EXHIBIT 10.51
-----------------------------------------------------------------------------
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
by and among
▇▇▇▇▇▇▇.▇▇▇, Inc.
and
the parties named herein on Schedule 1, as Purchasers
December 22, 2005
-----------------------------------------------------------------------------
This PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement")
is dated as of December 22, 2005, among ▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware
corporation (the "Company"), and the purchasers identified on Schedule 1 hereto
(each a "Purchaser" and collectively the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below),
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
the Purchasers, and the Purchasers, severally and not jointly, desire to
purchase from the Company in the aggregate, 1,530 shares of Series D Convertible
Preferred Stock and Warrants to purchase 2,394.8407 shares of Series B
Convertible Preferred Stock.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:
ARTICLE I
DEFINITIONS; TERMS OF PREFERRED STOCK AND WARRANTS
1.1 Definitions.
-----------
In addition to the terms defined elsewhere in this Agreement, for all
purposes of this Agreement, the following terms have the meanings indicated in
this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section
3.1(j).
"Affiliate" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144. With
respect to a Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as such Purchaser will
be deemed to be an Affiliate of such Purchaser.
"Agreement" shall have the meaning ascribed to such term in the
Preamble.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
"Certificates of Designation" shall mean the Series B Certificate of
Designation and the Series D Certificate of Designation.
"Closing" shall have the meaning ascribed to such term in Section
2.1(a).
"Closing Date" shall have the meaning ascribed to such term in Section
2.1(a).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, $0.001 par value
per share, and any securities into which such common stock may hereafter be
reclassified.
"Common Stock Equivalents" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
"Company" shall have the meaning ascribed to such term in the Preamble.
"Conversion Shares" means the shares of Common Stock issuable or issued
upon conversion of the Series D Preferred Stock.
"Disclosure Schedules" means the Disclosure Schedules concurrently
delivered herewith.
"Effective Date" means the date that the Registration Statement is
first declared effective by the Commission.
"Environmental Laws" shall have the meaning ascribed to such term in
Section 3.1(y).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" shall have the meaning ascribed to such term in Section 3.1(h).
"Governmental Authorizations" shall have the meaning ascribed to such
term in Section 3.1(m).
"Hazardous Substances" shall have the meaning ascribed to such term in
Section 3.1(y).
"Indemnified Party" shall have the meaning ascribed to such term in
Section 5.3.
"Indemnifying Party" shall have the meaning ascribed to such term in
Section 5.3.
"Intellectual Property" shall have the meaning ascribed to such term in
Section 3.1(o).
"Investor Rights Agreement" means the Investor Rights Agreement between
the Company and each of the Purchasers, in the form of Exhibit A hereto.
"Lien" means a lien, charge, security interest, encumbrance, right of
first refusal or other restriction, except for a lien for current taxes not yet
due and payable and a minor imperfection of title, if any,
not material in nature or amount and not materially detracting from the value or
impairing the use of the property subject thereto or impairing the operations or
proposed operations of the Company.
"Material Adverse Effect" shall have the meaning ascribed to such term
in Section 3.1(b).
3
"Per Share Purchase Price" equals Ten Thousand Dollars ($10,000).
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Preferred Shares" means the shares of Series D Preferred Stock issued
to each Purchaser pursuant to this Agreement.
"Premises" shall have the meaning ascribed to such term in Section
3.1(y).
"Purchaser" shall have the meaning ascribed to such term in the
Preamble.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Investor Rights Agreement and covering the resale
by the Purchasers of the Shares and the Warrant Shares.
"Rights" shall have the meaning ascribed to such term in Section
3.1(o).
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in Section
3.1(h).
"Securities" means the Preferred Shares, the Conversion Shares, the
Warrants, the Warrant Common Stock and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Series B Certificate of Designation" shall have the meaning ascribed
to such term in Section 1.2.
"Series B Preferred Stock" means the Company's Series B Convertible
Preferred Stock, par value $0.001 per share.
"Series D Certificate of Designation" shall have the meaning ascribed
to such term in Section 1.2.
"Series D Preferred Stock" means the Company's Series D Convertible
Preferred Stock, par value $0.001 per share.
"Significant Agreements" means (i) the Consulting Services Agreement
dated November 21, 2003 between AAI and ▇▇▇▇▇ ▇▇▇▇▇▇▇ Medicine, (ii) the
Services and Licensing Agreement dated December 2004 between AAI and ▇▇▇▇▇
▇▇▇▇▇▇▇ Medicine, and (iii) the Retail Alliance Agreement dated December 2004
between AAI and Sephora USA, LLC.
"Subscription Amount" means, as to each Purchaser, the amount set forth
beside such Purchaser's name on Schedule 1 hereto, in United States dollars and
in immediately available funds.
4
"Subsidiary" means, with respect to any entity, any corporation or
other organization of which securities or other ownership interest having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions, are directly or indirectly owned by such
entity or of which such entity is a partner or is, directly or indirectly, the
beneficial owner of 50% or more of any class of equity securities or equivalent
profit participation interests.
"Trading Day" means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a
day on which the Common Stock is traded on the over-the-counter market, as
reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted
on the OTC Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.
"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
American Stock Exchange, the New York Stock Exchange, the Nasdaq National
Market, or the Nasdaq SmallCap Market.
"Transaction Documents" means this Agreement, the Certificates of
Designation, the Investor Rights Agreement, the Warrants and any other documents
or agreements executed in connection with the transactions contemplated
hereunder.
"Warrants" means the Stock Purchase Warrants, in the form of Exhibit B
hereto.
"Warrant Common Stock" means, as applicable, the shares Common Stock
issued or issuable upon exercise of the Warrants and any shares of Common Stock
issued or issuable upon conversion of Series B Preferred Stock issued or
issuable upon exercise of the Warrants.
"Warrant Shares" means the shares of Series B Preferred Stock issued or
issuable upon exercise of the Warrants and, if applicable, any Warrant Common
Stock.
1.2 Terms of the Preferred Stock and Warrants. The terms and provisions
of the Series B Preferred Stock are set forth in the form of Designations of
Rights and Preferences of Series B Convertible Preferred Stock, attached hereto
as Exhibit C (the "Series B Certificate of Designation"). The terms and
provisions of the Series D Preferred Stock are set forth in the form of
Designations of Rights and Preferences of Series D Convertible Preferred Stock,
attached hereto as Exhibit D (the "Series D Certificate of Designation"). The
terms and provisions of the Warrants are more fully set forth in the form of
Stock Purchase Warrant, attached hereto as Exhibit B.
5
ARTICLE II
PURCHASE AND SALE
-----------------
2.1 Closing.
-------
(a) The closing of the transactions contemplated under this Agreement
(the "Closing") will take place as promptly as practicable, but no later than
five (5) Business Days following satisfaction or waiver of the conditions set
forth in Sections 2.2 and 2.3 (other than those conditions which by their terms
are not to be satisfied or waived until the Closing), at the offices of ▇▇▇▇▇▇
and ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (or remotely via exchange
of documents and signatures) or at such other place or day as may be mutually
acceptable to the Purchasers and the Company. The date on which the Closing
occurs is the "Closing Date".
(b) At the Closing, the Purchasers shall purchase, severally and not
jointly, and the Company shall issue and sell, in the aggregate, 1,530 shares of
Series D Preferred Stock and Warrants to purchase 2,394.8407 shares of Series B
Preferred Stock on the Closing Date. Each Purchaser shall purchase from the
Company, and the Company shall issue and sell to each Purchaser, a number of
Preferred Shares equal to such Purchaser's Subscription Amount divided by the
Per Share Purchase Price and a Warrant to purchase a number of Warrant Shares
(in Series B Preferred Stock) equal to the result (to four decimal places) of
dividing (i) 30% of the number of Conversion Shares that the Preferred Shares
purchased by such Purchaser are convertible into on the date hereof (rounded to
the nearest whole share and without regard to the number of shares of Common
Stock that the Company is authorized to issue) by (ii) 10,000. On the date
hereof, the Subscription Amount paid by each Purchaser shall be placed in escrow
pending the Closing pursuant to a Closing Escrow Agreement among the Company,
North Sound Capital LLC and ▇▇▇▇▇▇ and ▇▇▇▇ LLP (the "Escrow Agent"), which
agreement shall be in the form attached hereto as Exhibit E (the "Closing Escrow
Agreement").
2.2 Conditions to Obligations of Purchasers to Effect the Closing.
-------------------------------------------------------------
The obligations of each Purchaser to effect the Closing and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, by such Purchaser:
(a) At the Closing (unless otherwise specified below) the Company shall
deliver or cause to be delivered to each Purchaser the following:
(i) This Agreement, duly executed by the Company;
(ii) A copy of the certificate evidencing a number of Preferred
Shares equal to such Purchaser's Subscription Amount divided by the Per
Share Purchase Price as set forth on Schedule 1 hereto, registered in the
name of such Purchaser, with the original certificate to be delivered as
soon as practicable following the Closing pursuant to instructions to be
provided by the Purchaser;
(iii) A copy of the Warrant, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to acquire
up to the number of Warrant
6
Shares (in Series B Preferred Stock) equal to the result (to four decimal
places) of dividing (i) 30% of the number of Conversion Shares that the
Preferred Shares purchased by such Purchaser are convertible into on the
date hereof (rounded to the nearest whole share and without regard to the
number of shares of Common Stock that the Company is authorized to issue)
by (ii) 10,000, as set forth on Schedule 1 hereto, with the original
Warrant certificate to be delivered as soon as practicable following the
Closing pursuant to instructions to be provided by the Purchaser;
(iv) The Investor Rights Agreement, duly executed by the Company;
(v) A legal opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, counsel to the Company,
in the form of Exhibit F hereto; and
(vi) A certificate of the Secretary of the Company (the "Secretary's
Certificate"), attaching a true copy of the Certificate of Incorporation
and Bylaws of the Company, as amended to the Closing Date (including,
without limitation, the Certificates of Designation), and attaching true
and complete copies of the resolutions of the Board of Directors of the
Company authorizing the execution, delivery and performance of this
Agreement and the other Transaction Documents.
(vii) A certificate of the chief executive officer, president or
chief financial officer of the Company certifying that the representations
and warranties of the Company contained Sections 3(b), (c), (d), (e), (f),
(h), (r), (z) and (aa) herein are true and correct as of the Closing Date
as though such representations and warranties were made on such date
(except those representations and warranties that address matters only as
of a particular date which shall be true and correct as of such date).
(viii) Proof that the Certificates of Designation were duly filed
with the Secretary of State of the State of Delaware authorizing the Series
B Preferred Stock and the Series D Preferred Stock.
(b) As of the Closing Date, there shall have been no Material Adverse
Effect (solely as defined in clause (i) and (iii) of the definition thereof)
with respect to the Company since the date hereof.
(c) From the date hereof to the Closing Date, trading in the Common
Stock shall not have been suspended by the Commission (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities.
(d) The Company will have timely filed with the Commission the
financial statements and pro forma financial information required under Item
9.01 of Form 8-K with respect to Advanced Aesthetics, Inc. ("AAI") and such
Current Report on Form 8-K shall be in compliance with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder and such financial statements shall not differ materially
7
from the financial statements of AAI provided to the Purchasers. The failure to
make such filing on a timely basis shall constitute a material breach of this
Agreement and shall allow each Purchaser to withdraw from this Agreement without
liability to the Company or any other Purchaser.
(e) The Company shall have entered into the Closing Escrow Agreement.
2.3. Conditions to Obligations of the Company to Effect the Closing.
--------------------------------------------------------------
(a) The obligations of the Company to effect the Closing and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, by the Company. At the Closing, each Purchaser shall
deliver or cause to be delivered to the Company the following:
(i) this Agreement, duly executed by such Purchaser;
(ii) such Purchaser's Subscription Amount, by wire transfer of
immediately available funds as provided in the Closing Escrow Agreement;
and
(iii) the Investor Rights Agreement, duly executed by such
Purchaser.
(b) All representations and warranties of such Purchaser contained
herein shall be true and correct as of the Closing Date as though such
representations and warranties were made on such date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 Representations and Warranties of the Company.
---------------------------------------------
Except as set forth under the corresponding section of the Disclosure
Schedules delivered concurrently herewith, the Company hereby makes the
following representations and warranties as of the date hereof to each
Purchaser:
(a) Subsidiaries. Except as listed in Schedule 3.1(a), the Company has
no direct or indirect Subsidiaries.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite corporate
power and authority to own and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not have or result in (i) a material adverse
effect on the legality, validity or
8
enforceability of any Transaction Document, (ii) a material adverse effect on
the business or financial condition of the Company and the Subsidiaries, taken
as a whole, or (iii) a material adverse effect on the Company's ability to
perform in any material respect on a timely basis its obligations under any
Transaction Document (any of (i), (ii) or (iii), a "Material Adverse Effect").
(c) Authorization; Enforceability. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby (including, but not limited to, the sale and delivery of
the Series D Preferred Stock and the Warrants and the issuance and delivery of
the Series B Preferred Stock upon exercise of the Warrants) have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company in connection therewith. The issuance and
delivery of the Conversion Shares and the Warrant Common Stock have been duly
authorized by all necessary action on the part of the Company, except for
approval by the shareholders of the Company of the increase in the authorized
Common Stock and the filing of the related amendment to the certificate of
incorporation of the Company, in each case, as contemplated by Section 4.10 and,
other than such shareholder approval and filing, no further action is required
by the Company in connection therewith. Each Transaction Document has been (or
upon delivery will have been) duly executed by the Company and, when delivered
in accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, subject to laws of general application relating to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and rules of law governing specific performance,
injunctive relief, or other equitable remedies.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected, except, in the cases of clause
(ii), where such conflict, default or violation would not have or result in a
Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than (a) the filing with the Commission of the Registration
9
Statement, the application(s) to each Trading Market for the listing of the
Conversion Shares and Warrant Common Stock for trading thereon in the time and
manner required thereby, Form D and applicable Blue Sky filings, (b) the
approval of the shareholders of the Company of an increase in the number of
shares of Common Stock and the filing of the related amendment to the
certificate of incorporation of the Company in connection therewith, in each
case, as contemplated by Section 4.10 and (c) such as have already been obtained
or such exemptive filings as are required to be made under applicable securities
laws.
(f) Issuance of the Securities. The Securities are duly authorized and,
when issued and paid for in accordance with the Transaction Documents, will be
duly and validly issued, fully paid and nonassessable, free and clear of all
Liens, other than any Liens created by or imposed on the holders thereof through
no action of the Company, provided that the Conversion Shares and Warrant Common
Stock are subject to the approval of the shareholders of the Company of an
increase in the number of shares of Common Stock and the filing of an amendment
to the certificate of incorporation of the Company, in each case, as
contemplated by Section 4.10. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Series B Preferred Stock and
Series D Preferred Stock issuable pursuant to this Agreement and the Warrants.
(g) Capitalization.
(i) Including shares issued in connection with the acquisition of a
majority of the capital stock of AAI, the entire authorized capital stock
of the Company consists of (A) 20,000,000 shares of Common Stock, (B)
1,000,000 shares of Preferred Stock, par value $0.001 per share, of which
5,000 shares are designated as Series A Preferred Stock, 100,000 shares are
designated as shares of Series B Preferred Stock, 50,000 shares are
designated as shares of Series C Preferred Stock, and 1530 shares are
designated as shares of Series D Preferred Stock. As of the date hereof,
and prior to the Closing, 14,995,513 shares of Common Stock, no shares of
Series A Preferred Stock, 27,926.4689 shares of Series B Preferred Stock,
8,452.0222 shares of Series C Preferred Stock, and no shares of Series D
Preferred Stock are issued and outstanding. All shares of the Company's
issued and outstanding capital stock have been duly authorized, are validly
issued and outstanding, and are fully paid and nonassessable. No securities
issued by the Company from the date of its incorporation to the date hereof
were issued in violation of any statutory or common law preemptive rights.
There are no dividends which have accrued (other than dividends on the
shares of Series C Preferred Stock issued on December 20, 2005) or been
declared but are unpaid on the capital stock of the Company. All taxes
required to be paid by the Company in connection with the issuance and any
transfers of the Company's capital stock have been paid. All securities of
the Company have been issued in all material respects in accordance with
the provisions of all applicable securities and other laws.
(ii) No Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as a result
of the purchase and sale of the Securities and except outstanding warrants
to purchase 3,969.0363 shares of Series B Preferred Stock, there are no
outstanding options, warrants, rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company
or any
10
Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. The issue and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any Person
(other than the Purchasers) and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, exchange or reset
price under such securities.
(h) SEC Reports; Financial Statements; Liabilities.
----------------------------------------------
(i) 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) of the Exchange Act, for the 12 months preceding the
date hereof (or such shorter period as the Company was required by law to
file such material) (the foregoing materials, including the exhibits
thereto, being collectively referred to herein as the "SEC Reports") on a
timely basis or has received 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 filing dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as the case may be, and the rules and regulations of the
Commission promulgated thereunder, as applicable, and none of the SEC
Reports, as of their respective filing dates, 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.
(ii) The financial statements of the Company and any acquired entities
included in the SEC Reports comply 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 generally accepted accounting principles in the United States, applied on a
consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, subject to normal year-end audit adjustments. Such financial statements
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries, if any, 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 year-end audit adjustments.
(iii) Except as set forth in the SEC Reports, and except for
liabilities and obligations incurred since October 1, 2005 in the ordinary
course of business, consistent with past practice, as of the date hereof:
(i) the Company and its Subsidiaries do not have any material liabilities
or obligations (absolute, accrued, contingent or otherwise) and (ii) there
has not been any aspect of the prior or current conduct of the business of
the Company or its Subsidiaries which may form the basis for any material
claim by any third party which if asserted could result in a Material
Adverse Effect.
(i) Material Changes. Since October 1, 2005, the Company has conducted
its business only in the ordinary course, consistent with past practice, and
there has not occurred:
(i) any event that could have a Material Adverse Effect on the
Company or any of its Subsidiaries;
11
(ii) any amendments or changes in the charter documents of the
Company and its Subsidiaries;
(iii) any damage, destruction or loss, whether or not covered by
insurance, that would, individually or in the aggregate, have or would be
reasonably likely to have, a Material Adverse Effect on the Company and its
Subsidiaries;
(iv) any:
(A) incurrence, assumption or guarantee by the Company or its
Subsidiaries of any debt for borrowed money other than (i) equipment leases made
in the ordinary course of business, consistent with past practice and (ii) any
such incurrence, assumption or guarantee with respect to an amount of $25,000 or
less that has been disclosed in the SEC Reports;
(B) issuance or sale of any securities convertible into or
exchangeable for securities of the Company other than to directors, employees
and consultants pursuant to existing equity compensation or stock purchase plans
of the Company;
(C) issuance or sale of options or other rights to acquire from the
Company or its Subsidiaries, directly or indirectly, securities of the Company
or any securities convertible into or exchangeable for any such securities,
other than options issued to directors, employees and consultants in the
ordinary course of business, consistent with past practice;
(D) issuance or sale of any stock, bond or other corporate security
other than to directors, employees and consultants pursuant to existing equity
compensation or stock purchase plans of the Company;
(E) discharge or satisfaction of any material Lien of the Company or
its Subsidiaries;
(F) declaration or making any payment or distribution to
stockholders or purchase or redemption of any share of its capital stock or
other security other than to directors, officers and employees of the Company or
its Subsidiaries as compensation for services rendered to the Company or its
Subsidiary (as applicable) or for reimbursement of expenses incurred on behalf
of the Company or its Subsidiary (as applicable);
(G) sale, assignment or transfer of any of the intangible assets of
the Company or its Subsidiaries except in the ordinary course of business,
consistent with past practice, or cancellation of any debt or claim except in
the ordinary course of business, consistent with past practice;
(H) waiver of any right of substantial value of the Company or its
Subsidiaries whether or not in the ordinary course of business;
(I) material change in officer compensation of the Company or its
Subsidiaries, except in the ordinary course of business and consistent with past
practice; or
12
(J) other commitment (contingent or otherwise) of the Company or its
Subsidiaries to do any of the foregoing.
(v) any creation, sufferance or assumption by the Company or any of
its Subsidiaries of any Lien on any asset or any making of any loan,
advance or capital contribution to or investment in any Person, in an
aggregate amount which exceeds $25,000 outstanding at any time;
(vi) any entry into, amendment of, relinquishment, termination or
non-renewal by the Company or its Subsidiaries of any material contract,
license, lease, transaction, commitment or other right or obligation, other
than in the ordinary course of business, consistent with past practice; or
(vii) any transfer or grant of a right with respect to the patents,
trademarks, trade names, service marks, trade secrets, copyrights or other
intellectual property rights owned or licensed by the Company or its
Subsidiaries, except as among the Company and its Subsidiaries.
(j) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company or its
Subsidiaries, threatened against the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "Action") which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision, have or
result in a Material Adverse Effect. Neither the Company nor any Subsidiary,
nor, to the knowledge of the Company or its Subsidiaries, any director or
officer thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty. To the knowledge of the Company or its Subsidiaries,
there has not been and there is not pending or contemplated, any investigation
by the Commission involving the Company or its Subsidiaries or any current or
former director or officer of the Company or its Subsidiaries. The Commission
has not issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company or its Subsidiaries, is imminent with respect to any of
the employees of the Company or its Subsidiaries which could have or result in a
Material Adverse Effect.
(l) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), including but
not limited to its Significant Agreements (which Significant Agreements are in
full force and effect), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state
13
and local laws applicable to its business, except in the case of clauses (i) and
(iii) as would not have or reasonably be expected to result in a Material
Adverse Effect.
(m) Licenses; Compliance With Regulatory Requirements. The Company and
its Subsidiaries hold all material authorizations, consents, approvals,
franchises, licenses and permits required under applicable law or regulation for
the operation of the business of the Company and its Subsidiaries as presently
operated (the "Governmental Authorizations"). All the Governmental
Authorizations have been duly issued or obtained and are in full force and
effect, and the Company and its Subsidiaries are in material compliance with the
terms of all the Governmental Authorizations. The Company and its Subsidiaries
have not engaged in any activity that, to their knowledge, would cause
revocation or suspension of any such Governmental Authorizations. The Company
has no knowledge of any facts which could reasonably be expected to cause the
Company to believe that the Governmental Authorizations will not be renewed by
the appropriate governmental authorities in the ordinary course. Neither the
execution, delivery nor performance of this Agreement shall adversely affect the
status of any of the Governmental Authorizations.
(n) Title to Assets. The Company and the Subsidiaries do not own any
real property, and have good and marketable title to all personal property owned
by them that is material to the business of the Company and the Subsidiaries,
taken as a whole, in each case free and clear of all Liens, except those, if
any, reflected in the Company's financial statements. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases (subject to laws of general
application relating to bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and rules of law
governing specific performance, injunctive relief, or other equitable remedies)
with which the Company and the Subsidiaries are in material compliance.
(o) Intellectual Property.
(i) The Company or a Subsidiary thereof has the right to use or is
the sole and exclusive owner of all right, title and interest in and to all
foreign and domestic patents, patent rights, trademarks, service marks,
trade names, brands and copyrights (whether or not registered and, if
applicable, including pending applications for registration) owned, used or
controlled by the Company and its Subsidiaries (collectively, the "Rights")
and in and to each material invention, software, trade secret, technology,
product, composition, formula and method of process used by the Company or
its Subsidiaries (the Rights and such other items, the "Intellectual
Property"), and, to the Company's and its Subsidiaries' knowledge, has the
right to use the same, free and clear of any claim or conflict with the
rights of others;
(ii) other than as set forth in the SEC Reports, no royalties or
fees (license or otherwise) are payable by the Company or its Subsidiaries
to any Person by reason of the ownership or use of any of the Intellectual
Property;
(iii) there have been no claims made against the Company or its
Subsidiaries asserting the invalidity, abuse, misuse, or unenforceability
of any of the Intellectual Property, and, to the best of the Company's
knowledge, there are no reasonable grounds for any such claims;
14
(iv) neither the Company nor its Subsidiaries have made any claim of
any violation or infringement by others of its rights in the Intellectual
Property, and to the best of the Company's knowledge, no reasonable grounds
for such claims exist; and
(v) neither the Company nor its Subsidiaries have received notice
that it is in conflict with or infringing upon the asserted rights of
others in connection with the Intellectual Property.
(p) Insurance. The Company and the Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as in the reasonable opinion of management are prudent and customary in
the businesses in which the Company and the Subsidiaries are engaged. All of the
insurance policies of the Company and its Subsidiaries are in full force and
effect and are valid and enforceable in accordance with their terms, and the
Company and its Subsidiaries have complied with all material terms and
conditions thereof. Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.
(q) Transactions With Affiliates and Employees. Except as set forth in
Schedule 3.1(q), none of the officers or directors of the Company or its
Subsidiaries and, to the knowledge of the Company and its Subsidiaries, none of
the employees of the Company or its Subsidiaries is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company and its Subsidiaries, any entity in which any officer, director, or any
such employee has a substantial interest or is an officer, director, trustee or
partner, other than (a) for payment of salary or consulting fees for services
rendered, (b) reimbursement for expenses incurred on behalf of the Company and
(c) for other employee benefits, including stock option agreements and other
stock awards under any equity compensation plan of the Company.
(r) Internal Accounting Controls. The Company and each of the
Subsidiaries maintains a system of internal accounting controls sufficient in
the judgment of the Company's management to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company's Form 10-KSB or 10-QSB, as the case may be, is being
prepared. The Company's certifying officers have evaluated the effectiveness of
the Company's controls and procedures as of June 30, 2005. The Company presented
in its Form 10-QSB for
15
the quarter ended June 30, 2005, the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on their
evaluations as of June 30, 2005. Since June 30, 2005, there have been no
significant changes in the Company's internal controls (as such term is defined
in Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company's
knowledge, in other factors that could significantly affect the Company's
internal controls.
(s) Certain Fees. No brokerage or finder's fees or commissions are or
will be payable by the Company or its Subsidiaries to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement.
(t) Private Placement; Integrated Offering. Assuming the accuracy of
the Purchasers representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchasers as contemplated hereby. The issuance
and sale of the Securities hereunder does not contravene the rules and
regulations of the OTC Bulletin Board. 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 security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act and would as a result require registration under the
Securities Act or trigger any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated.
(u) Charter, Bylaws and Corporate Records. The minute books of the
Company and its Subsidiaries contain in all material respects complete and
accurate records of all meetings and other corporate actions of the board of
directors, committees of the board of directors, incorporators and stockholders
of the Company and its Subsidiaries from the date of incorporation of each such
entity to the date hereof. All material corporate decisions and actions have
been validly made or taken. All corporate books, including without limitation
the share transfer register, comply in all material respects with applicable
laws and regulations and have been regularly updated.
(v) Registration Rights. Except as set forth in Schedule 3.1(v), no
Person has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
(w) Listing and Maintenance Requirements. The Company has not, in the
12 months preceding the date hereof, received notice from the OTC Bulletin Board
or any Trading Market on which the Common Stock is or has been listed or quoted
to the effect that the Company is not in compliance with the listing or
maintenance requirements of the OTC Bulletin Board or such Trading Market. The
Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance
requirements.
16
(x) Taxes. All tax returns and tax reports required to be filed with
respect to the income, operations, business or assets of the Company and its
Subsidiaries have been timely filed (or appropriate extensions have been
obtained) with the appropriate governmental agencies in all jurisdictions in
which such returns and reports are required to be filed, and all of the
foregoing as filed are, in all material respects, correct and complete and, in
all material respects, reflect accurately all liability for taxes of the Company
and its Subsidiaries for the periods to which such returns relate, and all
amounts shown as owing thereon have been paid. All income, profits, franchise,
sales, use, value added, occupancy, property, excise, payroll, withholding,
FICA, FUTA and other taxes (including interest and penalties), if any,
collectible or payable by the Company and its Subsidiaries or relating to or
chargeable against any of its material assets, revenues or income or relating to
any employee, independent contractor, creditor, stockholder or other third party
through the Closing Date, were fully collected and paid by such date if due by
such date or provided for by adequate reserves in the financial statements
contained in the SEC Reports as of and for the periods ended October 1, 2005
(other than taxes accruing after such date) and all similar items due through
the Closing Date will have been fully paid by that date or provided for by
adequate reserves, whether or not any such taxes were reported or reflected in
any tax returns or filings. No taxation authority has sought to audit the
records of the Company or any of its Subsidiaries for the purpose of verifying
or disputing any tax returns, reports or related information and disclosures
provided to such taxation authority, or for the Company's or any of its
Subsidiaries' alleged failure to provide any such tax returns, reports or
related information and disclosure. No material claims or deficiencies have been
asserted against or inquiries raised with the Company or any of its Subsidiaries
with respect to any taxes or other governmental charges or levies which have not
been paid or otherwise satisfied, including claims that, or inquiries whether,
the Company or any of its Subsidiaries has not filed a tax return that it was
required to file, and, to the best of the Company's and its Subsidiaries'
knowledge, there exists no reasonable basis for the making of any such claims or
inquiries. Neither the Company nor any of its Subsidiaries has waived any
restrictions on assessment or collection of taxes or consented to the extension
of any statute of limitations relating to taxation.
(y) Environmental Matters. None of the premises or any properties
owned, occupied or leased by the Company or its Subsidiaries (the "Premises")
has been used by the Company or the Subsidiaries or, to the Company's knowledge,
by any other Person, to manufacture, treat, store, or dispose of any substance
that has been designated to be a "hazardous substance" under applicable
Environmental Laws (hereinafter defined) ("Hazardous Substances") in violation
of any applicable Environmental Laws. To their knowledge, the Company and its
Subsidiaries have not disposed of, discharged, emitted or released any Hazardous
Substances which would require, under applicable Environmental Laws,
remediation, investigation or similar response activity. No Hazardous Substances
are present as a result of the actions of the Company or its Subsidiaries or, to
the Company's or its Subsidiaries' knowledge, any other Person, in, on or under
the Premises which would give rise to any liability or clean-up obligations of
the Company or its Subsidiaries under applicable Environmental Laws. The Company
and its Subsidiaries and, to the Company's or its Subsidiaries knowledge, any
other Person for whose conduct it may be responsible pursuant to an agreement or
by operation of law, are in compliance with all laws, regulations and other
federal, state or local governmental requirements, and all applicable judgments,
orders, writs, notices, decrees, permits, licenses, approvals, consents or
injunctions in effect on the date of this Agreement relating to the generation,
management, handling, transportation, treatment, disposal, storage, delivery,
discharge, release or emission of any Hazardous Substance (the "Environmental
Laws"). Neither
17
the Company or its Subsidiaries nor, to the Company's or its Subsidiaries'
knowledge, any other Person for whose conduct it may be responsible pursuant to
an agreement or by operation of law has received any written complaint, notice,
order, or citation of any actual, threatened or alleged noncompliance with any
of the Environmental Laws, and there is no proceeding, suit or investigation
pending or, to the Company's or its Subsidiaries' knowledge, threatened against
the Company or its Subsidiaries or, to the Company's or its Subsidiaries'
knowledge, any such Person with respect to any violation or alleged violation of
the Environmental Laws, and, to the knowledge of the Company or its
Subsidiaries, there is no basis for the institution of any such proceeding, suit
or investigation.
(z) Advanced Aesthetics, Inc. On December 20, 2005, the Company entered
into a Share Exchange Agreement (the "Share Exchange Agreement") with AAI and
certain securityholders of AAI (the "AAI Securityholders"), pursuant to which
such AAI Securityholders received newly issued securities of the Company in
exchange for their securities of AAI. The Company had the requisite corporate
power and authority to consummate the transactions contemplated by the Share
Exchange Agreement. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company or its
Subsidiaries, threatened against the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) which adversely affects or challenges the legality, validity or
enforceability of the Share Exchange Agreement or any agreement or contract
entered into in connection therewith.
(aa) Disclosure. All disclosure provided to the Purchasers regarding
the Company or its Subsidiaries, their respective businesses and the
transactions contemplated hereby, including the Disclosure Schedules to this
Agreement and the Confidential Private Placement Memorandum of AAI dated
September 1, 2005, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
3.2 Representations and Warranties of the Purchasers.
------------------------------------------------
Each Purchaser hereby, for itself and for no other Purchaser,
represents and warrants as of the date hereof and as of the Closing Date to the
Company as follows:
(a) Organization; Authority; Enforceability. Such Purchaser (other than
individuals) is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with full power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by such Purchaser of the transactions
contemplated by this Agreement has been duly authorized by all necessary
corporate or similar action on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors'
18
rights generally and rules of law governing specific performance, injunctive
relief, or other equitable remedies.
(b) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
(c) No Public Sale or Distribution. Such Purchaser is (i) acquiring the
Preferred Shares and Warrants and (ii) upon conversion of the Series D Preferred
Stock will acquire the Conversion Shares and upon exercise of the Warrants will
acquire the Warrant Shares, in each case, for its own account and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof; provided, however, that by making the representations herein, such
Purchaser does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the Securities Act. Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.
(d) Accredited Investor Status. Such Purchaser is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
(e) Residency. Such Purchaser is a resident of the jurisdiction set
forth below such Purchaser's name on Schedule 1 attached hereto.
(f) Reliance on Exemptions. Such Purchaser understands that the
Preferred Shares and Warrants are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying in part upon the truth
and accuracy of, and such Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Purchaser to acquire the Preferred Shares and Warrants.
(g) Information. Such Purchaser and its advisors, if any, have been
furnished with all publicly available materials relating to the business,
finances and operations of the Company and such other publicly available
materials relating to the offer and sale of the Preferred Shares and Warrants as
have been requested by such Purchaser. Such Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Purchaser
or its advisors, if any, or its representatives shall modify, amend or affect
such Purchaser's right to rely on the Company's representations and warranties
contained herein. Such Purchaser understands that its investment in the
Preferred Shares and Warrants involves a high degree of risk.
(h) No Governmental Review. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Preferred Shares
and Warrants or the fairness or
19
suitability of the investment in the Preferred Shares and Warrants, nor have
such authorities passed upon or endorsed the merits of the offering of the
Preferred Shares and Warrants.
(i) Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters, including investing in companies
engaged in the business in which the Company is engaged, so as to be capable of
evaluating the merits and risks of the prospective investment in the Preferred
Shares and Warrants, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an investment in
the Preferred Shares and Warrants and, at the present time, is able to afford a
complete loss of such investment.
The Company acknowledges and agrees that each Purchaser does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
---------------------
(a) The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement, to the Company, to an
Affiliate of a Purchaser (who is an accredited investor and executes a customary
representation letter) or in connection with a pledge as contemplated in Section
4.1(b), the Company may require the transferor thereof to provide to the Company
an opinion of counsel selected by the transferor, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act, provided, however, that in the case of a transfer
pursuant to Rule 144, no opinion shall be required if the transferor provides
the Company with a customary seller's representation letter, and if such sale is
not pursuant to subsection (k) of Rule 144, a customary broker's representation
letter and a Form 144. Any such transferee that agrees in writing to be bound by
the terms of this Agreement and the Investor Rights Agreement shall have the
rights of a Purchaser under this Agreement and the Investor Rights Agreement.
Except as required by federal securities laws and the securities law of any
state or other jurisdiction within the United States, the Securities may be
transferred, in whole or in part, by any of the Purchasers at any time. The
Company shall reissue certificates evidencing the Securities upon surrender of
certificates evidencing the Securities being transferred in accordance with this
Section 4.1(a).
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of a legend on any of the Securities in substantially the
following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND,
20
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT.
The Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Securities to a
financial institution that is an "accredited investor" as defined in Rule 501(a)
under the Securities Act and, if required under the terms of such arrangement,
such Purchaser may transfer pledged or secured Securities to the pledgees or
secured parties. Such a pledge or transfer would not be subject to approval of
the Company and no legal opinion of legal counsel of the pledgee, secured party
or pledgor shall be required in connection therewith; provided, however, that
such Purchaser shall provide the Company with such documentation as is
reasonably requested by the Company to ensure that the pledge is pursuant to a
bona fide margin agreement with a registered broker-dealer or a security
interest in some or all of the Securities to a financial institution that is an
"accredited investor" as defined in Rule 501(a) under the Securities Act. The
Company will execute and deliver such documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
selling stockholders thereunder.
(c) Certificates evidencing the Securities shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) following any sale of
such Securities pursuant to Rule 144, or (ii) if such Securities are eligible
for sale under Rule 144(k), or (iii) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission). The
Company shall cause its counsel to issue a legal opinion to the Company's
transfer agent promptly upon the occurrence of any of the events in clauses (i),
(ii) or (iii) above to effect the removal of the legend hereunder and shall also
cause its counsel to issue a "blanket" legal opinion to the Company's transfer
agent promptly after the Effective Date, if required by the Company's transfer
agent, to allow sales pursuant to an effective Registration Statement. The
Company agrees that at such time as such legend is no longer required under this
Section 4.1(c), it will, no later than three Trading Days following the delivery
by a Purchaser to the Company or the Company's transfer agent of a certificate
representing Securities issued with a restrictive legend, deliver or cause to be
delivered to such Purchaser a certificate representing such Securities that is
free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this Section.
21
(d) Each Purchaser, severally and not jointly, agrees that the removal
of the restrictive legend from certificates representing Securities as set forth
in this Section 4.1 is predicated upon the Company's reliance on, and the
Purchaser's agreement that, and each Purchaser hereby agrees that, the Purchaser
will not sell any Securities except pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom.
4.2 Furnishing of Information.
-------------------------
As long as any Purchaser owns Securities, the Company covenants to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to the Exchange Act. Upon the request of any such
holder of Securities, the Company shall deliver to such holder a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as any Purchaser owns Securities, if the Company
is not required to file reports pursuant to the Exchange Act, it will prepare
and furnish to the Purchasers and make publicly available in accordance with
Rule 144(c), such information as is required for the Purchasers to sell the
Securities under Rule 144. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell such Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.
4.3 Integration.
-----------
The Company shall not sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of the OTC Bulletin Board or any Trading Market.
4.4 Limitation on Future Financing.
------------------------------
From the date hereof until the earlier of 60 calendar days after the
Closing Date or 15 calendar days after the Effective Date, the Company shall not
effect an issuance of its Common Stock or Common Stock Equivalents.
Notwithstanding anything to the contrary herein, this Section 4.4 shall not
apply to the following: (a) the granting of options or other equity compensation
awards or the issuance of Common Stock or Common Stock Equivalents to employees,
independent contractors, officers and directors of the Company pursuant to any
equity compensation plan duly adopted by a majority of the non-employee members
of the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose (and the
exercise of such options or Common Stock Equivalents), or (b) the exercise of
any security issued by the Company in connection with the offer and sale of the
Company's securities pursuant to this Agreement, or (c) the exercise of or
conversion of any convertible securities, options or warrants issued and
outstanding on the date hereof, or (d) the issuance of Common Stock or Common
Stock Equivalents in connection with acquisitions or strategic investments,
partnerships, business relationship or joint venture, the primary purpose of
which is not to raise capital, or (e) the issuance of securities pursuant to a
22
stock split or stock dividend or similar capital modification, or (f) the
issuance of securities upon the authorization of the Company's Board of
Directors in connection with business conducted by the Company with vendors,
lessors or financial institutions in connection with financing transactions.
4.5 Publicity.
---------
The Company shall, within four Business Days following the date of this
Agreement, file a Current Report on Form 8-K, disclosing the transactions
contemplated hereby and make such other filings and notices prior to and
following the Closing Date in the manner and time required by the Commission
with respect thereto. The Company and North Sound Capital LLC shall consult with
each other in issuing any press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or
without the prior consent of North Sound Capital LLC, with respect to any press
release of the Company, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication.
4.6 Shareholders Rights Plan.
------------------------
No claim will be made or enforced by the Company or any other Person
that any Purchaser is an "acquiring person" under any shareholders rights plan
or similar plan or arrangement in effect or hereafter adopted by the Company, or
that any Purchaser could be deemed to trigger the provisions of any such plan or
arrangement, by virtue of receiving Securities under the Transaction Documents
or under any other agreement between the Company and the Purchasers.
4.7 Non-Public Information.
----------------------
The Company covenants and agrees that neither it nor any other Person
acting on its behalf will after the date hereof provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.8 Use of Proceeds.
---------------
The Company covenants and agrees that the proceeds from the sale of the
Common Stock and Warrants shall be used by the Company for working capital and
general corporate purposes. For the two year period following the Closing Date,
no portion of the proceeds shall in any circumstances be applied to:
(i) accelerated repayment of debt existing on the date hereof;
(ii) the payment of dividends or other distributions on any capital
stock of the Company;
23
(iii) increased executive compensation (other than in the ordinary
course of business) or loans to officers, employees, stockholders or
directors, unless approved by a majority of the disinterested members of
the Board of Directors;
(iv) the purchase of debt or equity securities of any Person, including
the Company and its Subsidiaries, except (A) in connection with investment
of excess cash in high quality (A1/P1 or better) money market instruments
having maturities of one year or less or (B) in connection with bona-fide
mergers, acquisitions or strategic transactions, including without
limitation joint ventures, manufacturing, marketing, distribution,
technology transfer or research and development arrangements that are
approved by the Company's Board of Directors, including a majority of the
disinterested directors (if applicable); or
(v) any expenditure not directly related to the business of the
Company.
4.9 Reservation of Preferred Stock.
------------------------------
As of the date hereof, the Company has reserved and the Company shall
continue to reserve and keep available at all times, free of preemptive rights,
a sufficient number of shares of Series B Preferred Stock and Series D Preferred
Stock for the purpose of enabling the Company to issue Series D Preferred Stock
pursuant to this Agreement and Warrant Shares pursuant to the Warrants.
4.10 Authorization of Conversion Shares and Warrant Shares; Reservation
of Common Stock.
The Company shall use its best efforts to cause the number of
authorized shares of Common Stock of the Company to be increased to a number
sufficient to permit (i) all of the Preferred Shares to be fully converted into
shares of Common Stock and (ii) the issuance of the Warrant Common Stock. In
order to effect such increase, the Company shall, in addition to all other
actions that may be necessary or desirable in connection therewith, use its best
efforts to obtain the approval of the Company's shareholders for such increase
and file with the Secretary of State of the State of Delaware, an amendment to
the Company's certificate of incorporation effecting such increase, in each
case, as soon as practicable following the Closing. Immediately upon such
approval and filing, the Company shall reserve out of its authorized capital
stock and keep available at all times, free of preemptive rights, a number of
shares of Common Stock sufficient for the Company to issue all of the Conversion
Shares and all of the shares of Warrant Common Stock.
4.11 Listing of Common Stock.
-----------------------
The Company hereby agrees to use commercially reasonable efforts to
maintain the listing of the Common Stock on the pink sheets or any applicable
Trading Market, and, if required, to list the applicable Conversion Shares and
Warrant Common Stock on the pink sheets or any applicable Trading Market in
accordance with the applicable rules thereof. The Company further agrees, if the
Company applies to have the Common Stock traded on any other Trading Market, it
will include in such application the Conversion Shares and the Warrant Common
Stock, and will take such other action as is necessary to cause the Conversion
Shares and Warrant Common Stock to be listed on such other Trading Market as
promptly as possible.
24
Notwithstanding the foregoing, the Company shall not be required to list the
Conversion Shares or Warrant Common Stock until such shares have been authorized
and approved pursuant to Section 4.10.
4.12 Business Operations. Until the earlier of: (i) the fourth year
anniversary of the Closing Date and (ii) the date that the Purchasers own less
than 50% of the Preferred Shares originally issued pursuant to this Agreement
and the Conversion Shares issued upon any conversion thereof, the Company shall
comply with the following covenants:
(a) Insurance. The Company and its Subsidiaries shall maintain
insurance policies such that the representations contained in the first sentence
of Section 3.1(p) hereof continue to be true and correct and shall, from time to
time upon the written request of the Purchasers, promptly furnish or cause to be
furnished to the Purchasers evidence, in form and substance reasonably
satisfactory to the Purchasers, of the maintenance of all insurance maintained
by it.
(b) Corporate Existence; Licenses. The Company shall preserve and
maintain and cause its Subsidiaries to preserve and maintain their corporate
existence and good standing in the jurisdiction of their incorporation and the
rights, privileges and franchises of the Company and its Subsidiaries (except,
in each case, in the event of a merger or consolidation in which the Company or
its Subsidiaries, as applicable, is not the surviving entity) in each case where
the failure to so preserve or maintain could have a Material Adverse Effect on
the financial condition, business or operations of the Company and its
Subsidiaries taken as a whole. The Company shall, and shall cause its
Subsidiaries to, maintain at all times all material licenses or permits
necessary to the conduct of its business and as required by any governmental
agency or instrumentality thereof.
(c) Taxes and Claims. The Company and its Subsidiaries shall duly pay
and discharge (a) all taxes, assessments and governmental charges upon or
against the Company or its properties or assets prior to the date on which
penalties attach thereto, unless and to the extent that such taxes are being
diligently contested in good faith and by appropriate proceedings, and
appropriate reserves therefor have been established, and (b) all lawful claims,
whether for labor, materials, supplies, services or anything else which might or
could, if unpaid, become a lien or charge upon the properties or assets of the
Company or its Subsidiaries, unless and to the extent only that the same are
being contested in good faith and by appropriate proceedings and appropriate
reserves therefor have been established.
(d) Affiliate Transactions. Except for transactions approved by a
majority of the disinterested members of the board of directors of the Company,
neither the Company nor any of its Subsidiaries shall enter into any transaction
with any (i) director, officer, employee or holder of more than 5% of the
outstanding capital stock of any class or series of capital stock of the Company
or any of its Subsidiaries, (ii) member of the immediate family of any such
person, or (iii) corporation, partnership, trust or other entity in which any
such person, or member of the immediate family of any such person, is a
director, officer, trustee, partner or holder of more than 5% of the outstanding
capital stock thereof.
25
4.13 Securities Law Compliance.
-------------------------
(a) Securities Act. The Company shall timely prepare and file with the
Securities and Exchange Commission the form of notice of the sale of securities
pursuant to the requirements of Regulation D regarding the sale of the Series D
Preferred Stock and Warrants under this Agreement.
(b) State Securities Law Compliance Sale. The Company shall timely
prepare and file such applications, consents to service of process (but not
including a general consent to service of process) and similar documents and
take such other steps and perform such further acts as shall be required by the
state securities law requirements of each jurisdiction where a Purchaser
resides, as indicated on Schedule 1, with respect to the sale of the Series D
Preferred Stock and Warrants under this Agreement.
(c) State Securities Law Compliance --Resale. Beginning no later than
60 days following the date of this Agreement and continuing until either (i) the
Purchasers have sold all of their Registrable Securities (as defined in the
Investor Rights Agreement) under a registration statement pursuant to the
Investor Rights Agreement or (ii) the Common Stock becomes a "covered security"
under Section 18(b)(1)(A) of the Securities Act, the Company shall maintain
within either Moody's Industrial Manual or Standard and Poor's Standard
Corporation Descriptions (or any successors to these manuals which are similarly
qualified as "recognized securities manuals" under state Blue Sky laws) an
updated listing containing (i) the names of the officers and directors of the
Company, (ii) a balance sheet of the Company as of a date that is at no time
older than eighteen months and (iii) a profit and loss statement of the Company
for either the preceding fiscal year or the most recent year of operations.
ARTICLE V
INDEMNIFICATION, TERMINATION AND DAMAGES
5.1 Survival of Representations.
---------------------------
Except as otherwise provided herein, the representations and warranties
of the Company and the Purchasers contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing Date and shall continue in full force and effect for a period of three
(3) years from the Closing Date; provided, however, that the Company's
warranties and representations under Sections 3.1(a) (Subsidiaries), 3.1(b)
(Organization and Qualification), 3.1 (c) (Authorization; Enforceability), and
3.1(g) (Capitalization), shall survive the Closing Date and continue in full
force and effect indefinitely and Sections 3,1(x) (Taxes) and 3.1(y)
(Environmental Matters) shall survive the Closing Date and continue in full
force and effect until the expiration of all applicable statutes of limitation.
The Company's and the Purchasers' warranties and representations shall in no way
be affected or diminished in any way by any investigation of (or failure to
investigate) the subject matter thereof made by or on behalf of the Company or
the Purchasers.
26
5.2 Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless the Purchasers,
their Affiliates, each of their officers, directors, employees and agents and
their respective successors and assigns, from and against any losses, damages,
or expenses which are caused by or arise out of (i) any breach or default in the
performance by the Company of any covenant or agreement made by the Company in
this Agreement or in any of the Transaction Documents; (ii) any breach of
warranty or representation made by the Company in this Agreement or in any of
the Transaction Documents; and/or (iii) any and all third party actions, suits,
proceedings, claims, demands, judgments, costs and expenses (including
reasonable legal fees and expenses) incident to any of the foregoing.
(b) The Purchasers, severally and not jointly, agree to indemnify and
hold harmless the Company, its Affiliates, each of their officers, directors,
employees and agents and their respective successors and assigns, from and
against any losses, damages, or expenses which are caused by or arise out of (A)
any breach or default in the performance by the Purchasers of any covenant or
agreement made by the Purchasers in this Agreement or in any of the Transaction
Documents; (B) any breach of warranty or representation made by the Purchasers
in this Agreement or in any of the Transaction Documents; and (C) any and all
third party actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal fees and expenses) incident to any of the
foregoing.
5.3 Indemnity Procedure.
-------------------
A party or parties hereto agreeing to be responsible for or to
indemnify against any matter pursuant to this Agreement is referred to herein as
the "Indemnifying Party" and the other party or parties claiming indemnity is
referred to as the "Indemnified Party". An Indemnified Party under this
Agreement shall, with respect to claims asserted against such party by any third
party, give written notice to the Indemnifying Party of any liability which
might give rise to a claim for indemnity under this Agreement within sixty (60)
Business Days of the receipt of any written claim from any such third party, but
not later than twenty (20) days prior to the date any answer or responsive
pleading is due, and with respect to other matters for which the Indemnified
Party may seek indemnification, give prompt written notice to the Indemnifying
Party of any liability which might give rise to a claim for indemnity; provided,
however, that any failure to give such notice will not waive any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
materially prejudiced.
The Indemnifying Party shall have the right, at its election, to take
over the defense or settlement of such claim by giving written notice to the
Indemnified Party at least fifteen (15) days prior to the time when an answer or
other responsive pleading or notice with respect thereto is required. If the
Indemnifying Party makes such election, it may conduct the defense of such claim
through counsel of its choosing (subject to the Indemnified Party's approval of
such counsel, which approval shall not be unreasonably withheld), shall be
solely responsible for the expenses of such defense and shall be bound by the
results of its defense or settlement of the claim. The Indemnifying Party shall
not settle any such claim without prior notice to and consultation with the
Indemnified Party, and no such settlement involving any equitable relief or
which might have an adverse effect on the Indemnified Party may be agreed to
without the written consent of the Indemnified Party (which consent shall not be
unreasonably withheld). So
27
long as the Indemnifying Party is diligently contesting any such claim in good
faith, the Indemnified Party may pay or settle such claim only at its own
expense and the Indemnifying Party will not be responsible for the fees of
separate legal counsel to the Indemnified Party, unless the named parties to any
proceeding include both parties or representation of both parties by the same
counsel would be inappropriate in the reasonable opinion of the Indemnified
Party, due to conflicts of interest or otherwise. If the Indemnifying Party does
not make such election, or having made such election does not, in the reasonable
opinion of the Indemnified Party proceed diligently to defend such claim, then
the Indemnified Party may (after written notice to the Indemnifying Party), at
the expense of the Indemnifying Party, elect to take over the defense of and
proceed to handle such claim in its discretion and the Indemnifying Party shall
be bound by any defense or settlement that the Indemnified Party may make in
good faith with respect to such claim. In connection therewith, the Indemnifying
Party will fully cooperate with the Indemnified Party should the Indemnified
Party elect to take over the defense of any such claim. The parties agree to
cooperate in defending such third party claims and the Indemnified Party shall
provide such cooperation and such access to its books, records and properties as
the Indemnifying Party shall reasonably request with respect to any matter for
which indemnification is sought hereunder; and the parties hereto agree to
cooperate with each other in order to ensure the proper and adequate defense
thereof.
With regard to claims of third parties for which indemnification is
payable hereunder, such indemnification shall be paid by the Indemnifying Party
upon the earlier to occur of: (i) the entry of a judgment against the
Indemnified Party and the expiration of any applicable appeal period, or if
earlier, five (5) days prior to the date that the judgment creditor has the
right to execute the judgment; (ii) the entry of an unappealable judgment or
final appellate decision against the Indemnified Party; or (iii) a settlement of
the claim. Notwithstanding the foregoing, the reasonable expenses of counsel to
the Indemnified Party shall be reimbursed on a current basis by the Indemnifying
Party. With regard to other claims for which indemnification is payable
hereunder, such indemnification shall be paid promptly by the Indemnifying Party
upon demand by the Indemnified Party.
ARTICLE VI
MISCELLANEOUS
-------------
6.1 Fees and Expenses.
-----------------
The Company shall be responsible for the payment of the Purchasers'
reasonable and documented legal fees and other third-party expenses relating to
the preparation, negotiation and execution of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated herein.
6.2 Entire Agreement.
----------------
The Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters, which the parties acknowledge
have been merged into such documents, exhibits and schedules.
28
6.3 Notices.
-------
Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given
and effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified on
the signature pages attached hereto prior to 5:00 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number on
the signature pages attached hereto on a day that is not a Trading Day or later
than 5:00 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
If to the Purchasers, at each Purchaser's address set forth under its
name on Schedule 1 attached hereto, or with respect to the Company, addressed
to:
▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: President
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company shall be sent to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: 212-704-6160
Copies of notices to any Purchaser shall be sent to the addresses, if any,
listed on Schedule 1 attached hereto.
6.4 Amendments; Waivers.
-------------------
No provision of this Agreement may be waived or amended except in a
written instrument signed, in the case of an amendment, by the Company and each
Purchaser or, in the case of a waiver, by the party against whom enforcement of
any such waiver is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.
29
6.5 Construction.
------------
The headings herein are for convenience only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
6.6 Successors and Assigns.
----------------------
This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser. Any Purchaser, subject to applicable securities laws,
may assign any or all of its rights under this Agreement to any Person, provided
such transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions hereof that apply to the Purchasers.
6.7 No Third-Party Beneficiaries.
----------------------------
This Agreement is intended for the benefit of the parties hereto and
their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except as
otherwise set forth in Article V.
6.8 Governing Law.
-------------
All questions concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof.
6.9 Jurisdiction; Venue; Service of Process.
---------------------------------------
This Agreement shall be subject to the exclusive jurisdiction of the
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ of New York and if such court does not
have proper jurisdiction, the State Courts of New York County, New York. The
parties to this Agreement agree that any breach of any term or condition of this
Agreement shall be deemed to be a breach occurring in the State of New York by
virtue of a failure to perform an act required to be performed in the State of
New York and irrevocably and expressly agree to submit to the jurisdiction of
the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ of New York and if such court does
not have proper jurisdiction, the State Courts of New York County, New York for
the purpose of resolving any disputes among the parties relating to this
Agreement or the transactions contemplated hereby. The parties irrevocably
waive, to the fullest extent permitted by law, any objection which they may now
or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement, or any judgment entered by any
court in respect hereof brought in New York County, New York, and further
irrevocably waive any claim that any suit, action or proceeding brought in
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ of New York and if such court does not
have proper jurisdiction, the State Courts of New York County, New York has been
brought in an inconvenient forum. Each of the parties hereto 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
30
and sufficient service of process and notice thereof. Nothing in this Section
6.9 shall affect or limit any right to serve process in any other manner
permitted by law.
6.10 Execution.
---------
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
6.11 Severability.
------------
If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
6.12 Replacement of Securities.
-------------------------
If any certificate or instrument evidencing any Securities is
mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation thereof, or in
lieu of and substitution therefor, a new certificate or instrument, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction and customary and reasonable indemnity, if requested by the
Company.
6.13 Remedies.
--------
In addition to being entitled to exercise all rights provided herein or
granted by law, including recovery of damages, each of the Purchasers and the
Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
6.14 Payment Set Aside.
-----------------
To the extent that the Company makes a payment or payments to any
Purchaser pursuant to any Transaction Document or a Purchaser enforces or
exercises its rights thereunder, and such payment or payments or the proceeds of
such enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally
31
intended to be satisfied shall, to the extent permissible under applicable law,
be revived and continued in full force and effect as if such payment had not
been made or such enforcement or setoff had not occurred.
6.15 Independent Nature of Purchasers' Obligations and Rights.
--------------------------------------------------------
The obligations of each Purchaser under any Transaction Document are
several and not joint with the obligations of any other Purchaser, and no
Purchaser shall be responsible in any way for the performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. For reasons of administrative convenience only, Purchasers and their
respective counsel have chosen to communicate with the Company through ▇▇▇▇▇▇
and ▇▇▇▇ LLP, but such counsel does not represent any of the Purchasers in this
transaction other than North Sound Capital LLC. The Company has elected to
provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do so
by the Purchasers.
6.16 Waiver of Trial by Jury.
-----------------------
THE PARTIES HERETO IRREVOCABLY WAIVE TRIAL BY JURY IN ANY SUIT, ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
6.17 Further Assurances.
------------------
Each party agrees to cooperate fully with the other parties and to
execute such further instruments, documents and agreements and to give such
further written assurances as may be reasonably requested by any other party to
better evidence and reflect the transactions described herein and contemplated
hereby and to carry into effect the intents and purposes of this Agreement, and
further agrees to take promptly, or cause to be taken, all actions, and to do
promptly, or cause to be done, all things necessary, proper or advisable under
applicable law to consummate and make effective the transactions contemplated
hereby, to obtain all necessary waivers, consents and approvals, to effect all
necessary registrations and filings, and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement.
[Signature Page Follows]
32
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
COMPANY:
▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
33
PURCHASERS:
Print Exact Name:____________________________
By:__________________________________________
Name:
Title:
Address:_____________________________________
---------------------------------------------
---------------------------------------------
Telephone:___________________________________
Facsimile:___________________________________
Email:_______________________________________
SSN/EIN:_____________________________________
Amount of Investment:$_______________________
[Omnibus ▇▇▇▇▇▇▇.▇▇▇, Inc.
Preferred Stock and Warrant Purchase Agreement Signature Page]
34
Schedule 1
to Preferred Stock and Warrant Purchase Agreement
Purchasers and Shares of Preferred Stock and Warrants
------------------------------------------------------------------------------------------------------------------------------------
Name, Address and Fax Copies of Notices to Shares of Series B
Number of Purchaser Series D Preferred
Preferred Stock
Stock Underlying Purchase
Purchased Warrants Price
------------------------------------------------------------------------------------------------------------------------------------
North Sound Legacy International Ltd. ▇▇▇▇▇▇ and ▇▇▇▇ LLP 1080 1690.4759 $10,800,000
c/o North Sound Capital LLC ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
20 Horseneck Lane Stamford, CT 06901
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ T: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ F: (▇▇▇) ▇▇▇-▇▇▇▇
T: (▇▇▇) ▇▇▇-▇▇▇▇ Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
F: (▇▇▇) ▇▇▇-▇▇▇▇ email: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
email: ▇▇▇▇▇▇.▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇
------------------------------------------------------------------------------------------------------------------------------------
North Sound Legacy Institutional Fund LLC ▇▇▇▇▇▇ and ▇▇▇▇ LLP 420 657.4073 4,200,000
North Sound Legacy International Ltd. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
c/o North Sound Capital LLC ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ T: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ F: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
T: (▇▇▇) ▇▇▇-▇▇▇▇ email: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
F: (▇▇▇) ▇▇▇-▇▇▇▇
email: ▇▇▇▇▇▇.▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇
------------------------------------------------------------------------------------------------------------------------------------
Valesco Healthcare Partners I LP 8.1 12.6785 81,000
c/o Valesco Healthcare GP, LLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
T: (▇▇▇) ▇▇▇-▇▇▇▇
F: (▇▇▇) ▇▇▇-▇▇▇▇
email: ▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
------------------------------------------------------------------------------------------------------------------------------------
Valesco Healthcare Partners II LP 9.6 15.0264 96,000
c/o Valesco Healthcare GP, LLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
T: (▇▇▇) ▇▇▇-▇▇▇▇
F: (▇▇▇) ▇▇▇-▇▇▇▇
email: ▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
------------------------------------------------------------------------------------------------------------------------------------
Valesco Healthcare Overseas Fund, Ltd. 12.3 19.2526 123,000
c/o Valesco Healthcare GP, LLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
T: (▇▇▇) ▇▇▇-▇▇▇▇
F: (▇▇▇) ▇▇▇-▇▇▇▇
email: ▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
------------------------------------------------------------------------------------------------------------------------------------
Totals: 1530 2,394.8407 $15,300,000