COMMON STOCK PURCHASE AGREEMENT Dated April 30, 2008 by and between SULPHCO, INC. and AZIMUTH OPPORTUNITY LTD.
EXHIBIT
10.1
Dated
April 30, 2008
by
and between
SULPHCO,
INC.
and
AZIMUTH
OPPORTUNITY LTD.
TABLE
OF CONTENTS
Page
|
Article
I
|
PURCHASE
AND SALE OF COMMON STOCK
|
1
|
|
Section
1.1
|
Purchase
and Sale of Stock
|
1
|
|
Section
1.2
|
Effective
Date; Settlement Dates
|
1
|
|
Section
1.3
|
The
Shares
|
2
|
|
Section
1.4
|
Current
Report; Prospectus Supplement
|
2
|
|
Article
II
|
FIXED
REQUEST TERMS; OPTIONAL AMOUNT
|
2
|
|
Section
2.1
|
Fixed
Request Notice
|
2
|
|
Section
2.2
|
Fixed
Requests
|
3
|
|
Section
2.3
|
Share
Calculation
|
4
|
|
Section
2.4
|
Limitation
of Fixed Requests
|
4
|
|
Section
2.5
|
Reduction
of Commitment
|
4
|
|
Section
2.6
|
Below
Threshold Price
|
4
|
|
Section
2.7
|
Settlement
|
5
|
|
Section
2.8
|
Reduction
of Pricing Period
|
5
|
|
Section
2.9
|
Optional
Amount
|
6
|
|
Section
2.10
|
Calculation
of Optional Amount Shares
|
6
|
|
Section
2.11
|
Exercise
of Optional Amount
|
7
|
|
Section
2.12
|
Aggregate
Limit
|
7
|
|
Article
III
|
REPRESENTATIONS
AND WARRANTIES OF THE INVESTOR
|
8
|
|
Section
3.1
|
Organization
and Standing of the Investor
|
8
|
|
Section
3.2
|
Authorization
and Power
|
8
|
|
Section
3.3
|
No
Conflicts
|
8
|
|
Section
3.4
|
Information
|
9
|
|
Article
IV
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
9
|
|
Section
4.1
|
Organization,
Good Standing and Power
|
9
|
|
Section
4.2
|
Authorization,
Enforcement
|
9
|
|
Section
4.3
|
Capitalization
|
10
|
|
Section
4.4
|
Issuance
of Shares
|
10
|
|
Section
4.5
|
No
Conflicts
|
11
|
|
Section
4.6
|
Commission
Documents, Financial Statements
|
11
|
|
Section
4.7
|
Subsidiaries
|
13
|
|
Section
4.8
|
No
Material Adverse Effect
|
13
|
|
Section
4.9
|
Indebtedness
|
13
|
|
Section
4.10
|
Title
To Assets
|
13
|
|
Section
4.11
|
Actions
Pending
|
13
|
|
Section
4.12
|
Compliance
With Law
|
13
|
|
Section
4.13
|
Certain
Fees
|
14
|
|
Section
4.14
|
Operation
of Business
|
14
|
i
|
Section
4.15
|
Environmental
Compliance
|
15
|
|
Section
4.16
|
Material
Agreements
|
15
|
|
Section
4.17
|
Transactions
With Affiliates
|
15
|
|
Section
4.18
|
Securities
Act; NASD Conduct Rules
|
16
|
|
Section
4.19
|
Employees
|
18
|
|
Section
4.20
|
Use
of Proceeds
|
18
|
|
Section
4.21
|
Investment
Company Act Status
|
18
|
|
Section
4.22
|
ERISA
|
18
|
|
Section
4.23
|
Taxes
|
18
|
|
Section
4.24
|
Insurance
|
19
|
|
Section
4.25
|
Acknowledgement
Regarding Investor’s Purchase of Shares
|
19
|
|
Article
V
|
COVENANTS
|
19
|
|
Section
5.1
|
Securities
Compliance
|
19
|
|
Section
5.2
|
Registration
and Listing
|
19
|
|
Section
5.3
|
Compliance
with Laws.
|
19
|
|
Section
5.4
|
Keeping
of Records and Books of Account; Foreign Corrupt Practices
Act
|
20
|
|
Section
5.5
|
Limitations
on Holdings and Issuances
|
21
|
|
Section
5.6
|
Other
Agreements and Other Financings.
|
21
|
|
Section
5.7
|
Stop
Orders
|
22
|
|
Section
5.8
|
Amendments
to the Registration Statement; Prospectus Supplements; Free Writing
Prospectuses
|
23
|
|
Section
5.9
|
Prospectus
Delivery
|
23
|
|
Section
5.10
|
Selling
Restrictions.
|
24
|
|
Section
5.11
|
Effective
Registration Statement
|
25
|
|
Section
5.12
|
Non-Public
Information
|
25
|
|
Section
5.13
|
Broker/Dealer
|
25
|
|
Section
5.14
|
Disclosure
Schedule
|
25
|
|
Article
VI
|
OPINION
OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND PURCHASE
OF THE
SHARES
|
26
|
|
Section
6.1
|
Opinion
of Counsel and Certificate
|
26
|
|
Section
6.2
|
Conditions
Precedent to the Obligation of the Company
|
26
|
|
Section
6.3
|
Conditions
Precedent to the Obligation of the Investor
|
27
|
|
Article
VII
|
TERMINATION
|
29
|
|
Section
7.1
|
Term,
Termination by Mutual Consent
|
29
|
|
Section
7.2
|
Other
Termination
|
30
|
|
Section
7.3
|
Effect
of Termination
|
30
|
|
Article
VIII
|
INDEMNIFICATION
|
31
|
|
Section
8.1
|
General
Indemnity.
|
31
|
|
Section
8.2
|
Indemnification
Procedures
|
32
|
ii
|
Article
IX
|
MISCELLANEOUS
|
34
|
|
Section
9.1
|
Fees
and Expenses.
|
34
|
|
Section
9.2
|
Specific
Enforcement, Consent to Jurisdiction, Waiver of Jury Trial
|
34
|
|
Section
9.3
|
Entire
Agreement; Amendment
|
35
|
|
Section
9.4
|
Notices
|
35
|
|
Section
9.5
|
Waivers
|
36
|
|
Section
9.6
|
Headings
|
36
|
|
Section
9.7
|
Successors
and Assigns
|
36
|
|
Section
9.8
|
Governing
Law
|
36
|
|
Section
9.9
|
Survival
|
37
|
|
Section
9.10
|
Counterparts
|
37
|
|
Section
9.11
|
Publicity
|
37
|
|
Section
9.12
|
Severability
|
37
|
|
Section
9.13
|
Further
Assurances
|
37
|
|
Annex
A.
|
Definitions |
iii
This
COMMON
STOCK PURCHASE AGREEMENT,
made
and entered into on this 30th
day of
April 2008 (this “Agreement”),
by
and between Azimuth Opportunity Ltd., an international business company
incorporated under the laws of the British Virgin Islands (the “Investor”),
and
SulphCo, Inc., a corporation organized and existing under the laws of the State
of Nevada (the “Company”).
Capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in Annex
A
hereto.
RECITALS
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company may issue and sell to the Investor and the Investor shall
thereupon purchase from the Company up to $60,000,000 worth of newly issued
shares of the Company’s common stock, $0.001 par value (“Common
Stock”),
subject, in all cases, to the Trading Market Limit; and
WHEREAS,
the
offer and sale of the shares of Common Stock hereunder have been registered
by
the Company in the Registration Statement, which has been declared effective
by
order of the Commission under the Securities Act;
NOW,
THEREFORE,
the
parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE
I
PURCHASE
AND SALE OF COMMON STOCK
Section
1.1 Purchase
and Sale of Stock.
Upon
the terms and subject to the conditions of this Agreement, during the Investment
Period the Company in its discretion may issue and sell to the Investor up
to
$60,000,000 (the “Total
Commitment”)
worth
of duly authorized, validly issued, fully paid and non-assessable shares of
Common Stock (subject in all cases to the Trading Market Limit, the
“Aggregate
Limit”),
by
(i) the delivery to the Investor of not more than twenty-four (24) separate
Fixed Request Notices (unless the Investor and the Company mutually agree that
a
different number of Fixed Request Notices may be delivered) as provided in
Article II hereof and (ii) the exercise by the Investor of Optional Amounts,
which the Company may in its discretion grant to the Investor and which may
be
exercised by the Investor, in whole or in part, as provided in Article II
hereof. The aggregate of all Fixed Request Amounts and Optional Amount Dollar
Amounts shall not exceed the Aggregate Limit.
Section
1.2 Effective
Date; Settlement Dates.
This
Agreement shall become effective and binding upon delivery of counterpart
signature pages of this Agreement executed by each of the parties hereto, and
by
delivery of an opinion of counsel and a certificate of the Company as provided
in Section 6.1 hereof, to the offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., New York time, on the Effective
Date. In consideration of and in express reliance upon the representations,
warranties and covenants, and otherwise upon the terms and subject to the
conditions, of this Agreement, from and after the Effective Date and during
the
Investment Period (i) the Company shall issue and sell to the Investor, and
the
Investor agrees to purchase from the Company, the Shares in respect of
each
Fixed
Request and (ii) the Investor may in its discretion elect to purchase Shares
in
respect of each Optional Amount. The issuance and sale of Shares to the Investor
pursuant to any Fixed Request or Optional Amount shall occur on the applicable
Settlement Date in accordance with Sections 2.7 and 2.9 (or on such Trading
Day
in accordance with Section 2.8, as applicable), provided in each case that
all
of the conditions precedent thereto set forth in Article VI theretofore shall
have been fulfilled or (to the extent permitted by applicable law)
waived.
Section
1.3 The
Shares.
The
Company has or will have duly authorized and reserved for issuance, and
covenants to continue to so reserve once reserved for issuance, free of all
preemptive and other similar rights, at all times during the Investment Period,
the requisite aggregate number of authorized but unissued shares of its Common
Stock to timely effect the issuance, sale and delivery in full to the Investor
of all Shares to be issued in respect of all Fixed Requests and Optional Amounts
under this Agreement, in any case prior to the issuance to the Investor of
such
Shares.
Section
1.4 Current
Report; Prospectus Supplement.
As soon
as practicable, but in any event not later than 5:30 p.m. (New York time) on
the
first Trading Day immediately following the Effective Date, the Company shall
file with the Commission a report on Form 8-K relating to the transactions
contemplated by, and describing the material terms and conditions of, this
Agreement and disclosing all information relating to the transactions
contemplated hereby required to be disclosed in the Registration Statement
and
the Base Prospectus (but which permissibly has been omitted therefrom in
accordance with the Securities Act), including, without limitation, information
required to be disclosed in the section captioned “Plan of Distribution” in the
Base Prospectus (the “Current
Report”).
The
Current Report shall include a copy of this Agreement as an exhibit. To the
extent applicable, the Current Report shall be incorporated by reference in
the
Registration Statement in accordance with the provisions of Rule 430B under
the
Securities Act. The Company heretofore has provided the Investor a reasonable
opportunity to comment on a draft of such Current Report and has given due
consideration to such comments. The Company shall file a final Base Prospectus
pursuant to Rule 424(b) under the Securities Act on or prior to the second
Trading Day immediately following the Effective Date. Pursuant to Section 5.9
and subject to the provisions of Section 5.8, on the first Trading Day
immediately following the last Trading Day of each Pricing Period, the Company
shall file with the Commission a Prospectus Supplement pursuant to Rule 424(b)
under the Securities Act disclosing the number of Shares to be issued and sold
to the Investor thereunder, the total purchase price therefor and the net
proceeds to be received by the Company therefrom and, to the extent required
by
the Securities Act, identifying the Current Report.
ARTICLE
II
FIXED
REQUEST TERMS; OPTIONAL AMOUNT
Subject
to the satisfaction of the conditions set forth in this Agreement, the parties
agree (unless otherwise mutually agreed upon by the parties in writing) as
follows:
Section
2.1 Fixed
Request Notice.
Upon
two (2) Trading Days’ prior written notice to the Investor, the Company may,
from time to time in its sole discretion, provide a notice to the Investor
of a
Fixed Request before 9:30 a.m. (New York time) on the first Trading Day of
the
Pricing Period (the “Fixed
Request Notice”),
substantially in the form attached hereto as Exhibit
2
A.
The
Fixed Request Notice shall specify the Fixed Amount Requested, establish the
Threshold Price for such Fixed Request, designate the first Trading Day of
the
Pricing Period and specify the Optional Amount, if any, that the Company elects
to grant to the Investor during the Pricing Period and the applicable Threshold
Price for such Optional Amount (the “Optional
Amount Threshold Price”).
The
Threshold Price and the Optional Amount Threshold Price established by the
Company in a Fixed Request Notice may be the same or different, in the Company’s
sole discretion. Upon the terms and subject to the conditions of this Agreement,
the Investor is obligated to accept each Fixed Request Notice prepared and
delivered in accordance with the provisions of this Agreement.
Section
2.2 Fixed
Requests.
From
time to time during the Investment Period, the Company may in its sole
discretion deliver to the Investor via facsimile or other electronic
transmission a Fixed Request Notice for a specified Fixed Amount Requested,
and
the applicable discount price (the “Discount
Price”)
shall
be determined, in accordance with the price and share amount parameters as
set
forth below or such other parameters mutually agreed upon by the Investor and
the Company, and upon the terms and subject to the conditions of this Agreement,
the Investor shall purchase from the Company the Shares subject to such Fixed
Request Notice; provided,
however,
that
(i) if an ex-dividend date is established by the Trading Market in respect
of
the Common Stock on or between the first Trading Day of the applicable Pricing
Period and the applicable Settlement Date, the Discount Price shall be reduced
by the per share dividend amount and (ii) the Company may not deliver any single
Fixed Request Notice for a Fixed Amount Requested in excess of the lesser of
(a)
the amount in the applicable Fixed Amount Requested column below and (b) 2.5%
of
the Market Capitalization:
|
Threshold
Price
|
Fixed
Amount Requested
|
Discount
Price
|
||
|
Equal
to or greater than $12.00
|
Not
to exceed $9,000,000
|
96.25%
of the VWAP
|
||
|
Equal
to or greater than $11.00 and less than $12.00
|
Not
to exceed $8,250,000
|
96.25%
of the VWAP
|
||
|
Equal
to or greater than $10.00 and less than $11.00
|
Not
to exceed $7,500,000
|
96.00%
of the VWAP
|
||
|
Equal
to or greater than $9.00 and less than $10.00
|
Not
to exceed $6,750,000
|
95.75%
of the VWAP
|
||
|
Equal
to or greater than $8.00 and less than $9.00
|
Not
to exceed $6,000,000
|
95.75%
of the VWAP
|
||
|
Equal
to or greater than $7.00 and less than $8.00
|
Not
to exceed $5,250,000
|
95.50%
of the VWAP
|
||
|
Equal
to or greater than $6.00 and less than $7.00
|
Not
to exceed $4,500,000
|
95.25%
of the VWAP
|
||
|
Equal
to or greater than $5.00 and less than $6.00
|
Not
to exceed $3,750,000
|
95.00%
of the VWAP
|
||
|
Equal
to or greater than $4.00 and less than $5.00
|
Not
to exceed $3,000,000
|
94.50%
of the VWAP
|
||
|
Equal
to or greater than $3.00 and less than $4.00
|
Not
to exceed $2,250,000
|
94.50%
of the VWAP
|
||
Anything
to the contrary in this Agreement notwithstanding, at no time shall the Investor
be required to purchase more than $9,000,000 worth of Common Stock in respect
of
any Pricing Period (not including Common Stock subject to any Optional Amount).
The date on which the
3
Company
delivers any Fixed Request Notice in accordance with this Section 2.2
hereinafter shall be referred to as a “Fixed
Request Exercise Date”.
Section
2.3 Share
Calculation.
Subject
to Section 2.6, the number of Shares to be issued by the Company to the Investor
pursuant to a Fixed Request shall equal the aggregate sum of each quotient
(calculated for each Trading Day during the applicable Pricing Period for which
the VWAP equals or exceeds the Threshold Price) determined pursuant to the
following equation (rounded to the nearest whole Share):
| N = |
(A
x B)/C, where:
|
| N = |
the
number of Shares to be issued by the Company to the Investor in respect
of
a Trading Day during the applicable Pricing Period for which the
VWAP
equals or exceeds the Threshold
Price,
|
| A = |
0.10
(the “Multiplier”);
provided,
however,
that if the number of Trading Days constituting a Pricing Period
is
decreased as set forth in Section 2.8 hereof, then the Multiplier
correspondingly shall be increased to equal the decimal equivalent
(in
10-millionths) of a fraction, the numerator of which is one and the
denominator of which equals the number of Trading Days in the Pricing
Period as so decreased,
|
| B = |
the
Fixed Amount Requested, and
|
| C = |
the
applicable Discount Price.
|
Section
2.4 Limitation
of Fixed Requests.
The
Company shall not make more than one Fixed Request in each Pricing Period.
Not
less than five (5) Trading Days shall elapse between the end of one Pricing
Period and the commencement of any other Pricing Period during the Investment
Period. There shall be permitted a maximum of twenty-four (24) Fixed Requests
during the Investment Period. Each Fixed Request automatically shall expire
immediately following the last Trading Day of each Pricing Period.
Section
2.5 Reduction
of Commitment.
On the
last Trading Day of each Pricing Period, the Investor’s Total Commitment under
this Agreement automatically (and without the need for any amendment to this
Agreement) shall be reduced, on a dollar-for-dollar basis, by the total amount
of the Fixed Request Amount and the Optional Amount Dollar Amount, if any,
for
such Pricing Period paid to the Company at the Settlement Date.
Section
2.6 Below
Threshold Price.
If the
VWAP on any Trading Day in a Pricing Period is lower than the Threshold Price,
then for each such Trading Day the total amount of the Fixed Amount Requested
shall be reduced, on a dollar-for-dollar basis, by an amount equal to the
product of (x) the Multiplier and (y) the original Fixed Amount Requested,
and
no Shares shall be purchased or sold with respect to such Trading Day, except
as
provided below. If trading in the Common Stock on the AMEX (or any other
national securities exchange on which the Common Stock is then listed) is
suspended for any reason for more than three (3) hours on any Trading Day,
the
Investor may at its option deem the price of the Common Stock to be lower than
the Threshold Price for such Trading Day and, for each such Trading Day, the
total amount of the Fixed Amount Requested shall be reduced as provided in
the
immediately preceding
4
sentence,
and no Shares shall be purchased or sold with respect to such Trading Day,
except as provided below. For each Trading Day during a Pricing Period on which
the VWAP is lower (or is deemed to be lower as provided in the immediately
preceding sentence) than the Threshold Price, the Investor may in its sole
discretion elect to purchase such
U.S.
dollar amount of Shares equal to the amount by which the Fixed Amount Requested
has been reduced in accordance with this Section 2.6, at the Threshold Price
multiplied by the applicable percentage determined in accordance with the price
and share amount parameters set forth in Section 2.2. The Investor shall inform
the Company via facsimile transmission not later than 8:00 p.m. (New York time)
on the last Trading Day of such Pricing Period as to the number of Shares,
if
any, the Investor elects to purchase as provided in this Section
2.6.
Section
2.7 Settlement.
The
payment for, against simultaneous delivery of, Shares in respect of each Fixed
Request shall be settled on the second Trading Day next following the last
Trading Day of each Pricing Period, or on such earlier date as the parties
may
mutually agree (the “Settlement
Date”).
On
each Settlement Date, the Company shall deliver the Shares purchased by the
Investor to the Investor or its designees via DTC’s Deposit Withdrawal Agent
Commission (DWAC) system, against simultaneous payment therefor to the Company’s
designated account by wire transfer of immediately available funds, provided
that if the Shares are received by the Investor later than 1:00 p.m. (New York
time), payment therefor shall be made with next day funds. As set forth in
Section 9.1(ii), a failure by the Company to deliver such Shares shall result
in
the payment of liquidated damages by the Company to the Investor.
Section
2.8 Reduction
of Pricing Period.
If
during a Pricing Period the Company elects to reduce the number of Trading
Days
in such Pricing Period (and thereby amend its previously delivered Fixed Request
Notice), the Company shall so notify the Investor before 9:00 a.m. (New York
time) on any Trading Day during a Pricing Period (a “Reduction
Notice”)
and
the last Trading Day of such Pricing Period shall be the Trading Day immediately
preceding the Trading Day on which the Investor received such Reduction Notice;
provided,
however,
that if
the Company delivers the Reduction Notice later than 9:00 a.m. (New York time)
on a Trading Day during a Pricing Period, then the last Trading Day of such
Pricing Period instead shall be the Trading Day on which the Investor received
such Reduction Notice.
Upon
receipt of a Reduction Notice, the Investor (i) shall purchase the Shares in
respect of each Trading Day in such reduced Pricing Period for which the VWAP
equals or exceeds the Threshold Price in accordance with Section 2.3 hereof;
(ii) may elect to purchase the Shares in respect of any Trading Day in such
reduced Pricing Period for which the VWAP is (or is deemed to be) lower than
the
Threshold Price in accordance with Section 2.6 hereof; and (iii) may elect
to
exercise all or any portion of an Optional Amount on any Trading Day during
such
reduced Pricing Period in accordance with Sections 2.10 and 2.11
hereof.
In
addition, upon receipt of a Reduction Notice, the Investor may elect to purchase
such U.S. dollar amount of additional Shares equal to the quotient determined
pursuant to the following equation:
D
= (A/B)
x (B - C), where:
D
= the
U.S. dollar amount of additional Shares to be purchased,
5
A
= the
Fixed Amount Requested,
B
= 10
or, for purposes of this Section 2.8, such lesser number of Trading Days as
the
parties may mutually agree to, and
C
= the
number of Trading Days in the reduced Pricing Period, at
a per
Share price equal to (x) the Fixed Amount Requested attributable to the reduced
Pricing Period divided by (y) the number of Shares to be purchased during such
reduced Pricing Period pursuant to clauses (i) and (ii) (as applicable) of
the
immediately preceding paragraph.
The
Investor may also elect to exercise any portion of the applicable Optional
Amount which was unexercised during the reduced Pricing Period by issuing an
Optional Amount Notice to the Company not later than 10:00 a.m. (New York time)
on the first Trading Day next following the last Trading Day of the reduced
Pricing Period. The number of Shares to be issued upon exercise of such Optional
Amount shall be calculated pursuant to the equation set forth in Section 2.10
hereof, except that “C” shall equal the greater of (i) the VWAP for the Common
Stock on the last Trading Day of the reduced Pricing Period or (ii) the Optional
Amount Threshold Price.
The
payment for, against simultaneous delivery of, Shares to be purchased and sold
in accordance with this Section 2.8 shall be settled on the second Trading
Day
next following the Trading Day on which the Investor receives a Reduction
Notice.
Section
2.9 Optional
Amount.
With
respect to any Pricing Period, the Company may in its sole discretion grant
to
the Investor the right to exercise, from time to time during the Pricing Period
(but not more than once on any Trading Day), all or any portion of an Optional
Amount. The maximum Optional Amount Dollar Amount and the Optional Amount
Threshold Price shall be set forth in the Fixed Request Notice. If an
ex-dividend date is established by the Trading Market in respect of the Common
Stock on or between the first Trading Day of the applicable Pricing Period
and
the applicable Settlement Date, the applicable exercise price in respect of
the
Optional Amount shall be reduced by the per share dividend amount. Each daily
Optional Amount exercise shall be aggregated during the Pricing Period and
settled on the next Settlement Date. The Optional Amount Threshold Price
designated by the Company in its Fixed Request Notice shall apply to each
Optional Amount during the applicable Pricing Period.
Section
2.10 Calculation
of Optional Amount Shares.
The
number of shares of Common Stock to be issued in connection with the exercise
of
an Optional Amount shall be the quotient determined pursuant to the following
equation (rounded to the nearest whole Share):
O
= A/(B
x C), where:
O
= the
number of shares of Common Stock to be issued in connection with such Optional
Amount exercise,
A
= the
Optional Amount Dollar Amount with respect to which the Investor has delivered
an Optional ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇
B
= the
applicable percentage determined in accordance with the price and shares amount
parameters set forth in Section 2.2 (with the Optional Amount Threshold Price
serving as the Threshold Price for such purposes), and
C
= the
greater of (i) the VWAP for the Common Stock on the day the Investor delivers
the Optional Amount Notice or (ii) the Optional Amount Threshold
Price.
Section
2.11 Exercise
of Optional Amount.
If
granted by the Company to the Investor with respect to a Pricing Period, all
or
any portion of the Optional Amount may be exercised by the Investor on any
Trading Day during the Pricing Period, subject to the limitations set forth
in
Section 2.9. As a condition to each exercise of an Optional Amount pursuant
to
this Section 2.11, the Investor shall issue an Optional Amount Notice to the
Company no later than 8:00 p.m. (New York time) on the day of such Optional
Amount exercise. If the Investor does not exercise an Optional Amount in full
by
8:00 p.m. (New York time) on the last Trading Day of the applicable Pricing
Period, such unexercised portion of the Investor’s Optional Amount with respect
to that Pricing Period automatically shall lapse and terminate.
Section
2.12 Aggregate
Limit.
Notwithstanding anything to the contrary contained in this Agreement, in no
event may the Company issue a Fixed Request Notice or grant an Optional Amount
to the extent that the sale of Shares pursuant thereto and pursuant to all
prior
Fixed Request Notices and Optional Amounts issued hereunder, and as liquidated
damages pursuant to Section 9.1(ii), would cause the Company to sell or the
Investor to purchase Shares which in the aggregate are in excess of the
Aggregate Limit. If the Company issues a Fixed Request Notice or Optional Amount
that otherwise would permit the Investor to purchase shares of Common Stock
which would cause the aggregate purchases by Investor hereunder to exceed the
Aggregate Limit, such Fixed Request Notice or Optional Amount shall be void
ab
initio
to the
extent of the amount by which the dollar value of shares or number of shares,
as
the case may be, of Common Stock otherwise issuable pursuant to such Fixed
Request Notice or Optional Amount together with the dollar value of shares
or
number of shares, as the case may be, of all other Common Stock purchased by
the
Investor pursuant hereto would exceed the Aggregate Limit. The Company hereby
represents, warrants and covenants that neither it nor any of its Subsidiaries
(i) has effected any transaction or series of transactions, (ii) is a party
to
any pending transaction or series of transactions or (iii) shall enter into
any
contract, agreement, agreement-in-principle, arrangement or understanding with
respect to, or shall effect, any Other Financing which, in any of such cases,
may be integrated with the transactions contemplated by this Agreement for
purposes of determining whether approval of the Company’s stockholders is
required under any bylaw, listed securities maintenance standards or other
rules
of the Trading Market; provided,
however,
that
the Company shall be permitted to take any action referred to in clause (iii)
above if the Company has timely provided the Investor with an Integration Notice
as provided in Section 5.6(ii) hereof.
At
the
Company’s sole discretion, and effective automatically upon receipt by the
Investor of notice thereof from the Company, this Agreement may be amended
by
the Company from time to time to reduce the Aggregate Limit by a specified
dollar amount of Common Stock which shall be no greater than is required to
enable the Company to utilize the Registration Statement to consummate an
underwritten public offering of Common Stock or a registered direct public
offering of Common Stock during the Investment Period; provided,
however,
that
7
any
such
amendment of this Agreement (and any such purported amendment) shall be void
and
of no force and effect if the effect thereof would restrict, materially delay,
conflict with or impair the ability or right of the Company to perform its
obligations under this Agreement, including, without limitation, the obligation
of the Company to deliver Shares to the Investor in respect of a Fixed Request
or Optional Amount on the applicable Settlement Date. In the event the Company
shall have elected to reduce the Aggregate Limit as provided in the immediately
preceding sentence, at the Company’s sole discretion, and effective
automatically upon receipt by the Investor of notice thereof from the Company,
the Company may subsequently amend this Agreement to increase the Aggregate
Limit up to $60,000,000; provided,
however,
that in
no event shall the Company be entitled to issue Fixed Requests and grant
Optional Amounts during the remainder of the Investment Period for an aggregate
amount greater than the amount obtained by subtracting (x) the aggregate of
all
Fixed Request Amounts and Optional Amount Dollar Amounts (including any amounts
paid as liquidated damages pursuant to Section 9.1(ii) hereunder) covered by
all
Fixed Requests and Optional Amounts theretofore issued or granted by the Company
in respect of which a settlement has occurred pursuant to Section 2.7 from
(y)
$60,000,000, subject in all cases to the Trading Market Limit.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE INVESTOR
The
Investor hereby makes the following representations and warranties to the
Company:
Section
3.1 Organization
and Standing of the Investor.
The
Investor is an international business company duly organized, validly existing
and in good standing under the laws of the British Virgin Islands.
Section
3.2 Authorization
and Power.
The
Investor has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement and to purchase the Shares in
accordance with the terms hereof. The execution, delivery and performance of
this Agreement by the Investor and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action,
and no further consent or authorization of the Investor, its Board of Directors
or stockholders is required. This Agreement has been duly executed and delivered
by the Investor. This Agreement constitutes a valid and binding obligation
of
the Investor enforceable against it in accordance with its terms, except as
such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general
application.
Section
3.3 No
Conflicts.
The
execution, delivery and performance by the Investor of this Agreement and the
consummation by the Investor of the transactions contemplated herein do not
and
shall not (i) result in a violation of such Investor’s charter documents, bylaws
or other applicable organizational instruments, (ii) conflict with, constitute
a
default (or an event which, with notice or lapse of time or both, would become
a
default) under, or give rise to any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Investor is a party or is bound, (iii) create or impose any lien,
charge or encumbrance on any
8
property
of the Investor under any agreement or any commitment to which the Investor
is
party or under which the Investor is bound or under which any of its properties
or assets are bound, or (iv) result in a violation of any federal, state, local
or foreign statute, rule, or regulation, or any order, judgment or decree of
any
court or governmental agency applicable to the Investor or by which any of
its
properties or assets are bound or affected, except, in the case of clauses
(ii),
(iii) and (iv), for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in
the
aggregate, prohibit or otherwise interfere with the ability of the Investor
to
enter into and perform its obligations under this Agreement in any material
respect. The Investor is not required under federal, state, local or foreign
law, rule or regulation to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement or to purchase the Shares in accordance with the terms
hereof.
Section
3.4 Information.
All
materials relating to the business, financial condition, management and
operations of the Company and materials relating to the offer and sale of the
Shares which have been requested by the Investor have been made available to
the
Investor or its advisors. The Investor and its advisors have been afforded
the
opportunity to ask questions of representatives of the Company. The Investor
has
sought such accounting, legal and tax advice as it has considered necessary
to
make an informed investment decision with respect to its acquisition of the
Shares. The Investor understands that it (and not the Company) shall be
responsible for its own tax liabilities that may arise as a result of this
investment or the transactions contemplated by this Agreement.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except
as
set forth in the disclosure schedule delivered by the Company to the Investor
(which is hereby incorporated by reference in, and constitutes an integral
part
of, this Agreement) (the “Disclosure
Schedule”),
the
Company hereby makes the following representations and warranties to the
Investor:
Section
4.1 Organization,
Good Standing and Power.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada and has the requisite corporate power
and
authority to own, lease and operate its properties and assets and to conduct
its
business as it is now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes
such
qualification necessary, except for any jurisdiction in which the failure to
be
so qualified would not have a Material Adverse Effect.
Section
4.2 Authorization,
Enforcement.
The
Company has the requisite corporate power and authority to enter into and
perform this Agreement and to issue and sell the Shares in accordance with
the
terms hereof. Except for approvals of the Company’s Board of Directors or a
committee thereof as may be required in connection with any issuance and sale
of
Shares to the Investor hereunder (which approvals shall be obtained prior to
the
delivery of any Fixed Request Notice), the execution, delivery and performance
by the Company of this Agreement and the consummation by it of the transactions
contemplated hereby have been duly and validly
9
authorized
by all necessary corporate action and no further consent or authorization of
the
Company or its Board of Directors or stockholders is required. This Agreement
has been duly executed and delivered by the Company and constitutes a 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,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application.
Section
4.3 Capitalization.
The
authorized capital stock of the Company and the shares thereof issued and
outstanding are as set forth in the Commission Documents as of the dates
reflected therein. All of the outstanding shares of Common Stock have been
duly
authorized and validly issued, and are fully paid and nonassessable. Except
as
set forth in the Commission Documents, as of the Effective Date, (i) no shares
of Common Stock were entitled to preemptive rights or registration rights and
(ii) there were no outstanding options, warrants, scrip, rights to subscribe
to,
call or commitments of any character whatsoever relating to, or securities
or
rights convertible into or exchangeable for, any shares of capital stock of
the
Company. Except as set forth in the Commission Documents, there were no
contracts, commitments, understandings, or arrangements by which the Company
is
or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into or exchangeable for
any shares of capital stock of the Company. Except for customary transfer
restrictions contained in agreements entered into by the Company to sell
restricted securities or as set forth in the Commission Documents, as of the
Effective Date, the Company was not a party to, and it had no knowledge of,
any
agreement restricting the voting or transfer of any shares of the capital stock
of the Company. Except as set forth in the Commission Documents, the offer
and
sale of all capital stock, convertible or exchangeable securities, rights,
warrants or options of the Company issued prior to the Effective Date complied
with all then applicable federal and state securities laws, and no stockholder
has any right of rescission or damages or any “put” or similar right with
respect thereto that would have a Material Adverse Effect. The Company has
furnished or made available to the Investor via the Commission’s Electronic Data
Gathering, Analysis and Retrieval System (“▇▇▇▇▇”)
true
and correct copies of the Company’s Articles of Incorporation as in effect on
the Effective Date (the “Charter”),
and
the Company’s Bylaws as in effect on the Effective Date (the “Bylaws”),
and
true and correct copies (redacted as appropriate) of all executed resolutions
of
the Company’s Board of Directors (and committees thereof) relating to the
capital stock of the Company (and transactions in respect thereof) since
December 31, 2005 (except with respect to issuances of shares of capital stock
of the Company to directors or employees of the Company as fees or compensation
that were duly approved by the Company’s Board of Directors or a committee
thereof).
Section
4.4 Issuance
of Shares.
The
Shares to be issued under this Agreement have been or will be duly authorized
by
all necessary corporate action and, when paid for or issued in accordance with
the terms hereof, the Shares shall be validly issued and outstanding, fully
paid
and nonassessable, and, when the Shares have been issued to the Investor, the
Investor shall be entitled to all rights accorded to a holder and beneficial
owner of Common Stock.
10
Section
4.5 No
Conflicts.
The
execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated herein do not
and
shall not (i) result in a violation of any provision of the Company’s Charter or
Bylaws, (ii) conflict with, constitute a default (or an event which, with notice
or lapse of time or both, would become a default) under, or give rise to any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company or any of its
Significant Subsidiaries is a party or is bound (including, without limitation,
any listing agreement with the Trading Market), (iii) create or impose a lien,
charge or encumbrance on any property of the Company or any of its Significant
Subsidiaries under any agreement or any commitment to which the Company or
any
of its Significant Subsidiaries is a party or under which the Company or any
of
its Significant Subsidiaries is bound or under which any of their respective
properties or assets are bound, or (iv) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
applicable to the Company or any of its Subsidiaries or by which any property
or
asset of the Company or any of its Subsidiaries are bound or affected, except,
in the case of clauses (ii), (iii) and (iv), for such conflicts, defaults,
terminations, amendments, acceleration, cancellations, liens, charges,
encumbrances and violations as would not, individually or in the aggregate,
have
a Material Adverse Effect. The Company is not required under federal, state,
local or foreign law, rule or regulation to obtain any consent, authorization
or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement, or to issue and sell the Shares to the Investor in
accordance with the terms hereof (other than any filings which may be required
to be made by the Company with the Commission or the Trading Market subsequent
to the Effective Date, including but not limited to a Prospectus Supplement
under Sections 1.4 and 5.9 of this Agreement, and any registration statement,
prospectus or prospectus supplement which has been or may be filed pursuant
to
this Agreement).
Section
4.6 Commission
Documents, Financial Statements.
(a)
The
Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange
Act and, except as disclosed in the Commission Documents, as of the Effective
Date the Company had timely filed (giving effect to permissible extensions
in
accordance with Rule 12b-25 under the Exchange Act) all Commission Documents.
The Company has delivered or made available to the Investor via ▇▇▇▇▇ or
otherwise true and complete copies of the Commission Documents filed with the
Commission prior to the Effective Date (including, without limitation, the
2007
Form 10-K) and has delivered or made available to the Investor via ▇▇▇▇▇ or
otherwise true and complete copies of all of the Commission Documents heretofore
incorporated by reference in the Registration Statement and the Prospectus.
The
Company has not provided to the Investor any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by
the
Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement. As of its filing date, each
Commission Document filed with the Commission and incorporated by reference
in
the Registration Statement and the Prospectus (including, without limitation,
the 2007 Form 10-K) complied in all material respects with the requirements
of
the Securities Act or the Exchange Act, as applicable, and other federal, state
and local laws, rules and regulations applicable to it, and, as of its filing
date (or, if amended or superseded by a filing prior to the Effective Date,
on
the date of such amended or
11
superseded
filing), such Commission Document did not contain any untrue statement of a
material fact or omit 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. Each Commission Document to be
filed
with the Commission after the Effective Date and incorporated by reference
in
the Registration Statement, the Prospectus and any Prospectus Supplement
required to be filed pursuant to Sections 1.4 and 5.9 hereof during the
Investment Period (including, without limitation, the Current Report), when
such
document becomes effective or is filed with the Commission, as the case may
be,
shall comply in all material respects with the requirements of the Securities
Act or the Exchange Act, as applicable, and other federal, state and local
laws,
rules and regulations applicable to it, and shall not contain any untrue
statement of a material fact or omit 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.
(b) The
financial statements, together with the related notes and schedules, of the
Company included in the Commission Documents comply as to form in all material
respects with all applicable accounting requirements and the published rules
and
regulations of the Commission and all other applicable rules and regulations
with respect thereto. Such financial statements, together with the related
notes
and schedules, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the
case
of unaudited interim statements, to the extent they may not include footnotes
or
may be condensed or summary statements), and fairly present in all material
respects the financial condition of the Company and its consolidated
Subsidiaries as of 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 year-end audit adjustments).
(c) The
Company has timely filed with the Commission and made available to the Investor
via ▇▇▇▇▇ or otherwise all certifications and statements required by (x) Rule
13a-14 or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C. Section 1350
(Section 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (“SOXA”))
with
respect to all relevant Commission Documents. The Company is in compliance
in
all material respects with the provisions of SOXA applicable to it as of the
date hereof. The Company maintains disclosure controls and procedures required
by Rule 13a-15 or Rule 15d-15 under the Exchange Act; such controls and
procedures are effective to ensure that all material information concerning
the
Company and its Subsidiaries is made known on a timely basis to the individuals
responsible for the timely and accurate preparation of the Company’s Commission
filings and other public disclosure documents. As used in this Section 4.6(c),
the term “file” shall be broadly construed to include any manner in which a
document or information is furnished, supplied or otherwise made available
to
the Commission.
(d) Each
of
▇▇▇▇ & Associates LLP and ▇▇▇▇ ▇▇▇▇▇ & Company, who has expressed its
opinions on the audited financial statements and related schedules included
or
incorporated by reference in the Registration Statement and the Base Prospectus
are, with respect to the Company, independent public accountants as required
by
the Securities Act and is an independent registered public accounting firm
within the meaning of SOXA as required by the rules of the Public Company
Accounting Oversight Board.
12
Section
4.7 Subsidiaries.
The
Company does not have any Subsidiaries as of the Effective Date.
Section
4.8 No
Material Adverse Effect.
Since
December
31, 2007, the Company has not experienced or suffered any Material Adverse
Effect, and there exists no current state of facts, condition or event which
would have a Material Adverse Effect, except (i) as disclosed in any Commission
Documents filed since December 31, 2007 or (ii) continued losses from
operations.
Section
4.9 Indebtedness.
The
2007 Form 10-K sets forth, as of December 31, 2007, all outstanding secured
and
unsecured Indebtedness of the Company, or for which the Company has commitments
through such date. For the purposes of this Agreement, “Indebtedness”
shall
mean (a) any liabilities for borrowed money or amounts owed in excess of
$10,000,000 (other than trade accounts payable incurred in the ordinary course
of business), (b) all guaranties, endorsements, indemnities and other contingent
obligations in respect of Indebtedness of others in excess of $10,000,000,
whether or not the same are or should be reflected in the Company’s balance
sheet (or the notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business; and (c) the present value of any lease payments in excess
of
$10,000,000 due under leases required to be capitalized in accordance with
GAAP.
There is no existing or continuing default or event of default in respect of
any
Indebtedness of the Company or any of its Subsidiaries.
Section
4.10 Title
To Assets.
Each of
the Company and its Subsidiaries has good and marketable title to all of their
respective real and personal property reflected in the Commission Documents,
free of mortgages, pledges, charges, liens, security interests or other
encumbrances, except for those indicated in the Commission Documents or those
that would not have a Material Adverse Effect. All real property leases of
the
Company are valid and subsisting and in full force and effect in all material
respects.
Section
4.11 Actions
Pending.
There
is no action, suit, claim, investigation or proceeding pending, or, to the
knowledge of the Company threatened, against the Company which questions the
validity of this Agreement or the transactions contemplated hereby or any action
taken or to be taken pursuant hereto or thereto. Except as set forth in the
Commission Documents, there is no action, suit, claim, investigation or
proceeding pending, or to the knowledge of the Company, threatened, against
or
involving the Company, or any of its properties or assets, or involving any
officers or directors of the Company, including, without limitation, any
securities class action lawsuit or stockholder derivative lawsuit, in each
case
which, if determined adversely to the Company, or any officer or director of
the
Company, would have a Material Adverse Effect. With respect to each of those
certain actions under the caption “Item 3. Legal Proceedings” in the 2007 Form
10-K, there has been no event or change required to be disclosed in a filing
under the Exchange Act that has not been so disclosed.
Section
4.12 Compliance
With Law.
The
business of the Company and the Subsidiaries has been and is presently being
conducted in compliance with all applicable federal, state, local and foreign
governmental laws, rules, regulations and ordinances, except as set
forth
13
in
the
Commission Documents and except for such non-compliance which, individually
or
in the aggregate, would not have a Material Adverse Effect.
Section
4.13 Certain
Fees.
Except
for the placement fee payable by the Company to Reedland Capital Partners,
an
Institutional Division of the Financial West Group, Member FINRA/SIPC
(“Reedland”),
which
shall be set forth in a separate placement agency agreement between the Company
and Reedland (a true and complete fully executed copy of which has heretofore
been provided to the Investor), no brokers, finders or financial advisory fees
or commissions shall be payable by the Company (or any of its affiliates) with
respect to the transactions contemplated by this Agreement.
Section
4.14 Operation
of Business.
(b)
The
Company or one or more of its Subsidiaries possesses such permits, licenses,
approvals, consents and other authorizations (including licenses, accreditation
and other similar documentation or approvals of any local health departments)
(collectively, “Governmental
Licenses”)
issued
by the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by it, except where the
failure to possess such Governmental Licenses, individually or in the aggregate,
would not have a Material Adverse Effect. The Company and its Subsidiaries
are
in compliance with the terms and conditions of all such Governmental Licenses,
except where the failure to so comply, individually or in the aggregate, would
not have a Material Adverse Effect. All of the Governmental Licenses are valid
and in full force and effect, except where the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force and
effect, individually or in the aggregate, would not have a Material Adverse
Effect. Except as set forth in the Commission Documents or the Registration
Statement, neither the Company nor any of its Subsidiaries has received any
notice of proceedings relating to the revocation or modification of any such
Governmental Licenses. This Section 4.14 does not relate to environmental
matters, such items being the subject of Section 4.15.
(b) The
Company or one or more of its Subsidiaries owns or possesses adequate rights
to
use the patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary
or
confidential information, systems or procedures), trademarks, service marks,
trade names, trade dress, logos, copyrights and other intellectual property,
including, without limitation, all of the intellectual property described in
the
Commission Documents as being owned or licensed by the Company (collectively,
“Intellectual
Property”),
necessary to carry on the business now operated by it. Except as set forth
in
the Commission Documents, there are no actions, suits or judicial proceedings
pending, or to the Company’s knowledge threatened, relating to patents or
proprietary information to which the Company or any of its Subsidiaries is
a
party or of which any property of the Company or any of its Subsidiaries is
subject, and neither the Company nor any of its Subsidiaries has received any
notice or is otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or of any facts
or
circumstances which could render any Intellectual Property invalid or inadequate
to protect the interest of the Company and its Subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision, ruling
or
finding) or invalidity or inadequacy, individually or in the aggregate, would
have a Material Adverse Effect.
14
Section
4.15 Environmental
Compliance.
Except
as disclosed in the Commission Documents, the Company and each of its
Subsidiaries have obtained all material approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any other person, that are required under
any
Environmental Laws, except for any approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations the
failure of which to obtain does not or would not have a Material Adverse Effect.
“Environmental
Laws”
shall
mean all applicable laws relating to the protection of the environment
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except for
such
instances as would not, individually or in the aggregate, have a Material
Adverse Effect, to the best of the Company’s knowledge, there are no past or
present events, conditions, circumstances, incidents, actions or omissions
relating to or in any way affecting the Company or its Subsidiaries that violate
or could reasonably be expected to violate any Environmental Law after the
Effective Date or that could reasonably be expected to give rise to any
environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
Section
4.16 Material
Agreements.
Except
as set forth in the Commission Documents, the Company is not a party to any
written or oral contract, instrument, agreement commitment, obligation, plan
or
arrangement, a copy of which would be required to be filed with the Commission
as an exhibit to an annual report on Form 10-K (collectively, “Material
Agreements”).
The
Company and each of its Subsidiaries have performed in all material respects
all
the obligations required to be performed by them under the Material Agreements,
have received no notice of default or an event of default by the Company or
any
of its Subsidiaries thereunder and are not aware of any basis for the assertion
thereof, and neither the Company or any of its Subsidiaries nor, to the best
knowledge of the Company, any other contracting party thereto are in default
under any Material Agreement now in effect, the result of which would have
a
Material Adverse Effect. Each of the Material Agreements is in full force and
effect, and constitutes a legal, valid and binding obligation enforceable in
accordance with its terms against the Company and/or any of its Subsidiaries
and, to the knowledge of the Company, each other contracting party thereto,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor’s rights and remedies or by other equitable principles of general
application.
Section
4.17 Transactions
With Affiliates.
Except
as set forth in the Commission Documents, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts, service
arrangements or other continuing transactions exceeding $120,000 between (a)
the
Company, on the one hand, and (b) any person or entity who would be covered
by
Item
15
404(a)
of
Regulation S-K, on the other hand. Except as disclosed in the Commission
Documents, there are no outstanding amounts payable to or receivable from,
or
advances by the Company or any of its Subsidiaries to, and neither the Company
nor any of its Subsidiaries is otherwise a creditor of or debtor to, any
beneficial owner of more than five percent (5%) of the outstanding shares of
Common Stock, or any director, employee or affiliate of the Company or any
of
its Subsidiaries, other than (i) reimbursement for reasonable expenses incurred
on behalf of the Company or any of its Subsidiaries or (ii) as part of the
normal and customary terms of such persons’ employment or service as a director
with the Company or any of its Subsidiaries.
Section
4.18 Securities
Act; NASD Conduct Rules.
The
Company has complied with all applicable federal and state securities laws
in
connection with the offer, issuance and sale of the Shares
hereunder.
(i) The
Company has prepared and filed with the Commission in accordance with the
provisions of the Securities Act the Registration Statement, including a base
prospectus relating to the Shares. The Registration Statement was declared
effective by order of the Commission on September 4, 2007. As of the date
hereof, no stop order suspending the effectiveness of the Registration Statement
has been issued by the Commission or is continuing in effect under the
Securities Act and no proceedings therefor are pending before or, to the
Company’s knowledge, threatened by the Commission. No order preventing or
suspending the use of the Prospectus or any Permitted Free Writing Prospectus
has been issued by the Commission.
(ii) The
Company meets the requirements for the use of Form S-3 under the Securities
Act.
The Commission has not notified the Company of any objection to the use of
the
form of the Registration Statement. The Registration Statement complied in
all
material respects on the date on which it was declared effective by the
Commission and on the Effective Date of this Agreement, and will comply in
all
material respects on each applicable Fixed Request Exercise Date and on each
applicable Settlement Date, with the requirements of the Securities Act and
the
Registration Statement (including the documents incorporated by reference
therein) did not on the date it was declared effective by the Commission and
on
the Effective Date of this Agreement and shall not on each applicable Fixed
Request Exercise Date and on each applicable Settlement Date 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;
provided
that
this representation and warranty does not apply to statements in or omissions
from the Registration Statement made in reliance upon and in conformity with
information relating to the Investor furnished to the Company in writing by
or
on behalf of the Investor expressly for use therein. The Registration Statement,
as of the Effective Date, meets the requirements set forth in Rule 415(a)(1)(x)
under the Securities Act. The Base Prospectus complied in all material respects
on its date and on the Effective Date, and will comply in all material respects
on each applicable Fixed Request Exercise Date and, when taken together with
the
applicable Prospectus Supplement and any applicable Permitted Free Writing
Prospectus, on each applicable Settlement Date, with the requirements of the
Securities Act and did not on its date and on the Effective Date and shall
not
on each applicable Fixed Request Exercise Date and, when taken together with
the
applicable Prospectus Supplement and any applicable Permitted Free Writing
Prospectus, on each applicable Settlement Date 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
16
statements
therein, in the light of the circumstances under which they were made, not
misleading; provided
that
this representation and warranty does not apply to statements in or omissions
from the Base Prospectus made in reliance upon and in conformity with
information relating to the Investor furnished to the Company in writing by
or
on behalf of the Investor expressly for use therein.
(iii) In
accordance with NASD Conduct Rule 2710(b)(7)(C)(i) of the Financial Industry
Regulatory Authority (the “FINRA”),
the
offering of the Shares pursuant to this Agreement has been registered with
the
Commission on Form S-3 under the Securities Act pursuant to the standards for
Form S-3 in effect prior to October 21, 1992, and the Shares are being offered
pursuant to Rule 415 promulgated under the Securities Act.
(iv) Each
Prospectus Supplement required to be filed pursuant to Sections 1.4 and 5.9
hereof, when taken together with the Base Prospectus and any applicable
Permitted Free Writing Prospectus, on its date and on the applicable Settlement
Date, shall comply in all material respects with the provisions of the
Securities Act and shall not on its date and on the applicable Settlement Date
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,
in
the light of the circumstances under which they are made, not misleading, except
that this representation and warranty does not apply to statements in or
omissions from any Prospectus Supplement made in reliance upon and in conformity
with information relating to the Investor furnished to the Company in writing
by
or on behalf of the Investor expressly for use therein.
(v) At
the
earliest time after the filing of the Registration Statement that the Company
or
another offering participant made a bona fide offer (within the meaning of
Rule
164(h)(2) under the Securities Act) relating to the Shares, the Company was
not
and is not an Ineligible Issuer (as defined in Rule 405 under the Securities
Act). Each Permitted Free Writing Prospectus (a) shall conform in all material
respects to the requirements of the Securities Act on the date of its first
use,
(b) when considered together with the Prospectus on each applicable Fixed
Request Exercise Date and on each applicable Settlement Date, shall not 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, in the light
of the circumstances under which they are made, not misleading, and (c) shall
not include any information that conflicts with the information contained in
the
Registration Statement, including any document incorporated by reference therein
and any Prospectus Supplement deemed to be a part thereof that has not been
superseded or modified. The immediately preceding sentence does not apply to
statements in or omissions from any Permitted Free Writing Prospectus made
in
reliance upon and in conformity with information relating to the Investor
furnished to the Company in writing by or on behalf of the Investor expressly
for use therein.
(vi) Prior
to
the Effective Date, the Company has not distributed any offering material in
connection with the offering and sale of the Shares. From and after the
Effective Date and prior to the completion of the distribution of the Shares,
the Company shall not distribute any offering material in connection with the
offering and sale of the Shares, other than the Registration Statement, the
Base
Prospectus as supplemented by any Prospectus Supplement or a Permitted Free
Writing Prospectus.
17
Section
4.19 Employees.
As
of the
Effective Date, the Company has no collective bargaining arrangements or
agreements covering any of its employees, except as set forth in the Commission
Documents. As of the Effective Date, except as disclosed in the Registration
Statement or the Commission Documents, no officer, consultant or key employee
of
the Company whose termination, either individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, has terminated or,
to
the knowledge of the Company, has any present intention of terminating his
or
her employment or engagement with the Company.
Section
4.20 Use
of Proceeds.
The
proceeds from the sale of the Shares shall be used by the Company and its
Subsidiaries as set forth in the Base Prospectus and any Prospectus Supplement
filed pursuant to Sections 1.4 and 5.9.
Section
4.21 Investment
Company Act Status.
The
Company is not, and as a result of the consummation of the transactions
contemplated by this Agreement and the application of the proceeds from the
sale
of the Shares as set forth in the Base Prospectus and any Prospectus Supplement
shall not be, an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended.
Section
4.22 ERISA.
No
liability to the Pension Benefit Guaranty Corporation has been incurred with
respect to any Plan by the Company or any of its Subsidiaries which has had
or
would have a Material Adverse Effect. No “prohibited transaction” (as defined in
Section 406 of ERISA or Section 4975 of the Code) or “accumulated funding
deficiency” (as defined in Section 203 of ERISA) or any of the events set forth
in Section 4043(b) of ERISA has occurred with respect to any Plan which has
had
or would have a Material Adverse Effect, and the execution and delivery of
this
Agreement and the issuance and sale of the Shares hereunder shall not result
in
any of the foregoing events. Each Plan is in compliance in all material respects
with applicable law, including ERISA and the Code; the Company has not incurred
and does not expect to incur any liability under Title IV of ERISA with respect
to the termination of, or withdrawal from, any Plan; and each Plan for which
the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or failure to act, which would cause the loss of
such qualifications. As used in this Section 4.22, the term “Plan”
shall
mean an “employee
pension benefit plan”
(as
defined in Section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or by any trade
or business, whether or not incorporated, which, together with the Company,
is
under common control, as described in Section 414(b) or (c) of the
Code.
Section
4.23 Taxes.
The
Company (i) has filed all necessary federal, state and foreign income and
franchise tax returns or has duly requested extensions thereof, except for
those
the failure of which to file would not have a Material Adverse Effect, (ii)
has
paid all federal, state, local and foreign taxes due and payable for which
it is
liable, except to the extent that any such taxes are being contested in good
faith and by appropriate proceedings, except for such taxes the failure of
which
to pay would not have a Material Adverse Effect, and (iii) does not have any
tax
deficiency or claims outstanding or assessed or, to the best of the Company’s
knowledge, proposed against it which would have a Material Adverse
Effect.
18
Section
4.24 Insurance.
The
Company carries, or is covered by, insurance in such amounts and covering such
risks as is adequate for the conduct of its and its Subsidiaries’ businesses and
the value of their respective properties and as is customary for companies
engaged in similar businesses in similar industries.
Section
4.25 Acknowledgement
Regarding Investor’s Purchase of Shares.
The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of an arm’s length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that
the
Investor is not acting as a financial advisor or fiduciary of the Company (or
in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder, and any advice given by the Investor or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Investor’s purchase of the
Shares.
ARTICLE
V
COVENANTS
The
Company covenants with the Investor, and the Investor covenants with the
Company, as follows, which covenants of one party are for the benefit of the
other party, during the Investment Period:
Section
5.1 Securities
Compliance.
The
Company shall notify the Commission and the Trading Market, as applicable,
in
accordance with their respective rules and regulations, of the transactions
contemplated by this Agreement, and shall take all necessary action, undertake
all proceedings and obtain all registrations, permits, consents and approvals
for the legal and valid issuance of the Shares to the Investor in accordance
with the terms of this Agreement.
Section
5.2 Registration
and Listing.
The
Company shall take all action necessary to cause the Common Stock to continue
to
be registered as a class of securities under Sections 12(b) or 12(g) of the
Exchange Act, shall comply with its reporting and filing obligations under
the
Exchange Act, and shall not take any action or file any document (whether or
not
permitted by the Securities Act) to terminate or suspend such registration
or to
terminate or suspend its reporting and filing obligations under the Exchange
Act
or Securities Act, except as permitted herein. The Company shall take all action
necessary to continue the listing and trading of its Common Stock and the
listing of the Shares purchased by Investor hereunder on the Trading Market,
and
shall comply with the Company’s reporting, filing and other obligations under
the bylaws, listed securities maintenance standards and other rules of the
Trading Market.
Section
5.3 Compliance
with Laws.
(i) The
Company shall comply, and cause each Subsidiary to comply, (a) with all laws,
rules, regulations and orders applicable to the business and operations of
the
Company and its Subsidiaries except as would not have a Material Adverse Effect
and (b) with all applicable provisions of the Securities Act, the Exchange
Act,
and the listing standards of the Trading Market. Without limiting the generality
of the foregoing, neither the Company nor any of its officers, directors or
affiliates has taken or will take, directly or indirectly, any action designed
or intended to stabilize or manipulate the price of any security of the Company,
or
19
which
caused or resulted in, or which would in the future reasonably be expected
to
cause or result in, stabilization or manipulation of the price of any security
of the Company.
(ii) The
Investor shall comply with all laws, rules, regulations and orders applicable
to
the performance by it of its obligations under this Agreement and its investment
in the Shares, except as would not, individually or in the aggregate, prohibit
or otherwise interfere with the ability of the Investor to enter into and
perform its obligations under this Agreement in any material respect. Without
limiting the foregoing, the Investor shall comply with all applicable provisions
of the Securities Act and the Exchange Act, including, without limitation,
Section 13(d) of the Exchange Act.
Section
5.4 Keeping
of Records and Books of Account; Foreign Corrupt Practices
Act.
(i) The
Company shall keep and cause each Subsidiary to keep adequate records and books
of account, in which complete entries shall be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company
and
its Subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made. The Company shall
maintain a system of internal accounting controls that (a) pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect
the transactions and dispositions of the assets of the Company; (b) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors
of
the Company; and (c) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the Company’s
assets that could have a material effect on the Company’s financial
statements.
(ii) Neither
the Company, nor any of its Subsidiaries, nor to the knowledge of the Company,
any of their respective directors, officers, agents, employees or any other
persons acting on their behalf shall, in connection with the operation of the
Company’s and its Subsidiaries’ respective businesses, (a) use any corporate
funds for unlawful contributions, payments, gifts or entertainment or to make
any unlawful expenditures relating to political activity to government
officials, candidates or members of political parties or organizations, (b)
pay,
accept or receive any unlawful contributions, payments, expenditures or gifts,
or (c) violate or operate in noncompliance with any export restrictions,
anti-boycott regulations, embargo regulations or other applicable domestic
or
foreign laws and regulations.
(iii) Subject
to the requirements of Section 5.12 of this Agreement, from time to time from
and after the period beginning with the second Trading Day immediately preceding
each Fixed Request Exercise Date through and including the applicable Settlement
Date, the Company shall make available for inspection and review by the
Investor, customary documentation allowing the Investor and/or its appointed
counsel or advisors to conduct due diligence.
20
Section
5.5 Limitations
on Holdings and Issuances.
At no
time during the term of this Agreement shall the Investor directly or indirectly
own more than nine and nine-tenths percent (9.9%) of the then issued and
outstanding shares of Common Stock. The Company shall not be obligated to issue
and the Investor shall not be obligated to purchase any shares of Common Stock
which would result in the issuance under this Agreement to the Investor at
any
time of Shares which, when aggregated with all other shares of Common Stock
then
owned beneficially by the Investor, would result in the beneficial ownership
by
the Investor of more than nine and nine-tenths percent (9.9%) of the then issued
and outstanding shares of the Common Stock.
Section
5.6 Other
Agreements and Other Financings.
(i) The
Company shall not enter into, announce or recommend to its stockholders any
agreement, plan, arrangement or transaction in or of which the terms thereof
would restrict, materially delay, conflict with or impair the ability or right
of the Company or any Subsidiary to perform its obligations under this
Agreement, including, without limitation, the obligation of the Company to
deliver Shares to the Investor in respect of a Fixed Request or Optional Amount
on the applicable Settlement Date.
(ii) The
Company shall notify the Investor, within forty-eight (48) hours, if it enters
into any agreement, plan, arrangement or transaction with a third party, the
principal purpose of which is to obtain during a Pricing Period an Other
Financing not constituting an Acceptable Financing (an “Other
Financing Notice”);
provided,
however,
that
the Company shall notify the Investor immediately (an “Integration
Notice”)
if it
enters into any agreement, plan, arrangement or transaction with a third party,
the principal purpose of which is to obtain at any time during the Investment
Period an Other Financing which may be integrated with the transactions
contemplated by this Agreement for purposes of determining whether approval
of
the Company’s stockholders is required under any bylaw, listed securities
maintenance standards or other rules of the Trading Market and, if required
under applicable law, including, without limitation, Regulation FD promulgated
by the Commission, or under the applicable rules and regulations of the Trading
Market, the Company shall simultaneously publicly disclose such information
in
accordance with Regulation FD and the applicable rules and regulations of the
Trading Market. For purposes of this Section 5.6(ii), any press release issued
by, or Commission Document filed by, the Company shall constitute sufficient
notice, provided that it is issued or filed, as the case may be, within the
time
requirements set forth in the first sentence of this Section 5.6(ii) for an
Other Financing Notice or an Integration Notice, as applicable. During any
Pricing Period in which the Company is required to provide an Other Financing
Notice pursuant to the first sentence of this Section 5.6(ii), the Investor
shall (i) have the option to purchase the Shares subject to the Fixed Request
at
(x) the price therefor in accordance with the terms of this Agreement or (y)
the
third party’s per share purchase price in connection with the Other Financing,
net of such third party’s discounts, Warrant Value and fees, or (ii) the
Investor may elect to not purchase any Shares subject to the Fixed Request
for
that Pricing Period. An “Other
Financing”
shall
mean (x) the issuance of Common Stock for a purchase price less than, or the
issuance of securities convertible into or exchangeable for Common Stock at
an
exercise or conversion price (as the case may be) less than, the then Current
Market Price of the Common Stock (in each case, after all fees, discounts,
Warrant Value and commissions associated with the transaction) (a “Below
Market Offering”);
(y)
the implementation by the Company of any
21
mechanism
in respect of any securities convertible into or exchangeable for Common Stock
for the reset of the purchase price of the Common Stock to below the then
Current Market Price of the Common Stock (including, without limitation, any
antidilution or similar adjustment provisions in respect of any Company
securities, but specifically excluding customary adjustments for stock splits,
stock dividends, stock combinations and similar events); or (z) the issuance
of
options, warrants or similar rights of subscription in each case not
constituting an Acceptable Financing. “Acceptable
Financing”
shall
mean the issuance by the Company of: (1) shares of Common Stock or securities
convertible into or exchangeable for Common Stock other than in connection
with
a Below Market Offering; (2) shares of Common Stock or securities convertible
into or exchangeable for Common Stock in connection with awards under the
Company’s benefit and equity plans and arrangements and the issuance of shares
of Common Stock upon the conversion, exercise or exchange thereof; (3) shares
of
Common Stock issuable upon the conversion or exchange of equity awards or
convertible or exchangeable securities outstanding as of the Effective Date;
(4)
shares of Common Stock or securities convertible into or exchangeable for Common
Stock or similar rights to subscribe for the purchase of shares of Common Stock
in connection with technology sharing, licensing, research and joint development
agreements (or amendments thereto) with third parties, and the issuance of
shares of Common Stock upon the conversion, exercise or exchange thereof; and
(5) shares of Common Stock and/or warrants or similar rights to subscribe for
the purchase of shares of Common Stock issued in connection with equipment
financings and/or real property leases (or amendments thereto) and the issuance
of shares of Common Stock upon the exercise thereof.
Section
5.7 Stop
Orders.
The
Company shall advise the Investor immediately and shall confirm such advice
in
writing: (i) of the Company’s receipt of notice of any request by the Commission
for amendment of or a supplement to the Registration Statement, the Prospectus,
any Permitted Free Writing Prospectus or for any additional information; (ii)
of
the Company’s receipt of notice of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or prohibiting
or suspending the use of the Prospectus or any Prospectus Supplement, or of
the
suspension of qualification of the Shares for offering or sale in any
jurisdiction, or the initiation or contemplated initiation of any proceeding
for
such purpose; and (iii) of the Company becoming aware of the happening of any
event, which makes any statement of a material fact made in the Registration
Statement, the Prospectus or any Permitted Free Writing Prospectus untrue or
which requires the making of any additions to or changes to the statements
then
made in the Registration Statement, the Prospectus or any Permitted Free Writing
Prospectus in order to state a material fact required by the Securities Act
to
be stated therein or necessary in order to make the statements then made therein
(in the case of the Prospectus, in light of the circumstances under which they
were made) not misleading, or of the necessity to amend the Registration
Statement or supplement the Prospectus or any Permitted Free Writing Prospectus
to comply with the Securities Act or any other law. The Company shall not be
required to disclose to the Investor the substance or specific reasons of any
of
the events set forth in clauses (i) through (iii) of the immediately preceding
sentence, but rather, shall only be required to disclose that the event has
occurred. The Company shall not issue any Fixed Request during the continuation
of any of the foregoing events. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement or
prohibiting or suspending the use of the Prospectus or any Prospectus
Supplement, the Company shall use commercially reasonable efforts to obtain
the
withdrawal of such order at the earliest possible time.
22
Section
5.8 Amendments
to the Registration Statement; Prospectus Supplements; Free Writing
Prospectuses.
(i) Except
as
provided in this Agreement and other than periodic reports required to be filed
pursuant to the Exchange Act, the Company shall not file with the Commission
any
amendment to the Registration Statement that relates to the Investor, the
Agreement or the transactions contemplated hereby or file with the Commission
any Prospectus Supplement that relates to the Investor, this Agreement or the
transactions contemplated hereby with respect to which (a) the Investor shall
not previously have been advised, (b) the Company shall not have given due
consideration to any comments thereon received from the Investor or its counsel,
or (c) the Investor shall reasonably object after being so advised, unless
it is
necessary to amend the Registration Statement or make any supplement to the
Prospectus to comply with the Securities Act or any other applicable law or
regulation, in which case the Company shall immediately so inform the Investor,
the Investor shall be provided with a reasonable opportunity to review and
comment upon any disclosure relating to the Investor and the Company shall
expeditiously furnish to the Investor an electronic copy thereof. In addition,
for so long as, in the reasonable opinion of counsel for the Investor, the
Prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under
the
Securities Act) is required to be delivered in connection with any purchase
of
Shares by the Investor, the Company shall not file any Prospectus Supplement
with respect to the Shares without delivering or making available a copy of
such
Prospectus Supplement, together with the Base Prospectus, to the Investor
promptly.
(ii) The
Company agrees that, unless it obtains the prior written consent of the
Investor, it has not made and will not make an offer relating to the Shares
that
would constitute an Issuer Free Writing Prospectus or that would otherwise
constitute a Free Writing Prospectus required to be filed by the Company or
the
Investor with the Commission or retained by the Company or the Investor under
Rule 433 under the Securities Act. The Investor agrees that, unless it obtains
the prior written consent of the Company, it has not made and will not make
an
offer relating to the Shares that would constitute a Free Writing Prospectus
required to be filed by the Company with the Commission or retained by the
Company under Rule 433 under the Securities Act. Any such Issuer Free Writing
Prospectus or other Free Writing Prospectus consented to by the Investor or
the
Company is referred to in this Agreement as a “Permitted
Free Writing Prospectus.”
The
Company agrees that (x) it has treated and will treat, as the case may be,
each
Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus and
(y)
it has complied and will comply, as the case may be, with the requirements
of
Rules 164 and 433 under the Securities Act applicable to any Permitted Free
Writing Prospectus, including in respect of timely filing with the Commission,
legending and record keeping.
Section
5.9 Prospectus
Delivery.
The
Company shall file with the Commission a Prospectus Supplement pursuant to
Rule
424(b) under the Securities Act on the first Trading Day immediately following
the last Trading Day of each Pricing Period. The Company shall provide the
Investor a reasonable opportunity to comment on a draft of each such Prospectus
Supplement and any Issuer Free Writing Prospectus, shall give due consideration
to all such comments and, subject to the provisions of Section 5.8 hereof,
shall
deliver or make available to the Investor, without charge, an electronic copy
of
each form of Prospectus Supplement, together with the Base Prospectus, and
any
Permitted Free Writing Prospectus on each applicable Settlement Date. The
Company consents to the use of the Prospectus (and of any Prospectus Supplement
thereto)
23
in
accordance with the provisions of the Securities Act and with the securities
or
“blue sky” laws of the jurisdictions in which the Shares may be sold by the
Investor, in connection with the offering and sale of the Shares and for such
period of time thereafter as the Prospectus (or in lieu thereof, the notice
referred to in Rule 173(a) under the Securities Act) is required by the
Securities Act to be delivered in connection with sales of the Shares. If during
such period of time any event shall occur that in the judgment of the Company
and its counsel is required to be set forth in the Registration Statement or
the
Prospectus or any Permitted Free Writing Prospectus or should be set forth
therein in order to make the statements made therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading, or if it is necessary to amend the Registration Statement or
supplement or amend the Prospectus or any Permitted Free Writing Prospectus
to
comply with the Securities Act or any other applicable law or regulation, the
Company shall forthwith prepare and, subject to Section 5.8 above, file with
the
Commission an appropriate amendment to the Registration Statement or Prospectus
Supplement to the Prospectus (or supplement to the Permitted Free Writing
Prospectus) and shall expeditiously furnish or make available to the Investor
an
electronic copy thereof.
Section
5.10 Selling
Restrictions.
(i) The
Investor covenants that from and after the date hereof through and including
the
90th
day next
following the termination of this Agreement (the “Restricted
Period”),
neither the Investor nor any of its affiliates (within the meaning of the
Exchange Act) nor any entity managed or controlled by the Investor shall,
directly or indirectly, sell any securities of the Company, except the Shares
that it owns or has the right to purchase as provided in a Fixed Request Notice.
During the Restricted Period, neither the Investor or any of its affiliates
nor
any entity managed or controlled by the Investor shall sell any shares of Common
Stock of the Company it does not “own” or have the unconditional right to
receive under the terms of this Agreement (within the meaning of Rule 200 of
Regulation SHO promulgated by the Commission under the Exchange Act), including
Shares in any account of the Investor or in any account directly or indirectly
managed or controlled by the Investor or any of its affiliates or any entity
managed or controlled by the Investor. Without limiting the generality of the
foregoing, prior to and during the Restricted Period, neither the Investor
nor
any of its affiliates nor any entity managed or controlled by the Investor
or
any of its affiliates shall enter into a short position with respect to shares
of Common Stock of the Company, including in any account of the Investor’s or in
any account directly or indirectly managed or controlled by the Investor or
any
of its Affiliates or any entity managed or controlled by the Investor, except
that the Investor may sell Shares that it is obligated to purchase under a
pending Fixed Request Notice but has not yet taken possession of so long as
the
Investor (or the Broker-Dealer, as applicable) covers any such sales with the
Shares purchased pursuant to such Fixed Request Notice; provided,
however,
that
the Investor (or the Broker-Dealer, as applicable) shall not be required to
cover any such sales with the Shares purchased pursuant to such Fixed Request
Notice if (a) the Fixed Request is terminated by mutual agreement of the Company
and the Investor and, as a result of such termination, no Shares are delivered
to the Investor under this Agreement or (b) the Company otherwise fails to
deliver such Shares to the Investor on the applicable Settlement Date upon
the
terms and subject to the provisions of this Agreement. Prior to and during
the
Restricted Period, the Investor shall not grant any option to purchase or
acquire any right to dispose or otherwise dispose for value of any shares of
Common Stock or any securities convertible into or
24
exercisable
or exchangeable for, or warrants to purchase, any shares of Common Stock, or
enter into any swap, hedge or other agreement that transfers, in whole or in
part, the economic risk of ownership of the Common Stock, except for such sales
expressly permitted by this Section 5.10(i).
(ii) In
addition to the foregoing, in connection with any sale of the Company’s
securities (including any sale permitted by paragraph (i) above), the Investor
shall comply in all respects with all applicable laws, rules, regulations and
orders, including, without limitation, the requirements of the Securities Act
and the Exchange Act.
Section
5.11 Effective
Registration Statement.
During
the Investment Period, the Company shall use its best efforts to maintain the
continuous effectiveness of the Registration Statement under the Securities
Act.
Section
5.12 Non-Public
Information.
Neither
the Company nor any of its directors, officers or agents shall disclose any
material non-public information about the Company to the Investor, unless a
simultaneous public announcement thereof is made by the Company in the manner
contemplated by Regulation FD.
Section
5.13 Broker/Dealer.
The
Investor shall use one or more broker-dealers to effectuate all sales, if any,
of the Shares that it may purchase from the Company pursuant to this Agreement
which (or whom) shall be unaffiliated with the Investor and not then currently
engaged or used by the Company (collectively, the “Broker-Dealer”).
The
Investor shall provide the Company with all information regarding the
Broker-Dealer reasonably requested by the Company. The Investor shall be solely
responsible for all fees and commissions of the Broker-Dealer.
Section
5.14 Disclosure
Schedule.
(i) During
the Investment Period, the Company shall from time to time update the Disclosure
Schedule as may be required to satisfy the condition set forth in Section
6.3(i). For purposes of this Section 5.14, any disclosure made in a schedule
to
the Compliance Certificate substantially in the form attached hereto as
Exhibit
D
shall be
deemed to be an update of the Disclosure Schedule. Notwithstanding anything
in
this Agreement to the contrary, no update to the Disclosure Schedule pursuant
to
this Section 5.14 shall cure any breach of a representation or warranty of
the
Company contained in this Agreement and shall not affect any of the Investor’s
rights or remedies with respect thereto.
(ii) Notwithstanding
anything to the contrary contained in the Disclosure Schedules or in this
Agreement, the information and disclosure contained in any Schedule of the
Disclosure Schedules shall be deemed to be disclosed and incorporated by
reference in any other Schedule of the Disclosure Schedules as though fully
set
forth in such Schedule for which applicability of such information and
disclosure is readily apparent on its face. The fact that any item of
information is disclosed in the Disclosure Schedules shall not be construed
to
mean that such information is required to be disclosed by this Agreement. Except
as expressly set forth in this Agreement, such information and the thresholds
(whether based on quantity, qualitative characterization, dollar amounts or
otherwise) set forth herein shall not be used as a basis for
25
interpreting
the terms “material” or “Material Adverse Effect” or other similar terms in this
Agreement.
ARTICLE
VI
OPINION
OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND
PURCHASE
OF THE SHARES
Section
6.1 Opinion
of Counsel and Certificate.
Simultaneously with the execution and delivery of this Agreement, the Investor
has received and relied upon (i) opinions of outside counsel to the Company,
dated the Effective Date, in the forms mutually agreed to by the parties hereto,
and (ii) a certificate from the Company, dated the Effective Date, in the form
of Exhibit
C
hereto.
Section
6.2 Conditions
Precedent to the Obligation of the Company.
The
obligation hereunder of the Company to issue and sell the Shares to the Investor
under any Fixed Request or Optional Amount is subject to the satisfaction or
(to
the extent permitted by applicable law) waiver of each of the conditions set
forth below. These conditions are for the Company’s sole benefit and (to the
extent permitted by applicable law) may be waived by the Company at any time
in
its sole discretion.
(i) Accuracy
of the Investor’s Representations and Warranties.
The
representations and warranties of the Investor contained in this Agreement
(i)
that are not qualified by “materiality” shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects as of the applicable Fixed Request Exercise Date and the applicable
Settlement Date with the same force and effect as if made on such dates, except
to the extent such representations and warranties are as of another date, in
which case, such representations and warranties shall be true and correct in
all
material respects as of such other date and (ii) that are qualified by
“materiality” shall have been true and correct when made and shall be true and
correct as of the applicable Fixed Request Exercise Date and the applicable
Settlement Date with the same force and effect as if made on such dates, except
to the extent such representations and warranties are as of another date, in
which case, such representations and warranties shall be true and correct as
of
such other date.
(ii) Registration
Statement.
The
Registration Statement is effective and neither the Company nor the Investor
shall have received notice that the Commission has issued or intends to issue
a
stop order with respect to the Registration Statement. The Company shall have
a
maximum dollar amount certain of Shares registered under the Registration
Statement which are in an amount (A) as of the Effective Date, not less than
the
Total Commitment and (B) as of the applicable Fixed Request Exercise Date,
not
less than the maximum dollar amount worth of Shares issuable pursuant to the
applicable Fixed Request Notice and applicable Optional Amount, if any. The
Current Report shall have been filed with the Commission, as required pursuant
to Section 1.4, and all Prospectus Supplements shall have been filed with the
Commission, as required pursuant to Sections 1.4 and 5.9 hereof, to disclose
the
sale of the Shares prior to each Settlement Date, as applicable. Any other
material required to be filed by the Company or any other offering participant
pursuant to Rule 433(d) under the Securities Act shall have been filed with
the
Commission within the applicable time periods prescribed for such filings by
Rule 433 under the Securities Act.
26
(iii) Performance
by the Investor.
The
Investor shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Investor at or prior to the
applicable Fixed Request Exercise Date and the applicable Settlement
Date.
(iv) No
Injunction.
No
statute, regulation, order, decree, writ, ruling or injunction shall have been
enacted, entered, promulgated, threatened or endorsed by any court or
governmental authority of competent jurisdiction which prohibits the
consummation of or which would materially modify or delay any of the
transactions contemplated by this Agreement.
(v) No
Suspension, Etc.
Trading
in the Common Stock shall not have been suspended by the Commission or the
Trading Market (except for any suspension of trading of limited duration agreed
to by the Company, which suspension shall be terminated prior to the applicable
Fixed Request Exercise Date and applicable Settlement Date), and, at any time
prior to the applicable Fixed Request Exercise Date and applicable Settlement
Date, none of the events described in clauses (i), (ii) and (iii) of Section
5.7
shall have occurred, trading in securities generally as reported on the Trading
Market shall not have been suspended or limited, 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 or crisis 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 the Company, makes it impracticable
or
inadvisable to issue the Shares.
(vi) No
Proceedings or Litigation.
No
action, suit or proceeding before any arbitrator or any court or governmental
authority shall have been commenced or threatened, and no inquiry or
investigation by any governmental authority shall have been commenced or
threatened, against the Company or any Subsidiary, or any of the officers,
directors or affiliates of the Company or any Subsidiary, seeking to restrain,
prevent or change the transactions contemplated by this Agreement, or seeking
damages in connection with such transactions.
(vii) Aggregate
Limit.
The
issuance and sale of the Shares issuable pursuant to such Fixed Request Notice
or Optional Amount shall not violate Sections 2.2, 2.12 and 5.5 hereof.
Section
6.3 Conditions
Precedent to the Obligation of the Investor.
The
obligation hereunder of the Investor to accept a Fixed Request Notice or
Optional Amount grant and to acquire and pay for the Shares is subject to the
satisfaction or (to the extent permitted by applicable law) waiver, at or before
each Fixed Request Exercise Date and each Settlement Date, of each of the
conditions set forth below. These conditions are for the Investor’s sole benefit
and (to the extent permitted by applicable law) may be waived by the Investor
at
any time in its sole discretion.
(i) Accuracy
of the Company’s Representations and Warranties.
The
representations and warranties of the Company contained in this Agreement (i)
that are not qualified by “materiality” or “Material Adverse Effect” shall have
been true and correct in all material respects when made and shall be true
and
correct in all material respects as of the applicable Fixed Request Exercise
Date and the applicable Settlement Date with the same force
27
and
effect as if made on such dates, except to the extent such representations
and
warranties are as of another date, in which case, such representations and
warranties shall be true and correct in all material respects as of such other
date and (ii) that are qualified by “materiality” or “Material Adverse
Effect” shall have been true and correct when made and shall be true and correct
as of the applicable Fixed Request Exercise Date and the applicable Settlement
Date with the same force and effect as if made on such dates, except to the
extent such representations and warranties are as of another date, in which
case, such representations and warranties shall be true and correct as of such
other date.
(ii) Registration
Statement.
The
Registration Statement is effective and neither the Company nor the Investor
shall have received notice that the Commission has issued or intends to issue
a
stop order with respect to the Registration Statement. The Company shall have
a
maximum dollar amount certain of Shares registered under the Registration
Statement which are in an amount (A) as of the Effective Date, not less than
the
Total Commitment and (B) as of the applicable Fixed Request Exercise Date,
not
less than the maximum dollar amount worth of Shares issuable pursuant to the
applicable Fixed Request Notice and applicable Optional Amount, if any. The
Current Report shall have been filed with the Commission, as required pursuant
to Section 1.4, and all Prospectus Supplements shall have been filed with the
Commission, as required pursuant to Sections 1.4 and 5.9 hereof, to disclose
the
sale of the Shares prior to each Settlement Date, as applicable, and an
electronic copy of each such Prospectus Supplement together with the Base
Prospectus shall have been delivered or made available to the Investor in
accordance with Section 5.9 hereof. Any other material required to be filed
by
the Company or any other offering participant pursuant to Rule 433(d) under
the
Securities Act shall have been filed with the Commission within the applicable
time periods prescribed for such filings by Rule 433 under the Securities
Act.
(iii) No
Suspension.
Trading
in the Common Stock shall not have been suspended by the Commission or the
Trading Market (except for any suspension of trading of limited duration agreed
to by the Company, which suspension shall be terminated prior to the applicable
Fixed Request Exercise Date and applicable Settlement Date), and, at any time
prior to the applicable Fixed Request Exercise Date and applicable Settlement
Date, none of the events described in clauses (i), (ii) and (iii) of Section
5.7
shall have occurred, trading in securities generally as reported on the Trading
Market shall not have been suspended or limited, 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 or crisis 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 the Investor, makes it impracticable
or
inadvisable to purchase the Shares.
(iv) Performance
of the Company.
The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Company at or prior to the
applicable Fixed Request Exercise Date and the applicable Settlement Date and
shall have delivered to the Investor on the applicable Settlement Date the
Compliance Certificate substantially in the form attached hereto as Exhibit
D.
28
(v) No
Injunction.
No
statute, rule, regulation, order, decree, writ, ruling or injunction shall
have
been enacted, entered, promulgated, threatened or endorsed by any court or
governmental authority of competent jurisdiction which prohibits the
consummation of or which would materially modify or delay any of the
transactions contemplated by this Agreement.
(vi) No
Proceedings or Litigation.
No
action, suit or proceeding before any arbitrator or any court or governmental
authority shall have been commenced or threatened, and no inquiry or
investigation by any governmental authority shall have been commenced or
threatened, against the Company or any Subsidiary, or any of the officers,
directors or affiliates of the Company or any Subsidiary, seeking to restrain,
prevent or change the transactions contemplated by this Agreement, or seeking
damages in connection with such transactions.
(vii) Aggregate
Limit.
The
issuance and sale of the Shares issuable pursuant to such Fixed Request Notice
or Optional Amount shall not violate Sections 2.2, 2.12 and 5.5
hereof.
(viii) Shares
Authorized.
The
Shares issuable pursuant to such Fixed Request Notice or Optional Amount shall
have been duly authorized by all necessary corporate action of the
Company.
(ix) Notification
of Listing of Shares.
If
required, the Company shall have submitted to the Trading Market a notification
form of listing of additional shares related to the Shares issuable pursuant
to
such Fixed Request or Optional Amount in accordance with the bylaws, listed
securities maintenance standards and other rules of the Trading
Market.
(x) Opinions
of Counsel; Bring-Down.
Subsequent to the filing of the Current Report pursuant to Section 1.4 and
prior
to the first Fixed Request Exercise Date, the Investor shall have received
opinions from outside counsel to the Company in the forms mutually agreed to
by
the parties hereto. On each Settlement Date, the Investor shall have received
opinion “bring downs” from outside counsel to the Company in the forms mutually
agreed to by the parties hereto.
(xi) Payment
of Investor’s Counsel Fees; Due Diligence Expenses.
On the
Effective Date, the Company shall have paid by wire transfer of immediately
available funds to an account designated by the Investor’s counsel, the fees and
expenses of the Investor’s counsel in accordance with the proviso to the first
sentence of Section 9.1(i) of this Agreement. On the 30th
day of
the third month in each calendar quarter during the Investment Period, the
Company shall have paid by wire transfer of immediately available funds to
an
account designated by the Investor, the due diligence expenses incurred by
the
Investor in accordance with the provisions of the second sentence of Section
9.1(i) of this Agreement.
ARTICLE
VII
TERMINATION
Section
7.1 Term,
Termination by Mutual Consent.
Unless
earlier terminated as provided hereunder, this Agreement shall terminate
automatically on the earliest of (i) the first day of the month next following
the 18-month anniversary of the Effective Date (the “Investment
Period”),
(ii)
the date that the entire dollar amount of Shares registered under the
Registration
29
Statement
have been issued and sold and (iii) the date the Investor shall have purchased
the Total Commitment of shares of Common Stock (subject in all cases to the
Trading Market Limit). The Company may terminate this Agreement effective upon
three Trading Days’ prior written notice to the Investor under Section 9.4;
provided,
however,
that
such termination shall not occur during a Pricing Period or prior to a
Settlement Date. This Agreement may be terminated at any time by the mutual
written consent of the parties, effective as of the date of such mutual written
consent unless otherwise provided in such written consent, it being hereby
acknowledged and agreed that the Investor may not consent to such termination
during a Pricing Period or prior to a Settlement Date in the event the Investor
has instructed the Broker-Dealer to effect an open-market sale of Shares which
are subject to a pending Fixed Request Notice but which have not yet been
physically delivered by the Company (and/or credited by book-entry) to the
Investor in accordance with the terms and subject to the conditions of this
Agreement.
Section
7.2 Other
Termination.
If the
Company provides the Investor with an Other Financing Notice (other than in
respect of an underwritten public offering of equity securities of the Company
or a registered direct public offering of equity securities of the Company)
or
an Integration Notice, in each case pursuant to Section 5.6(ii) of this
Agreement, or if the Company otherwise enters into any agreement, plan,
arrangement or transaction with a third party, the principal purpose of which
is
to obtain outside a Pricing Period, but otherwise during the Investment Period,
an Other Financing not constituting an Acceptable Financing (other than in
respect of an underwritten public offering of equity securities of the Company
or a registered direct public offering of equity securities of the Company),
in
which latter case the Company shall so notify the Investor within forty-eight
(48) hours thereof, then in all such cases the Investor shall have the right
to
terminate this Agreement within the subsequent 30-day period (the “Event
Period”),
effective upon one Trading Day’s prior written notice delivered to the Company
in accordance with Section 9.4 at any time during the Event Period. The
Company shall immediately notify the Investor (and, if required under applicable
law, including, without limitation, Regulation FD promulgated by the Commission,
or under the applicable rules and regulations of the Trading Market, the Company
shall simultaneously publicly disclose such information in accordance with
Regulation FD and the applicable rules and regulations of the Trading Market),
and the Investor shall have the right to terminate this Agreement at any time
after receipt of such notification, if: (i) any condition, occurrence, state
of
facts or event constituting a Material Adverse Effect has occurred; (ii) a
Material Change in Ownership has occurred or the Company enters into a
definitive agreement providing for a Material Change in Ownership; or (iii)
a
default or event of default has occurred and is continuing under the terms
of
any agreement, contract, note or other instrument to which the Company or any
of
its Subsidiaries is a party with respect to any indebtedness for borrowed money
representing more than ten percent (10%) of the Company’s consolidated assets,
in any such case, upon one Trading Day’s prior written notice delivered to the
Company in accordance with Section 9.4 hereof.
Section
7.3 Effect
of Termination.
In the
event of termination by the Company or the Investor, written notice thereof
shall forthwith be given to the other party as provided in Section 9.4 and
the
transactions contemplated by this Agreement shall be terminated without further
action by either party. If this Agreement is terminated as provided in Section
7.1 or 7.2 herein, this Agreement shall become void and of no further force
and
effect, except as provided in Section 9.9 hereof. Nothing in this Section 7.3
shall be deemed to release the Company or the
30
Investor
from any liability for any breach under this Agreement, or to impair the rights
of the Company and the Investor to compel specific performance by the other
party of its obligations under this Agreement.
ARTICLE
VIII
INDEMNIFICATION
Section
8.1 General
Indemnity.
(i) Indemnification
by the Company.
The
Company shall indemnify and hold harmless the Investor, the Broker-Dealer,
each
affiliate, employee, representative and advisor of and to the Investor and
the
Broker-Dealer,
and each
person, if any, who controls the Investor or the Broker-Dealer within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act
from and against all losses, claims, damages, liabilities and expenses
(including reasonable costs of defense and investigation and all attorneys’
fees) to which the Investor, the Broker-Dealer and each such other person may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities and expenses (or actions in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged untrue statement
of
a material fact contained, or incorporated by reference, in the Registration
Statement or any amendment thereto or any omission or alleged omission to state
therein, or in any document incorporated by reference therein, a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (ii) any untrue statement or alleged untrue statement of a
material fact contained, or incorporated by reference, in the Prospectus, any
Issuer Free Writing Prospectus, or in any amendment thereof or supplement
thereto, or in any “issuer information” (as defined in Rule 433 under the
Securities Act) of the Company, which “issuer information” is required to be, or
is, filed with the Commission or otherwise contained in any Free Writing
Prospectus, or any amendment or supplement thereto, or any omission or alleged
omission to state therein, or in any document incorporated by reference 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,
not misleading; provided,
however,
that
(A) the Company shall not be liable under this Section 8.1(i) to the extent
that
a court of competent jurisdiction shall have determined by a final judgment
(from which no further appeals are available) that such loss, claim, damage,
liability or expense resulting directly and solely from any such acts or
failures to act, undertaken or omitted to be taken by the Investor, any
Broker-Dealer or such person through its bad faith or willful misconduct, (B)
the foregoing indemnity shall not apply to any loss, claim, damage, liability
or
expense to the extent, but only to the extent, arising out of or based upon
any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished
to
the Company by the Investor or any Broker-Dealer expressly for use in the
Current Report or any Prospectus Supplement or Permitted Free Writing
Prospectus, or any amendment thereof or supplement thereto, and (C) with respect
to the Prospectus, the foregoing indemnity shall not inure to the benefit of
the
Investor or any such person from whom the person asserting any loss, claim,
damage, liability or expense purchased Common Stock, if copies of all Prospectus
Supplements required to be filed pursuant to Section 1.4 and 5.9, together
with
the Base Prospectus, were timely delivered or made available to the Investor
pursuant hereto and a copy of the Base Prospectus, together with a Prospectus
Supplement (as applicable), was not sent or given by or on behalf of the
Investor or any such person to such person, if required by law to
31
have
been
delivered, at or prior to the written confirmation of the sale of the Common
Stock to such person, and if delivery of the Base Prospectus, together with
a
Prospectus Supplement (as applicable), would have cured the defect giving rise
to such loss, claim, damage, liability or expense.
The
Company shall reimburse the Investor, the Broker-Dealer and each such
controlling person promptly upon demand (with accompanying presentation of
documentary evidence) for all legal and other costs and expenses reasonably
incurred by the Investor, the Broker-Dealer or such indemnified persons in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding with respect to which it is entitled to
indemnification.
(ii) Indemnification
by the Investor.
The
Investor shall indemnify and hold harmless the Company, each of its directors
and officers, and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act
from and against all losses, claims, damages, liabilities and expenses
(including reasonable costs of defense and investigation and all attorneys
fees)
to which the Company and each such other person may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Current Report or any Prospectus Supplement or Permitted Free
Writing Prospectus, or in any amendment thereof or supplement thereto, or any
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, not misleading, in each case, to
the
extent, but only to the extent, the untrue statement, alleged untrue statement,
omission or alleged omission was made in reliance upon, and in conformity with,
written information furnished by the Investor to the Company expressly for
inclusion in the Current Report or such Prospectus Supplement or Permitted
Free
Writing Prospectus, or any amendment thereof or supplement thereto.
The
Investor shall reimburse the Company and each such director, officer or
controlling person promptly upon demand for all legal and other costs and
expenses reasonably incurred by the Company or such indemnified persons in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding with respect to which it is entitled to
indemnification.
Section
8.2 Indemnification
Procedures.
Promptly after a person receives notice of a claim or the commencement of an
action for which the person intends to seek indemnification under Section 8.1,
the person will notify the indemnifying party in writing of the claim or
commencement of the action, suit or proceeding; provided,
however,
that
failure to notify the indemnifying party will not relieve the indemnifying
party
from liability under Section 8.1, except to the extent it has been materially
prejudiced by the failure to give notice. The indemnifying party will be
entitled to participate in the defense of any claim, action, suit or proceeding
as to which indemnification is being sought, and if the indemnifying party
acknowledges in writing the obligation to indemnify the party against whom
the
claim or action is brought, the indemnifying party may (but will not be required
to) assume the defense against the claim, action, suit or proceeding with
counsel satisfactory to it. After an indemnifying party notifies an indemnified
party that the indemnifying party wishes to assume the defense of a
32
claim,
action, suit or proceeding, the indemnifying party will not be liable for any
legal or other expenses incurred by the indemnified party in connection with
the
defense against the claim, action, suit or proceeding except that if, in the
opinion of counsel to the indemnifying party, one or more of the indemnified
parties should be separately represented in connection with a claim, action,
suit or proceeding, the indemnifying party will pay the reasonable fees and
expenses of one separate counsel for the indemnified parties. Each indemnified
party, as a condition to receiving indemnification as provided in Section 8.1,
will cooperate in all reasonable respects with the indemnifying party in the
defense of any action or claim as to which indemnification is sought. No
indemnifying party will be liable for any settlement of any action effected
without its prior written consent. Notwithstanding the foregoing sentence,
if at
any time an indemnified party shall have requested (by written notice provided
in accordance with Section 9.4) an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated
hereby effected without its written consent if (i) such settlement is entered
into more than forty-five (45) days after receipt by such indemnifying party
of
the aforesaid request, (ii) such indemnifying party shall have received written
notice of the terms of such settlement at least thirty (30) days prior to such
settlement being entered into and (iii) such indemnifying party shall not have
reimbursed such indemnified party in accordance with such request prior to
the
date of such settlement. No indemnifying party will, without the prior written
consent of the indemnified party, effect any settlement of a pending or
threatened action with respect to which an indemnified party is, or is informed
that it may be, made a party and for which it would be entitled to
indemnification, unless the settlement includes an unconditional release of
the
indemnified party from all liability and claims which are the subject matter
of
the pending or threatened action.
If
for
any reason the indemnification provided for in this Agreement is not available
to, or is not sufficient to hold harmless, an indemnified party in respect
of
any loss or liability referred to in Section 8.1 as to which such indemnified
party is entitled to indemnification thereunder, each indemnifying party shall,
in lieu of indemnifying the indemnified party, contribute to the amount paid
or
payable by the indemnified party as a result of such loss or liability, (i)
in
the proportion which is appropriate to reflect the relative benefits received
by
the indemnifying party, on the one hand, and by the indemnified party, on the
other hand, from the sale of Shares which is the subject of the claim, action,
suit or proceeding which resulted in the loss or liability or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above, but also the relative fault of the indemnifying party,
on the one hand, and the indemnified party, on the other hand, with respect
to
the statements or omissions which are the subject of the claim, action, suit
or
proceeding that resulted in the loss or liability, as well as any other relevant
equitable considerations.
The
remedies provided for in Section 8.1 and this Section 8.2 are not exclusive
and
shall not limit any rights or remedies which may otherwise be available to
any
Indemnified Person at law or in equity.
33
ARTICLE
IX
MISCELLANEOUS
Section
9.1 Fees
and Expenses.
(i) Each
party shall bear its own fees and expenses related to the transactions
contemplated by this Agreement; provided,
however,
that
the Company shall pay, on the Effective Date, by wire transfer of immediately
available funds to an account designated by the Investor’s counsel, promptly
following the receipt of an invoice therefor, all reasonable attorneys’ fees and
expenses (exclusive of disbursements and out-of-pocket expenses) incurred by
the
Investor, up to $35,000, in connection with the preparation, negotiation,
execution and delivery of this Agreement, legal due diligence of the Company
and
review of the Registration Statement, the Base Prospectus, the Current Report,
any Permitted Free Writing Prospectus and all other related transaction
documentation. In addition, the Company shall pay, on the 30th
day of
the third month in each calendar quarter during the Investment Period, promptly
following the receipt of an invoice therefor, up to $12,500, representing the
due diligence expenses incurred by the Investor during such calendar quarter
of
the Investment Period. The Company shall pay all U.S. federal, state and local
stamp and other similar transfer and other taxes and duties levied in connection
with issuance of the Shares pursuant hereto.
(ii) If
the
Company issues a Fixed Request Notice and fails to deliver the Shares to the
Investor on the applicable Settlement Date and such failure continues for ten
(10) Trading Days, the Company shall pay the Investor, in cash (or, at the
option of the Investor, in shares of Common Stock which have not been registered
under the Securities Act), as liquidated damages for such failure and not as
a
penalty, an amount equal to two percent (2.0%) of the payment required to be
paid by the Investor on such Settlement Date (i.e., the sum of the Fixed Amount
Requested and the Optional Amount Dollar Amount) for the initial thirty (30)
days following such Settlement Date until the Shares have been delivered, and
an
additional two percent (2.0%) for each additional 30-day period thereafter
until
the Shares have been delivered, which amount shall be prorated for such periods
less than thirty (30) days (subject in all cases to the Trading Market Limit).
Section
9.2 Specific
Enforcement, Consent to Jurisdiction, Waiver of Jury
Trial.
(i) The
Company and the Investor acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It
is accordingly agreed that either party shall be entitled to an injunction
or
injunctions to prevent or cure breaches of the provisions of this Agreement
by
the other party and to enforce specifically the terms and provisions hereof
this
being in addition to any other remedy to which either party may be entitled
by
law or equity.
(ii) Each
of
the Company and the Investor (a) hereby irrevocably submits to the jurisdiction
of the United States District Court and other courts of the United States
sitting in the State of New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement, and (b) hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim
that
it is not personally subject to the jurisdiction of such court, that
the
34
suit,
action or proceeding is brought in an inconvenient forum or that the venue
of
the suit, action or proceeding is improper. Each of the Company and the Investor
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof 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 in this Section 9.2
shall affect or limit any right to serve process in any other manner permitted
by law.
(iii) Each
of
the Company and the Investor hereby waives to the fullest extent permitted
by
applicable law, any right it may have to a trial by jury in respect to any
litigation directly or indirectly arising out of, under or in connection with
this Agreement or the transactions contemplated hereby or disputes relating
hereto. Each of the Company and the Investor (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation,
seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
parties hereto have been induced to enter into this Agreement by, among other
things, the mutual waivers and certifications in this Section 9.2.
Section
9.3 Entire
Agreement; Amendment.
This
Agreement, together with the exhibits referred to herein and the Disclosure
Schedule, represents the entire agreement of the parties with respect to the
subject matter hereof, and there are no promises, undertakings, representations
or warranties by either party relative to subject matter hereof not expressly
set forth herein. No provision of this Agreement may be amended other than
by a
written instrument signed by both parties hereto. The Disclosure Schedule and
all exhibits to this Agreement are hereby incorporated by reference in, and
made
a part of, this Agreement as if set forth in full herein.
Section
9.4 Notices.
Any
notice, demand, request, waiver or other communication required or permitted
to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery or facsimile (with facsimile machine confirmation of delivery received)
at the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business
day
during normal business hours where such notice is to be received) or (b) on
the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The address for such communications shall
be:
If
to the
Company:
SulphCo,
Inc.
▇▇▇▇
▇.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Telephone
Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
With
copies to:
▇▇▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone
Number: (▇▇▇) ▇▇▇-▇▇▇▇
35
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If
to the
Investor:
Azimuth
Opportunity Ltd.
c/o
Fortis Prime Fund Solutions (BVI) Limited
▇.▇.
▇▇▇
▇▇▇, ▇▇▇
▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇ Building
Road
Town, Tortola
British
Virgin Islands
Telephone
Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
With
copies to:
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, LLP
The
MetLife Building
▇▇▇
▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone
Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, Esq.
Either
party hereto may from time to time change its address for notices by giving
at
least 10 days advance written notice of such changed address to the other party
hereto.
Section
9.5 Waivers.
No
waiver by either party 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 other provisions, condition or requirement hereof
nor shall any delay or omission of any party to exercise any right hereunder
in
any manner impair the exercise of any such right accruing to it thereafter.
No
provision of this Agreement may be waived other than in a written instrument
signed by the party against whom enforcement of such waiver is
sought.
Section
9.6 Headings.
The
article, section and subsection headings in this Agreement are for convenience
only and shall not constitute a part of this Agreement for any other purpose
and
shall not be deemed to limit or affect any of the provisions
hereof.
Section
9.7 Successors
and Assigns.
The
Investor may not assign this Agreement to any person without the prior consent
of the Company, in the Company’s sole discretion. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. The assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this
Agreement.
Section
9.8 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the internal
procedural and substantive laws of the State of New York, without giving effect
to the choice of law provisions of such state.
36
Section
9.9 Survival.
The
representations and warranties of the Company and the Investor contained in
Articles III and IV and the covenants contained in Article V shall survive
the
execution and delivery hereof until the termination of this Agreement, and
the
agreements and covenants set forth in Article VIII of this Agreement shall
survive the execution and delivery hereof.
Section
9.10 Counterparts.
This
Agreement may be executed in counterparts, all of which taken together shall
constitute one and the same original and binding instrument and shall become
effective when all counterparts have been signed by each party and delivered
to
the other parties hereto, it being understood that all parties hereto need
not
sign the same counterpart. In the event any signature is delivered by facsimile
transmission, the party using such means of delivery shall cause four (4)
additional executed signature pages to be physically delivered to the other
parties within five (5) days of the execution and delivery hereof.
Section
9.11 Publicity.
On or
after the Effective Date, the Company may issue a press release or otherwise
make a public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement (including,
without limitation, by filing a copy of this Agreement with the Commission);
provided,
however,
that
prior to issuing any such press release, or making any such public statement
or
announcement, the Company shall consult with the Investor on the form and
substance of such press release or other disclosure.
Section
9.12 Severability.
The
provisions of this Agreement are severable and, in the event that any court
of
competent jurisdiction shall determine that any one or more of the provisions
or
part of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part
of a
provision of this Agreement, and this Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible, provided that
the
Agreement, as so amended, (a) reflects the intent of the parties hereto and
(b)
does not change the bargained for consideration or benefits to be received
by
each party hereto.
Section
9.13 Further
Assurances.
From
and after the date of this Agreement, upon the request of the Investor or the
Company, each of the Company and the Investor shall execute and deliver such
instrument, documents and other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
[Signature
Page Follows]
37
IN
WITNESS WHEREOF,
the
parties hereto have caused this Agreement to be duly executed by their
respective authorized officer as of the date first above written.
SULPHCO,
INC.:
By:
Name:
▇▇▇▇▇ ▇. ▇▇▇▇
Title:
Chief Executive Officer
AZIMUTH
OPPORTUNITY LTD.:
By:
Name:
Title:
38
ANNEX
A TO THE
DEFINITIONS
(a) “Acceptable
Financing”
shall
have the meaning assigned to such term in Section 5.6(ii) hereof.
(b) “Aggregate
Limit”
shall
have the meaning assigned to such term in Section 1.1 hereof.
(c) “AMEX”
means
the American Stock Exchange or any successor thereto.
(d) “Base
Prospectus”
shall
mean the Company’s prospectus, dated April 30, 2008, a preliminary form of which
is included in the Registration Statement, including the documents incorporated
by reference therein.
(e) “Below
Market Offering”
shall
have the meaning assigned to such term in Section 5.6(ii) hereof.
(f) “Broker-Dealer”
shall
have the meaning assigned to such term in Section 5.13 hereof.
(g) “Bylaws”
shall
have the meaning assigned to such term in Section 4.3 hereof.
(h) “Charter”
shall
have the meaning assigned to such term in Section 4.3 hereof.
(i) “Code”
shall
mean the Internal Revenue Code of 1986, as amended.
(j) “Commission”
shall
mean the Securities and Exchange Commission or any successor
entity.
(k) “Commission
Documents”
shall
mean (1) all reports, schedules, registrations, forms, statements, information
and other documents filed by the Company with the Commission pursuant to the
reporting requirements of the Exchange Act, including all material filed
pursuant to Section 13(a) or 15(d) of the Exchange Act, which have been filed
by
the Company since December 31, 2007, and which hereafter shall be filed by
the
Company during the Investment Period, including, without limitation, the Form
10-K filed by the Company for its fiscal year ended December 31, 2007 (the
“2007
Form 10-K”)
and
the Current Report, (2) the Registration Statement, as the same may be amended
from time to time, the Prospectus and each Prospectus Supplement, and each
Permitted Free Writing Prospectus and (3) all information contained in such
filings and all documents and disclosures that have been and heretofore shall
be
incorporated by reference therein.
(l) “Common
Stock”
shall
have the meaning assigned to such term in the Recitals.
(m) “Current
Market Price”
means,
with respect to any particular measurement date, the closing price of a share
of
Common Stock as reported on the Trading Market for the Trading Day immediately
preceding such measurement date.
(n) “Current
Report”
shall
have the meaning assigned to such term in Section 1.4 hereof.
(o) “Discount
Price”
shall
have the meaning assigned to such term in Section 2.2 hereof.
(p) “▇▇▇▇▇”
shall
have the meaning assigned to such term in Section 4.3 hereof.
(q) “Effective
Date”
shall
mean the date of this Agreement.
(r) “Environmental
Laws”
shall
have the meaning assigned to such term in Section 4.15 hereof.
(s) “ERISA”
shall
mean the Employee Retirement Income Security Act of 1974, as
amended.
(t) “Event
Period”
shall
have the meaning assigned to such term in Section 7.2 hereof.
(u) “Exchange
Act”
shall
mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder.
(v) “FINRA”
shall
have the meaning assigned to such term in Section 4.18(iii) hereof.
(w) “Fixed
Amount Requested”
shall
mean the amount of a Fixed Request requested by the Company in a Fixed Request
Notice delivered pursuant to Section 2.1 hereof.
(x) “Fixed
Request”
means
the transactions contemplated under Sections 2.1 through 2.8 of this
Agreement.
(y) “Fixed
Request Amount”
means
the actual amount of proceeds received by the Company pursuant to a Fixed
Request under this Agreement.
(z) “Fixed
Request Exercise Date”
shall
have the meaning assigned to such term in Section 2.2 hereof.
(aa) “Fixed
Request Notice”
shall
have the meaning assigned to such term in Section 2.1 hereof.
(bb) “Free
Writing Prospectus”
shall
mean a “free writing prospectus” as defined in Rule 405 promulgated under the
Securities Act.
(cc) “GAAP”
shall
mean generally accepted accounting principles in the United States of America
as
applied by the Company.
(dd) “Governmental
Licenses”
shall
have the meaning assigned to such term in Section 4.14(a) hereof.
(ee) “Indebtedness”
shall
have the meaning assigned to such term in Section 4.9 hereof.
(ff) “Integration
Notice”
shall
have the meaning assigned to such term in Section 5.6(ii) hereof.
(gg) “Intellectual
Property”
shall
have the meaning assigned to such term in Section 4.14(b) hereof.
(hh) “Investment
Period”
shall
have the meaning assigned to such term in Section 7.1 hereof.
(ii) “Issuer
Free Writing Prospectus”
shall
mean an “issuer free writing prospectus” as defined in Rule 433 promulgated
under the Securities Act.
(jj) “Market
Capitalization”
shall
be calculated on the Trading Day preceding the applicable Pricing Period and
shall be the product of (x) the number of shares of Common Stock outstanding
and
(y) the closing bid price of the Common Stock, both as determined by Bloomberg
Financial LP using the DES and HP functions.
(kk) “Material
Adverse Effect”
shall
mean any condition, occurrence, state of facts or event having, or insofar
as
reasonably can be foreseen would likely have, any effect on the business,
operations, properties or condition (financial or otherwise) of the Company
that
is material and adverse to the Company and its Subsidiaries, taken as a whole,
and/or any condition, occurrence, state of facts or event that would prohibit
or
otherwise materially interfere with or delay the ability of the Company to
perform any of its obligations under this Agreement.
(ll) “Material
Agreements”
shall
have the meaning assigned to such term in Section 4.16 hereof.
(mm) “Material
Change in Ownership”
shall
mean the occurrence of any one or more of the following: (i) the acquisition
by
any person, including any syndicate or group deemed to be a “person” under
Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or
indirectly, through a purchase, merger or other acquisition transaction or
series of transactions, of shares of capital stock or other securities of the
Company entitling such person to exercise, upon an event of default or default
or otherwise, 50% or more of the total voting power of all series and classes
of
capital stock and other securities of the Company entitled to vote generally
in
the election of directors, other than any such acquisition by the Company,
any
Subsidiary of the Company or any employee benefit plan of the Company; (ii)
any
consolidation or merger of the Company with or into any other person, any merger
of another person into the Company, or any conveyance, transfer, sale, lease
or
other disposition of all or substantially all of the properties and assets
of
the Company to another person, other than (a) any such
transaction
(x) that does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of capital stock of the Company and (y)
pursuant to which holders of capital stock of the Company immediately prior
to
such transaction have the entitlement to exercise, directly or indirectly,
50%
or more of the total voting power of all shares of capital stock of the Company
entitled to vote generally in the election of directors of the continuing or
surviving person immediately after such transaction or (b) any merger which
is
effected solely to change the jurisdiction of incorporation of the Company
and
results in a reclassification, conversion or exchange of outstanding shares
of
Common Stock solely into shares of common stock of the surviving entity; (iii)
during any consecutive two-year period, individuals who at the beginning of
that
two-year period constituted the Board of Directors (together with any new
directors whose election to the Board of Directors, or whose nomination for
election by the stockholders of the Company, was approved by a vote of a
majority of the directors then still in office who were either directors at
the
beginning of such period or whose elections or nominations for election were
previously so approved) cease for any reason to constitute a majority of the
Board of Directors then in office; or (iv) the Company is liquidated or
dissolved or a resolution is passed by the Company’s stockholders approving a
plan of liquidation or dissolution of the Company. Beneficial ownership shall
be
determined in accordance with Rule 13d-3 promulgated by the SEC under the
Exchange Act. The term “person” shall include any syndicate or group which would
be deemed to be a “person” under Section 13(d)(3) of the Exchange
Act.
(nn) “Multiplier”
shall
have the meaning assigned to such term in Section 2.3 hereof.
(oo) “Optional
Amount”
means
the transactions contemplated under Sections 2.9 through 2.11 of this
Agreement.
(pp) “Optional
Amount Dollar Amount”
shall
mean the actual amount of proceeds received by the Company pursuant to the
exercise of an Optional Amount under this Agreement.
(qq) “Optional
Amount Notice”
shall
mean a notice sent to the Company with regard to the Investor’s election to
exercise all or any portion of an Optional Amount, as provided in Section 2.11
hereof and substantially in the form attached hereto as Exhibit
B.
(rr) “Optional
Amount Threshold Price”
shall
have the meaning assigned to such term in Section 2.1 hereof.
(ss) “Other
Financing”
shall
have the meaning assigned to such term in Section 5.6(ii) hereof.
(tt) “Other
Financing Notice”
shall
have the meaning assigned to such term in Section 5.6(ii) hereof.
(uu) “Permitted
Free Writing Prospectus”
shall
have the meaning assigned to such term in Section 5.8(ii) hereof.
(vv) “Plan”
shall
have the meaning assigned to such term in Section 4.22 hereof.
(ww) “Pricing
Period
shall
mean a period of 10 consecutive Trading Days commencing on the day of delivery
of a Fixed Request Notice (or, if the Fixed Request Notice is delivered after
9:30 a.m. (New York time), on the next Trading Day), or such other period
mutually agreed upon by the Investor and the Company.
(xx) “Prospectus”
shall
mean the Base Prospectus, together with any final prospectus filed with the
Commission pursuant to Rule 424(b), as supplemented by any Prospectus
Supplement, including the documents incorporated by reference
therein.
(yy) “Prospectus
Supplement”
shall
mean any prospectus supplement to the Base Prospectus filed with the Commission
pursuant to Rule 424(b) under the Securities Act, including the documents
incorporated by reference therein.
(zz) “Reduction
Notice”
shall
have the meaning assigned to such term in Section 2.8 hereof.
(aaa) “Registration
Statement”
shall
mean the registration statement on Form S-3, Commission File Number 333-145460,
filed by the Company with the Commission under the Securities Act for the
registration of the Shares, as such Registration Statement may be amended and
supplemented from time to time, including the documents incorporated by
reference therein and the information deemed to be a part thereof at the time
of
effectiveness pursuant to Rule 430A or Rule 430B under the Securities
Act.
(bbb) “Restricted
Period”
shall
have the meaning assigned to such term in Section 5.10 hereof.
(ccc) “Securities
Act”
shall
mean the Securities Act of 1933, as amended, and the rules and regulations
of
the Commission thereunder.
(ddd) “Settlement
Date”
shall
have the meaning assigned to such term in Section 2.7 hereof.
(eee) “Shares”
shall
mean shares of Common Stock issuable to the Investor upon exercise of a Fixed
Request and shares of Common Stock issuable to the Investor upon exercise of
an
Optional Amount, as applicable.
(fff) “Significant
Subsidiary”
means
any Subsidiary of the Company that would constitute a Significant Subsidiary
of
the Company within the meaning of Rule 1-02 of Regulation S-X of the
Commission.
(ggg) “SOXA”
shall
have the meaning assigned to such term in Section 4.6(c) hereof.
(hhh) “Subsidiary”
shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other Subsidiaries.
(iii) “Threshold
Price”
is
the
lowest price (except to the extent otherwise provided in Section 2.6) at which
the Company may sell Shares during the applicable Pricing Period as set forth
in
a Fixed Request Notice (not taking into account the applicable percentage
discount during such Pricing Period determined in accordance with Section 2.2);
provided,
however,
that at
no time shall the Threshold Price be lower than $3.00 per share unless the
Company and the Investor mutually shall agree.
(jjj) “Total
Commitment”
shall
have the meaning assigned to such term in Section 1.1 hereof.
(kkk) “Trading
Day”
shall
mean a full trading day (beginning at 9:30 a.m., New York City time, and ending
at 4:00 p.m., New York City time) on the AMEX.
(lll) “Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the AMEX, The New York Stock Exchange,
Inc.
or The NASDAQ Stock Market LLC.
(mmm) “Trading
Market Limit”
means
that number of shares which is one less than 20.0% of the issued and outstanding
shares of the Company’s Common Stock as of the Effective Date.
(nnn) “VWAP”
shall
mean the daily volume weighted average price (based on a Trading Day from 9:30
a.m. to 4:00 p.m. (New York time)) of the Company on the AMEX as reported by
Bloomberg Financial L.P. using the AQR function.
(ooo) “Warrant
Value”
shall
mean the fair value of all warrants, options and other similar rights issued
to
a third party in connection with an Other Financing, determined by using a
standard Black-Scholes option-pricing model using an expected volatility
percentage as shall be mutually agreed by the Investor and the Company. In
the
case of a dispute relating to such expected volatility assumption, the Investor
shall obtain applicable volatility data from three (3) investment banking firms
of nationally recognized reputation, and the parties hereto shall use the
average thereof for purposes of determining the expected volatility percentage
in connection with the Black-Scholes calculation referred to in the immediately
preceding sentence.
EXHIBIT
A TO THE
FORM
OF FIXED REQUEST NOTICE
Reference
is made to the Common Stock Purchase Agreement dated as of April 30, 2008,
(the
“Purchase
Agreement”)
between SulphCo, Inc., a corporation organized and existing under the laws
of
the State of Nevada (the “Company”),
and
Azimuth Opportunity Ltd., an international business company incorporated under
the laws of the British Virgin Islands. Capitalized terms used and not otherwise
defined herein shall have the meanings given such terms in the Purchase
Agreement.
In
accordance with and pursuant to Section 2.1 of the Purchase Agreement, the
Company hereby issues this Fixed Request Notice to exercise a Fixed Request
for
the Fixed Request Amount indicated below.
|
Fixed
Amount Requested:
|
|
|
Optional
Amount Dollar Amount:
|
|
|
Pricing
Period start date:
|
|
|
Pricing
Period end date:
|
|
|
Settlement
Date:
|
|
|
Fixed
Request Threshold Price:
|
|
|
Optional
Amount Threshold Price:
|
|
|
Dollar
Amount and Number of Shares of Common
Stock Currently Unissued under the Registration Statement;
|
|
|
Dollar
Amount and Number of Shares of Common
Stock Currently Available under the Aggregate Limit:
|
|
|
Dated:
_________________________
|
By:
________________________________________
Name
Title:
|
|
Address:
Facsimile
No.
|
AGREED
AND ACCEPTED
By:
______________________________
Name
Title:
EXHIBIT
B TO THE
FORM
OF OPTIONAL AMOUNT NOTICE
To:
_________________
Fax#:
_______________
Reference
is made to the Common Stock Purchase Agreement dated as of April 30, 2008 (the
“Purchase
Agreement”)
between SulphCo, Inc., a corporation organized and existing under the laws
of
the State of Nevada (the “Company”),
and
Azimuth Opportunity Ltd., an international business company incorporated under
the laws of the British Virgin Islands (the “Investor”).
Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement.
In
accordance with and pursuant to Section 2.1 of the Purchase Agreement, the
Investor hereby issues this Optional Amount Notice to exercise an Optional
Amount for the Optional Amount Dollar Amount indicated below.
|
Optional
Amount Dollar Amount Exercised
|
|
|
Number
of Shares to be purchased
|
|
|
VWAP
on the date hereof:
|
|
|
Discount
Price:
|
|
|
Settlement
Date:
|
|
|
Threshold
Price:
|
|
|
Dated:
____________________
|
By:
_________________________
Name
Title:
|
|
Address:
Facsimile
No.
|
EXHIBIT
C TO THE
CERTIFICATE
OF THE COMPANY
CLOSING
CERTIFICATE
_________
200__
The
undersigned, the [___________] of SulphCo, Inc., a corporation organized and
existing under the laws of the State of Nevada (the “Company”),
delivers this certificate in connection with the Common Stock Purchase
Agreement, dated as of April 30, 2008 (the “Agreement”),
by
and between the Company and Azimuth Opportunity Ltd., an international business
company incorporated under the laws of the British Virgin Islands (the
“Investor”),
and
hereby certifies on the date hereof that (capitalized terms used herein without
definition have the meanings assigned to them in the Agreement):
1. Attached
hereto as Exhibit
A
is a
true, complete and correct copy of the Articles of Incorporation of the Company
as filed with the Secretary of State of the State of Nevada. The Articles of
Incorporation of the Company have not been further amended or restated, and
no
document with respect to any amendment to the Articles of Incorporation of
the
Company has been filed in the office of the Secretary of State of the State
of
Nevada since the date shown on the face of the state certification relating
to
the Company’s Articles of Incorporation, which is in full force and effect on
the date hereof, and no action has been taken by the Company in contemplation
of
any such amendment or the dissolution, merger or consolidation of the
Company.
2. Attached
hereto as Exhibit
B
is a
true and complete copy of the Bylaws of the Company, as amended and restated
through, and as in full force and effect on, the date hereof, and no proposal
for any amendment, repeal or other modification to the Bylaws of the Company
has
been taken or is currently pending before the Board of Directors or stockholders
of the Company.
3. The
Board
of Directors of the Company has approved the transactions contemplated by the
Agreement; said approval has not been amended, rescinded or modified and remains
in full force and effect as of the date hereof.
4. Each
person who, as an officer of the Company, or as attorney-in-fact of an officer
of the Company, signed (i) the Agreement and (ii) any other document delivered
prior hereto or on the date hereof in connection with the transactions
contemplated by the Agreement, was duly elected, qualified and acting as such
officer or duly appointed and acting as such attorney-in-fact, and the signature
of each such person appearing on any such document is his genuine
signature.
IN
WITNESS WHEREOF,
I have
signed my name as of the date first above written.
___________________________________
By:
Title:
EXHIBIT
D TO THE
COMMON
STOCK PURCHASE AGREEMENT
COMPLIANCE
CERTIFICATE
In
connection with the issuance of shares of common stock of SulphCo, Inc., a
corporation organized and existing under the laws of the State of Nevada (the
“Company”),
pursuant to the Fixed Request Notice, dated [_____________], delivered by the
Company to Azimuth Opportunity Ltd. (the “Investor”)
pursuant to Article II of the Common Stock Purchase Agreement, dated April
30,
2008, by and between the Company and the Investor (the “Agreement”),
the
undersigned hereby certifies as follows:
1. The
undersigned is the duly elected [_____________] of the Company.
2. Except
as
set forth in the attached Disclosure Schedule, the representations and
warranties of the Company set forth in Article IV of the Agreement (i) that
are
not qualified by “materiality” or “Material Adverse Effect” are true and correct
in all material respects as of [insert Fixed Request Exercise Date] and as
of
the date hereof with the same force and effect as if made on such dates, except
to the extent such representations and warranties are as of another date, in
which case, such representations and warranties are true and correct in all
material respects as of such other date and (ii) that are qualified by
“materiality” or “Material Adverse Effect” are true and correct as of [insert
Fixed Request Exercise Date] and as of the date hereof with the same force
and
effect as if made on such dates, except to the extent such representations
and
warranties are as of another date, in which case, such representations and
warranties are true and correct as of such other date.
3. The
Company has performed, satisfied and complied in all material respects with
all
covenants, agreements and conditions required by the Agreement to be performed,
satisfied or complied with by the Company at or prior to [insert Fixed Request
Exercise Date] and the date hereof.
Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
them in the Agreement.
The
undersigned has executed this Certificate this [___] day of [___________],
200[__].
By:
_______________________________
Name:
_____________________________
Title:
______________________________
DISCLOSURE
SCHEDULE
RELATING
TO THE COMMON STOCK
PURCHASE
AGREEMENT, DATED AS OF APRIL 30, 2008
BETWEEN
SULPHCO, INC. AND AZIMUTH OPPORTUNITY LTD.
This
disclosure schedule is made and given pursuant to Article IV of the Common
Stock
Purchase Agreement, dated as of April 30, 2008 (the “Agreement”),
by
and between SulphCo, Inc., a Nevada corporation (the “Company”),
and
Azimuth Opportunity Ltd., an international business company incorporated under
the laws of the British Virgin Islands. Unless the context otherwise requires,
all capitalized terms are used herein as defined in the Agreement. The numbers
below correspond to the section numbers of representations and warranties in
the
Agreement most directly modified by the below exceptions.
FORM
OF OPINION OF OUTSIDE COUNSEL TO BE DELIVERED PURSUANT TO
SECTION
6.1(I) OF THE COMMON STOCK PURCHASE AGREEMENT
DATED
AS OF APRIL 30, 2008 BETWEEN SULPHCO, INC. AND AZIMUTH OPPORTUNITY
LTD.
[Company
Counsel’s Letterhead]
April
30,
2008
Azimuth
Opportunity Ltd.
c/o
Fortis Prime Fund Solutions (BVI) Limited
▇.▇.
▇▇▇
▇▇▇, ▇▇▇
▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇ Building
Road
Town, Tortola, BVI
Re:
SulphCo, Inc.
Ladies
and Gentlemen:
We
have
acted as counsel to SulphCo, Inc., a Nevada corporation (the “Company”),
in
connection with the Common Stock Purchase Agreement, dated April 30, 2008 (the
“Stock
Purchase Agreement”),
between Azimuth Opportunity Ltd. (the “Purchaser”)
and
the Company. The Stock Purchase Agreement provides for the issuance and sale
(the “Transaction”),
by
the Company to the Purchaser, of up to $60,000,000 of shares (the “Shares”)
of
common stock, $0.001 par value (“Common
Stock”),
of
the Company. We are delivering this opinion letter to you at the Company’s
request pursuant to Section 6.1 of the Stock Purchase Agreement.
The
following documents are referred to collectively in this opinion letter as
the
“Transaction
Documents”:
1. The
Stock
Purchase Agreement
2. The
Company’s Articles of Incorporation
3.
The
Company’s By-laws
4.
Resolutions
adopted by the Company’s Board of Directors on April 25, 2008
5.
The
Company’s Form S-3, filed with the Securities and Exchange Commission (the
“Commission”)
on
August 15, 2007 (the “Registration
Statement”)
References
in this opinion letter to our knowledge, or words to that effect, mean a
conscious awareness of facts, without investigation, by any of the lawyers
currently with this firm who have given substantive attention to legal
representation of the Company in matters relating directly to the Transaction
Documents.
In
connection with rendering the opinions set forth below, we have examined the
Transaction Documents and made such other investigation as we have deemed
appropriate. We have examined and relied on certificates of public officials
and, as to certain matters of fact that are material to our opinions, we have
also examined and relied on a certificate of an officer of the Company (the
“Fact
Certificate”).
A
copy of the Fact Certificate is attached to this opinion letter. We have not
independently established any of the facts so relied on.
For
the
purposes of this opinion letter we have made the assumptions that are customary
in opinion letters of this kind, including the assumptions that each document
submitted to us is accurate and complete, that each such document that is an
original is authentic, that each such document that is a copy conforms to an
authentic original, that all signatures (other than signatures on behalf of
the
Company) on each such document are genuine, and that no changes in the facts
certified in the Fact Certificate have occurred or will occur after the date
of
the Fact Certificate. We have further assumed the legal capacity of natural
persons, and we have assumed that each party to the Stock Purchase Agreement
(other than the Company) has the legal capacity and has satisfied all legal
requirements that are applicable to that party to the extent necessary to make
the Stock Purchase Agreement enforceable against that party. We have not
verified any of the foregoing assumptions.
We
have
also assumed with your permission that the Company is a corporation validly
existing and in good standing in the State of Nevada, that it has full corporate
power and has been duly authorized by all necessary corporate action to execute,
deliver and perform its obligations under the Stock Purchase Agreement, and
that
it has duly executed and delivered the Stock Purchase Agreement. We understand
that you are today receiving a separate opinion of ▇▇▇▇▇▇▇▇ Carano Wilson LLP
with respect to these matters.
The
opinions expressed in this opinion letter are limited to the laws of the State
of New York and federal laws of the United States that in our experience are
normally applicable to the transactions contemplated by the Stock Purchase
Agreement. We are not opining on specialized laws that are not customarily
covered in opinion letters of this kind, such as tax, insolvency, antitrust,
pension, employee benefit, environmental, intellectual property, banking,
insurance, labor, health and safety, or (except as expressly set forth in
opinion paragraph 2 below) securities laws.
Based
on
the foregoing, and subject to the foregoing and the additional qualifications
and other matters set forth below, it is our opinion that:
1. The
Stock
Purchase Agreement constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
2. The
Registration Statement has become effective under the Securities Act of 1933,
as
amended (the “1933
Act”).
To
our knowledge, based solely on a telephone conversation with a member of the
staff of the Commission, no stop order suspending the effectiveness of the
Registration Statement has been issued under the 1933 Act and no proceedings
for
that purpose have been initiated or threatened by the Commission.
Our
opinion in paragraph number 1 above is subject to the effect of bankruptcy,
insolvency, fraudulent transfer, reorganization, receivership, moratorium,
and
other laws affecting the rights and remedies of creditors generally, and to
general principles of equity (whether applied by a court of law or
equity).
We
express no opinion with respect to any matter involving financial information
or
relating to compliance with financial covenants or financial
requirements.
We
also
express no opinion with respect to the enforceability of any provision of any
of
the Transaction Documents that purports to:
(a) waive
equitable rights, remedies, or defenses;
(b) limit
any person’s liability, or relieve any party of the consequences of its own
unlawful, willful or negligent acts or omissions, or grant indemnity or a right
of contribution;
(c) waive
trial by jury;
(d) waive
the right to assert any statute of limitations;
(e) designate
the jurisdiction, forum or venue for resolution of any cause of action or
dispute or the method of service of process; or
(f) preclude
the modification of the Transaction Documents by any means other than a
writing.
We
further advise you that the enforceability of “severability” provisions may
depend on the materiality of the unenforceable provisions to the document as
a
whole and to the undertakings of the parties thereunder
We
are
furnishing this opinion letter to you solely in connection with the Transaction.
You may not rely on this opinion letter in any other connection, and it may
not
be furnished to or relied upon by any other person for any purpose, without
our
specific prior written consent.
The
foregoing opinions are rendered as of the date of this letter. We assume no
obligation to update or supplement any of our opinions to reflect any changes
of
law or fact that may occur.
Yours
truly,
April
____, 2008
Azimuth
Opportunity Ltd.
_________________________
_________________________
_________________________
|
Re:
|
Common
Stock Purchase Agreement (the "Purchase Agreement") by and between
Sulphco, Inc., a Nevada corporation (the "Company"), and Azimuth
Opportunity Ltd., an international business company incorporated
under the
laws of the British Virgin Islands (the "Investor"), dated April
___,
2008.
|
Ladies
and Gentlemen:
We
have
acted as special Nevada counsel to the Company in connection with the execution
and delivery of the Purchase Agreement. Unless otherwise indicated, capitalized
terms used herein shall have the meanings ascribed to them in the Purchase
Agreement.
In
connection with the preparation of this opinion letter, and as the basis for
the
opinions hereinafter set forth, we have made such investigations of the laws
of
the State of Nevada as we have deemed relevant and necessary, and we have
examined such documents as we have deemed relevant and necessary, including
copies of the following documents and records:
(a) An
email
copy of the Purchase Agreement (except that we have not reviewed any other
documents or instruments that may be referenced or referred to in the Purchase
Agreement and not attached thereto);
(b) An
email
copy of the Restated Articles of Incorporation of the Company filed with the
Secretary of State of the State of Nevada on December 30, 2003, as amended
by
that certain Certificate of Amendment to Articles of Incorporation of the
Company filed with the Secretary of State of the State of Nevada on March 10,
2008 (collectively, the "Articles");
(c) An
email
copy of the Amended and Restated Bylaws of the Company duly adopted by the
Board
of Directors of the Company on April 18, 2003, as amended by that certain
Amendment to Bylaws of the Company adopted by the Board of Directors of the
Company on January 17, 2007 (collectively, the "Bylaws");
(d) A
email
copy of the Certificate of Existence with Status in Good Standing of the Company
issued by the Secretary of State of the State of Nevada as of April 28, 2008
(the "Good Standing Certificate”);
(e) An
email
copy of the Resolutions Of The Board of Directors of the Company, duly adopted
by unanimous written consent on April ____, 2008, as certified by an officer
of
the Company in the Officer’s Certificate attached hereto (the "Resolutions");
and
(f) A
photocopy of the Officer’s Certificate of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice-President and
Chief Financial Officer of the Company, dated of even date herewith (the
"Officer’s Certificate"), attached hereto as Exhibit "A" and made a part hereof
by reference.
As
to
matters of fact relevant to our opinion, we have relied upon representations
made by the Company in the Purchase Agreement and Officer’s Certificate, and
upon certificates of public officials as to matters stated therein. We have
assumed (i) the genuineness of all signatures; (ii) the legal capacity of
natural persons; (iii) the authenticity and accuracy of all documents submitted
to us as originals and the conformity to originals of all documents submitted
to
us as copies; (iv) that all of the shares of the Company’s Common Stock to be
issued under the Purchase Agreement have been or will be, as the case may be,
issued in accordance with the registration or qualification provisions of the
Securities Act of 1933, as amended, and any relevant state securities laws,
or
pursuant to valid exemptions therefrom; and (v) the adequacy of consideration
received by the Company for the issuance and sale of any of the shares of the
Company’s Common Stock.
This
opinion letter deals only with the specific and express legal issues addressed,
and does not and is not intended to address any other legal issues. No opinions
may be implied from the specific and express opinions set forth below, nor
may
the taking of any actions on our part be inferred or implied unless specifically
and expressly stated. Based upon the foregoing, and subject to the
qualifications, limitations and exceptions set forth herein, as of the date
hereof and under current interpretations of the laws of the State of Nevada,
we
are of the opinion that:
1. The
execution, delivery and performance of the Purchase Agreement by the Company
and
the consummation by it of the transactions contemplated thereby have been duly
and validly authorized by all necessary corporate action of the
Company.
2. The
Company has been duly incorporated as a corporation under the laws of the State
of Nevada with corporate power and authority to own its properties and to
conduct its business as described in the Registration Statement and the
Prospectus. Based on the Good Standing Certificate, we confirm that the Company
is validly existing and in good standing under the laws of the State of
Nevada.
4. The
issuance and sale of the Shares by the Company to you pursuant to the Purchase
Agreement, assuming such issuance and sale occurred on the date hereof, do
not:
(i) violate the Company’s Articles and Bylaws; (ii) violate the corporate laws
of the State of Nevada; or (iii) require any consents, approvals, or
authorizations to be obtained by the Company, or any registrations, declarations
or filings to be made by the Company, in each case, under the corporate laws
of
the State of Nevada.
5. When
the
terms (including the sales price and number of Shares) of the issuance of the
Shares are determined by resolution of the Company’s Board of Directors, or a
duly authorized committee thereof, in accordance with the Purchase Agreement,
and upon receipt of payment for the Shares in the manner contemplated by the
Purchase Agreement in legal consideration of not less than the aggregate par
value for such Shares, and upon execution, issuance and delivery of certificates
representing the Shares (and notation of such issuance in the stock transfer
records of the Company) and assuming the Company completes all other actions
and
proceedings required on its part to be taken prior to the issuance and delivery
of the Shares pursuant to the Purchase Agreement, the Shares will be duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights arising under the Company’s Articles and Bylaws or the laws of the State
of Nevada.
The
foregoing opinions are subject to the following qualifications, exceptions,
assumptions, and limitations:
A. In
rendering the opinion in Paragraph 2 above, we have relied solely upon the
Articles, Bylaws, Good Standing Certificate and the Officer’s
Certificate.
B. Please
be
advised that we are licensed to practice law only in the State of Nevada and
our
opinions are therefore limited only to matters of Nevada law and should not
be
construed as expressions of opinions as to the laws of any other
jurisdiction.
C. In
rendering the opinions set forth above, please be advised that we are not giving
an opinion as to the Company’s compliance with any state or federal securities
laws, rules or regulations, including Nevada Blue Sky laws, in connection with
the Purchase Agreement and the issuance and sale of the Shares.
All
of
the opinions rendered herein are as of the date hereof. We assume no obligation
to update such opinions to reflect any facts or circumstances that hereafter
may
come to our attention or any changes in the law that hereafter may occur. This
opinion is rendered only with regard to the matters set out in the numbered
paragraphs above.
This
opinion is limited to the laws of the State of Nevada. This opinion is given
to
the addressee solely for its benefit in connection with the transactions
described in the Purchase Agreement and, except for you, may not be relied
upon
in any respect by any other person or for any other purpose.
Very
truly yours,
▇▇▇▇▇▇▇▇
Carano Wilson LLP
FORM
OF OPINION OF OUTSIDE COUNSEL TO BE DELIVERED PURSUANT TO
SECTION
6.3(X) OF THE COMMON STOCK PURCHASE AGREEMENT
DATED
AS OF APRIL 30, 2008 BETWEEN SULPHCO, INC. AND AZIMUTH OPPORTUNITY
LTD.
[Company
Counsel’s Letterhead]
_______
__, 2008
Azimuth
Opportunity Ltd.
c/o
Fortis Prime Fund Solutions (BVI) Limited
▇.▇.
▇▇▇
▇▇▇, ▇▇▇
▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇ Building
Road
Town, Tortola, BVI
Re:
SulphCo, Inc.
Ladies
and Gentlemen:
We
have
acted as counsel to SulphCo, Inc., a Nevada corporation (the “Company”),
in
connection with the Common Stock Purchase Agreement, dated April 30, 2008 (the
“Stock
Purchase Agreement”),
between Azimuth Opportunity Ltd. (the “Purchaser”)
and
the Company. The Stock Purchase Agreement provides for the issuance and sale
(the “Transaction”),
by
the Company to the Purchaser, of up to $60,000,000 of shares (the “Shares”)
of
common stock, $0.001 par value (“Common
Stock”),
of
the Company. We are delivering this opinion letter to you at the Company’s
request pursuant to Section 6.3(x) of the Stock Purchase Agreement.
The
following documents are referred to collectively in this opinion letter as
the
“Transaction
Documents”:
1. The
Stock
Purchase Agreement
2. The
Company’s Articles of Incorporation
3.
The
Company’s By-laws
4.
Resolutions
adopted by the Company’s Board of Directors on April 25, 2008
5. The
Company’s Form S-3, filed with the Securities and Exchange Commission (the
“Commission”)
on
August 15, 2007 (the “Registration
Statement”)
6.
The
Form
8-K filed by the Company with the Commission on April 30, 2008
7. Prospectus,
filed with the Commission, pursuant to Rule 424(b) on April 30,
2008
References
in this opinion letter to our knowledge, or words to that effect, mean a
conscious awareness of facts, without investigation, by any of the lawyers
currently with this firm who have given substantive attention to legal
representation of the Company in matters relating directly to the Transaction
Documents.
In
connection with rendering the opinions set forth below, we have examined the
Transaction Documents and made such other investigation as we have deemed
appropriate. We have examined and relied on certificates of public officials
and, as to certain matters of fact that are material to our opinions, we have
also examined and relied on a certificate of an officer of the Company (the
“Fact
Certificate”).
A
copy of the Fact Certificate is attached to this opinion letter. We have not
independently established any of the facts so relied on.
For
the
purposes of this opinion letter we have made the assumptions that are customary
in opinion letters of this kind, including the assumptions that each document
submitted to us is accurate and complete, that each such document that is an
original is authentic, that each such document that is a copy conforms to an
authentic original, that all signatures (other than signatures on behalf of
the
Company) on each such document are genuine, and that no changes in the facts
certified in the Fact Certificate have occurred or will occur after the date
of
the Fact Certificate. We have not verified any of the foregoing
assumptions.
We
have
also assumed with your permission that the Company is a corporation validly
existing and in good standing in the State of Nevada, that it has full corporate
power and has been duly authorized by all necessary corporate action to execute,
deliver and perform its obligations under the Stock Purchase Agreement. We
understand that you are today receiving a separate opinion of ▇▇▇▇▇▇▇▇ Carano
Wilson LLP with respect to these matters.
The
opinions expressed in numbered paragraphs 3, 4, 6, 7 and 8 below are limited
to
the laws of the State of New York and federal laws of the United States that
in
our experience are normally applicable to the transactions contemplated by
the
Stock Purchase Agreement. The opinions expressed in numbered paragraphs 1,
2 and
5 below are limited to the laws of the State of Texas and federal laws of the
United States that in our experience are normally applicable to the transactions
contemplated by the Stock Purchase Agreement. We are not opining on specialized
laws that are not customarily covered in opinion letters of this kind, such
as
tax, insolvency, antitrust, pension, employee benefit, environmental,
intellectual property, banking, insurance, labor, health and safety, or (except
as expressly set forth herein) securities laws.
Based
on
the foregoing, and subject to the foregoing and the additional qualifications
and other matters set forth below, it is our opinion that:
1. Based
solely on the Certificate of Fact issued by the Secretary of State of the State
of Texas on April 16, 2008, the Company is qualified as a foreign corporation
in
the State of Texas.
2. The
execution and delivery by the Company of the Transaction Documents, and the
performance by the Company of its obligations under the Transaction Documents,
do not violate
any applicable statute, rule, or regulation of the State of Texas or the United
States.
3. The
Registration Statement has become effective under the Securities Act of 1933,
as
amended (the “1933
Act”).
Any
required filing of a prospectus (the “Prospectus”)
pursuant to Rule 424(b) of the 1933 Act (“Rule
424(b)”)
has
been made in accordance with Rule 424(b). To our knowledge, based solely on
a
telephone conversation with a member of the staff of the Commission, no stop
order suspending the effectiveness of the Registration Statement has been issued
under the 1933 Act and no proceedings for that purpose have been initiated
or
threatened by the Commission.
4. The
Registration Statement and the Prospectus, as of their respective effective
or
issue dates (other than the financial statements and related notes and schedules
and other financial, accounting, and statistical information included therein
or
omitted therefrom, as to which we express no opinion), complied as to form
in
all material respects with the requirements of the 1933 Act and the regulations
under the 1933 Act.
5. The
execution and delivery by the Company of the Transaction Documents, and the
performance by the Company of its obligations under the Transaction Documents,
do not require the Company to obtain any approval by or make any filing with
any
governmental authority under any statute, rule, or regulation of the State
of
Texas or the United States, except such approvals and filings as have been
obtained or made and are in full force and effect.
6. The
execution and delivery by the Company of the Transaction Documents, and the
performance by the Company of its obligations under the Transaction Documents,
do not (a) breach or constitute a default or an event which, with the giving
of
notice or the passage of time or both, would constitute a default under any
existing obligation of the Company under the express terms of any agreement
listed in Exhibit
A
attached
hereto, (b) result in the acceleration of (or entitle any party to accelerate)
the maturity of any obligation of the Company under any such agreement or
instrument, or (c) result in a lien on any property of the Company pursuant
to
the express terms of any such agreement or instrument.
7. The
Company is not an “investment company” (as each such term is defined in the
Investment Company Act of 1940 (“1940 Act”)) that is registered or required to
be registered under the ▇▇▇▇ ▇▇▇.
8. To
our
knowledge, at the date of this opinion letter there is no action or proceeding
pending before any court, governmental agency or arbitrator, or threatened
in
writing, against the Company that seeks to enjoin the performance or affect
the
enforceability of the Transaction Documents or the consummation of the
Transaction or, except as disclosed in the Company’s most recent Form 10-K,
seeks damages from the Company in excess of $100,000.
We
are
not opining as to factual matters, and the character of determinations involved
in the registration process is such that we are not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness of the
information included in the Registration Statement and the Prospectus. We assume
the correctness and completeness of the information included in the Registration
Statement and the Prospectus, and, except as set forth in the immediately
following sentence, we have made no independent investigation or verification
of
that information. We can advise you, however, that in and on the basis of our
review of the Registration Statement and the Prospectus, and, with respect
to
those documents incorporated by reference in the Registration Statement and
the
Prospectus, only the Company’s Form 10-K for the year ended December 31, 2007
(the “Form 10-K”) and the Company’s current reports on Form 8-K filed in 2008
(the “Current Reports”), nothing has come to our attention that causes us to
believe that the Registration Statement, at the time it became effective, and
the Prospectus, as of its date, contained an untrue statement of a material
fact
or omitted 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.
We
express no opinion with respect to the financial statements and related notes
and schedules, and other financial, accounting, and statistical information,
included in, incorporated by reference in, or omitted from the Registration
Statement and the Prospectus.
We
express no opinion with respect to any matter involving financial information
or
relating to compliance with financial covenants or financial requirements,
including the Management Discussion and Analysis of Financial Condition and
Results of Operation in the Form 10-K. We also express no opinion with respect
to the Company’s determination of its internal control over financial reporting
or its disclosure controls and procedures as reported in the Form 10-K.
We
are
furnishing this opinion letter to you solely in connection with the Transaction.
You may not rely on this opinion letter in any other connection, and it may
not
be furnished to or relied upon by any other person for any purpose, without
our
specific prior written consent.
The
foregoing opinions are rendered as of the date of this letter. We assume no
obligation to update or supplement any of our opinions to reflect any changes
of
law or fact that may occur.
Yours
truly,
FORM
OF OPINION “BRING DOWN” OF OUTSIDE COUNSEL TO BE DELIVERED PURSUANT TO SECTION
6.3(X) OF THE COMMON STOCK PURCHASE AGREEMENT DATED AS OF APRIL 30, 2008 BETWEEN
SULPHCO, INC. AND AZIMUTH OPPORTUNITY LTD.
[Company
Counsel’s Letterhead]
_______
__, 2008
Azimuth
Opportunity Ltd.
c/o
Fortis Prime Fund Solutions (BVI) Limited
▇.▇.
▇▇▇
▇▇▇, ▇▇▇
▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇ Building
Road
Town, Tortola, BVI
Re:
SulphCo, Inc.
Ladies
and Gentlemen:
We
have
acted as counsel to SulphCo, Inc., a Nevada corporation (the “Company”),
in
connection with the Common Stock Purchase Agreement, dated April 30, 2008 (the
“Stock
Purchase Agreement”),
between Azimuth Opportunity Ltd. (the “Purchaser”)
and
the Company. The Stock Purchase Agreement provides for the issuance and sale
(the “Transaction”),
by
the Company to the Purchaser, of up to $60,000,000 of shares (the “Shares”)
of
common stock, $0.001 par value (“Common
Stock”),
of
the Company. We are delivering this opinion letter to you at the Company’s
request pursuant to Section 6.3(x) of the Stock Purchase Agreement.
The
following documents are referred to collectively in this opinion letter as
the
“Transaction
Documents”:
1. The
Stock
Purchase Agreement
2. The
Company’s Articles of Incorporation
3.
The
Company’s By-laws
4.
Resolutions
adopted by the Company’s Board of Directors on April 25, 2008
5. The
Company’s Form S-3, filed with the Securities and Exchange Commission (the
“Commission”)
on
August 15, 2007 (the “Registration
Statement”)
6.
The
Form
8-K filed by the Company with the Commission on April 30, 2008
7. Prospectus,
filed with the Commission, pursuant to Rule 424(b) on April 30, 2008 (the
“Prospectus”)
8. Prospectus
supplement, filed with the Commission, pursuant to Rule 424(b) on _____, 2008
(the “Prospectus
Supplement”).
References
in this opinion letter to our knowledge, or words to that effect, mean a
conscious awareness of facts, without investigation, by any of the lawyers
currently with this firm who have given substantive attention to legal
representation of the Company in matters relating directly to the Transaction
Documents.
In
connection with rendering the opinions set forth below, we have examined the
Transaction Documents and made such other investigation as we have deemed
appropriate. We have examined and relied on certificates of public officials
and, as to certain matters of fact that are material to our opinions, we have
also examined and relied on a certificate of an officer of the Company (the
“Fact
Certificate”).
A
copy of the Fact Certificate is attached to this opinion letter. We have not
independently established any of the facts so relied on.
For
the
purposes of this opinion letter we have made the assumptions that are customary
in opinion letters of this kind, including the assumptions that each document
submitted to us is accurate and complete, that each such document that is an
original is authentic, that each such document that is a copy conforms to an
authentic original, that all signatures (other than signatures on behalf of
the
Company) on each such document are genuine, and that no changes in the facts
certified in the Fact Certificate have occurred or will occur after the date
of
the Fact Certificate. We have not verified any of the foregoing
assumptions.
The
opinions expressed in numbered paragraphs 1 and 3 below are limited to federal
laws of the United States that in our experience are normally applicable to
the
transactions contemplated by the Stock Purchase Agreement. The opinions
expressed in numbered paragraph 2 below is limited to the laws of the State
of
Texas and federal laws of the United States that in our experience are normally
applicable to the transactions contemplated by the Stock Purchase Agreement.
We
are not opining on specialized laws that are not customarily covered in opinion
letters of this kind, such as tax, insolvency, antitrust, pension, employee
benefit, environmental, intellectual property, banking, insurance, labor, health
and safety, or (except as expressly set forth herein) securities
laws.
Based
on
the foregoing, and subject to the foregoing and the additional qualifications
and other matters set forth below, it is our opinion that:
1. The
Registration Statement has become effective under the Securities Act of 1933,
as
amended (the “1933
Act”).
Any
required filing of a prospectus and prospectus supplement pursuant to Rule
424(b) of the 1933 Act (“Rule
424(b)”)
has
been made in accordance with Rule 424(b). To our knowledge, based solely on
a
telephone conversation with a member of the staff of the Commission, no stop
order suspending the effectiveness of the Registration Statement has been issued
under the 1933 Act and no proceedings for that purpose have been initiated
or
threatened by the Commission.
2. The
execution and delivery by the Company of the Transaction Documents, and the
performance by the Company of its obligations under the Transaction Documents,
do not violate
any applicable statute, rule, or regulation of the State of Texas or the United
States.
3. The
Registration Statement, the Prospectus, and the Prospectus Supplement, as of
their respective effective or issue dates (other than the financial statements
and related notes and schedules and other financial, accounting, and statistical
information included therein or omitted therefrom, as to which we express no
opinion), complied as to form in all material respects with the requirements
of
the 1933 Act and the regulations under the 1933 Act.
We
are
not opining as to factual matters, and the character of determinations involved
in the registration process is such that we are not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness of the
information included in the Registration Statement, the Prospectus and the
Prospectus Supplement. We assume the correctness and completeness of the
information included in the Registration Statement, the Prospectus and the
Prospectus Supplement, and, except as set forth in the immediately following
sentence, we have made no independent investigation or verification of that
information. We can advise you, however, that in and on the basis of our review
of the Registration Statement, the Prospectus and the Prospectus Supplement,
and, with respect to those documents incorporated by reference in the
Registration Statement, the Prospectus and the Prospectus Supplement, only
the
Company’s Form 10-K for the year ended December 31, 2007 (the “Form 10-K”) and
the Company’s current reports on Form 8-K filed after December 31, 2007 (the
“Current Reports”), nothing has come to our attention that causes us to believe
that the Registration Statement, at the time it became effective, the
Prospectus, as of its date and the Prospectus Supplement, as of its date,
contained an untrue statement of a material fact or omitted 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.
We
express no opinion with respect to the financial statements and related notes
and schedules, and other financial, accounting, and statistical information,
included in, incorporated by reference in, or omitted from the Registration
Statement, the Prospectus and the Prospectus Supplement.
We
express no opinion with respect to any matter involving financial information
or
relating to compliance with financial covenants or financial requirements,
including the Management Discussion and Analysis of Financial Condition and
Results of Operation in the Form 10-K. We also express no opinion with respect
to the Company’s determination of its internal control over financial reporting
or its disclosure controls and procedures as reported in the Form 10-K.
We
are
furnishing this opinion letter to you solely in connection with the Transaction.
You may not rely on this opinion letter in any other connection, and it may
not
be furnished to or relied upon by any other person for any purpose, without
our
specific prior written consent.
The
foregoing opinions are rendered as of the date of this letter. We assume no
obligation to update or supplement any of our opinions to reflect any changes
of
law or fact that may occur.
Yours
truly,
[Letterhead
of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP]
FORM
OF
BRING-DOWN OPINION
Reply
to: Reno
____________,
20___
Azimuth
Opportunity Ltd.
c/o
Fortis Prime Fund Solutions (BVI) Limited
▇.▇.
▇▇▇
▇▇▇, ▇▇▇
▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇ Building
Road
Town, Tortola
British
Virgin Islands
|
Re:
|
Common
Stock Purchase Agreement (the "Purchase Agreement") by and between
Sulphco, Inc., a Nevada corporation (the "Company"), and Azimuth
Opportunity Ltd., an international business company incorporated
under the
laws of the British Virgin Islands, dated April 30,
2008.
|
Ladies
and Gentlemen:
We
have
acted as special Nevada counsel to the Company in the issuance to you of a
legal
opinion dated April 30, 2008, in connection with the Purchase Agreement
(“Azimuth Opinion”).
You
have
requested that we issue a bring-down opinion pursuant to Section 6.3(x) of
the
Purchase Agreement. In that regard, and subject to all of the qualifications,
exceptions, assumptions, and limitations set forth herein and in the Azimuth
opinion, no facts have been brought to our attention that cause us to believe
that any of the opinions expressed in Paragraphs 3 and 4 of the Azimuth Opinion
are not true and correct as of the date hereof.
For
purposes of this bring-down opinion, we have relied solely on the Officer’s
Certificate of even date attached hereto and have not made any investigation
or
inquiry as to, and have not independently verified, any of such matters. Any
limited inquiry undertaken by us during the preparation of this bring-down
opinion should not and may not be regarded as such an investigation or
inquiry.
The
opinion rendered herein is as of the date hereof. We assume no obligation to
update such opinion to reflect any facts or circumstances that hereafter may
come to our attention or any changes in the law that hereafter may occur.
This
opinion is limited to the laws of the State of Nevada. This opinion is given
to
the addressee solely for its benefit in connection with the transactions
described in the Purchase Agreement and, except for you, may not be relied
upon
in any respect by any other person or for any other purpose.
Very
truly yours,
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP