FORM OF SECURITIES PURCHASE AGREEMENT
Published on February 3, 2010
EXHIBIT
10.1
SAVE
THE WORLD AIR, INC.
SECURITIES
PURCHASE AGREEMENT
This
Securities Purchase Agreement (“Agreement”) is made as of
November 26, 2009, by and between Save The World Air, Inc., a company organized
under the laws of the State of Nevada (the “Company”), and the purchasers
who execute the Purchaser Signature Page (as hereinafter defined) hereto (each,
a “Purchaser”).
R E C I T A L S
A. The
Company desires to obtain funds from each Purchaser in order to provide working
capital to fund the Company’s general working capital needs.
B. In order
to obtain such funds, the Company is borrowing and in exchange therefore issuing
Units (the “Units”),
each Unit comprised of (i) an unsecured $25,000 principal amount of 7%
Convertible Promissory Note, initially convertible at $.25 per share (as may be
adjusted from time to time, the “Conversion Price”) a form of
which is annexed hereto as Exhibit
A, (each a “Note,” and
collectively, the “Notes”), and (ii) Common Stock
Purchase Warrants, initially exercisable into at the $.30 per share, a form of
which is annexed hereto as Exhibit
B (the “Warrants”). The
Units being acquired herein are being acquired directly from the Company without
the benefit of an Escrow Agent or any Placement Agent and there is no minimum
required amount to be raised in order for the Company to conduct a Closing and
utilize the Purchaser’s funds for a subscription. The Purchaser
understands that the Company has raised over $300,000 of Units on its own, as
well as $75,000 of Notes through a placement agent (which agency has since
completed and terminated) and, that the Securities sold are
substantially similar to the Units. The Company is further offering
to the Purchaser and potential additional purchasers, additional Units through
January 15, 2010. The common stock, par value $.001 per share of the
Company (“Common Stock”)
into which the Notes are convertible are sometimes referred to herein as the
Conversion Shares, and the shares of Common Stock into which the Warrants are
exercisable are sometimes referred to herein as the “Warrant
Shares”. The Notes, Warrants, Conversion Shares and Warrant
Shares are sometimes referred to herein as the “Securities”.
C. Purchasers
understand that there is a great deal or risk, illiquidity and uncertainty in
the Purchase of the Units herein and that no assurance can be made that the
Company will complete its business plans or, if completed, that it will be
successful in doing so or that the Company will be successful with its other
offerings. Purchasers also understand that the Company is dependant
on its ability to raise substantial additional capital and that additional
securities such as any one or more of the Securities, or securities at different
or senior or more favorable terms, may be sold.
D. The
Purchasers are investing herein on an irrevocable basis, without the benefit of
an escrow agent or escrow account and without the benefit of any minimum closing
amount. All funds reflecting subscriptions are being deposited
immediately directly with the Company in accordance with the wire instructions
annexed hereto as Exhibit
C. All funds deposited will
become immediately available for use by the Company or may be attacked or
attached by creditors upon deposit regardless of whether a closing has occurred
or the minimum has been raised. The Purchaser’s
acknowledge and agree that their subscriptions are irrevocable and binding
commitments on the part of the Purchaser and that once their funds have been
tendered with appropriate subscription documents and the minimum offering amount
has been raised in accepted funds and subscriptions, the Company may conduct a
Closing without any consent of or notice to Purchasers. The
Company may reject any subscriptions in whole or in part for any reason or for
no reason but shall return funds to the extent not closed upon prior to January
15, 2010. This offering shall be terminated at January 15, 2010
unless earlier terminated by the Company.
AGREEMENT
NOW
THEREFORE, based on the mutual premises and consideration of the parties, it is
agreed as follows:
1. PURCHASE AND
SALE OF NOTES.
1.1 Purchase and
Sale. In reliance upon the representations and warranties of
the Company and each Purchaser contained herein and subject to the terms and
conditions set forth herein, at Closing (as hereinafter defined), each Purchaser
hereby agrees to purchase, and the Company shall sell and issue to each
Purchaser, the Units comprised of Notes and Warrants as set forth on the
signature page annexed to the end of this Agreement (the “Purchaser Signature Page”) at
a purchase price equal to the principal amount of Notes being acquired (the
“Purchase Price”) as set
forth in Section
1.2 below. After the initial minimum amount of Units are sold
at a Closing in this offering, the Company may accept additional Purchasers in
Closings from time to time without notice to or consent of any investor, until
the maximum offering amount (inclusive of the overallotment option) is sold
hereby.
1.2 Notes and
Warrants. At Closing, the Company will issue and deliver to
the Purchaser as listed on the Purchaser Signature Page hereto, the (i) Notes
for the principal amount of Notes subscribed for and,
(ii) Warrants to acquire such number of shares of
common stock of the Company (the “Common Stock”) as equals the
principal amount of Notes acquired and accepted divided by the initial
Conversion Price of $.25 per share (the “Warrant Shares”), and
exercisable at $.30 per share (the “Exercise Price”) commencing
six months after the issuance date at any time prior to the three year
anniversary of the first Closing of this offering. The Notes and
Warrants comprising the Units are substantially similar to those Notes and
Warrants offered and sold to other Purchasers in previously reported offerings
of the Company.
2. CLOSING.
2.1 Date and
Time.
(a) The
sale of Notes and Warrants will take place at the discretion of the Company,
upon receipt of cleared funds represented by subscriptions accepted by the
Company (the “Closing”)
subject to the satisfaction of all the parties hereto of their obligations
herein. There is no minimum offering amount to the number of Units
that may be sold prior to a closing of the sale of the Units
hereby. The Purchaser(s) shall each submit an executed copy of this
Agreement to the Company along with the Purchase Price in advance of Closing,
which shall be by the Company at the account set forth in Exhibit
C, which account is operated by the Company and is not a segregated
account. The Closing shall take place from time to time at the
discretion of the Company at such place as the Company shall agree in writing,
on or before January 15, 2010 unless otherwise terminated early by the Company
or extended by it for up to 30 days (the “Termination
Date”). In the event that the Company desires to extend
the offering period beyond January 15, 2010, consent of each Purchaser shall be
required.
(b) There is no minimum offering
amount in this private offering and purchasers will not have an
opportunity to approve of a Closing or request refund of any moneys held in
escrow until the final closing has occurred or offering period has
terminated. In the event that funds are returned if a Closing
does not occur on such Purchaser’s investment, no interest shall be paid and
only the net amount received by the Company need by
repaid. Purchaser’s acknowledge and agree that their subscriptions
are irrevocable and binding commitments on the part of the Purchaser and that
once their funds have been tendered to escrow with the appropriate subscription
documents and the minimum offering amount has been raised in accepted funds and
subscriptions, the Company may conduct a closing and utilize funds
therefore. The Company may reject any subscriptions in whole or
in part for any reason or for no reason, or, retains the right to hold the same
in escrow for acceptance or rejection at a future closing, until termination of
the offering, at which time, any unused subscription funds shall be returned to
Purchaser.
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3. REPRESENTATIONS AND
WARRANTIES OF THE COMPANY.
As a
material inducement to each Purchaser to enter into this Agreement and to
purchase the Units, the Company represents and warrants that the following
statements are true and correct in all material respects as of the date hereof
and will be true and correct in all material respects at Closing, except as
expressly qualified or modified herein or as specifically updated in the
Company’s recently filed Current Reports on Form 8-K, or Quarterly Report on
Form10-Q for the period ended September 30, 2009.
3.1 Organization and
Qualification. The Company is duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the state of
Nevada, with the requisite power and authority to own and use its properties and
assets and to carry on its business as currently conducted. The
Company is not in any violation of any of the provisions of its certificate of
incorporation, bylaws or other organizational or charter documents (the “Company
Documents”).
3.2 Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated under
this Agreement, the Notes and along with the Warrants (collectively as may be
amended or supplemented through each Closing, the “Transaction Documents”) herein
and otherwise to carry out its obligations hereunder. The execution
and delivery of the Transaction Documents by the Company and the consummation by
it of the transactions contemplated thereby have been duly authorized by all
necessary corporate action on the part of the Company and no further action is
required by the Company in connection therewith. This Agreement and
the other Transaction Documents have been duly executed by the Company and, when
delivered in accordance with the terms hereof or thereof, will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies, or (ii) laws relating to the availability of specific
performance, injunctive relief or other equitable principles of general
application.
3.3 SEC Reports; Financial
Statements. The Company has filed all reports required to be
filed by it under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof
(or such shorter period as the Company was required by law to file such reports)
(the foregoing materials, as finally amended being collectively referred to
herein as the "SEC
Reports") on a timely basis or has timely filed a valid extension of such
time of filing and has filed any such SEC Reports prior to the expiration of any
such extension. As of their respective dates, the SEC Reports, as
amended, complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except to the extent that such SEC Reports may have been
subsequently amended or supplemented to correct such misstatement or omission or
to correct information relating to the Company’s internal
controls. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit
adjustments.
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3.4 Certain Registration
Matters. Assuming the accuracy of each Purchaser’s representations and
warranties, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to the Purchaser under this
Agreement.
3.5 Capitalization. The
Company is authorized to issue 200,000,000 shares of Common Stock, of which,
prior to the date of this Agreement, there are 65,355,858 shares issued and
outstanding, with an additional 14,947,583 shares currently underlying warrants,
options and convertible notes or other securities, in addition to other shares
and warrants as a result of consummation of the recent offerings of
Units. There are no shares of preferred stock or other securities or
convertible securities. All outstanding shares of the company’s
capital stock have been duly authorized and validly issued, and are fully paid
and non-assessable, and are free of any preemptive rights. The
Company has not entered into any agreement, or granted any right to any party,
that results or would result in, the Company’s obligation to redeem or
repurchase any securities or issue any dividends. The shares issuable
upon conversion of the Notes and upon exercise of the Warrants are, duly
authorized and reserved for issuance and, upon issuance upon due conversion of
the Notes or due exercise of the Warrants, will be deemed validly issued and
fully paid.
3.6 Securities Law
Compliance. Assuming the accuracy of the representations and
warranties of each Purchaser set forth in this Agreement and the Questionnaire,
the offer, issue, sale and delivery of the Notes and Warrants will constitute an
exempted transaction under the Securities Act of 1933, as amended and now in
effect (the “Securities
Act”), and registration of the Notes, Warrants, or the issuance of the
Conversion Shares (upon conversion of the Note) or Warrant Shares (upon due
exercise thereof), under the Securities Act is not required. The
Company shall make such filings as may be necessary to comply with the Federal
securities laws and the “blue sky” laws of any state or other jurisdictions
where filings must be made, which filings will be made in a timely
manner.
3.7 Tax
Matters. The Company has timely prepared and filed all tax
returns required to have been filed by the Company with all appropriate
governmental agencies and timely paid all taxes shown thereon or otherwise owed
by it. The charges, accruals and reserves on the books of the Company
in respect of taxes for all fiscal periods are adequate in all material
respects, and there are no material unpaid assessments against the Company nor,
to the Company’s Knowledge, any basis for the assessment of any additional
taxes, penalties or interest for any fiscal period or audits by any federal,
state or local taxing authority except for any assessment which is not material
to the Company, taken as a whole. All taxes and other assessments and
levies that the Company is required to withhold or to collect for payment have
been duly withheld and collected and paid to the proper governmental entity or
third party when due. For the purposes of this agreement, “Company’s
Knowledge” means the actual knowledge of the executive officers (as defined in
Rule 405 under the Securities Act) of the Company, after due
inquiry.
3.8 Title to
Properties. The Company has good and marketable title to all real
properties and all other properties and assets owned by it (if any), in each
case free from liens, encumbrances and defects that would materially affect the
value thereof or materially interfere with the use made or currently planned to
be made thereof by them; the Company holds any leased real or personal property
under valid and enforceable leases with no exceptions that would materially
interfere with the use made or currently planned to be made thereof by
them.
3.9 Litigation. There
are no pending actions, suits or proceedings against or affecting the Company,
its subsidiaries or any of its or their properties; and to the Company’s
Knowledge, no such actions, suits or proceedings are threatened or
contemplated.
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3.10 No Directed Selling Efforts
or General Solicitation. Neither the Company, nor any Person
acting on its or their behalf has conducted any general solicitation or general
advertising (as those terms are used in Regulation D) in connection with the
offer or sale of any of the Securities.
3.11 No Integrated
Offering. Neither the Company nor any of its Affiliates, nor
any Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any Company security or solicited any offers to buy any
security, under circumstances that would adversely affect reliance by the
Company on Section
4(2) for the exemption from registration for the transactions
contemplated hereby or would require registration of the Securities under the
Securities Act. For purposes of this Agreement, “Affiliate” means, with respect
to any Person, any other Person which directly or indirectly through one or more
intermediaries controls, is controlled by, or is under common control with, such
Person.
3.12 Questionable
Payments. Neither the Company nor, to the Company’s
Knowledge, any of their respective directors, executive officers, employees, or
other Persons acting at the direction of the Company or any subsidiary, has on
behalf of the Company or any subsidiary or in connection with their respective
businesses: (i) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (ii)
made any direct or indirect unlawful payments to any governmental officials or
employees from corporate funds; (iii) established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; (iv) made any false or
fictitious entries on the books and records of the Company or any subsidiary; or
(v) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature.
3.13 Transactions with
Affiliates. None of the officers or directors of the Company
is presently a party to any transaction with the Company or any subsidiary
(other than as holders of stock options and/or warrants, and for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the Company’s
Knowledge, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or
partner.
3.14 Disclosures. The
written materials delivered to the Purchasers in connection with the
transactions contemplated by the Transaction Documents do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
4. REPRESENTATIONS AND
WARRANTIES OF EACH PURCHASER.
Each
Purchaser hereby represents, warrants and covenants with the Company as
follows. For avoidance of doubt, these warranties and representations
are made to Purchasers:
4.1 Legal
Power. Each Purchaser has the requisite individual, corporate,
partnership, limited liability company, trust, or fiduciary power, as
appropriate, and is authorized, if such Purchaser is a corporation, partnership,
limited liability company, or trust, to enter into this Agreement, to purchase
the Units hereunder, and to carry out and perform its obligations under the
terms of the Transaction Documents to which it is a party.
4.2 Due
Execution. This Agreement and the other Transaction Documents
have been duly authorized, if such Purchaser is a corporation, partnership,
limited liability company, trust or fiduciary, executed and delivered by such
Purchaser, and, upon due execution and delivery by the Company, this Agreement
and such other Transaction Documents will be a valid and binding agreement of
such Purchaser.
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4.3 Access to
Information. Purchaser has thoroughly reviewed
this Agreement including, without limitation, Section 3 which discloses certain
material information about the Company and Section 6. Each
Purchaser represents that such Purchaser has been given full and complete access
to the Company and to all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Notes and Warrants and the issuance of Conversion Shares and/or Warrant Shares
upon conversion or exercise thereof, which have been requested by Purchaser or
its advisors. Each Purchaser represents that such Purchaser has been
afforded the opportunity to ask questions of, and has inquired with, the
officers of the Company regarding its business prospects and the Notes, all as
such Purchaser or such Purchaser’s qualified representative have found necessary
to make an informed investment decision to purchase the
Units. Neither such inquiries nor any other due diligence
investigation conducted by Purchaser or any of its advisors or representatives
shall modify, amend or affect purchaser’s right to rely on the Company’s
representations and warranties contained herein. The Purchaser
understands that an investment in the Units involves a significant degree of
risk and illiquidity. The Purchaser understands further that the
Conversion Shares and Warrant Shares when issued will also be restricted
securities, and may only be re-sold pursuant to an exemption from the
registration requirements of the Securities Act that may or may not be available
at such time, and, that even if the Company is successful and succeeds with its
business plan, no assurance can be made that the securities of the Company will
be liquid or will increase in market price.
4.4 Restricted
Securities.
4.4.1 Each
Purchaser has been advised that none of the Notes,
Warrants, Conversion Shares or Warrant Shares (collectively, the
“Securities”) have been
registered under the Securities Act or any other applicable securities laws and
that Securities are being offered and sold pursuant to Section 4(2) of the
Securities Act and/or Rule 506 of Regulation D thereunder or such other
exemption as may be available from the Securities Act registration requirements
as may be available from time to time, and that the Company’s reliance upon
Section 4(2) and/or Rule 506 of Regulation D is predicated in part on such
Purchaser’s representations as contained herein. Each Purchaser
acknowledges that the Notes and Warrants, and upon conversion or exercise
thereof, the Conversion Shares and the Warrant Shares when issued, will be
issued as “restricted securities” as defined by Rule 144 promulgated pursuant to
the Securities Act. None of the Securities may be resold in the
absence of an effective registration thereof under the Securities Act and
applicable state securities laws unless, in the opinion of the Company’s
counsel, an applicable exemption from registration is available.
4.4.2 Each
Purchaser represents that such Purchaser is acquiring the Securities for such
Purchaser’s own account, and not as nominee or agent, for investment purposes
only and not with a view to, or for sale in connection with, a distribution, as
that term is used in Section 2(11) of the Securities Act, in a manner which
would require registration under the Securities Act or any state securities
laws.
4.4.3 Each
Purchaser understands and acknowledges that the Notes and Warrants, and if and
when issued, the Conversion Shares will bear substantially the following
legend:
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
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4.4.4 Each
Purchaser acknowledges that an investment in any of the Securities are not
liquid and are transferable only under limited conditions. Each
Purchaser acknowledges that such securities must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available. Each Purchaser is aware of the
provisions of Rule 144 promulgated under the Securities Act, which permits
limited resale of restricted securities subject to the satisfaction of certain
conditions and that such Rule is not now available and, in the future, may not
become available for resale of any of the Notes or Conversion
Shares.
4.4.5 Each
Purchaser is an “accredited investor” as defined under Rule 501(a) of Regulation
D of the Securities Act (an “Accredited
Investor”).
4.4.6 The
representations made by each Purchaser on the Purchaser Signature Page and in
the questionnaire immediately preceding the same (the “Questionnaire”) are true and
correct and do not omit any material information.
4.5 Purchaser Sophistication and
Ability to Bear Risk of Loss. Each Purchaser acknowledges that
it is able to protect its interests in connection with the acquisition of the
Notes and Warrants and other Securities and can bear the economic risk of
investment in such Securities without producing a material adverse change in
such Purchaser’s financial condition. Each Purchaser, either alone or
with such Purchaser’s representative(s), otherwise has such knowledge and
experience in financial or business matters that such Purchaser is capable of
evaluating the merits and risks of the investment in the Notes.
4.6 Preexisting
Relationship. Each Purchaser has a preexisting personal or
business relationship with the Company, one or more of its officers, directors,
or controlling persons.
4.7 Purchases by
Groups. Each Purchaser represents, warrants and covenants that
it is not acquiring the Securities as part of a group within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended.
4.8 Placement Agent
Review. Each Purchaser acknowledges that placement agent or
representative of the purchasers has independently verified the
accuracy, completeness, materiality or otherwise, of any information,
representation or warranty contained in this Purchase Agreement or any offering
documents provided, that such placement agent related entities and their
principals shall have no liability for any representation (express or implied)
contained in, or for any omissions from, the Purchase Agreement or any offering
documents provided or any other written or oral communications transmitted to
the recipient in the course of his or her evaluation of the investment, and that
it is understood that each prospective investor will make an independent
investigation and analysis of a potential investment in the Company and will be
relying upon same in making any such investment.
5. COVENANTS OF
THE COMPANY.
5.1 Use of
Proceeds. The Company intends to employ the net proceeds from
the purchase and sale of the Units (after legal, blue-sky, and related fees) for
general working capital purposes and research and development only (inclusive or
repayment of payables incurred in the ordinary course of business).
5.2 Best
Efforts. The parties shall use their best efforts to satisfy
timely each of the conditions described herein as applicable to
them.
5.3 Form D; Blue Sky
Laws. The Company agrees to file a Form D with respect to the
Notes and Warrants as required under Regulation D and to provide a copy thereof
to each Purchaser promptly after such filing.
5.4 Financial
Information. For as long as the Notes are outstanding, the
Company agrees to remain current with the filings of its SEC
Reports.
5.5 Reservation of
Shares. The Company shall, as a condition to any merger or
business combination (and in addition to other restrictions that may arise),
require the provisions of this Agreement and the Notes and Warrants (including
issuance of shares upon conversion or exercise thereof) to be assumed by the
surviving parent company.
5.6 Covenants Relating to
Promissory Note. For so long as any principal or interest is
outstanding on the Notes the Company shall not, without consent of holders of a
majority of the outstanding principal amount of Notes that will be outstanding
immediately after the consummation of taking such action:
5.6.1 effect a
merger or consolidation, share exchange, asset purchase or similar transaction
resulting in a Change of Control (as hereinafter defined) with an entity without
causing the assumption of the obligations herein and under the Notes and
Warrants by such surviving entity. The term “Change of Control” shall mean
any merger or consolidation, business transaction or similar transaction in
which securities possessing more then fifty percent (50%) of the total combined
voting power of the Company’s outstanding securities are transferred to a person
or persons different from the persons holding those securities immediately prior
to such transaction, whether or not the Company or a subsidiary is the surviving
corporation or other transaction wherein the Company becomes a material or
controlling stockholder of any other corporation. Notwithstanding the
foregoing, the Company may raise capital in the form of debt, convertible debt
or equity financings;
5.6.2 sell,
transfer or otherwise dispose of more than 50% of the consolidated assets of the
Company (computed either on the basis of book value, as determined in accordance
with generally accepted accounting principles consistently applied, or fair
market value) in any transaction or series of related transactions outside of
the ordinary course of the Company’s business consistent with past
practice;
5.6.3 sell or
transfer in any transaction or series of related transactions, any of the
Company’s assets to any person or entity that is an Affiliate of the Company,
other then a sale or transfer in the ordinary course of business or such assets
as are immaterial to the business purpose of the Company;
5.6.4 declare or
pay any distribution or dividend, in cash or otherwise on any of the Shares of
the Company, or redeem, purchase or otherwise acquire any of its Shares now or
hereafter outstanding;
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provided, however, that the
Company may take any of the foregoing actions without the consent of the
Purchasers in connection with, if contemporaneous with the consummation of such
action, the Notes are converted in accordance with their terms, and Section 5.5
above is complied with.
5.7 Conversion of
Notes.
5.7.1 Upon the
conversion of a Note or part thereof, the Company shall, at its own cost and
expense, take all commercially reasonable action, including obtaining and
delivering, an opinion of counsel to assure that the Company's transfer agent
shall issue stock certificates in the name of Purchaser (or its permitted
nominee) or such other persons as designated by Purchaser and in such
denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion. The Company warrants that
no instructions other than these instructions have been or will be given to the
transfer agent of the Company's Common Stock and that the certificates
representing such shares shall contain no legend other than the usual Securities
Act restriction from transfer legend.
5.7.2 A Purchaser
will give notice of its decision to exercise its right to convert the Note,
interest, or part thereof by telecopying, or otherwise delivering a completed
Notice of Conversion (a form of which is annexed as “Exhibit A” to the
Note) to the Company via confirmed telecopier transmission or otherwise pursuant
to Section 13(a) of this Agreement. Such Purchaser will not be
required to surrender the Note until the Note has been fully converted or
satisfied. Each date on which a Notice of Conversion is telecopied to
the Company in accordance with the provisions hereof by 6 PM Eastern Time
(“ET”) (or if received
by the Company after 6 PM ET or at any time or a non-business day then the next
business day) shall be deemed a “Conversion
Date.” The Company will itself or cause the Company’s transfer
agent to transmit the Company's Common Stock certificates representing the
Shares issuable upon conversion of the Note to such Purchaser via express
courier for receipt by such Purchaser within ten (10) business days after
receipt by the Company of the Notice of Conversion (such seventh day being the
"Delivery
Date"). In the event the Conversion Shares are electronically
transferable, then delivery of the Shares must be made by
electronic transfer provided request for such electronic transfer has been made
by the Purchaser. A Note representing the balance of the Note
not so converted will be provided by the Company to such Purchaser if requested
by Purchaser, provided such Purchaser delivers the original Note to the
Company. In the event that a Purchaser elects not to surrender a Note
for reissuance upon partial payment or conversion of a Note, such Purchaser
hereby indemnifies the Company against any and all loss or damage attributable
to a third-party claim in an amount in excess of the actual amount then due
under the Note.
5.7.3 Delivery of
Shares. In
lieu of delivering physical certificates representing the Unlegended Shares,
upon request of a Purchaser, so long as the certificates therefore do not bear a
legend and the Purchaser is not obligated to return such certificate for the
placement of a legend thereon, the Company will undertake commercially
reasonable efforts cause its transfer agent to electronically transmit the
Unlegended Shares by crediting the account of Purchaser’s prime broker with the
Depository Trust Company through its Deposit Withdrawal Agent Commission system,
if such transfer agent participates in such DWAC system. Such
delivery must be made on or before the Unlegended Shares Delivery
Date.
5.8. Exchange of Notes for New
Securities Issued in Subsequent Offering. In the event the Company
conducts any subsequent financings (each, a “Follow On Offering”) of any
kind other than an offering of Units or securities substantially similar hereto
as is currently being offered by the Company through one or more placement
agents and other than any Exempted Issuances (as hereinafter defined), the Notes
may, at the discretion of each holder thereof, be exchanged in whole
or in part to the extent of outstanding principal and/or interest in such Note,
into the securities offered in the Follow On Offering, by applying and
exchanging the outstanding principal and interest of such Notes towards the
purchase price of the securities offered in such Follow On Offering, at the
price offered for such units or securities to other investors
generally. In lieu of offering cash, such Note holder shall tender
the Note with the duly executed subscription documents provided to all investors
in such Follow On Offering, and a notice indicating the dollar amount of
principal and interest being applied, and the Company shall, at closing of such
Follow On Offering, issue to such holder any securities acquired by such holder
in such offering, and a Note certificate reflecting the remaining principal and
interest owed, if any. In the event that the holder of the Notes
elects not to so convert, such holder may do so in whole or in part from time to
time, until the Note is either repaid or fully exchanged for securities issued
in Follow On Offerings. Nothing herein shall be deemed to
prohibit any early repayment of the Notes without penalty.
8
5.9 No pre-emptive
Rights. Holders of Notes and Warrants shall not have
pre-emptive or other rights of a shareholders, notwithstanding that other
investors or prospective investors may receive the benefit of such
rights.
5.10 Third Party
Beneficiaries. There are no third party beneficiaries to the warranties
or covenants made by the Company in this agreement.
6. CONDITIONS.
6.1 Conditions Precedent to the
Obligation of the Company to Close and to Sell the Notes. The
obligation hereunder of the Company to close and issue and sell the Units to the
Purchasers at a Closing is subject to the satisfaction or waiver, at or before
such Closing of the conditions set forth below. These conditions are
for the Company’s sole benefit and may be waived by the Company at any time in
its sole discretion.
6.1.1 Accuracy of the Purchasers’
Representations and Warranties. The representations and
warranties of each Purchaser herein and in the Questionnaire attached hereto
shall be true and correct in all material respects as of the date when made and
as of such Closing as though made at that time, except for representations and
warranties that are expressly made as of a particular date, which shall be true
and correct in all material respects as of such date.
6.1.2 Performance by the
Purchasers. Each Purchaser 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 Purchasers at or prior to such Closing.
6.1.3 No
Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
6.1.4 Delivery of Purchase
Price. The Purchase Price for the Units shall have been
delivered to the Company on or before such Closing.
6.1.5 Delivery of Transaction
Documents. The Transaction Documents shall have been duly
executed and delivered by the Purchasers to the Company.
6.2 Conditions Precedent to the
Obligation of the Purchasers to Close and to Purchase the
Notes. The obligation hereunder of the Purchasers to purchase
the Units and consummate the transactions contemplated by this Agreement is
subject to the satisfaction or waiver, at or before such Closing, of each of the
conditions set forth below. These conditions are for the Purchasers’
sole benefit and may be waived by the Purchasers at any time in their sole
discretion.
9
6.2.1 Accuracy of the Company’s
Representations and Warranties. Each of the representations
and warranties of the Company in this Agreement and the other Transaction
Documents shall be true and correct in all material respects as of such Closing,
except for representations and warranties that speak as of a particular date,
which shall be true and correct in all material respects as of such
date.
6.2.2 Performance by 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 such Closing.
6.2.3 No
Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
6.2.4 No Proceedings or
Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been initiated, 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.
6.2.5 Notes and
Shares. At the Closing, the Company shall have delivered to
the Purchasers the Notes in such denominations as each Purchaser may
request.
6.2.6 Closing
Date. In the event that no Closing occurs by the Termination
Date, then the Company shall return to each Purchaser the net amount of all of
the funds for subscription amounts of such Purchaser without interest or set
off, other than any check or wire or similar fees.
7. PLACEMENT
AGENT/LEGAL FEES.
7.1 Placement Agent’s
Commission. The Company and each Purchaser represent
that there are no other parties entitled to receive fees, commissions, or
similar payments in connection with the offering described in this Agreement
other than legal, accounting, blue sky filing, printing or similar offering
expenses. The parties also agree and acknowledge hereby that such
fees shall not be deemed as interest or fees relating to the Note.
7.2 Legal
Fees. The Purchasers and the Company shall each bear
their own legal fees in connection with this Agreement.
8. MISCELLANEOUS.
8.1 Indemnification. Each
Purchaser agrees to defend, indemnify and hold the Company harmless against any
liability, costs or expenses arising as a result of any dissemination of any of
the Shares by such Purchaser in violation of the Securities Act or applicable
state or Cayman securities law.
10
8.2 Governing Law -
Waiver of Stay,
Extension or Usury Laws. This Agreement shall be governed by
and construed under the laws of the State of New York. The Company
represents and warrants that it deems the sale of the Units hereby as an
Investment and does not consider the sale of the Units together with the payment
of all fees and expenses in connection herewith to be usurious under the usury
laws of the State of New York (“Applicable
Law”). If, from any circumstances whatsoever, interest (or any
original issue discount that would be determined to be interest) would otherwise
be payable to any holder of the Notes in excess of the maximum amount
permissible under Applicable Law, the interest payable to such holder shall be
reduced to the maximum amount permissible under Applicable Law, and if from any
circumstances such holder shall ever receive anything deemed interest by the
Applicable Law in excess of the maximum amount permissible under the Applicable
Law, an amount equal to the excessive interest shall be applied to the reduction
of the principal hereof and not to the payment of interest, or if such excessive
amount of interest exceeds the unpaid principal balance of principal hereof,
such excess shall be refunded to the Company as applicable. All
interest paid or agreed to be paid to the holders of the Notes shall, to the
extent permitted by Applicable Law, be amortized, prorated, allocated and spread
throughout full period (including any renewal or extension) until payment in
full of the principal so that the interest hereon for such full period shall not
exceed the maximum amount permissible under the Applicable Law.
8.3 Successors and
Assigns. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties
hereto.
8.4 Entire
Agreement. This Agreement and the Exhibits hereto and thereto,
and the other documents delivered pursuant hereto and thereto, constitute the
full and entire understanding and agreement among the parties with regard to the
subjects hereof and no party shall be liable or bound to any other party in any
manner by any representations, warranties, covenants, or agreements except as
specifically set forth herein or therein. Nothing in this Agreement,
express or implied, is intended to confer upon any party, other than the parties
hereto and their respective successors and assigns, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided herein.
8.5 Severability. In
case any provision of this Agreement shall be invalid, illegal, or
unenforceable, it shall to the extent practicable, be modified so as to make it
valid, legal and enforceable and to retain as nearly as practicable the intent
of the parties, and the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
8.6 Amendment and
Waiver. Except as otherwise provided herein, any term of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance, either retroactively or
prospectively, and either for a specified period of time or indefinitely), with
the written consent of the Company and the Purchasers holding a majority of the
outstanding principal amount of Notes, or, to the extent such amendment affects
only one Purchaser, by the Company and such Purchaser. Any amendment
or waiver effected in accordance with this Section shall be binding upon each
future holder of any security purchased under this Agreement (including
securities into which such securities have been converted) and the
Company.
8.7 Notices. All
notices and other communications required or permitted hereunder shall be in
writing and shall be effective when delivered personally, or sent by telex or
telecopier (with receipt confirmed), provided that a copy is mailed by
registered mail, return receipt requested, or when received by the addressee, if
sent by Express Mail, Federal Express or other nationally recognized overnight
courier service (receipt requested) in each case to the appropriate address set
forth below:
| If to the Company: |
Save the
World Air, Inc.
235
Tennant Avenue
Morgan
Hill, California 95037
Attn: Cecil
Bond Kyte
Tel: (408)
778-0101
Fax:
(408) 778-8585
|
11
| With a copy to: |
Sichenzia
Ross Friedman Ference LLP
61
Broadway, 32nd
Floor
New
York, NY 10006
Attn:
Greg Sichenzia
Fax:
(212) 930-9725
|
|
|
If
to the Purchaser:
|
At
the address set forth on the Purchaser’s Signature
Page
|
8.8 Faxes and
Counterparts. This Agreement may be executed in one or more
counterparts. Delivery of an executed counterpart of the Agreement or
any exhibit attached hereto by facsimile transmission shall be equally as
effective as delivery of an executed hard copy of the same. Any party
delivering an executed counterpart of this Agreement or any exhibit attached
hereto by facsimile transmission shall also deliver an executed hard copy of the
same, but the failure by such party to deliver such executed hard copy shall not
affect the validity, enforceability or binding nature effect of this Agreement
or such exhibit.
8.9 Consent of
Purchasers. As used in the Agreement, “consent of the
Purchasers” or similar language means the consent of holders of not less than
50% of the total principal and interest outstanding on the Notes owned by
Purchasers on the date consent is requested.
8.10 Titles and
Subtitles. The titles of the paragraphs and subparagraphs of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
12
[Counterpart
Signature Page to Securities Purchase Agreement of Save the World Air,
Inc.]
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth on the Purchase Signature Page hereto.
|
PURCHASER
(By
Counterpart Form - See Purchaser Signature
Pages
following the Questionnaire)
COMPANY
SAVE
THE WORLD AIR, INC
(By
Execution of Acceptance Page following
Certificate
of Signatory)
|
13
QUESTIONNAIRE
The
undersigned Purchaser has read the Securities Purchase Agreement of Save the
World Air, Inc., dated as of ______ __, 2009, and acknowledges that the
completion of this Questionnaire and the execution of the Purchaser Signature
Page that follows shall constitute the undersigned’s execution of such
Agreement. This Questionnaire is and shall remain part of the
Agreement. All capitalized terms used herein shall be as defined in
such Agreement
I hereby
subscribe for the 7% Convertible Promissory Note in the aggregate principal
amount of $__________________,
and Common Stock Purchase Warrants to purchase ___________________ shares
(each as subject to adjustment) and tender a purchase price of $_______________
therefore.
I am a
resident of the State of __________________.
Please
print above the exact name(s) in which the Notes are to be held
| My address is: | |
[continued]
I agree
to keep information relating to the Company strictly confidential and not to
discuss or exploit or distribute any of the information herein except to my
professional advisors or as necessary to comply with law.
I
acknowledge that the offering of the Units is subject to the Federal securities
laws of the United States and state securities laws of those states in which the
Notes are offered, and that, pursuant to the U.S. Federal securities laws and
state securities laws, the Units may be purchased by persons who come within the
definition of an “Accredited
Investor” as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act (“Regulation D”).
By
initialing one of the categories below, I represent and warrant that I come
within the category so initialed and have truthfully set forth the factual basis
or reason I come within that category. All information in response to
this paragraph will be kept strictly confidential. I agree to furnish
any additional information that the Company deems necessary in order to verify
the answers set forth below.
NOTE: You
must either initial that at least ONE
category.
Individual
Purchaser:
(A
Purchaser who is an individual may initial either Category I, II, or
III)
|
Category
I
|
______
|
I
am a director or executive officer of the
Company.
|
|
Category
II
|
______
|
I
am an individual (not a partnership, corporation, etc.) whose individual
net worth, or joint net worth with my spouse, presently exceeds
$1,000,000.
Explanation. In calculation of net
worth, you may include equity in personal property and real estate,
including your principal residence, cash, short term investments, stocks
and securities. Equity in personal property and real estate
should be based on the fair market value of such property less debt
secured by such property.
|
|
Category
III
|
______
|
I
am an individual (not a partnership, corporation, etc.) who had an
individual income in excess of $200,000 in 2007 and 2008, or joint income
with my spouse in excess of $300,000 in 2007 and 2008, and I have a
reasonable expectation of reaching the same income level in
2009.
|
[continued]
Entity
Purchasers:
(A Purchaser which is a corporation,
limited liability company, partnership, trust, or other entity may initial either Category IV, V, VI,
VII or VIII)
|
Category
IV
|
______
|
The
Purchaser is an entity in which all of the equity owners are “Accredited Investors” as
defined in Rule 501(a) of Regulation D. If relying upon this category
alone, each equity owner must complete a separate copy of this
Agreement.
_____________________________________________________
_____________________________________________________
|
|
_____________________________________________________
|
|
(describe
entity)
|
|
Category
V
|
______
|
The
Purchaser is a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Units offered, whose
purchase is directed by a “Sophisticated Person” as
described in Rule 506(b)(2)(ii) of Regulation
D.
|
|
Category
VI
|
______
|
The
Purchaser is an organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of acquiring
the Units, with total assets in excess of
$5,000,000.
|
_____________________________________________________
_____________________________________________________
|
_____________________________________________________
|
|
(describe
entity)
|
|
Category
VII
|
______
|
The
Purchaser is a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
_____________________________________________________
_____________________________________________________
|
|
_____________________________________________________
|
(describe
entity)
Executed
this _____ day of _________, 2009 at ____________________,
________________.
[Purchasers'
Signature Page follows]
PURCHASER
SIGNATURE PAGE
(For
Individual Purchasers)
This
Securities Purchase Agreement of Save the World Air, Inc. (including the
Questionnaire) is hereby executed and entered into by the below
Purchaser.
|
Principal
Amount of Note $_____________
No.
of Warrants_____________________
|
______________________________________
Signature
(Individual)
______________________________________
Name
(Print)
______________________________________
Street
address
______________________________________
City,
State and Zip Code
|
|
______________________________________
Tax
Identification or Social Security Number
(______)_______________________________
Telephone
Number
(______)_______________________________
Facsimile
Number
|
|
Address
to Which Correspondence Should Be
Directed
(if different from above)
______________________________________
c/o
Name
______________________________________
Street
Address
|
|
|
______________________________________
City,
State and Zip Code
(______)_______________________________
Telephone
Number
(______)_______________________________
Facsimile
Number
|
PURCHASER
SIGNATURE PAGE
(for
Corporation, Partnership, Trust or Other Entities)
This Securities Purchase Agreement of
Save the World Air, Inc. (including the Questionnaire) is hereby
executed and entered into by the below Purchaser:
|
Principal
Amount of Note $_____________
No.
of Warrants_____________________
|
______________________________________
Name
of Entity
______________________________________
Type
of Entity (i.e., corporation, partnership, etc.)
|
|
______________________________________
Tax
Identification or Social Security Number
______________________________________
State
of Formation of Entity
______________________________________
Name of
Signatory Typed or Printed
Its:____________________________________
Title
|
|
Address
to Which Correspondence Should Be
Directed
(if different from above)
______________________________________
c/o
Name
______________________________________
Street
Address
|
|
|
______________________________________
City,
State and Zip Code
(______)_______________________________
Telephone
Number
(______)_______________________________
Facsimile
Number
|
*If
Notes are being subscribed for by an entity, the Certificate of Signatory that
follows must also be completed.
CERTIFICATE
OF SIGNATORY
To be
completed if Units are being subscribed for by an
entity.
I,__________________________________,
am the ___________________________ of
___________________________________________ (the
“Entity”).
I certify
that I am empowered and duly authorized by the Entity to execute and carry out
the terms of the Securities Purchase Agreement and to purchase and hold the
Notes and Shares. The Securities Purchase Agreement has been duly and
validly executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.
IN
WITNESS WHEREOF, I have hereto set my hand this ______ day of _________,
2009.
|
______________________________________________
Signature
|
ACCEPTANCE
PAGE TO SECURITIES PURCHASE AGREEMENT OF
SAVE
THE WORLD AIR, INC
The
foregoing subscriptions for an aggregate of $___________ principal amount of 7%
Convertible Promissory Notes and Warrants, in accordance with the foregoing
Securities Purchase Agreement, AGREED AND ACCEPTED; provided, however, that the
Company may accept additional subscriptions from time to time without consent of
Purchasers until the maximum offering amount (plus the over-allotment option, if
any) are accepted and Closed upon, in accordance with this
Agreement:
SAVE
THE WORLD AIR, INC
By:_____________________________________
Name:
Title:
Date: September
__, 2009
EXHIBIT
A
Form
of 7% Convertible Promissory Note
EXHIBIT
B
Form
of Common Stock Purchase Warrant
EXHIBIT
C
Wire
Instructions