COMMON STOCK PURCHASE AGREEMENT by and between KINGSBRIDGE CAPITAL LIMITED and DISCOVERY LABORATORIES, INC. dated as of April 17, 2006
Exhibit
10.1
Execution
Copy
by
and between
KINGSBRIDGE
CAPITAL LIMITED
and
DISCOVERY
LABORATORIES, INC.
dated
as of April 17, 2006
TABLE
OF CONTENTS
Page
|
DEFINITIONS
|
2
|
|
Section
1.01.
|
“2004
Registration Rights Agreement”
|
2
|
|
|
Section
1.02.
|
“2004
Stock Purchase Agreement”
|
2
|
|
|
Section
1.03.
|
“2004
Warrant”
|
2
|
|
|
Section
1.04.
|
“Blackout
Amount”
|
2
|
|
|
Section
1.05.
|
“Blackout
Shares”
|
2
|
|
|
Section
1.06.
|
“Certificate”
|
2
|
|
|
Section
1.07.
|
“Closing
Date”
|
2
|
|
|
Section
1.08.
|
“Commission”
|
2
|
|
|
Section
1.09.
|
“Commission
Documents”
|
2
|
|
|
Section
1.10.
|
“Commitment
Period”
|
2
|
|
|
Section
1.11.
|
“Common
Stock”
|
2
|
|
|
Section
1.12.
|
“Condition
Satisfaction Date”
|
2
|
|
|
Section
1.13.
|
“Convertible
Security”
|
2
|
|
|
Section
1.14.
|
“Conversion
Price”
|
3
|
|
|
Section
1.15.
|
“Damages”
|
3
|
|
|
Section
1.16.
|
“Draw
Down”
|
3
|
|
|
Section
1.17.
|
“Draw
Down Amount”
|
3
|
|
|
Section
1.18.
|
“Draw
Down Discount Price”
|
3
|
|
|
Section
1.19.
|
“Draw
Down Notice”
|
3
|
|
|
Section
1.20.
|
“Draw
Down Pricing Period”
|
3
|
|
|
Section
1.21.
|
“DTC”
|
3
|
|
|
Section
1.22.
|
“Effective
Date”
|
3
|
|
|
Section
1.23.
|
“Exchange
Act”
|
3
|
|
|
Section
1.24.
|
“Excluded
Merger or Sale”
|
3
|
|
|
Section
1.25.
|
“Knowledge”
|
3
|
|
|
Section
1.26.
|
“LIBOR”
|
3
|
|
|
Section
1.27.
|
“Make
Whole Amount”
|
3
|
|
|
Section
1.28.
|
“Market
Capitalization”
|
4
|
|
|
Section
1.29.
|
“Material
Adverse Effect”
|
4
|
|
|
Section
1.30.
|
“Maximum
Commitment Amount”
|
4
|
|
|
Section
1.31.
|
“Maximum
Draw Down Amount”
|
4
|
|
|
Section
1.32.
|
“NASD”
|
4
|
i
TABLE
OF CONTENTS
(Continued)
Page
|
Section
1.33.
|
“Permitted
Transaction”
|
4
|
|
|
Section
1.34.
|
“Person”
|
4
|
|
|
Section
1.35.
|
“Principal
Market”
|
4
|
|
|
Section
1.36.
|
“Prohibited
Transaction”
|
4
|
|
|
Section
1.37.
|
“Prospectus”
|
4
|
|
|
Section
1.38.
|
“Registrable
Securities”
|
5
|
|
|
Section
1.39.
|
“Registration
Rights Agreement”
|
5
|
|
|
Section
1.40.
|
“Registration
Statement”
|
5
|
|
|
Section
1.41.
|
“Regulation
D”
|
5
|
|
|
Section
1.42.
|
“Section4(2)”
|
5
|
|
|
Section
1.43.
|
“Securities
Act”
|
5
|
|
|
Section
1.45.
|
“Shares”
|
5
|
|
|
Section
1.46.
|
“Trading
Day”
|
5
|
|
|
Section
1.47.
|
“VWAP”
|
5
|
|
|
Section
1.48.
|
“Warrant”
|
5
|
|
|
Section
1.49.
|
“Warrant
Shares”
|
6
|
|
ARTICLE
II
|
PURCHASE
AND SALE OF COMMON STOCK; TERMINATION OF 2004 STOCK PURCHASE
AGREEMENT
|
6
|
|
Section
2.01.
|
Purchase
and Sale of Stock
|
6
|
|
|
Section
2.02.
|
Closing
|
6
|
|
|
Section
2.03.
|
Registration
Statement and Prospectus
|
6
|
|
|
Section
2.04.
|
Warrant
|
6
|
|
|
Section
2.05.
|
Blackout
Shares
|
6
|
|
|
Section
2.06.
|
Termination
of 2004 Stock Purchase Agreement
|
6
|
|
ARTICLE
III
|
DRAW
DOWN TERMS
|
7
|
|
Section
3.01.
|
Draw
Down Notice
|
7
|
|
|
Section
3.02.
|
Number
of Shares
|
7
|
|
|
Section
3.03.
|
Limitation
on Draw Downs
|
7
|
|
|
Section
3.04.
|
Trading
Cushion
|
7
|
|
|
Section
3.05.
|
Settlement
|
7
|
|
|
Section
3.06.
|
Delivery
of Shares; Payment of Draw Down Amount
|
7
|
|
|
Section
3.07.
|
Failure
to Deliver Shares
|
8
|
ii
TABLE
OF CONTENTS
(Continued)
Page
|
ARTICLE
IV
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
9
|
|
Section
4.01.
|
Organization,
Good Standing and Power
|
9
|
|
|
Section
4.02.
|
Authorization;
Enforcement
|
9
|
|
|
Section
4.03.
|
Capitalization
|
9
|
|
|
Section
4.04.
|
Issuance
of Shares
|
10
|
|
|
Section
4.05.
|
No
Conflicts
|
10
|
|
|
Section
4.06.
|
Commission
Documents, Financial Statements
|
11
|
|
|
Section
4.07.
|
No
Material Adverse Change
|
11
|
|
|
Section
4.08.
|
No
Undisclosed Liabilities
|
11
|
|
|
Section
4.09.
|
No
Undisclosed Events or Circumstances
|
11
|
|
|
Section
4.10.
|
Actions
Pending
|
12
|
|
|
Section
4.11.
|
Compliance
with Law
|
12
|
|
|
Section
4.12.
|
Certain
Fees
|
12
|
|
|
Section
4.13.
|
Disclosure
|
12
|
|
|
Section
4.14.
|
Material
Non-Public Information
|
12
|
|
|
Section
4.15.
|
Exemption
from Registration; Valid Issuances
|
12
|
|
|
Section
4.16.
|
No
General Solicitation or Advertising in Regard to this
Transaction
|
13
|
|
|
Section
4.17.
|
No
Integrated Offering
|
13
|
|
|
Section
4.18.
|
Acknowledgment
Regarding Investor’s Purchase of Shares
|
13
|
|
ARTICLE
V
|
REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE INVESTOR
|
13
|
|
Section
5.01.
|
Organization
and Standing of the Investor
|
13
|
|
|
Section
5.02.
|
Authorization
and Power
|
13
|
|
|
Section
5.03.
|
No
Conflicts
|
14
|
|
|
Section
5.04.
|
Financial
Capability
|
14
|
|
|
Section
5.05.
|
Information
|
14
|
|
|
Section
5.06.
|
Trading
Restrictions
|
15
|
|
|
Section
5.07.
|
Statutory
Underwriter Status
|
15
|
|
|
Section
5.08.
|
Not
an Affiliate
|
15
|
|
|
Section
5.09.
|
Manner
of Sale
|
15
|
|
|
Section
5.10.
|
Prospectus
Delivery
|
15
|
|
ARTICLE
VI
|
COVENANTS
OF THE COMPANY
|
15
|
|
Section
6.01.
|
Securities
|
15
|
|
|
Section
6.02.
|
Reservation
of Common Stock
|
15
|
iii
TABLE
OF CONTENTS
(Continued)
Page
|
Section
6.03.
|
Registration
and Listing
|
16
|
|
|
Section
6.04.
|
Registration
Statement
|
16
|
|
|
Section
6.05.
|
Compliance
with Laws
|
16
|
|
|
Section
6.06.
|
Other
Financing
|
16
|
|
|
Section
6.07.
|
Prohibited
Transactions
|
17
|
|
|
Section
6.08.
|
Corporate
Existence
|
17
|
|
|
Section
6.09.
|
Non-Disclosure
of Non-Public Information
|
17
|
|
|
Section
6.10.
|
Notice
of Certain Events Affecting Registration; Suspension of Right to
Request a
Draw Down
|
18
|
|
|
Section
6.11.
|
Amendments
to the Registration Statement
|
18
|
|
|
Section
6.12.
|
Prospectus
Delivery
|
18
|
|
ARTICLE
VII
|
CONDITIONS
TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN
|
18
|
|
Section
7.01.
|
Accuracy
of the Company’s Representations and Warranties
|
19
|
|
|
Section
7.02.
|
Performance
by the Company
|
19
|
|
|
Section
7.03.
|
Compliance
with Law
|
19
|
|
|
Section
7.04.
|
Effective
Registration Statement
|
19
|
|
|
Section
7.05.
|
No
Knowledge
|
19
|
|
|
Section
7.06.
|
No
Suspension
|
19
|
|
|
Section
7.07.
|
No
Injunction
|
19
|
|
|
Section
7.08.
|
No
Proceedings or Litigation
|
19
|
|
|
Section
7.09.
|
Sufficient
Shares Registered for Resale
|
19
|
|
|
Section
7.10.
|
Warrant
|
20
|
|
|
Section
7.11.
|
Opinion
of Counsel
|
20
|
|
|
Section
7.12.
|
Accuracy
of Investor’s Representation and Warranties
|
20
|
|
|
Section
7.13.
|
Payment
of Fees
|
20
|
|
ARTICLE
VIII
|
TERMINATION
|
20
|
|
Section
8.01.
|
Term
|
20
|
|
|
Section
8.02.
|
Other
Termination
|
20
|
|
|
Section
8.03.
|
Effect
of Termination
|
21
|
|
|
Section
9.01.
|
Indemnification
|
21
|
|
|
Section
9.02.
|
Notification
of Claims for Indemnification
|
22
|
iv
TABLE
OF CONTENTS
(Continued)
Page
|
ARTICLE
X
|
MISCELLANEOUS
|
23
|
|
Section
10.01.
|
Fees
and Expenses
|
23
|
|
|
Section
10.02.
|
Reporting
Entity for the Common Stock
|
24
|
|
|
Section
10.03.
|
Brokerage
|
24
|
|
|
Section
10.04.
|
Notices
|
24
|
|
|
Section
10.05.
|
Assignment
|
26
|
|
|
Section
10.06.
|
Amendment;
No Waiver
|
26
|
|
|
Section
10.07.
|
Entire
Agreement
|
26
|
|
|
Section
10.08.
|
Severability
|
26
|
|
|
Section
10.09.
|
Title
and Subtitles
|
26
|
|
|
Section
10.10.
|
Counterparts
|
26
|
|
|
Section
10.11.
|
Choice
of Law
|
27
|
|
|
Section
10.12.
|
Specific
Enforcement, Consent to Jurisdiction
|
27
|
|
|
Section
10.13.
|
Survival
|
27
|
|
|
Section
10.14.
|
Publicity
|
27
|
|
|
Section
10.15.
|
Further
Assurances
|
28
|
v
by
and between
KINGSBRIDGE
CAPITAL LIMITED
and
DISCOVERY
LABORATORIES, INC.
dated
as
of April 17, 2006
This
COMMON STOCK PURCHASE AGREEMENT (this “Agreement”)
is
entered into as of the 17th day of April, 2006, by and between KINGSBRIDGE
CAPITAL LIMITED,
an
entity organized and existing under the laws of the British Virgin Islands
(the
“Investor”)
and
DISCOVERY LABORATORIES, INC., a corporation organized and existing under
the
laws of the State of Delaware (the “Company”).
