which such Registrable Securities are
registered under the Securities Act and (ii) any underwriter be required to
undertake liability to any Person hereunder for any amounts in excess of the
aggregate discount, commission or other compensation payable to such underwriter
with respect to the Registrable Securities underwritten by it and distributed
pursuant to the Registration Statement.
(f)Other
Liabilities.
The
obligations of the Company under this Section 4.5 shall be in addition to
any liability which the Company may otherwise have to any Indemnified Person
and
the obligations of any Indemnified Person under this Section 4.5 shall be
in addition to any liability which such Indemnified Person may otherwise have
to
the Company. The remedies provided in this Section 4.5 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to
an
indemnified party at law or in equity.
Section
4.6.Rule
144.
With a
view to making available to the Investors the benefits of Rule 144, the
Company agrees to use its best efforts to:
(i)comply
with the provisions of paragraph (c)(1) of Rule 144; and
(ii)file
with
the Commission in a timely manner all reports and other documents required
to be
filed by the Company pursuant to Section 13 or 15(d) under the Exchange
Act; and, if at any time it is not required to file such reports but in the
past
had been required to or did file such reports, it will, upon the request of
any
Investor, make available other information as required by, and so long as
necessary to permit sales of, its Registrable Securities pursuant to
Rule 144.
Section 4.7.Common
Stock Issued Upon Stock Split, etc.
The
provisions of this Article 4 shall apply to any shares of Common Stock or
any other securities issued as a dividend or distribution in respect of the
Conversion Shares or the Warrant Shares.
ARTICLE
5
Other
Agreements of the Parties
Section
5.1. Certificates;
Legends.
(a)
The
Securities may only be transferred if in compliance with state and federal
securities laws. In connection with any transfer of the Securities other than
pursuant to an effective registration statement, to the Company, to an Affiliate
of the Investor or in connection with a pledge as contemplated in Section
5.1(b), the Company may require the transferor thereof
to
provide to the Company an opinion of counsel selected by the transferor (which
may be such transferor’s in-house counsel), the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that
such
transfer does not require registration of such transferred Securities under
the
Securities Act.
-21-
(b)
The
Convertible Note and the Warrant to be delivered at the Closing and certificates
evidencing the Conversion Shares and the Warrant Shares to be delivered upon
conversion of the Convertible Note or exercise of the Warrants, as the case
may
be, will contain appropriate legends referring to restrictions on transfer
relating to the registration requirements of the Securities Act and applicable
state securities laws.
(c)
Certificates evidencing the Registrable Securities shall not contain any legend
(including the legend referred to in Section 5.1(b)), (i) while a Registration
Statement covering the resale of such Security is effective under the Securities
Act, or (ii) following any sale of such Registrable Securities pursuant to
Rule
144, or (iii) if such Registrable Securities are eligible for sale under Rule
144(k), or (iv) if such legend is not required under applicable requirements
of
the Securities Act (including judicial interpretations and pronouncements issued
by the Staff of the Commission) and such lack of requirement is confirmed by
a
legal opinion satisfactory to the Company. If all or any portion of a
Warrant is exercised at a time when there is an effective Registration Statement
to cover the resale of the Warrant Shares, or if such Warrant Shares may be
sold
under paragraph (k) of Rule 144 or if such legend is not otherwise required
under applicable requirements of the Securities Act (including judicial
interpretations thereof) then such Warrant Shares shall be issued free of all
legends. The Company agrees that following the Effective Date or at such
time as such legend is no longer required under this Section 5.1(c), it will,
no
later than five (5) Trading Days following the delivery by the Investor to
the
Company or the Company’s transfer agent of a certificate representing
Registrable Securities, as the case may be, issued with a restrictive legend
(such date, the “Legend
Removal Date”),
deliver or cause to be delivered to such Investor a certificate representing
such Securities that is free from all restrictive and other legends. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section.
(d) The
Investor agrees that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 5.1 is predicated upon
the
Company’s reliance that the Investor will sell any Securities pursuant to either
the registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom.
Section
5.2. Integration.
The
Company has not and shall not, and shall use its best efforts to ensure that
no
Affiliate of the Company shall, sell, offer for sale or solicit offers to buy
or
otherwise negotiate in respect of any security (as defined in Section 2 of
the
Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Investors, or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market in a manner that would require stockholder
approval of the sale of the securities to the Investors.
Section
5.3. Securities
Laws Disclosure; Publicity.
By 9:00
a.m. (New York time) on the Trading Day following the execution of this
Agreement, and by 5:00 p.m. (New York time) on the Initial Closing Date, the
Company shall issue press releases disclosing the transactions contemplated
hereby and the Closing. On the Trading Day following the execution of this
Agreement the Company will file a Current Report on Form 8-K disclosing the
material terms of the Transaction Documents (and attach as exhibits thereto
the
Transaction Documents), and on the Initial Closing Date the Company will file
an
additional Current Report on Form 8-K to disclose the Initial Closing. In
addition, the Company will make such other filings and notices in the manner
and
time required by the Commission and the Trading Market on which the Common
Stock
is listed.
-22-
Section
5.4. Independent
Board.
Not
later than the first to occur of the Company’s next meeting of stockholders or
September 30, 2007, the Company’s board of directors shall consist of a majority
of independent
directors. The independence of the directors shall be determined by the rules
of
the Nasdaq Stock Exchange unless the Common Stock is listed on the New York
or
American Stock Exchange, in which event independence shall be determined by
the
rules of such exchange.
Section
5.5. Advisory
Director; Election to Board.
No
later
than the date of the first meeting of the Company’s Board of Directors following
the Initial Closing date, the Investor shall be designated as an “Advisory
Director” of the Company and the Investor shall continue to be an Advisory
Director so long as he holds any of the Securities. In his capacity as an
Advisory Director, the Investor shall be entitled to receive notice of, and
to
attend, every meeting of the Company’s Board of Directors, to receive copies of
all materials distributed to the members of the Board of Directors, and to
participate fully (without the right to vote) in all discussions and
deliberations of the Board of Directors, except when the Board of Directors
is
discussing the Company’s relationship with or obligations to the Investor or
when the Company’s legal counsel advises that the Investor’s participation would
result in the Company’s forfeiture of the attorney-client privilege or would
otherwise be inappropriate. As soon as the number of authorized members of
the
Company’s Board of Directors is increased beyond seven (7), the Company shall
nominate the Investor for election to the Company’s Board of
Directors.
Section
5.6. Use
of Proceeds.
Except
as otherwise disclosed in the Disclosure Materials, the
Company
shall use the net proceeds from the sale of the Securities hereunder (i) for
working capital purposes, (ii) to purchase fixed assets used in the development
or production of the Company’s products or (iii) for investment in new
technologies related to the Company’s business (including without limitation
through the acquisition of other companies).
ARTICLE
6
Conditions
Precedent to Closing
Section
6.1. Conditions
Precedent to the Obligations of the Investor to Purchase
Securities.
The
obligation of the Investor to acquire Securities at the Closing is subject
to
the satisfaction or waiver by the Investor, at or before the Closing, of each
of
the following conditions:
|
(a)
|
Representations
and Warranties.
The Company shall have delivered a certificate of the Company’s Chief
Executive Officer certifying that the representations and warranties
of
the Company contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing as though
made on
and as of such date;
|
|
(b)
|
Performance.
The Company shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by
the
Transaction Documents to be performed, satisfied or complied with
by it at
or prior to the Closing;
|
|
(c)
|
No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any
court or
governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents;
|
-23-
|
(d)
|
No
Adverse Changes.
Since the date of execution of this Agreement, no event or series
of
events shall have occurred that reasonably could have or result in
a
Material Adverse Effect;
|
|
(e)
|
No
Suspensions of Trading in Common Stock. From
the date hereof to the Closing Date, trading in the Common Stock
shall not
have been suspended by the Commission (except for any suspension
of
trading of limited duration agreed to by the Company, which suspension
shall be terminated prior to the Closing), and, at any time prior
to the
Closing Date, trading in securities generally as reported by Bloomberg
Financial Markets shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades
are
reported by such service, or on any Trading Market, nor shall a banking
moratorium have been declared either by the United States or New
York
State authorities nor shall there have occurred any material outbreak
or
escalation of hostilities or other national or international calamity
of
such magnitude in its effect on, or any material adverse change in,
any
financial market which, in each case, in the reasonable judgment
of each
Investor, makes it impracticable or inadvisable to purchase the Shares
and
the Warrants at the Closing;
and
|
| (f) |
Company
Deliverables.
The Company shall have delivered the Company Deliverables in accordance
with Section 2.2(a).
|
|
(a)
|
Representations
and Warranties.
The representations and warranties of the Investor contained herein
shall
be true and correct in all material respects as of the date when
made and
as of the Closing Date as though made on and as of such
date;
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|
(b)
|
Performance.
The Investor shall have performed, satisfied and complied in all
material
respects with all covenants, agreements and conditions required by
the
Transaction Documents to be performed, satisfied or complied with
by such
Investor at or prior to the Closing;
|
|
(c)
|
No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any
court or
governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents; and
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|
(d)
|
Investors
Deliverables.
The Investor shall have delivered the Purchase Price in accordance
with
Section 2.2(b).
|
ARTICLE
7
Miscellaneous
Section
7.1. Fees
and Expenses.
Each
party shall pay the fees and expenses of its advisers, counsel, accountants
and
other experts, if any, and all other expenses incurred by such party incident
to
the negotiation, preparation, execution, delivery and performance of the
Transaction Documents. The Company shall pay all stamp and other taxes and
duties levied in connection with the sale of the Shares.
-24-
Section
7.2. Entire
Agreement.
The
Transaction Documents, together with the Exhibits thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings, discussions and representations,
oral or written, with respect to such matters, which the parties acknowledge
have been merged into such documents and exhibits.
| If to the Company: |
ThermoEnergy
Corporation
|
Attn.:
Xxxxxx X. Xxxxxx
000
Xxxx
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx
Xxxx, XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
| With a copy to: |
Xxxxx
Peabody, LLP
|
Attn.:
Xxxxxxx X. Xxxxx
000
Xxxxxx Xxxxxx
Xxxxxx,
XX 00000-0000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
| If to the Investor: |
Xx.
Xxxxxx X. Xxxxxxx
|
00
Xxxxxxxx Xxxxxx
Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000;
or
such
other address as may be designated in writing hereafter, in the same manner,
by
such Person.
Section
7.4. Amendments;
Waivers; No Additional Consideration.
No
provision of this Agreement may be waived or amended except in a written
instrument signed by the Company and by Investors holding at least sixty-six
and
two-thirds percent (66-2/3%)
of the
then outstanding Shares. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right. No consideration shall be offered or paid to
any
Investor to amend or consent to a waiver or modification of any provision of
any
Transaction Document unless the same consideration is also offered to all
Investors who then hold Shares.
-25-
Section
7.5 Termination.
This
Agreement may be terminated prior to Closing:
|
(a)
|
by
written agreement of the Investor and the
Company;
|
|
by
the Company or the Investor, upon written notice to the other, if
the
Closing shall not have taken place by 6:30 p.m. Eastern time on the
Outside Date; provided,
that the right to terminate this Agreement under this Section 7.5(b)
shall
not be available to any Person whose failure to comply with its
obligations under this Agreement has been the cause of or resulted
in the
failure of the Closing to occur on or before such
time;
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|
(c)
|
by
the Investor if he concludes in good faith that any of the conditions
precedent contained in Section 7.1 shall have been breached or shall
not
be capable of being satisfied by the Outside Date despite the assumed
best
efforts of the Company.
|
In
the
event of a termination pursuant to this Section, the Company shall promptly
notify all non-terminating Investors. Upon a termination in accordance with
this
Section 7.5, the Company and the Investor shall have no further obligation
or
liability (including as arising from such termination) to the
other.
Section
7.6. Construction.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party. This Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden
of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement or any of the Transaction
Documents.
Section
7.7. Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Investor. The Investor may assign any or all of his rights under
this Agreement to any Person to whom the Investor assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions hereof that apply to the
“Investor.”
Section
7.8. No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Article 4. or Section 5.7 (with respect to rights to indemnification and
contribution).
Section
7.9. Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all Proceedings
concerning the interpretations, enforcement and of the transactions contemplated
by this Agreement and any other Transaction Documents (whether brought against
a
party hereto or its respective Affiliates,
employees or agents) shall be commenced exclusively in the state or federal
courts sitting in, or having jurisdiction over, Little Rock, Arkansas (the
“Arkansas Courts”). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the Arkansas Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of the
any
of the Transaction Documents), and hereby irrevocably waives, and agrees not
to
assert in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such Arkansas Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees
that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
and
all right to trial by jury in any legal proceeding arising out of or relating
to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document,
then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys’ fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Proceeding.
-26-
Section
7.10. Survival.
The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery of the Securities.
Section
7.11. Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original
thereof.
Section
7.12. Severability.
If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
Section
7.13. Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever they Investor
exercises a right, election, demand or option under a Transaction Document
and
the Company does not timely perform its related obligations within the periods
therein provided, then the Investor may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to its future
actions and rights.
-27-
Section
7.15. Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each of the Investors and the Company will
be entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of
any such obligation the defense that a remedy at law would be
adequate.
Section
7.16. Payment
Set Aside.
To the
extent that the Company makes a payment or payments to the Investor pursuant
to
any Transaction Document or the Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement
or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation,
any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as
of
the date first indicated above.
|
/s/
Xxxxxx X.
Xxxxxxx
Xxxxxx
X. Xxxxxxx
|
ThermoEnergy
Corporation
By: /s/
Xxxxxx X.
Xxxxxx
Xxxxxx
X. Xxxxxx
Chairman
and CEO
|
-28-