WHEREAS,
the parties desire that, upon the terms and subject to the conditions and
limitations set forth herein, the Company may issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase from
the
Company, up to $50 million worth of shares of Common Stock (as defined below);
and
WHEREAS,
such investments will be made in reliance upon the provisions of
Section 4(2) (“Section 4(2)”)
and
Regulation D (“Regulation
D”)
of the
United States Securities Act of 1933, as amended and the rules and regulations
promulgated thereunder (the “Securities
Act”),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
in Common Stock to be made hereunder; and
WHEREAS,
the parties hereto are concurrently entering into a Registration Rights
Agreement in the form of Exhibit A hereto (the “Registration
Rights Agreement”)
pursuant to which the Company shall register the Common Stock issued and
sold to
the Investor under this Agreement and under the Warrant (as defined below),
upon
the terms and subject to the conditions set forth therein; and
WHEREAS,
in consideration for the Investor’s execution and delivery of, and its
performance of its obligations under, this Agreement, the Company is
concurrently issuing to the Investor a Warrant in the form of Exhibit B hereto
(the “Warrant”)
pursuant to which the Investor may purchase from the Company up to 490,000
shares of Common Stock, upon the terms and subject to the conditions set
forth
therein;
NOW,
THEREFORE, the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
Section
1.01. “2004
Registration Rights Agreement”
shall
mean that certain Registration Rights Agreement dated as of July 7, 2004,
by and
between the Company and the Investor.
Section
1.02. “2004
Stock Purchase Agreement”
shall
mean that certain Common Stock Purchase Agreement dated as of July 7, 2004
by
and between the Company and the Investor.
Section
1.03. “2004
Warrant”
shall
mean that certain warrant dated July 7, 2004, entitling the Investor (or
any
other warrant holder under the 2004 Warrant), on the terms and conditions
and at
the exercise price set forth therein, to purchase from the Company at any
time
during the exercise period (as defined in the ▇▇▇▇ ▇▇▇▇▇▇▇) up to 375,000
shares
of Common Stock.
Section
1.04. “Blackout
Amount”
shall
have the meaning assigned to such term in the Registration Rights
Agreement.
Section
1.05. “Blackout
Shares”
shall
have the meaning assigned to such term in the Registration Rights
Agreement.
Section
1.06. “Certificate”
shall
have the meaning assigned to such term in Section 4.03 hereof.
Section
1.07. “Closing
Date”
means
the date on which this Agreement is executed and delivered by the Company
and
the Investor.
Section
1.08. “Commission”
means
the United States Securities Exchange Commission.
Section
1.09. “Commission
Documents”
shall
have the meaning assigned to such term in Section 4.06 hereof.
Section
1.10. “Commitment
Period”
means
the period commencing on the Effective Date and expiring on the earliest
to
occur of (i) the date on which the Investor shall have purchased Shares
pursuant to this Agreement for an aggregate purchase price equal to the Maximum
Commitment Amount, (ii) the date this Agreement is terminated pursuant to
Article VIII hereof, and (iii) the date occurring thirty-six (36)
months from the Effective Date.
Section
1.11. “Common
Stock”
means
the common stock of the Company, par value $0.001 per share.
Section
1.12. “Condition
Satisfaction Date”
shall
have the meaning assigned to such term in Article VII hereof.
Section
1.13. “Convertible
Security”
shall
have the meaning assigned to such term in Section 6.07 hereof.
2
Section
1.14. “Conversion
Price”
shall
have the meaning assigned to such term in Section 6.07 hereof.
Section
1.15. “Damages”
means
any loss, claim, damage, liability, reasonable costs and expenses (including,
without limitation, reasonable attorneys’ fees and expenses and costs and
expenses of expert witnesses and investigation).
Section
1.16. “Draw
Down”
shall
have the meaning assigned to such term in Section 3.01 hereof.
Section
1.17. “Draw
Down Amount”
means
the actual amount of a Draw Down paid to the Company.
Section
1.18. “Draw
Down Discount Price”
means
(i) 90% of the VWAP on any Trading Day during the Draw Down Pricing Period
when
the VWAP equals to or exceeds $2.00 but is less than or equal to $7.00, (ii)
92%
of the VWAP on any Trading Day during the Draw Down Pricing Period when the
VWAP
exceeds $7.00 but is less than or equal to $10.50 and (iii) 94% of the VWAP
on any Trading Day during the Draw Down Pricing Period when the VWAP exceeds
$10.50.
Section
1.19. “Draw
Down Notice”
shall
have the meaning assigned to such term in Section 3.01 hereof.
Section
1.20. “Draw
Down Pricing Period”
shall
mean, with respect to each Draw Down, a period of eight (8) consecutive Trading
Days beginning on the first Trading Day specified in a Draw Down
Notice.
Section
1.21. “DTC”
shall
mean the Depository Trust Company, or any successor thereto.
Section
1.22. “Effective
Date”
means
the first Trading Day immediately following the date on which the Registration
Statement is declared effective by the Commission.
Section
1.23. “Exchange
Act”
means
the U.S. Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
Section
1.24. “Excluded
Merger or Sale”
shall
have the meaning assigned to such term in the Warrant.
Section
1.25. “Knowledge”
with
respect to the Company, means the actual knowledge of the Company’s Chief
Executive Officer, Chief Financial Officer or any Senior or Executive Vice
President.
Section
1.26. “LIBOR”
means
the offered rate for twelve-month U.S. dollar deposits that appears on Moneyline
Telerate Page 3750 (or such other page as may replace such Moneyline Telerate
Page 3750 for the purpose of displaying comparable rates), as of 11:00 a.m.
(London time) two (2) business days prior to the beginning of the relevant
period.
Section
1.27. “Make
Whole Amount”
shall
have the meaning specified in Section 3.07.
3
Section
1.28. “Market
Capitalization”
means,
as of any Trading Day, the product of (i) the closing sale price of Common
Stock as reported by Bloomberg L.P. using the AQR function and (ii) the
number of outstanding shares of Common Stock of the Company as reported by
Bloomberg L.P. using the DES function.
Section
1.29. “Material
Adverse Effect”
means
any continuing effect on the business, operations, properties or financial
condition of the Company and its subsidiaries that is material and adverse
to
the Company and such subsidiaries, taken as a whole, and/or any condition,
circumstance, or situation that would prohibit or otherwise interfere with
the
ability of the Company to perform any of its obligations under this Agreement,
the Registration Rights Agreement or the Warrant in any material respect;
provided,
that
none of the following shall constitute a “Material Adverse Effect”: (i) the
effects of conditions or events that are generally applicable to the capital,
financial, banking or currency markets or the biotechnology or pharmaceutical
industries, (ii) any changes or effects resulting from the announcement or
consummation of the transactions contemplated by this Agreement, including,
without limitation, any changes or effects associated with any particular
Draw
Down, and (iii) changes in the market price of the Common
Stock.
Section
1.30. “Maximum
Commitment Amount”
means
the lesser of (i) $50 million in aggregate Draw Down Amounts or (ii)
that number of shares of Common Stock (as adjusted for stock splits, stock
combinations, stock dividends and recapitalizations that occur on or after
the
date of this Agreement) that equals the sum of 11,677,047 minus the number
of
Blackout Shares, if any, delivered to the Investor under the Registration
Rights
Agreement, provided,
however, that the Maximum Commitment Amount shall not exceed that number
of
shares of Common Stock which the Company may issue pursuant to the Agreement
and
the transactions contemplated herein, without breaching the Company’s
obligations under the rules and regulations of the Primary Market.
Section
1.31. “Maximum
Draw Down Amount”
means
the lesser of (i) 2.5% of the Company’s Market Capitalization at the time of the
Draw Down, or (ii) $10 million.
Section
1.32. “NASD”
means
the National Association of Securities Dealers, Inc.
Section
1.33. “Permitted
Transaction”
shall
have the meaning assigned to such term in Section 6.06 hereof.
Section
1.34. “Person”
means
any individual, corporation, partnership, limited liability company,
association, trust or other entity or organization, including any government
or
political subdivision or an agency or instrumentality thereof.
Section
1.35. “Principal
Market”
means
the Nasdaq
National Market,
the
Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market
for
the Common Stock.
Section
1.36. “Prohibited
Transaction”
shall
have the meaning assigned to such term in Section 6.07 hereof.
Section
1.37. “Prospectus”
as
used
in this Agreement means the prospectus in the form included in the Registration
Statement, as supplemented from time to time pursuant to Rule 424(b) of the
Securities Act (including, without limitation, any information that may have
been omitted from such prospectus pursuant to Rules 430(a), 430(b) and 430(c)
of
the Securities Act).
4
Section
1.38. “Registrable
Securities”
means
(i) the Shares, (ii) the Warrant Shares, and (iii) any securities
issued or issuable with respect to any of the foregoing by way of exchange,
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
As
to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (w) the Registration Statement has
been
declared effective by the Commission and such Registrable Securities have
been
disposed of pursuant to the Registration Statement, (x) such Registrable
Securities have been sold under circumstances under which all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the
Securities Act (“Rule
144”)
are
met, (y) such time as such Registrable Securities have been otherwise
transferred to holders who may trade such shares without restriction under
the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive legend
or
(z) in the opinion of inside or outside counsel to the Company such
Registrable Securities may be sold without registration and pursuant to Rule
144(k), without any time, volume or manner limitations of Rule 144 (or any
similar provision then in effect) under the Securities Act.
Section
1.39. “Registration
Rights Agreement”
shall
have the meaning set forth in the recitals of this Agreement.
Section
1.40. “Registration
Statement”
shall
have the meaning assigned to such term in the Registration Rights
Agreement.
Section
1.41. “Regulation
D”
shall
have the meaning set forth in the recitals of this Agreement.
Section
1.42. “Section 4(2)”
shall
have the meaning set forth in the recitals of this Agreement.
Section
1.43. “Securities
Act”
shall
have the meaning set forth in the recitals of this Agreement.
Section
1.44. “Settlement
Date”
shall
have the meaning assigned to such term in Section 3.05 hereof.
Section
1.45. “Shares”
means
the shares of Common Stock that are and/or may be purchased
hereunder.
Section
1.46. “Trading
Day”
means
any day other than a Saturday or a Sunday on which the Principal Market is
open
for trading in equity securities.
Section
1.47. “VWAP”
means
the volume weighted average price (the aggregate sales price of all trades
of
Common Stock during each Trading Day divided by the total number of shares
of
Common Stock traded during such Trading Day) of the Common Stock during any
Trading Day as reported by Bloomberg, L.P. using the AQR function.
Section
1.48. “Warrant”
shall
have the meaning set forth in the recitals of this Agreement.
5
Section
1.49. “Warrant
Shares”
means
the shares of Common Stock issuable to the Investor upon exercise of the
Warrant.
ARTICLE
II
PURCHASE
AND SALE OF COMMON STOCK; TERMINATION OF 2004 STOCK PURCHASE
AGREEMENT
Section
2.01. Purchase
and Sale of Stock.
Upon
the terms and subject to the conditions set forth in this Agreement, the
Company
shall, to the extent it elects to make Draw Downs in accordance with
Article III hereof, issue and sell to the Investor and the Investor shall
purchase from the Company Common Stock for an aggregate (in Draw Down Amounts)
of up to the Maximum Commitment Amount, consisting of purchases based on
Draw
Downs in accordance with Article III hereof.
Section
2.02. Closing.
In
consideration of and in express reliance upon the representations, warranties,
covenants, terms and conditions of this Agreement, the Company agrees to
issue
and sell to the Investor, and the Investor agrees to purchase from the Company,
that number of the Shares to be issued in connection with each Draw Down.
The
execution and delivery of this Agreement (the “Closing”)
shall
take place on April 17, 2006 (the “Closing
Date”).
Each
party shall deliver at or prior to the Closing all documents, instruments
and
writings required to be delivered at the Closing by such party pursuant to
this
Agreement.
Section
2.03. Registration
Statement and Prospectus.
The
Company shall prepare and file with the Commission the Registration Statement
(including the Prospectus) in accordance with the provisions of the Securities
Act and the Registration Rights Agreement.
Section
2.04. Warrant.
On the
Closing Date, the Company shall issue and deliver the Warrant to the
Investor.
Section
2.05. Blackout
Shares.
The
Company shall deliver any Blackout Amount or issue and deliver any Blackout
Shares to the Investor in accordance with Section 1(e) of the Registration
Rights Agreement.
Section
2.06. Termination
of 2004 Stock Purchase Agreement.
Effective on the date on which the Registration Statement is declared effective
by the Commission, the Investor and the Company agree that the 2004 Stock
Purchase Agreement shall terminate and shall become void and of no further
force
and effect. Notwithstanding termination of the 2004 Stock Purchase Agreement,
the 2004 Warrant, the 2004 Registration Rights Agreement and the registration
statement of the Company that was filed pursuant to the 2004 Stock Purchase
Agreement (the “2004
Registration Statement”)
shall
continue in full force and effect. Upon the occurrence of the earlier of
(a) the
date on which the Shares registered under the 2004 Registration Statement
shall
cease to be Registrable Securities under the 2004 Registration Rights Agreement
and (b) such time as the Investor shall have completed the distribution of
all
shares of Common Stock issued to the Investor under the 2004 Stock Purchase
Agreement, including the shares issued under the 2004 Warrant, the Company
shall
withdraw and terminate such 2004 Registration Statement and, upon such
withdrawal, the 2004 Registration Rights Agreement shall terminate and be
of no
further force and effect, except that Article III of the 2004 Registration
Rights Agreement shall survive such termination. The Investor shall notify
the
Company in writing within ten (10) Trading Days after the Investor shall
have
completed the distribution of all shares of Common Stock purchased under
the
2004 Stock Purchase Agreement or issued to the Investor pursuant to the 2004
Warrant.
6
ARTICLE
III
DRAW
DOWN TERMS
Subject
to the satisfaction of the conditions hereinafter set forth in this Agreement,
the parties agree as follows:
Section
3.01. Draw
Down Notice.
The
Company may, in its sole discretion, issue a Draw Down Notice (defined below)
specifying the dollar amount it elects to raise by selling Shares to the
Investor (each such election a “Draw
Down”)
up to
a Draw Down Amount equal to the Maximum Draw Down Amount, which Draw Down
the
Investor will be obligated to accept. The Company shall inform the Investor
in
writing, via e-mail to the addresses set forth in Section 10.04 and via
facsimile transmission to the number set forth in Section 10.04, with a copy
to
the Investor’s counsel, as to such Draw Down Amount before commencement of
trading on the first Trading Day of the related Draw Down Pricing Period
(the
“Draw
Down Notice”).
In
addition to the Draw Down Amount, each Draw Down Notice shall designate the
first Trading Day of the Draw Down Pricing Period. In no event shall any
Draw
Down Amount exceed the Maximum Draw Down Amount. Each Draw Down Notice shall
be
accompanied by a certificate, signed by the Chief Executive Officer or Chief
Financial Officer and dated, as of the date of such Draw Down Notice, in
the
form of Exhibit C
hereof.
Section
3.02. Number
of Shares.
Subject
to Section 3.06(b), the number of Shares to be issued in connection with
each Draw Down shall be equal to the sum of the number of shares issuable
on
each Trading Day of the Draw Down Pricing Period. Subject to Section 3.06(b),
the number of shares issuable on a Trading Day during a Draw Down Pricing
Period
shall be equal to the quotient of one eighth (1/8th)
of the
Draw Down Amount divided by the Draw Down Discount Price for such Trading
Day.
Section
3.03. Limitation
on Draw Downs.
Only
one Draw Down shall be permitted for each Draw Down Pricing Period.
Section
3.04. Trading
Cushion.
Unless
the parties agree in writing otherwise, there shall be a minimum of three
(3)
Trading Days between the expiration of any Draw Down Pricing Period and the
beginning of the next succeeding Draw Down Pricing Period.
Section
3.05. Settlement.
Subject
to Section 3.06(b), the number of Shares purchased by the Investor in any
Draw
Down shall be determined and settled on two separate dates. Shares purchased
by
the Investor during the first four Trading Days of any Draw Down Pricing
Period
shall be determined and settled no later than the sixth Trading Day of such
Draw
Down Pricing Period. Shares purchased by the Investor during the second four
Trading Days of any Draw Down Pricing Period shall be determined and settled
no
later than the second Trading Day after the last Trading Day of such Draw
Down
Pricing Period. Each date on which settlement of the purchase and sale of
Shares
occurs hereunder being referred to as a “Settlement
Date.”
The
Investor shall provide the Company with delivery instructions for the Shares
to
be issued at each Settlement Date at least two Trading Days in advance of
such
Settlement Date. The number of Shares actually issued shall be rounded to
the
nearest whole number of Shares.
Section
3.06. Delivery
of Shares; Payment of Draw Down Amount.
7
(a) On
each
Settlement Date, the Company shall deliver the Shares purchased by the Investor
to the Investor or its designees exclusively via book-entry through the DTC
to
an account designated by the Investor, and upon receipt of the Shares, the
Investor shall cause payment therefor to be made to the Company's designated
account by wire transfer of immediately available funds, if the Shares are
received by the Investor no later than 1:00 p.m. (Eastern Time), or next
day
available funds, if the Shares are received thereafter. Upon the request
of the
Company, the Investor will cause its bank or other liquidity provider to
provide
to the Company confirmation that it has received irrevocable instructions
from
the Investor to cause payment for the Shares to be made as set forth above
immediately following confirmation by such bank or other liquidity provider
that
such Shares have been delivered through the DTC in unrestricted
form.
(b)
For each
Trading Day during a Draw Down Pricing Period that the VWAP is less than
the
greater of (i) 85% of the Closing Price of the Company’s Common Stock on
the Trading Day immediately preceding the commencement of such Draw Down
Pricing
Period, or (ii) $2.00, such Trading Day shall not be used in calculating
the number of Shares to be issued in connection with such Draw Down, and
the
Draw Down Amount in respect of such Draw Down Pricing Period shall be reduced
by
one eighth (1/8th)
of the
initial Draw Down Amount specified in the Draw Down Notice. If trading in
the
Company’s Common Stock is suspended for any reason for more than three (3)
consecutive or non-consecutive hours during any Trading Day during a Draw
Down
Pricing Period, such Trading Day shall not be used in calculating the number
of
Shares to be issued in connection with such Draw Down, and the Draw Down
Amount
in respect of such Draw Down Pricing Period shall be reduced by one eighth
(1/8th) of the initial Draw Down Amount specified in the Draw Down
Notice.
Section
3.07. Failure
to Deliver Shares.
If, on
any Settlement Date, the Company fails to take all actions within the reasonable
control of the Company to cause the delivery of the Shares purchased by the
Investor, and such failure is not cured within two (2) Trading Days following
such Settlement Date, the Company shall pay to the Investor on demand in
cash by
wire transfer of immediately available funds to an account designated by
the
Investor the “Make
Whole Amount”
(as
defined below); provided,
however,
that in
the event that the Company is prevented from delivering Shares in respect
of any
such Settlement Date in a timely manner by any fact or circumstance that
is
reasonably within the control of, or directly attributable to, the Investor,
then such two (2) Trading Day period shall be automatically extended until
such
time as such fact or circumstance is cured. As used herein, the Make Whole
Amount shall be an amount equal to the sum of (i) the Draw Down Amount actually
paid by the Investor in respect of such Shares plus (ii) an amount equal
to the
actual loss suffered by the Investor in respect of sales to subsequent
purchasers, pursuant to transactions entered into before the Settlement Date,
of
the Shares that were required to be delivered by the Company, which shall
be
based upon documentation reasonably satisfactory to the Company demonstrating
the difference (if greater than zero) between (A) the price per share paid
by
the Investor to purchase such number of shares of Common Stock necessary
for the
Investor to meet its share delivery obligations to such subsequent purchasers
minus (B) the average Draw Down Discount Price during the applicable Draw
Down
Pricing Period in respect of such Settlement Date. In the event that the
Make
Whole Amount is not paid within two (2) Trading Days following a demand therefor
from the Investor, the Make Whole Amount shall accrue interest compounded
daily
at a rate of LIBOR plus 300 basis points, per annum up to and including the
date
on which the Make Whole Amount is actually paid. Notwithstanding anything
to the
contrary set forth in this Agreement, in the event that the Company pays
the
Make Whole Amount (plus interest, if applicable) in respect of any Settlement
Date in accordance with this Section 3.07, such payment shall be the Investor’s
sole remedy in respect of the Company’s failure to deliver Shares in respect of
such Settlement Date, and the Company shall not be obligated to deliver such
Shares.
8
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company hereby makes the following representations and warranties to the
Investor:
Section
4.01. Organization,
Good Standing and Power.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Except as set forth in the Commission Documents (as
defined below), as of the date hereof the Company does not own more than
fifty
percent (50%) of the outstanding capital stock of or control any other business
entity, other than any wholly-owned subsidiary that is not “significant” within
the meaning of Regulation S-X promulgated by the Commission. The Company
is duly
qualified as a foreign corporation to do business and is in good standing
in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which
the
failure so to qualify or be in good standing would not have a Material Adverse
Effect.
Section
4.02. Authorization;
Enforcement.
(i) The Company has the requisite corporate power and authority to enter
into and perform its obligations under this Agreement, the Registration Rights
Agreement and the Warrant and to issue the Shares, the Warrant, the Warrant
Shares and any Blackout Shares; (ii) the execution and delivery of this
Agreement and the Registration Rights Agreement, and the execution, issuance
and
delivery of the Warrant, by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by
all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required (other than
as
contemplated by Section 6.05); and (iii) each of this Agreement and
the Registration Rights Agreement has been duly executed and delivered, and
the
Warrant has been duly executed, issued and delivered, by the Company and
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may
be
limited by applicable bankruptcy, securities, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors’ rights and
remedies, or indemnification or by other equitable principles of general
application.
Section
4.03. Capitalization.
The
authorized capital stock of the Company and the shares thereof issued and
outstanding as of December 31, 2005 are set forth in the Commission Documents.
All of the outstanding shares of Common Stock have been duly and validly
authorized and issued, and are fully paid and non-assessable. Except as set
forth in this Agreement or in the Commission Documents, as of December 31,
2005,
no shares of Common Stock were entitled to preemptive rights or registration
rights, and there were no outstanding options, warrants, scrip, rights issued
by
the Company to subscribe to, call or commitments of any character whatsoever
issued by the Company relating to, or securities or rights convertible into
or
exchangeable for or giving any right to subscribe for, any shares of capital
stock of the Company. Except as set forth in this Agreement, or in the
Commission Documents, as of December 31, 2005, there were no contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the Company
or
options, securities or rights convertible into or exchangeable for or giving
any
right to subscribe for any shares of capital stock of the Company. Except
as
described in the Commission Documents, as of the date hereof the Company
is not
a party to any agreement granting registration rights to any Person with
respect
to any of its equity or debt securities. Except as set forth in the Commission
Documents or as previously disclosed to the Investor in writing, as of the
date
hereof the Company is not a party to, and it has no Knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of
the
Company. The offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued during the twenty-four
month
period immediately prior to the Closing complied in all material respects
with
all applicable federal and state securities laws, and no stockholder has
a right
of rescission or damages with respect thereto that could reasonably be expected
to have a Material Adverse Effect. The Company has furnished or made available
to the Investor true and correct copies of the Company’s Certificate of
Incorporation, as amended and in effect on the date hereof (the “Certificate”),
and
the Company’s Bylaws, as amended and in effect on the date hereof (the
“Bylaws”).
9
Section
4.04. Issuance
of Shares.
Subject
to Section 6.05, the Shares, the Warrant and the Warrant Shares have been,
and
any Blackout Shares will be, duly authorized by all necessary corporate action
and, when issued and paid for in accordance with the terms of this Agreement,
the Registration Rights Agreement and the Warrant, and subject to, and in
reliance on, the representations, warranties and covenants made herein by
the
Investor, the Shares and the Warrant Shares shall be validly issued and
outstanding, fully paid and non-assessable, and the Investor shall be entitled
to all rights accorded to a holder of shares of Common Stock.
Section
4.05. No
Conflicts.
The
execution, delivery and performance of this Agreement, the Registration Rights
Agreement, the Warrant and any other document or instrument contemplated
hereby
or thereby, by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not: (i) violate any
provision of the Certificate or Bylaws, (ii) conflict with, or constitute a
default (or an event which 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 of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party where such default or conflict would constitute
a Material Adverse Effect, (iii) create or impose a lien, charge or
encumbrance on any property of the Company under any agreement or any commitment
to which the Company is a party or by which the Company is bound or by which
any
of its respective properties or assets are bound which would constitute a
Material Adverse Effect, (iv) result in a violation of any federal, state,
local or foreign statute, rule, regulation, order, writ, judgment or decree
(including federal and state securities laws and regulations) applicable
to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries are bound where such violation would
constitute a Material Adverse Effect, or (v) require any consent of any
third-party that has not been obtained pursuant to any material contract
to
which the Company is a party or to which any of its assets, operations or
management may be bound where the failure to obtain any such consent would
constitute a Material Adverse Effect. The Company is not required under federal,
state or local law, rule or regulation to obtain any consent, authorization
or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement, the Registration Rights Agreement or the Warrant, or
issue
and sell the Shares, the Warrant Shares or the Blackout Shares in accordance
with the terms hereof and thereof (other than any filings that may be required
to be made by the Company with the Commission, the NASD/Nasdaq or state
securities commissions subsequent to the Closing, and, any registration
statement (including any amendment or supplement thereto) or any other filing
or
consent which may be filed pursuant to this Agreement, the Registration Rights
Agreement or the Warrant); provided
that,
for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Investor herein.
10
Section
4.06. Commission
Documents, Financial Statements.
The
Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and since December 31, 2004 the Company has timely filed all
reports, schedules, forms, statements and other documents required to be
filed
by it with the Commission pursuant to the reporting requirements of the Exchange
Act, including material filed pursuant to Section 13(a) or 15(d) of the
Exchange Act (all of the foregoing, including filings incorporated by reference
therein, being referred to herein as the “Commission
Documents”).
Except as previously disclosed to the Investor in writing, since December
31,
2004 the Company has maintained all requirements for the continued listing
or
quotation of its Common Stock, and such Common Stock is currently listed
or
quoted on the Nasdaq National Market. To the extent not available on the
Commission’s ▇▇▇▇▇ filing system, the Company has made available to the Investor
true and complete copies of the Commission Documents filed with the Commission
since December 31, 2004 and prior to the Closing Date. As of its date, the
Company’s Form 10-K for the year ended December 31, 2005 complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the Commission promulgated thereunder applicable to such
document, and, as of its date, after giving effect to the information disclosed
and incorporated by reference therein, to the Company’s Knowledge such
Form 10-K did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order
to
make the statements therein, in light of the circumstances under which they
were
made, not misleading. As of their respective dates, to the Company’s Knowledge
the financial statements of the Company included in the Commission Documents
filed with the Commission since December 31, 2004 complied as to form and
substance in all material respects with applicable accounting requirements
and
the published rules and regulations of the Commission or other applicable
rules
and regulations with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States (“GAAP”)
applied on a consistent basis during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto
or
(ii) in the case of unaudited interim statements, to the extent they may
not include footnotes or may be condensed or summary statements), and fairly
present in all material respects the financial position of the Company and
its
subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
Section
4.07. No
Material Adverse Change.
Except
as disclosed in the Commission Documents, since December 31, 2005 no event
or
series of events has or have occurred that would, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section
4.08. No
Undisclosed Liabilities.
To the
Company’s Knowledge, neither the Company nor any of its subsidiaries has any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) that would
be
required to be disclosed on a balance sheet of the Company or any subsidiary
(including the notes thereto) in conformity with GAAP and are not disclosed
in
the Commission Documents, other than those incurred in the ordinary course
of
the Company’s or its subsidiaries respective businesses since December 31, 2005
or which, individually or in the aggregate, do not or would not have a Material
Adverse Effect on the Company.
Section
4.09. No
Undisclosed Events or Circumstances.
To the
Company’s Knowledge, no event or circumstance has occurred or exists with
respect to the Company or its subsidiaries or their respective businesses,
properties, operations or financial condition, which, under applicable law,
rule
or regulation, requires public disclosure or announcement by the Company
but
which has not been so publicly announced or disclosed and which, individually
or
in the aggregate, would have a Material Adverse Effect on the
Company.
11
Section
4.10. Actions
Pending.
There
is no action, suit, claim, investigation or proceeding pending or, to the
Knowledge of the Company, threatened against the Company or any subsidiary
which
questions the validity of this Agreement or the transactions contemplated
hereby
or any action taken or to be taken pursuant hereto or thereto. Except as
set
forth in the Commission Documents, there is no action, suit, claim,
investigation or proceeding pending or, to the Knowledge of the Company,
threatened against or involving the Company, any subsidiary or any of their
respective properties or assets that could be reasonably expected to have
a
Material Adverse Effect on the Company. Except as set forth in the Commission
Documents or as previously disclosed to the Investor in writing, no judgment,
order, writ, injunction or decree or award has been issued by or, to the
Knowledge of the Company, requested of any court, arbitrator or governmental
agency which could be reasonably expected to result in a Material Adverse
Effect.
Section
4.11. Compliance
with Law.
The
businesses of the Company and its subsidiaries have been and are presently
being
conducted in accordance with all applicable federal, state and local
governmental laws, rules, regulations and ordinances, except as set forth
in the
Commission Documents or such that would not reasonably be expected to cause
a
Material Adverse Effect. Except as set forth in the Commission Documents,
the
Company and each of its subsidiaries have all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted by it, except
for such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, the failure to possess which,
individually or in the aggregate, could not reasonably be expected to have
a
Material Adverse Effect.
Section
4.12. Certain
Fees.
Except
as expressly set forth in this Agreement, no brokers, finders or financial
advisory fees or commissions will be payable by the Company or any of its
subsidiaries in respect of the transactions contemplated by this
Agreement.
Section
4.13. Disclosure.
To the
Company’s Knowledge, neither this Agreement nor any other documents,
certificates or instruments filed with the Commission or furnished to the
Investor by or on behalf of the Company or any subsidiary in connection with
the
transactions contemplated by this Agreement contain any untrue statement
of a
material fact or omit to state a material fact necessary in order to make
the
statements made herein or therein, in the light of the circumstances under
which
they were made herein or therein, not misleading.
Section
4.14. Material
Non-Public Information.
Except
for this Agreement and the transactions contemplated hereby, neither the
Company
nor its employees have disclosed to the Investor, any material non-public
information that, according to applicable law, rule or regulation, should
have
been disclosed publicly by the Company prior to the date hereof but which
has
not been so disclosed.
Section
4.15. Exemption
from Registration; Valid Issuances.
Subject
to, and in reliance on, the representations, warranties and covenants made
herein by the Investor, the issuance and sale of the Shares, the Warrant,
the
Warrant Shares and any Blackout Shares in accordance with the terms and on
the
bases of the representations and warranties set forth in this Agreement,
may and
shall be properly issued pursuant to Section 4(2), Regulation D and/or any
other applicable federal and state securities laws. Neither the sales of
the
Shares, the Warrant, the Warrant Shares or any Blackout Shares pursuant to,
nor
the Company’s performance of its obligations under, this Agreement, the
Registration Rights Agreement, or the Warrant shall (i) result in the
creation or imposition of any liens, charges, claims or other encumbrances
upon
the Shares, the Warrant Shares, any Blackout Shares or any of the assets
of the
Company, or (ii) except as previously disclosed to the Investor in writing,
entitle the holders of any outstanding shares of capital stock of the Company
to
preemptive or other rights to subscribe to or acquire the shares of Common
Stock
or other securities of the Company.
12
Section
4.16. No
General Solicitation or Advertising in Regard to this
Transaction.
Except
for the Registration Statement, neither the Company nor any of its affiliates
or
any person acting on its or their behalf (i) has conducted any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or general
advertising with respect to any of the Shares, the Warrant, the Warrant Shares
or any Blackout Shares or (ii) has made any offers or sales of any security
or solicited any offers to buy any security under any circumstances that
would
require registration of the Shares under the Securities Act.
Section
4.17. No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security
or
solicited any offers to buy any security, other than pursuant to this Agreement
and employee benefit plans, under circumstances that would require integration
under the Securities Act of shares of the Common Stock issuable hereunder
with
any other offers or sales of securities of the Company.
Section
4.18. Acknowledgment
Regarding Investor’s Purchase of Shares.
The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of an arm’s length investor with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that
the
Investor is not acting as a financial advisor or fiduciary of the Company
(or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder, and any advice given by the Investor or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Investor’s purchase of the
Shares.
ARTICLE
V
REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE INVESTOR
The
Investor hereby makes the following representations, warranties and covenants
to
the Company:
Section
5.01. Organization
and Standing of the Investor.
The
Investor is a company duly organized, validly existing and in good standing
under the laws of the British Virgin Islands.
Section
5.02. Authorization
and Power.
The
Investor has the requisite power and authority to enter into and perform
its
obligations under this Agreement, the Warrant and the Registration Rights
Agreement and to purchase the Shares, the Warrant and the Warrant Shares
in
accordance with the terms hereof and thereof. The execution, delivery and
performance of this Agreement, the Warrant and the Registration Rights Agreement
by Investor and the consummation by it of the transactions contemplated hereby
or thereby have been duly authorized by all necessary corporate action, and
no
further consent or authorization of the Investor, its Board of Directors
or
stockholders is required. Each of this Agreement and the Registration Rights
Agreement has been duly executed and delivered by the Investor and constitutes
a
valid and binding obligation of the Investor enforceable against the Investor
in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership, or similar laws relating to, or affecting
generally the enforcement of creditor’s rights and remedies or by other
equitable principles of general application.
13
Section
5.03. No
Conflicts.
The
execution, delivery and performance of this Agreement, the Registration Rights
Agreement, the Warrant and any other document or instrument contemplated
hereby,
by the Investor and the consummation of the transactions contemplated thereby
do
not (i) violate any provision of the Investor’s charter documents or
bylaws, (ii) conflict with, or constitute a default (or an event which 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 of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Investor is a party,
(iii) create or impose a lien, charge or encumbrance on any property of the
Investor under any agreement or any commitment to which the Investor is a
party
or by which the Investor is bound or by which any of its respective properties
or assets are bound, (iv) result in a violation of any federal, state,
local or foreign statute, rule, regulation, order, writ, judgment or decree
(including federal and state securities laws and regulations) applicable
to the
Investor or by which any property or asset of the Investor are bound or
affected, or (v) require the consent of any third-party that has not been
obtained pursuant to any material contract to which Investor is subject or
to
which any of its assets, operations or management may be subject. The Investor
is not required under federal, state, foreign or local law, rule or regulation
to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or to purchase
the Shares or the Warrant in accordance with the terms hereof, provided
that,
for purposes of the representation made in this sentence, the Investor is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Company herein.
Section
5.04. Financial
Capability.
The
Investor has the financial capability to perform all of its obligations under
this Agreement, including the capability to purchase the Shares, the Warrant
and
the Warrant Shares in accordance with the terms hereof. The Investor has
such
knowledge and experience in business and financial matters that it is capable
of
evaluating the merits and risks of an investment in Common Stock. The Investor
is an “accredited investor” as defined in Regulation D. The Investor is a
“sophisticated investor” as described in Rule 506(b)(2)(ii) of Regulation
D. The Investor acknowledges that an investment in the Common Stock and the
Warrant is speculative and involves a high degree of risk.
Section
5.05. Information.
The
Investor and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Shares, the Warrant and the Warrant
Shares
which have been requested by the Investor. The Investor has reviewed or received
copies of the Commission Documents. The Investor and its advisors, if any,
have
been afforded the opportunity to ask questions of the Company. The Investor
has
sought such accounting, legal and tax advice as it has considered necessary
to
make an informed investment decision with respect to its acquisition of the
Shares, the Warrant and the Warrant Shares. Except for this Agreement and
the
transactions contemplated hereby, the Company has not disclosed to the Investor
any material non-public information that, according to applicable law, rule
or
regulation, should have been disclosed publicly by the Company prior to the
date
hereof but which has not been so disclosed. The Investor understands that
it
(and not the Company) shall be responsible for its own tax liabilities that
may
arise as a result of this investment or the transactions contemplated by
this
Agreement.
14
Section
5.06. Trading
Restrictions.
The
Investor covenants that neither the Investor nor any of its affiliates nor
any
entity managed or controlled by the Investor will, or cause or assist any
Person
to, enter into or execute any “short sale” (as such term is defined in Rule 200
of Regulation SHO, or any successor regulation, promulgated by the Commission
under the Exchange Act) of any securities of the Company.
Section
5.07. Statutory
Underwriter Status.
The
Investor acknowledges that, pursuant to the Commission’s current interpretations
of the Securities Act, the Investor will be disclosed as an “underwriter” within
the meaning of the Securities Act in the Registration Statement (and amendments
thereto) and in any Prospectus contained therein to the extent required by
applicable law.
Section
5.08. Not
an
Affiliate.
The
Investor is not an officer, director or “affiliate” (as defined in Rule 405 of
the Securities Act) of the Company.
Section
5.09. Manner
of Sale.
At no
time was Investor presented with or solicited by or through any leaflet,
public
promotional meeting, television advertisement or any other form of general
solicitation or advertising.
Section
5.10. Prospectus
Delivery.
The
Investor agrees that unless the Shares and Warrant Shares are eligible for
resale pursuant to all the conditions of Rule 144, it will resell the Shares
and
Warrant Shares only pursuant to the Registration Statement, in a manner
described under the caption “Plan of Distribution” in the Registration
Statement, and in a manner in compliance with all applicable securities laws,
including, without limitation, the prospectus delivery requirements of the
Securities Act and the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ restrictions of the Exchange Act.
ARTICLE
VI
COVENANTS
OF THE COMPANY
The
Company covenants with the Investor as follows, which covenants are for the
benefit of the Investor and its permitted assignees (as defined
herein):
Section
6.01. Securities.
The
Company shall notify the Commission and the Principal Market, if and as
applicable, in accordance with their rules and regulations, of the transactions
contemplated by this Agreement, and shall use commercially reasonable efforts
to
take all other necessary action and proceedings as may be required and permitted
by applicable law, rule and regulation, for the legal and valid issuance
of the
Shares, the Warrant Shares and the Blackout Shares, if any, to the
Investor.
Section
6.02. Reservation
of Common Stock.
As of
the date hereof, the Company has available and the Company shall reserve
and
keep available at all times, free of preemptive rights and other similar
contractual rights of stockholders, shares of Common Stock for the purpose
of
enabling the Company to satisfy any obligation to issue the Shares in connection
with all Draw Downs contemplated hereunder and the Warrant Shares. The number
of
shares so reserved from time to time, as theretofore increased or reduced
as
hereinafter provided, may be reduced by the number of shares actually delivered
hereunder.
15
Section
6.03. Registration
and Listing.
During
the Commitment Period, the Company shall use commercially reasonable efforts:
(i) to take all action necessary to cause its Common Stock to continue to
be registered under Section 12(b) or 12(g) of the Exchange Act,
(ii) to comply in all material respects with its reporting and filing
obligations under the Exchange Act, (iii) to prevent the termination or
suspension of such registration, or the termination or suspension of its
reporting and filing obligations under the Exchange Act or Securities Act
(except as expressly permitted herein). The Company shall use commercially
reasonable efforts to maintain the listing and trading of its Common Stock
and
the listing of the Shares purchased by Investor hereunder on the Principal
Market (including, without limitation, maintaining sufficient net tangible
assets) and to comply in all material respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the NASD and the
Principal Market. The Company will not be required to carry out any action
pursuant to this Agreement, the Registration Rights Agreement or the Warrant
that would adversely impact the listing of the Company’s securities on the
Principal Market as now in effect, and as may be changed by the Company in
the
future in the Company’s discretion.
Section
6.04. Registration
Statement.
Without
the prior written consent of the Investor, the Registration Statement shall
be
used solely in connection with the transactions between the Company and the
Investor contemplated hereby.
Section
6.05. Compliance
with Laws.
(a) The
Company shall comply, and cause each subsidiary to comply, with all applicable
laws, rules, regulations and orders, noncompliance with which could reasonably
be expected to have a Material Adverse Effect.
(b) Without
the consent of its stockholders in accordance with NASD rules, the Company
will
not be obligated to issue, and the Investor will not be obligated to purchase,
any Shares or Blackout Shares which would result in the issuance under this
Agreement, the Warrant and the Registration Rights Agreement of Shares, Warrant
Shares and Blackout Shares (collectively) representing more than the applicable
percentage under the rules of the NASD, including, without limitation, NASD
Rule
4350(i), that would require stockholder approval of the issuance thereof.
Section
6.06. Other
Financing.
(a) Nothing
in this Agreement shall be construed to restrict the right of the Company
to
offer, sell and/or issue securities of any kind whatsoever, provided such
transaction is not a Prohibited Transaction (as defined below) (any such
transaction that is not a Prohibited Transaction is referred to in this
Agreement as a “Permitted
Transaction”).
Without limiting the generality of the preceding sentence, the Company may,
without the prior written consent of the Investor, (i) establish stock
option or award plans or agreements (for directors, employees, consultants
and/or advisors), and issue securities thereunder, and amend such plans or
agreements, including increasing the number of shares available thereunder,
(ii) issue equity securities to finance, or otherwise in connection with,
the acquisition of one or more other companies, equipment, technologies or
lines
of business, (iii) issue shares of Common Stock and/or Preferred Stock in
connection with the acquisition of products, licenses, equipment or other
assets
and strategic partnerships or joint ventures; (iv) issue shares of Common
and/or Preferred Stock to consultants and/or advisors as consideration for
services rendered or to be rendered, (v) issue and sell equity or debt
securities in a public offering, (vi) issue and sell and equity or debt
securities in a private placement (other than in connection with any Prohibited
Transaction), (vii) issue equity securities to equipment lessors, equipment
vendors, banks or similar lending institutions in connection with leases
or
loans, or in connection with strategic commercial or licensing transactions,
(viii) issue securities in connection with any stock split, stock dividend,
recapitalization, reclassification or similar event by the Company, and
(ix) issue shares of Common Stock to the Investor under any other agreement
entered into between the Investor and the Company.
16
(b) Notwithstanding
the foregoing, other than in the ordinary course of the Company’s business, the
Company shall not engage in any Permitted Transaction involving the issuance,
sale, disposition or other transaction in the capital markets (whether public
or
private) involving the Common Stock or any other capital or debt securities
of
the Company during any Draw Down Pricing Period.
Section
6.07. Prohibited
Transactions.
During
the term of this Agreement, the Company shall not enter into any Prohibited
Transaction without the prior written consent of the Investor, which consent
may
be withheld at the sole discretion of the Investor. For the purposes of this
Agreement, the term “Prohibited
Transaction”
shall
refer to the issuance by the Company of any “future priced securities,” which
shall mean the issuance of shares of Common Stock or securities of any type
whatsoever that are, or may become, convertible or exchangeable into shares
of
Common Stock where the purchase, conversion or exchange price for such Common
Stock is determined using any floating discount or other post-issuance
adjustable discount to the market price of Common Stock, including, without
limitation, pursuant to any equity line or other financing that is substantially
similar to the financing provided for under this Agreement, provided
that any
future issuance by the Company of a convertible security ("Convertible
Security")
that
contains provisions that adjust the conversion price of such Convertible
Security ("Conversion
Price")
in the
event of stock splits, dividends, distributions or similar events or pursuant
to
anti-dilution provisions shall not be a Prohibited Transaction for purposes
of
this Section 6.07 so long as such Convertible Security does not contain a
provision that adjusts the Conversion Price as a result of any decline in
the
market price of the Common Stock after the issue date of the Convertible
Security, other than a decline resulting directly from stock splits, dividends,
distributions or similar events including, without limitation, the type of
conversion price adjustments customarily found in a firm commitment Rule
144A offering to qualified institutional buyers.
Section
6.08. Corporate
Existence.
The
Company shall take all steps necessary to preserve and continue the corporate
existence of the Company; provided,
however,
that
nothing in this Agreement shall be deemed to prohibit the Company from engaging
in any Excluded Merger or Sale with another Person provided that in the event
of
an Excluded Merger or Sale, if the surviving, successor or purchasing Person
does not agree to assume the obligations under the Warrant, then the Company
shall deliver a notice to the Investor at least ten (10) days before the
consummation of such Excluded Merger or Sale, the Investor may exercise the
Warrant at any time before the consummation of such Excluded Merger or Sale
(and
such exercise may be made contingent upon the consummation of such Excluded
Merger or Sale), and any portion of the Warrant that has not been exercised
before consummation of such Excluded Merger or Sale shall terminate and expire,
and shall no longer be outstanding.
Section
6.09. Non-Disclosure
of Non-Public Information.
Except
as otherwise expressly provided in this Agreement, including Section 6.10
hereof, the Registration Rights Agreement or the Warrant, none of the Company,
its officers, directors, employees nor agents shall disclose material non-public
information to the Investor, its advisors or representatives.
17
Section
6.10. Notice
of Certain Events Affecting Registration; Suspension of Right to Request
a Draw
Down.
The
Company shall promptly notify the Investor upon the occurrence of any of
the
following events in respect of the Registration Statement or the Prospectus
related to the offer, issuance and sale of the Shares and the Warrant Shares
hereunder: (i) receipt of any request for additional information by the
Commission or any other federal or state governmental authority during the
period of effectiveness of the Registration Statement for amendments or
supplements to the Registration Statement or the Prospectus; (ii) the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of the Registration Statement
or
the initiation of any proceedings for that purpose; and (iii) receipt of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale
in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company shall not be required to disclose to the Investor the
substance or specific reasons of any of the events set forth in clauses (i)
through (ii) of the previous sentence, only that the event has occurred.
The
Company shall not request a Draw Down during the continuation of any of the
foregoing events.
Section
6.11. Amendments
to the Registration Statement.
When
the Registration Statement is declared effective by the Commission (i) the
Company shall not file any amendment to the Registration Statement or make
any
amendment or supplement to the Prospectus of which the Investor shall not
previously have been advised and (ii) so long as, in the reasonable opinion
of counsel for the Investor, a Prospectus is required to be delivered in
connection with sales of the Shares by the Investor, if the Company files
any
information, documents or reports that are incorporated by reference in the
Registration Statement pursuant to the Exchange Act, the Company shall, if
requested in writing by the Investor, deliver a copy of such information,
documents or reports to the Investor promptly following such
filing.
Section
6.12. Prospectus
Delivery.
From
time to time for such period as in the reasonable opinion of counsel for
the
Investor a prospectus is required by the Securities Act to be delivered in
connection with sales by the Investor, the Company will expeditiously deliver
to
the Investor, without charge, as many copies of the Prospectus (and of any
amendment or supplement thereto) as the Investor may reasonably request.
The
Company consents to the use of the Prospectus (and of any amendment or
supplement thereto) in accordance with the provisions of the Securities Act
and
state securities laws in connection with the offering and sale of the Shares
and
the Warrant Shares for such period of time thereafter as the Prospectus is
required by the Securities Act to be delivered in connection with sales of
the
Shares and the Warrant Shares.
ARTICLE
VII
CONDITIONS
TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN
The
obligation of the Investor hereunder to accept a Draw Down Notice and to
acquire
and pay for the Shares in accordance therewith is subject to the satisfaction
or
waiver, at each Condition Satisfaction Date, of each of the conditions set
forth
below. Other than those conditions set forth in Section 7.12 which are for
the Company’s sole benefit and may be waived by the Company at any time in its
sole discretion, the conditions are for the Investor’s sole benefit and may be
waived by the Investor at any time in its sole discretion. As used in this
Agreement, the term “Condition
Satisfaction Date”
shall
mean, with respect to each Draw Down, the date on which the applicable Draw
Down
Notice is delivered to the Investor and each Settlement Date in respect of
the
applicable Draw Down Pricing Period.
18
Section
7.01. Accuracy
of the Company’s Representations and Warranties.
Each of
the representations and warranties of the Company shall be true and correct
in
all material respects as of the date when made as though made at that time
except for representations and warranties that are expressly made as of a
particular date.
Section
7.02. Performance
by the Company.
The
Company shall have, in all material respects, performed, satisfied and complied
with all covenants, agreements and conditions required by this Agreement,
the
Registration Rights Agreement and the Warrant to be performed, satisfied
or
complied with by the Company.
Section
7.03. Compliance
with Law.
The
Company shall have complied in all respects with all applicable federal,
state
and local governmental laws, rules, regulations and ordinances in connection
with the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby except for any failures
to
so comply which would not reasonably be expected to have a Material Adverse
Effect.
Section
7.04. Effective
Registration Statement.
Upon
the terms and subject to the conditions set forth in the Registration Rights
Agreement, the Registration Statement shall have previously become effective
and
shall remain effective and (i) neither the Company nor the Investor shall
have received notice that the Commission has issued or intends to issue a
stop
order with respect to the Registration Statement or that the Commission
otherwise has suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently, or intends or has threatened
to do
so (unless the Commission’s concerns have been addressed and the Investor is
reasonably satisfied that the Commission no longer is considering or intends
to
take such action), and (ii) no other suspension of the use or withdrawal of
the effectiveness of the Registration Statement or the Prospectus shall
exist.
Section
7.05. No
Knowledge.
The
Company shall have no Knowledge of any event that could reasonably be expected
to have the effect of causing the Registration Statement with respect to
the
resale of the Registrable Securities by the Investor to be suspended or
otherwise ineffective (which event is reasonably likely to occur within eight
Trading Days following the Trading Day on which a Draw Down Notice is delivered)
as of the Settlement Date.
Section
7.06. No
Suspension.
Trading
in the Company’s Common Stock shall not have been suspended by the Commission,
the Principal Market or the NASD and trading in securities generally as reported
on the Principal Market shall not have been suspended or limited.
Section
7.07. No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction
shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
Section
7.08. No
Proceedings or Litigation.
No
action, suit or proceeding before any arbitrator or any governmental authority
shall have been commenced, and, to the Knowledge of the Company no investigation
by any governmental authority shall have been threatened, against the Company
or
any subsidiary, or any of the officers, directors or affiliates of the Company
or any subsidiary seeking to enjoin, prevent or change the transactions
contemplated by this Agreement.
Section
7.09. Sufficient
Shares Registered for Resale.
The
Company shall have sufficient Shares, calculated using the closing trade
price
of the Common Stock as of the Trading Day immediately preceding such Draw
Down
Notice, registered under the Registration Statement to issue and sell such
Shares in accordance with such Draw Down Notice.
19
Section
7.10. Warrant.
The
Warrant shall have been duly executed, delivered and issued to the Investor
on
the Closing Date, and the Company shall not be in default in any material
respect under any of the provisions thereof, provided that any refusal by
or
failure of the Company to issue and deliver Warrant Shares in respect of
any
exercise (in whole or in part) thereof shall be deemed to be material for
the
purposes of this Section 7.10.
Section
7.11. Opinion
of Counsel.
The
Investor shall have received the form of opinion agreed to between the parties
on the Closing Date.
Section
7.12. Accuracy
of Investor’s Representation and Warranties.
The
representations and warranties of the Investor shall be true and correct
in all
material respects as of the date when made as though made at that time except
for representations and warranties that are made as of a particular
date.
Section
7.13. Payment
of Fees.
The
Company shall be current on all undisputed expense invoices that the Company
is
required to pay pursuant to Section 10.01.
ARTICLE
VIII
TERMINATION
Section
8.01. Term.
Unless
otherwise terminated in accordance with Section 8.02 below, this Agreement
shall terminate upon the earlier to occur of (i) the expiration of the
Commitment Period or (ii) the issuance of Shares pursuant to this Agreement
in
an amount equal to the Maximum Commitment Amount.
Section
8.02. Other
Termination.
(a) The
Investor may terminate this Agreement upon (x) one (1) business day’s
notice if the Company enters into any Prohibited Transaction as set forth
in
Section 6.07 without the Investor’s prior written consent, or (y) one
(1) business day’s notice if the Investor provides written notice of a Material
Adverse Effect to the Company, and such Material Adverse Effect continues
for a
period of ten (10) Trading Days after the receipt by the Company of such
notice.
(b) The
Investor may terminate this Agreement upon one (1) business day’s notice to the
Company at any time in the event that the Registration Statement is not
initially declared effective in accordance with the Registration Rights
Agreement, provided, however, that in the event the Registration Statement
is
declared effective prior to the delivery of such notice, the Investor shall
thereafter have no right to terminate this Agreement pursuant to this Section
8.02(b).
(c) The
Investor may terminate this Agreement upon ten (10) business days’ notice to the
Company at any time in the event that following the first twelve (12) month
period of the term, the Company fails to make cumulative Draw Downs of at
least
$2 million during any consecutive twelve (12) month period during the term.
For
the avoidance of doubt, this provision shall not entitle the investor to
terminate this Agreement prior to the end of the tenty-fourth (24th)
month
of the term.
20
(d) The
Company may terminate this Agreement upon one (1) business day’s notice;
provided,
however,
that
the Company shall not terminate this Agreement pursuant to this Section 8.02(d)
during
any Draw Down Pricing Period; provided further;
that,
in the event of any termination of this Agreement by the Company hereunder,
so
long as the Investor owns Shares purchased hereunder and/or Warrant Shares,
unless all of such shares of Common Stock may be resold by the Investor without
registration and without any time, volume or manner limitations pursuant
to Rule
144(k) (or any similar provision then in effect) under the Securities Act,
the
Company shall not suspend or withdraw the Registration Statement or otherwise
cause the Registration Statement to become ineffective, or voluntarily delist
the Common Stock from, the Principal Market without listing the Common Stock
on
another Principal Market.
(e) Each
of
the parties hereto may terminate this Agreement upon one (1) day’s notice if the
other party has breached a material representation, warranty or covenant
to this
Agreement and such breach is not remedied within ten (10) Trading Days after
notice of such breach is delivered to the breaching party.
Section
8.03. Effect
of Termination.
In the
event of termination by the Company or the Investor, written notice thereof
shall forthwith be given to the other party and the transactions contemplated
by
this Agreement shall be terminated without further action by either party.
If
this Agreement is terminated as provided in Section 8.01 or 8.02 herein,
this Agreement shall become void and of no further force and effect, except
as
provided in Section 10.13. Nothing in this Section 8.03 shall be
deemed to release the Company or the Investor from any liability for any
breach
under this Agreement occurring prior to such termination, or to impair the
rights of the Company and the Investor to compel specific performance by
the
other party of its obligations under this Agreement arising prior to such
termination.
ARTICLE
IX
INDEMNIFICATION
Section
9.01. Indemnification.
(a) Except
as
otherwise provided in this Article IX, unless disputed as set forth in
Section 9.02, the Company agrees to indemnify, defend and hold harmless the
Investor and its affiliates and their respective officers, directors, agents,
employees, subsidiaries, partners, members and controlling persons (each,
an
“Investor
Indemnified Party”),
to
the fullest extent permitted by law from and against any and all Damages
directly resulting from or directly arising out of any breach of any
representation or warranty, covenant or agreement by the Company in this
Agreement, the Registration Rights Agreement or the Warrant; provided,
however,
that
the Company shall not be liable under this Article IX to an Investor
Indemnified Party to the extent that such Damages resulted or arose from
the
breach by an Investor Indemnified Party of any representation, warranty,
covenant or agreement of an Investor Indemnified Party contained in this
Agreement, the Registration Rights Agreement or the Warrant or the negligence,
recklessness, willful misconduct or bad faith of an Investor Indemnified
Party.
The parties intend that any Damages subject to indemnification pursuant to
this
Article IX will be net of insurance proceeds (which the Investor
Indemnified Party agrees to use commercially reasonable efforts to recover).
Accordingly, the amount which the Company is required to pay to any Investor
Indemnified Party hereunder (a “Company
Indemnity Payment”)
will
be reduced by any insurance proceeds actually recovered by or on behalf of
any
Investor Indemnified Party in reduction of the related Damages. In addition,
if
an Investor Indemnified Party receives a Company Indemnity Payment required
by
this Article IX in respect of any Damages and subsequently receives any
such insurance proceeds, then the Investor Indemnified Party will pay to
the
Company an amount equal to the Company Indemnity Payment received less the
amount of the Company Indemnity Payment that would have been due if the
insurance proceeds had been received, realized or recovered before the Company
Indemnity Payment was made.
21
(b) Except
as
otherwise provided in this Article IX, unless disputed as set forth in
Section 9.02, the Investor agrees to indemnify, defend and hold harmless
the Company and its affiliates and their respective officers, directors,
agents,
employees, subsidiaries, partners, members and controlling persons (each,
a
“Company
Indemnified Party”),
to
the fullest extent permitted by law from and against any and all Damages
directly resulting from or directly arising out of any breach of any
representation or warranty, covenant or agreement by the Investor in this
Agreement, the Registration Rights Agreement or the Warrant; provided,
however,
that
the Investor shall not be liable under this Article IX to a Company
Indemnified Party to the extent that such Damages resulted or arose from
the
breach by a Company Indemnified Party of any representation, warranty, covenant
or agreement of a Company Indemnified Party contained in this Agreement,
the
Registration Rights Agreement or the Warrant or negligence, recklessness,
willful misconduct or bad faith of a Company Indemnified Party. The parties
intend that any Damages subject to indemnification pursuant to this
Article IX will be net of insurance proceeds (which the Company agrees to
use commercially reasonable efforts to recover). Accordingly, the amount
which
the Investor is required to pay to any Company Indemnified Party hereunder
(an
“Investor
Indemnity Payment”)
will
be reduced by any insurance proceeds theretofore actually recovered by or
on
behalf of any Company Indemnified Party in reduction of the related Damages.
In
addition, if a Company Indemnified Party receives an Investor Indemnity Payment
required by this Article IX in respect of any Damages and subsequently
receives any such insurance proceeds, then the Company Indemnified Party
will
pay to the Investor an amount equal to the Investor Indemnity Payment received
less the amount of the Investor Indemnity Payment that would have been due
if
the insurance proceeds had been received, realized or recovered before the
Investor Indemnity Payment was made.
Section
9.02. Notification
of Claims for Indemnification.
Each
party entitled to indemnification under this Article IX (an “Indemnified
Party”)
shall,
promptly after the receipt of notice of the commencement of any claim against
such Indemnified Party in respect of which indemnity may be sought from the
party obligated to indemnify such Indemnified Party under this Article IX
(the “Indemnifying
Party”),
notify the Indemnifying Party in writing of the commencement thereof. Any
such
notice shall describe the claim in reasonable detail. The failure of any
Indemnified Party to so notify the Indemnifying Party of any such action
shall
not relieve the Indemnifying Party from any liability which it may have to
such
Indemnified Party (a) other than pursuant to this Article IX or (b) under
this Article IX unless, and only to the extent that, such failure results
in the Indemnifying Party’s forfeiture of substantive rights or defenses or the
Indemnifying Party is prejudiced by such delay. The procedures listed below
shall govern the procedures for the handling of indemnification
claims.
(a) Any
claim
for indemnification for Damages that do not result from a Third Party Claim
as
defined in the following paragraph, shall be asserted by written notice given
by
the Indemnified Party to the Indemnifying Party. Such Indemnifying Party
shall
have a period of thirty (30) days after the receipt of such notice within
which
to respond thereto. If such Indemnifying Party does not respond within such
thirty (30) day period, such Indemnifying Party shall be deemed to have refused
to accept responsibility to make payment as set forth in Section 9.01. If
such Indemnifying Party does not respond within such thirty (30) day period
or
rejects such claim in whole or in part, the Indemnified Party shall be free
to
pursue such remedies as specified in this Agreement.
22
(b) If
an
Indemnified Party shall receive notice or otherwise learn of the assertion
by a
person or entity not a party to this Agreement of any threatened legal action
or
claim (collectively a “Third
Party Claim”),
with
respect to which an Indemnifying Party may be obligated to provide
indemnification, the Indemnified Party shall give such Indemnifying Party
written notice thereof within twenty (20) days after becoming aware of such
Third Party Claim.
(c) An
Indemnifying Party may elect to defend (and, unless the Indemnifying Party
has
specified any reservations or exceptions, to seek to settle or compromise),
at
such Indemnifying Party’s own expense and by such Indemnifying Party’s own
counsel, any Third Party Claim. Within thirty (30) days after the receipt
of
notice from an Indemnified Party (or sooner if the nature of such Third Party
Claim so requires), the Indemnifying Party shall notify the Indemnified Party
whether the Indemnifying Party will assume responsibility for defending such
Third Party Claim, which election shall specify any reservations or exceptions.
If such Indemnifying Party does not respond within such thirty (30) day period
or rejects such claim in whole or in part, the Indemnified Party shall be
free
to pursue such remedies as specified in this Agreement. In case any such
Third
Party Claim shall be brought against any Indemnified Party, and it shall
notify
the Indemnifying Party of the commencement thereof, the Indemnifying Party
shall
be entitled to assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party in its reasonable judgment; provided,
however, that any Indemnified Party may, at its own expense, retain separate
counsel to participate in such defense at its own expense. Notwithstanding
the
foregoing, in any Third Party Claim in which both the Indemnifying Party,
on the
one hand, and an Indemnified Party, on the other hand, are, or are reasonably
likely to become, a party, such Indemnified Party shall have the right to
employ
separate counsel and to control its own defense of such claim if, in the
reasonable opinion of counsel to such Indemnified Party, either (x) one or
more significant defenses are available to the Indemnified Party that are
not
available to the Indemnifying Party or (y) a conflict or potential conflict
exists between the Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, that would make such separate representation
advisable; provided,
however,
that in
such circumstances the Indemnifying Party (i) shall not be liable for the
fees and expenses of more than one counsel to all Indemnified Parties and
(ii) shall reimburse the Indemnified Parties for such reasonable fees and
expenses of such counsel incurred in any such Third Party Claim, as such
expenses are incurred, provided that the Indemnified Parties agree to repay
such
amounts if it is ultimately determined that the Indemnifying Party was not
obligated to provide indemnification under this Article IX. The
Indemnifying Party agrees that it will not compromise or consent to the entry
of
any judgment in any pending or threatened claim relating to the matters
contemplated hereby (if any Indemnified Party is a party thereto or has been
actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Party from all liability arising or that may arise out of such claim. The
rights
accorded to an Indemnified Party hereunder shall be in addition to any rights
that any Indemnified Party may have at common law, by separate agreement
or
otherwise; provided,
however,
that
notwithstanding the foregoing or anything to the contrary contained in this
Agreement, nothing in this Article IX shall restrict or limit any rights
that any Indemnified Party may have to seek equitable relief.
ARTICLE
X
MISCELLANEOUS
Section
10.01. Fees
and Expenses.
23
(a) Each
of
the Company and the Investor agrees to pay its own expenses incident to the
performance of its obligations hereunder, except that the Company shall be
solely responsible for (i) all reasonable attorneys fees and expenses
incurred by the Investor in connection with the preparation, negotiation,
execution and delivery of this Agreement, the Registration Rights Agreement
and
the Warrant, and review of the Registration Statement, and in connection
with
any amendments, modifications or waivers of this Agreement, including, without
limitation, all reasonable attorneys fees and expenses, and (ii) all reasonable
fees and expenses incurred in connection with the Investor’s enforcement of this
Agreement, including, without limitation, all reasonable attorneys fees and
expenses, and (iii) all stamp or other similar taxes and duties, if any,
levied
in connection with issuance of the Shares pursuant hereto; provided,
however,
that in
each of the above instances the Investor shall provide customary supporting
invoices or similar documentation in reasonable detail describing such expenses
(however, the Investor shall not be obligated to provide detailed time sheets
for legal services rendered), and provided further
that the
maximum aggregate amount payable by the Company pursuant to clause (i) above
shall be $75,000 and the Investor shall bear all fees and expenses in excess
of
$75,000 incurred in connection with the events described under clause (i)
above.
(b) If
any
action at law or in equity is necessary to enforce or interpret the terms
of
this Agreement, the Registration Rights Agreement or the Warrant, the prevailing
party shall be entitled to reasonable fees, costs and necessary disbursements
in
addition to any other relief to which such party may be entitied.
Section
10.02. Reporting
Entity for the Common Stock.
The
reporting entity relied upon for the determination of the trading price or
trading volume of the Common Stock on any given Trading Day for the purposes
of
this Agreement shall be Bloomberg, L.P. or any successor thereto. The written
mutual consent of the Investor and the Company shall be required to employ
any
other reporting entity.
Section
10.03. Brokerage.
Each of
the parties hereto represents that it has had no dealings in connection with
this transaction with any finder or broker who will demand payment of any
fee or
commission from the other party. The Company, on the one hand, and the Investor,
on the other hand, agree to indemnify the other against and hold the other
harmless from any and all liabilities to any Persons claiming brokerage
commissions or finder’s fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.
Section
10.04. Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or
(iv) transmitted by hand delivery, telegram, or facsimile, addressed as set
forth below or to such other address as such party shall have specified most
recently by written notice given in accordance herewith, in each case with
a
copy to the e-mail address set forth beside the facsimile number for the
addressee below. Any notice or other communication required or permitted
to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery
by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or
the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
24
If
to the
Company:
Discovery
Laboratories, Inc.
▇▇▇▇
▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
E-mail:
▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
and
▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Attention: Chief
Financial Officer and General Counsel
with
a
copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
E-mail:
▇▇▇▇▇▇@▇▇▇▇.▇▇▇
Attention:
▇▇▇ ▇. ▇▇▇▇▇
if
to the
Investor:
Kingsbridge
Capital Limited
Attention:
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇
▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
9
Castle
Street
St
Helier
Jersey
JE42QP
▇▇▇▇▇▇▇▇
Islands
Tel:
To
be provided
Fax:
To
be provided
Email:
▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
with
a
copy to:
Kingsbridge
Corporate Services Limited
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
of Ireland
Facsimile:
011-353-45-482-0030
E-mail:
▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇;
▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
Attention:
▇▇▇▇ ▇▇▇▇▇▇, Managing Director
25
with
an
additional copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇
Chance US LLP
▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
E-mail:
▇▇▇▇▇.▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Either
party hereto may from time to time change its address or facsimile number
for
notices under this Section by giving at least ten (10) days’ prior
written notice of such changed address or facsimile number to the other party
hereto.
Section
10.05. Assignment.
Neither
this Agreement nor any rights of the Investor or the Company hereunder may
be
assigned by either party to any other Person.
Section
10.06. Amendment;
No Waiver.
No
party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth
in
this Agreement, the Warrant and the Registration Rights Agreement. Except
as
expressly provided in this Agreement, neither this Agreement nor any term
hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by both parties hereto. The failure of the either party
to
insist on strict compliance with this Agreement, or to exercise any right
or
remedy under this Agreement, shall not constitute a waiver of any rights
provided under this Agreement, nor estop the parties from thereafter demanding
full and complete compliance nor prevent the parties from exercising such
a
right or remedy in the future.
Section
10.07. Entire
Agreement.
This
Agreement, the Registration Rights Agreement and the Warrant set forth the
entire agreement and understanding of the parties relating to the subject
matter
hereof and supersede all prior and contemporaneous agreements, negotiations
and
understandings between the parties, both oral and written, relating to the
subject matter hereof.
Section
10.08. Severability.
If any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided
that, if
the severance of such provision materially changes the economic benefits
of this
Agreement to either party as such benefits are anticipated as of the date
hereof, then such party may terminate this Agreement on five (5) business
days
prior written notice to the other party. In such event, the Registration
Rights Agreement will terminate simultaneously with the termination of this
Agreement; provided that in the event that this Agreement is terminated by
the
Company in accordance with this Section 10.08 and the Warrant Shares either
have
not been registered for resale by the Investor in accordance with the
Registration Rights Agreement or are otherwise not freely tradable (if and
when
issued) in accordance with applicable law, then the Registration Rights
Agreement in respect of the registration of the Warrant Shares shall remain
in
full force and effect.
Section
10.09. Title
and Subtitles.
The
titles and subtitles used in this Agreement are used for the convenience
of
reference and are not to be considered in construing or interpreting this
Agreement.
Section
10.10. Counterparts.
This
Agreement may be executed in multiple counterparts, each of which may be
executed by less than all of the parties and shall be deemed to be an original
instrument which shall be enforceable against the parties actually executing
such counterparts and all of which together shall constitute one and the
same
instrument.
26
Section
10.11. Choice
of Law.
This
Agreement shall be construed under the laws of the State of New
York.
Section
10.12. Specific
Enforcement, Consent to Jurisdiction.
(a) The
Company and the Investor acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It
is accordingly agreed that the parties shall be entitled to an injunction
or
injunctions to prevent or cure breaches of the provisions of this Agreement
and
to enforce specifically the terms and provisions hereof or thereof, this
being
in addition to any other remedy to which any of them may be entitled by law
or
equity.
(b) Each
of
the Company and the Investor (i) hereby irrevocably submits to the
jurisdiction of the United States District Court and other courts of the
United
States sitting in the State of New York for the purposes of any suit, action
or
proceeding arising out of or relating to this Agreement and (ii) hereby
waives, and agrees not to assert in any such suit, action or proceeding,
any
claim that it is not personally subject to the jurisdiction of such court,
that
the suit, action or proceeding is brought in an inconvenient forum or that
the
venue of the suit, action or proceeding is improper. Each of the Company
and the
Investor consents to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address in effect for notices
to
it under this Agreement and agrees that such service shall constitute good
and
sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other
manner permitted by law.
Section
10.13. Survival.
The
representations and warranties of the Company and the Investor contained
in
Articles IV and V and the covenants contained in Article V and
Article VI shall survive the execution and delivery hereof and the Closing
until the termination of this Agreement, and the agreements and covenants
set
forth in Article VIII and Article IX of this Agreement shall survive
the execution and delivery hereof and the Closing hereunder.
Section
10.14. Publicity.
Except
as otherwise required by applicable law or regulation, or Nasdaq rule or
judicial process, prior to the Closing, neither the Company nor the Investor
shall issue any press release or otherwise make any public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement. In the event the Company is required
by law, regulation, Nasdaq rule or judicial process, based upon reasonable
advice of the Company’s counsel, to issue a press release or otherwise make a
public statement or announcement with respect to this Agreement prior to
the
Closing, the Company shall consult with the Investor on the form and substance
of such press release, statement or announcement. Promptly after the Closing,
each party may issue a press release or otherwise make a public statement
or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement; provided
that,
prior to issuing any such press release, making any such public statement
or
announcement, the party wishing to make such release, statement or announcement
consults and cooperates in good faith with the other party in order to formulate
such press release, public statement or announcement in form and substance
reasonably acceptable to both parties.
27
Section
10.15. Further
Assurances.
From
and after the date of this Agreement, upon the request of the Investor or
the
Company, each of the Company and the Investor shall execute and deliver such
instruments, documents and other writings as may be reasonably necessary
or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
[Remainder
of this page intentionally left blank]
28
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first
written.
KINGSBRIDGE
CAPITAL LIMITED
By: /s/
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇
Chief
Executive Officer
DISCOVERY
LABORATORIES, INC.
By: /s/
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇
▇.
▇▇▇▇▇▇
Executive
Vice President and Chief
Financial Officer
29
Exhibit
A
Form
of
Registration Rights Agreement
Exhibit
B
Form
of
Warrant
Exhibit
C
Officer’s
Certificate
I,
[NAME
OF OFFICER], do hereby certify to Kingsbridge Capital Limited (the “Investor”),
with respect to the common stock of Discovery Laboratories, Inc. (the “Company”)
issuable in connection with the Draw Down Notice, dated _____________ (the
“Notice”) attached hereto and delivered pursuant to Article III of the
Common Stock Purchase Agreement, dated April 17, 2006 (the “Agreement”), by and
between the Company and the Investor, as follows (capitalized terms used
but
undefined herein have the meanings given to such terms in the
Agreement):
1.
I
am the
duly elected [OFFICER] of the Company.
2.
The
representations and warranties of the Company set forth in Article IV of
the Agreement are true and correct in all material respects as though made
on
and as of the date hereof (except for such representations and warranties
that
are made as of a particular date).
3.
The
Company has performed in all material respects all covenants and agreements
to
be performed by the Company on or prior to the date hereof related to the
Notice
and has satisfied each of the conditions to the obligation of the Investor
set
forth in Article VII of the Agreement.
4. The
Shares issuable in respect of the Notice will be delivered without restrictive
legend via book entry through the Depositary Trust Company to an account
designated by the Investor.
The
undersigned has executed this Certificate this ____ day of ________,
200[_].
_______________________
Name:
Title: