Exhibit 10.1
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SUBSCRIPTION AGREEMENT
DATED AS OF DECEMBER 4, 2001
BY AND BETWEEN
STEMCELLS, INC.
AND
RIVERVIEW GROUP, L.L.C.
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CONVERTIBLE PREFERRED STOCK
AND
WARRANTS
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THIS SUBSCRIPTION AGREEMENT, dated this 4th day of December, 2001, (this
"AGREEMENT") by and between STEMCELLS, INC., a Delaware corporation (the
"COMPANY"), with headquarters located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and Riverview Group, L.L.C., a Delaware limited liability
company (the "BUYER").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Buyer, and the Buyer
wish to purchase from the Company: (i) shares of the Company's 3% Cumulative
Convertible Preferred Stock, liquidation preference $1,000 per share (all such
shares being "PREFERRED SHARES"), having the rights, designations and
preferences set forth in the Certificate of Designations (the "CERTIFICATE") in
the form of EXHIBIT 1 attached hereto, which Preferred Shares shall be
convertible into the number of shares of the Company's common stock, par value
$.01 per share ("COMMON STOCK") set forth in the Certificate (subject to
adjustment as provided therein); and (ii) one or more warrants (the "WARRANTS")
to purchase in the aggregate the number of shares of Common Stock set forth in
the Warrants (subject to adjustment as provided therein), in the form of EXHIBIT
2 attached hereto;
WHEREAS, the Buyer will have registration rights with respect to the shares
of Common Stock issuable upon conversion of the Preferred Shares or exercise of
the Warrants pursuant to the terms of that certain registration rights agreement
to be entered into between the Company and the Buyer as of the date hereof in
the form of EXHIBIT 3 hereto ("REGISTRATION RIGHTS AGREEMENT"); and
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D as promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933 (the "1933 ACT").
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) SUBSCRIPTION. The Buyer hereby agrees to purchase from the
Company, and the Company hereby agrees to sell to the Buyer, the number of
Preferred Shares set forth on the signature page of this Agreement at the price
per share set forth on the signature page of this Agreement. The shares of
Common Stock issuable upon conversion of the Preferred Shares are referred to
herein as the "COMMON SHARES." In connection with the purchase of the Preferred
Shares by the Buyer, the Company shall issue to the Buyer, at the closing on the
Closing Date (as defined herein) the Warrants. The shares of Common Stock
issuable upon exercise of the Warrants are referred to herein as the "WARRANT
SHARES." The Common Shares and the Warrant Shares are referred to herein
collectively as the "UNDERLYING SHARES." The Preferred Shares and the Warrants
are referred to herein collectively as the "SECURITIES." The aggregate purchase
price for the Preferred Shares and Warrants, which is set forth on the signature
page of this Agreement, is referred to herein as the "PURCHASE PRICE."
(b) THE CLOSING.
(i) TIMING. Subject to the fulfillment or waiver of the
conditions set forth in Sections 6 and 7 hereof, the purchase and sale of the
Preferred Shares and Warrants shall take place at a closing (the "CLOSING") on
the date hereof or such other date as the Buyer and the Company may agree upon
(the "CLOSING DATE") at the offices of Kleinberg, Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇, P.C.
(ii) FORM AND TIMING OF PAYMENT. The Buyer shall pay the Purchase
Price for the Preferred Shares and Warrants by delivering the Purchase Price to
the Company on the Closing Date. Upon Closing, the Company shall deliver to the
Buyer (or Kleinberg, Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇, P.C. on behalf of the Buyer) (A) one
or more certificates representing the aggregate Preferred Shares purchased
hereunder by Buyer at the Closing and (B) the Warrants, in each case registered
in the corporate securities records of the Company and on the certificates in
the name of the Buyer or its nominee.
(c) METHOD OF PAYMENT. Payment of the Purchase Price for the Preferred
Shares and the Warrants shall be made in U.S. Dollars by wire transfer of funds
to an account designated by the Company.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
(a) ACCREDITED BUYER STATUS; SOPHISTICATED BUYER. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D
under the 1933 Act. The Buyer has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
investment in the Securities and the Underlying Shares.
(b) INFORMATION. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company which have been requested and materials relating to the offer and
sale of the Securities and the Underlying Shares which have been requested by
the Buyer. The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by the Buyer or its advisors, if
any, or its representatives shall modify, amend or affect the Buyer's right to
rely on the Company's representations and warranties contained in Section 3
below. The Buyer understands that its investment in the Securities and the
Underlying Shares involves a high degree of risk. The Buyer 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 Securities
and Underlying Shares.
(c) LEGENDS. The Company shall issue certificates for the Securities
and Underlying Shares to the Buyer without any legend except as described
herein. The Buyer covenants that, in connection with any transfer of Underlying
Shares by the Buyer pursuant to the registration statement contemplated by the
Registration Rights Agreement, it will comply with the applicable prospectus
delivery requirements of the 1933 Act, provided that copies of a
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current prospectus relating to such effective registration statement are or have
been supplied to the Buyer.
(d) AUTHORIZATION; ENFORCEMENT. Each of this Agreement and the
Registration Rights Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable against the Buyer in accordance with its terms, subject as to
enforceability to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies. The Buyer has the requisite corporate power and authority
to enter into and perform its obligations under this Agreement and the
Registration Rights Agreement and each other agreement entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement.
(e) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Buyer and the
consummation by the Buyer of the transactions contemplated hereby and thereby
will not result in a violation of the certificate of incorporation, by-laws or
other documents of organization of the Buyer.
(f) INVESTMENT REPRESENTATION. The Buyer is purchasing the Securities
for its own account and not with a view to distribution in violation of any
securities laws. The Buyer has been advised and understands that neither the
Securities nor the Underlying Shares issuable upon conversion or exercise
thereof have been registered under the 1933 Act or under the "blue sky" laws of
any jurisdiction and may be resold only if registered pursuant to the provisions
of the 1933 Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law. The Buyer has been advised and understands that the Company, in issuing
the Securities, is relying upon, among other things, the representations and
warranties of the Buyer contained in this Section 3 in concluding that such
issuance is a "private offering" and is exempt from the registration provisions
of the 1933 Act.
(g) RULE 144. The Buyer understands that there is no public trading
market for the Preferred Shares and the Warrants and that none is expected to
develop. The Buyer understands that the Securities and the Underlying Shares
must be held indefinitely unless and until registered under the 1933 Act or an
exemption from registration is available. The Buyer is aware of the provisions
of Rule 144 promulgated under the 1933 Act.
(h) RELIANCE BY THE COMPANY. The Buyer understands that the Securities
are being offered and sold in reliance on a transactional exemption from the
registration requirements of Federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the applicability of such exemptions and the
suitability of the Buyer to acquire the Securities.
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3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees with, the
Buyer that, except as set forth in the schedules attached hereto:
(a) ORGANIZATION AND QUALIFICATION; MATERIAL ADVERSE EFFECT. The
Company is a corporation duly incorporated and existing in good standing under
the laws of the State of Delaware and has the requisite corporate power to own
its properties and to carry on its business as now being conducted. The Company
does not have any Subsidiary other than StemCells California, Inc. (the
"SUBSIDIARY"). The Subsidiary is duly organized, and validly existing and in
good standing under the laws of its jurisdiction of formation. Except where
specifically indicated to the contrary, all references in this Agreement to
Subsidiary shall be deemed to refer to the Subsidiary of the Company. 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 would not have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means any adverse effect on the business, operations,
properties, prospects or financial condition of the Company and its Subsidiary,
which is (either alone or together with all other adverse effects) material to
the Company and its Subsidiary, taken as a whole, and any material adverse
effect on the transactions contemplated under this Agreement, the Certificate,
the Warrants and the Registration Rights Agreement, or any other agreement or
document contemplated hereby or thereby.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has all requisite
corporate power and authority to enter into and perform this Agreement, the
Certificate, the Registration Rights Agreement and the Warrants (as they may be
amended from time to time, the "TRANSACTION DOCUMENTS") and to issue the
Preferred Shares and the Warrants in accordance with the terms hereof, (ii) the
execution and delivery of this Agreement, the Registration Rights Agreement, and
the Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including the issuance of the Securities, have
been duly authorized by all necessary corporate action, and no further consent
or authorization of the Company or its Board of Directors (or any committee or
subcommittee thereof) or stockholders is required, (iii) this Agreement, the
Certificate, the Registration Rights Agreement, and the Warrants have been duly
executed and delivered by the Company, (iv) this Agreement, the Certificate, the
Registration Rights Agreement, and the Warrants constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except (A) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of creditors' rights and
remedies or by other equitable principles of general application, and (B) to the
extent the indemnification provisions contained in this Agreement and the
Registration Rights Agreement may be limited by applicable federal or state
securities laws and (v) the Securities and the Underlying Shares issuable upon
the conversion or exercise thereof have been duly authorized and, upon issuance
thereof and payment therefor in accordance with the terms of this Agreement, the
Securities and the Underlying Shares will be validly issued, fully paid and
non-assessable, free and clear of any and all liens, claims and encumbrances.
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(c) CAPITALIZATION. As of the date hereof, following the acceptance of
the Certificate by the Secretary of State of Delaware, the authorized capital
stock of the Company consists of (i) 45,000,000 shares of Common Stock, of which
23,455,137 shares were issued and outstanding, and, 6,700,000 shares are
issuable and reserved for issuance pursuant to the Company's stock option and
purchase plans and committed pursuant to pending acquisitions, and,
approximately 938,530 shares are issuable pursuant to securities (other than
options and purchase plans referred to above) exercisable or exchangeable for,
or convertible into, shares of Common Stock, and approximately 1,800,000 shares
are reserved for issuance pursuant to such securities; and (ii) 1,000,000 shares
of preferred stock, of which, as of the date hereof, (A) 2,626 shares are
currently designated as 6% Cumulative Convertible Preferred Stock, 1,500 shares
of which are issued and outstanding, (B) 450,000 shares are designated as Junior
Preferred Shares, none of which are issued or outstanding and (C) 5,000
Preferred Shares, all of which are to be issued pursuant to this Agreement. All
of such outstanding shares have been, or upon issuance will be, validly issued,
fully paid and nonassessable. As of the date hereof, except as disclosed in
SCHEDULE 3(c), (i) no shares of the Company's capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company, (ii) there are no outstanding debt
securities, (iii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or its Subsidiary, or contracts, commitments, understandings or
arrangements by which the Company or its Subsidiary is or may become bound to
issue additional shares of capital stock of the Company or its Subsidiary or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or its Subsidiary, (iv) there are no
agreements or arrangements under which the Company or its Subsidiary is
obligated to register the sale of any of their securities under the 1933 Act
(except as set forth on SCHEDULE 3(c)), (v) there are no outstanding securities
of the Company or its Subsidiary which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or its Subsidiary is or may become bound to
redeem a security of the Company or its Subsidiary, (vi) there are no securities
or instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of any Securities or any Underlying Shares and (vii)
the Company does not have any stock appreciation rights or "phantom stock" plans
or agreements or any similar plan or agreement. The Company has furnished to the
Buyer true and correct copies of the Company's Certificate of Incorporation, as
amended and as in effect on the date hereof (the "CERTIFICATE OF
INCORPORATION"), and the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS").
(d) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby and the issuance of the Preferred
Shares, the Warrants, and the Underlying Shares will not (i) result in a
violation of the Certificate of Incorporation, any certificate of designations,
preferences and rights of any outstanding series of preferred stock of the
Company or the By-laws; (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 agreement, indenture or instrument to which the Company or
its Subsidiary is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and state
securities laws
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and regulations and the rules and regulations of the Principal Market (as
defined in the last sentence of this paragraph) applicable to the Company or its
Subsidiary or by which any property or asset of the Company or its Subsidiary is
bound or affected. Neither the Company nor its Subsidiary is in violation of any
term of, or in default under, (x) its certificate of incorporation, any
certificate of designations, preferences and rights of any outstanding series of
preferred stock or By-laws or its organizational charter or by-laws,
respectively, (y) any material contract, agreement, mortgage, indebtedness,
indenture, instrument, or (z) any judgment, decree or order or any statute, rule
or regulation applicable to the Company or its Subsidiary, the non-compliance
with which (in the cases of (y) and (z)) would cause a Material Adverse Effect.
Except as specifically contemplated by this Agreement and as required under the
1933 Act or state "blue sky" laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court, governmental agency or any regulatory or self-regulatory agency in order
for it to execute, deliver or perform any of its obligations under, or
contemplated by, the Transaction Documents or the issuance of the Securities in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof, or in the case of post-sale filings, will be made promptly
after the date hereof. The Company complies with and is not in violation of the
listing requirements of the Principal Market as in effect on the date hereof in
all material respects and on the Closing Date and is not aware of any existing
facts which provide a basis for delisting or suspension of the Common Stock by
the Principal Market. "PRINCIPAL MARKET" shall mean the Nasdaq National Market
System or, if the Common Stock ceases to be traded on the Nasdaq National Market
System, such other market on which the Common Stock is then principally listed
or quoted.
(e) SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31, 1998, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 ACT") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC DOCUMENTS"). As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, 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 exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Neither the Company
nor its Subsidiary or any of their officers,
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directors, employees or agents have provided the Buyer with any material,
nonpublic information which was not publicly disclosed prior to the date hereof.
(f) ABSENCE OF CERTAIN CHANGES. Except as set forth in the SEC
Documents, since December 31, 1998 there has been no adverse change or adverse
development in the business, properties, assets, operations, financial
condition, prospects, liabilities or results of operations of the Company or its
Subsidiary which has had or, to the knowledge of the Company or its Subsidiary,
is reasonably likely to have a Material Adverse Effect. The Company has not
taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or its Subsidiary
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings.
(g) ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or its Subsidiary, threatened against or affecting the Company, the
Common Stock or any of the Company's Subsidiary or any of the Company's or the
Company's Subsidiary's officers or directors in their capacities as such, which
individually and in the aggregate, respectively, would be reasonably likely to
result in liability to the Company in excess of $50,000 and $100,000,
respectively.
(h) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SHARES. The Company
acknowledges and agrees that the Buyer is acting solely in the capacity of arm's
length purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby. The Company further acknowledges that the Buyer
is not acting as financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by the Buyer or any of its
respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to the Buyer's purchase of the Securities. The Company further
represents to the Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
(i) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES.
No event, liability, development or circumstance has occurred or exists with
respect to the Company or its Subsidiary or their respective business,
properties, prospects, operations or financial condition, that would be required
to be disclosed by the Company under applicable securities laws in a
registration statement filed with the SEC relating to an issuance and sale by
the Company of its Common Stock and which has not been publicly disclosed.
(j) NO INSIDE INFORMATION. The Company has not provided and, the
Company shall not provide, the Buyer with any non-public information, except to
the extent that the Buyer exercises its right to review a registration statement
containing material non-public information (after receiving written notice of
the existence of such content) in writing or otherwise expressly consents in
writing to the receipt of non-public information (in any case subject to Section
4(k) hereof).
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(k) NO SECURITIES ACT REGISTRATION. The sale and issuance of the
Preferred Shares and Warrants in accordance with terms of this Agreement and the
issuance of the Underlying Shares upon the conversion and/or exercise of the
Securities are exempt from registration under the 1933 Act.
(l) EMPLOYEE RELATIONS. Neither the Company nor its Subsidiary is
involved in any labor dispute nor, to the knowledge of the Company or its
Subsidiary, is any such dispute threatened, the effect of which would be
reasonably likely to result in a Material Adverse Effect. Neither the Company
nor its Subsidiary is a party to a collective bargaining agreement. The Company
and its Subsidiary believe that relations between the Company and its Subsidiary
and their respective employees are good. No executive officer (as defined in
Rule 501(f) of the ▇▇▇▇ ▇▇▇) whose departure would be adverse to the Company has
notified the Company that such officer intends to leave the Company or otherwise
terminate such officer's employment with the Company.
(m) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiary own
or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. None of the Company's trademarks, trade names,
service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government authorizations,
trade secrets or other intellectual property rights have expired or terminated,
or are expected to expire or terminate within two (2) years from the date of
this Agreement except as would not have a Material Adverse Effect. The Company
and its Subsidiary do not have any knowledge of any infringement by the Company
or its Subsidiary of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service ▇▇▇▇
registrations, trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others, and no claim, action or proceeding has been made or brought against, or
to the Company's knowledge, is threatened against, the Company or its Subsidiary
regarding trademarks, trade name rights, patents, patent rights, inventions,
copyrights, licenses, service names, service marks, service ▇▇▇▇ registrations,
trade secrets or other infringement. The Company and its Subsidiary have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties.
(n) INTENTIONALLY OMITTED.
(o) ENVIRONMENTAL LAWS. The Company and its Subsidiary (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where such noncompliance or
failure to receive permits, licenses or approvals referred to in clauses (i),
(ii) or (iii) above could have, individually or in the aggregate, a Material
Adverse Effect.
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(p) TITLE. The Company and its Subsidiary have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiary, in each case free and clear of all liens, encumbrances and
defects except such as are described in SCHEDULE 3(P) or in the SEC Documents or
such as do not materially and adversely affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company or its Subsidiary. Any real property and facilities held under lease by
the Company or its Subsidiary are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiary.
(q) INSURANCE. The Company and its Subsidiary are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiary are engaged. Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiary taken as a whole.
(r) REGULATORY PERMITS. The Company and its Subsidiary possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities, necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificates, authorization or permit.
(s) INTERNAL ACCOUNTING CONTROLS. The Company and its Subsidiary
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(t) FOREIGN CORRUPT PRACTICES ACT. Neither the Company, nor any
director, officer, agent, employee or other person acting on behalf of the
Company or any Subsidiary has, in the course of acting for, or on behalf of, the
Company, directly or indirectly used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; directly or indirectly made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or any similar treaties of
the United States; or directly or indirectly made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government or party official or employee.
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(u) TAX STATUS. The Company and its Subsidiary has made or filed all
United States federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and (i) has
paid all taxes and other governmental assessments and charges, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (ii) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes claimed to be due by the taxing authority of any jurisdiction, and
the Company is not aware of any basis for any such claim.
(v) CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents
filed on ▇▇▇▇▇ at least thirty (30) Trading Days prior to the date hereof and
except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed on SCHEDULE 3(c), none of the officers, directors or employees
of the Company is presently a party to any transaction with the Company or its
Subsidiary (other than for services as employees, consultants, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(w) DILUTIVE EFFECT. The Company understands and acknowledges that the
number of Underlying Shares issuable upon conversion or exercise of the
Securities will increase in certain circumstances. The Company further
acknowledges that, subject to such limitations as are expressly set forth in the
Transaction Documents, its obligation to issue the Underlying Shares upon
conversion or exercise of the Securities is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.
(x) APPLICATION OF TAKEOVER PROTECTIONS. There are no anti-takeover
provisions contained in the Company's Certificate of Incorporation or otherwise
which will be triggered as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company's issuance of the
Securities or Underlying Shares and the Buyer's ownership of the Securities or
Underlying Shares.
(y) RIGHTS PLAN. The Company confirms that no provision of the
Company's rights plan will, under any present or future circumstances, delay,
prevent or interfere with the performance of any of the Company's obligations
under the Transaction Documents and such plan will not be "triggered" by such
performance.
(z) OBLIGATIONS ABSOLUTE. Each of the Company and the Buyer agrees
that, subject only to the conditions, qualifications and exceptions (if any)
specifically set forth in the Transaction Documents, its obligations under the
Transaction Documents are unconditional and absolute. Except to the extent (if
any) specifically set forth in the Transaction Documents, each party's
obligations thereunder are not subject to any right of set off, counterclaim,
delay or reduction.
10
(aa) ISSUANCE OF UNDERLYING SHARES. The Underlying Shares are duly
authorized and reserved for issuance and, upon exercise or conversion of the
Warrants or Preferred Shares, respectively, in accordance with the terms
thereof, such Underlying Shares will be validly issued, fully paid and
non-assessable, free and clear of any and all liens, claims and encumbrances,
and entitled to be traded on the Nasdaq National Market System, the New York
Stock Exchange, the American Stock Exchange or the Nasdaq Small-Cap Market
(collectively, the "APPROVED Markets"), and the holders of such Underlying
Shares shall be entitled to all rights and preferences accorded to a holder of
Common Stock. As of the date of this Agreement, the outstanding shares of Common
Stock are currently listed on the Nasdaq National Market System.
(bb) BROKERS. Other than the Company's engagement of Cantor ▇▇▇▇▇▇▇▇▇▇
& Co., the Company has taken no action which would give rise to any claim by any
person for brokerage commissions, finder's fees or similar payments by the Buyer
relating to this Agreement or the transactions contemplated hereby. The Company
shall be responsible for any and all payments to Cantor ▇▇▇▇▇▇▇▇▇▇ & Co. related
to such engagement.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) TRANSFER RESTRICTIONS.
The Company and the Buyer acknowledge and agree that (i) the Securities
have not been and are not being registered under the provisions of the 1933 Act
and, except as provided in the Registration Rights Agreement with respect to the
resale of the Underlying Shares, the Underlying Shares have not been and are not
being registered for resale under the 1933 Act, and the Securities may not be
transferred unless (A) subsequently registered for resale thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities and/or Underlying Shares to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration (unless waived) and
(ii) any resale of the Securities and/or Underlying Shares made in reliance on
Rule 144 promulgated under the 1933 Act ("RULE 144") may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any such resale of Securities and/or Underlying Shares under
circumstances in which the seller, or the person through whom the sale is made,
may be deemed to be an underwriter, as that term is used in the 1933 Act, may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder.
(b) RESTRICTIVE LEGEND.
(i) The Buyer acknowledges and agrees that the Preferred Shares
and Warrants shall bear a restrictive legend in substantially the following
form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities may not be
resold, transferred or assigned in the absence of an effective registration
statement for the securities under the Securities Act of 1933, as amended,
or an opinion of counsel that registration is not required under said Act.
11
(ii) The Buyer further acknowledges and agrees that until such
time as the Underlying Shares have been registered for resale under the 1933 Act
as contemplated by the Registration Rights Agreement, the certificates for the
Underlying Shares may bear a restrictive legend in substantially the following
form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities may not be
resold, transferred or assigned in the absence of an effective registration
statement for the securities under the Securities Act of 1933, as amended,
or an opinion of counsel that registration is not required under said Act.
(iii) Once the Registration Statement required to be filed by the
Company pursuant to Section 2 of the Registration Rights Agreement has been
declared effective or once the Underlying Shares may be sold pursuant to Rule
144, thereafter (A) upon request of the Buyer the Company will substitute
certificates without restrictive legend for certificates for all Underlying
Shares which bear such restrictive legend and remove any stop-transfer
restriction relating thereto promptly, but in no event later than three Trading
Days (as defined herein) after surrender of such certificates by the Buyer and
(B) the Company shall not place any restrictive legend on certificates for
Underlying Shares or impose any stop-transfer restriction thereon. As used in
this Agreement, "TRADING DAY" means a day on which the Principal Market is open
for general trading.
(c) REGISTRATION RIGHTS AGREEMENT.
The parties hereto agree to enter into the Registration Rights Agreement in
the form attached hereto as EXHIBIT 3 on or before the Closing Date.
(d) FORM D.
The Company agrees to file a Form D with respect to the Securities as
required under Regulation D and to provide a copy thereof to the Buyer promptly
after such filing. The Buyer agrees to cooperate with the Company in connection
with such filing and, upon request of the Company, to provide all information
relating to the Buyer reasonably required for such filing.
(e) AUTHORIZATION FOR TRADING; REPORTING STATUS.
On or before the Closing Date, the Company shall, if required, file a
notification for listing of additional shares with the Nasdaq relating to the
Underlying Shares and shall provide evidence of such filing to the Buyer. So
long as the Buyer beneficially owns any of the Securities or Underlying Shares,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act; provided, however, that if the Company is not required to file
reports pursuant to such sections, it will prepare and furnish to the Buyer and
make publicly available in accordance with Rule 144(c) promulgated under the
Securities Act such information as is required for the Buyer to sell the
Securities under Rule 144 promulgated under the Securities Act.
12
(f) BLUE SKY LAWS.
The Company shall take such action as shall be necessary to qualify, or to
obtain an exemption for, the Preferred Shares for sale to the Buyer and the
Warrants for issuance to the Buyer pursuant to this Agreement and the Underlying
Shares for issuance to the Buyer upon conversion of the Preferred Shares or
exercise of the Warrants under such of the securities or "blue sky" laws of
jurisdictions as shall be applicable to the sale of the Preferred Shares and the
issuance of the Warrants pursuant to this Agreement and the issuance to the
Buyer of the Underlying Shares pursuant to the terms of the Securities. The
Company shall furnish copies of all filings, applications, orders and grants or
confirmations of exemptions relating to such securities or "blue sky" laws.
(g) EXPENSES.
The parties shall each bear their own expenses in connection with this
Agreement, the other Transaction Documents and the transactions contemplated
hereby and thereby. In addition, the Company or the Buyer, as the case may be,
shall pay on demand all expenses incurred by the other party, including
reasonable attorneys' fees and expenses, as a consequence of, or in connection
with any default or breach of any of the defaulting or breaching party's
obligations set forth in any of such agreements or instruments and the
enforcement of any right of, including the collection of any payments due, the
other party under any of such agreements or instruments, including any action or
proceeding relating to such enforcement, or any order, injunction or other
process seeking to restrain a party from paying any amount due the other party,
in which the other party prevails, provided that, where the amount is
quantifiable, such reimbursable legal fees and expenses do not exceed, in each
instance, 35% of the amount sought in good faith to be recovered.
(h) CERTAIN ISSUANCES OF SECURITIES.
Unless the Company obtains (x) the approval of its stockholders as required
by Rule 4350(i)(1)(D) of Nasdaq as in effect from time to time or any successor,
replacement or similar provision thereof or of any other market on which the
Common Stock is listed for trading (the "SHAREHOLDER APPROVAL RULE") or (y) a
waiver thereof from Nasdaq, the Company will not issue any shares of Common
Stock or shares of any series of preferred stock or other securities convertible
into, exchangeable for, or otherwise entitling the holder to acquire, shares of
Common Stock which would be subject to the requirements of the Shareholder
Approval Rule and which would be integrated with the sale of the Preferred
Shares and issuance of the Warrants to the Buyer or the issuance of the
Underlying Shares for purposes of the Shareholder Approval Rule.
(i) COMMERCIALLY REASONABLE EFFORTS. Each of the parties shall use
commercially reasonable efforts timely to satisfy each of the conditions to the
other party's obligations to sell and purchase the Preferred Shares set forth in
Section 6 or 7, as the case may be, of this Agreement on or before the Closing
Date.
(j) INTENTIONALLY OMITTED.
13
(k) NON-PUBLIC INFORMATION. Notwithstanding anything to the contrary in any
Transaction Document or any other agreement between the Buyer and the Company,
the Company shall not be required to provide any non-public information
regarding the Company to the Buyer except to the extent that the disclosure of
such additional information to the Buyer is consistent with Regulation FD under
the Securities Act.
(l) PRESS RELEASE. Immediately following the Closing Date, the Company
shall issue a press release in the form set forth in EXHIBIT 5 hereto. Buyer
shall have the opportunity to review such press release prior to its issuance.
No press release shall name the Buyer except as shall be required by law or
permitted by Buyer. If the Company fails to issue a press release within 1
business day of the Closing Date, the Buyer may issue a press release covering
the Transaction Documents and complying with any legal requirement applicable to
the Buyer and the Company.
5. CLOSING DATE.
Subject to the satisfaction or waiver of the conditions set forth in
Sections 6 and 7 below, the date and time of the issuance and sale of the
Preferred Shares and the issuance of the Warrants shall be 4:00 p.m., New York
City time, on the Closing Date.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.
The Buyer understands that the Company's obligation to sell the Preferred
Shares and issue the Warrants to the Buyer pursuant to this Agreement is
conditioned upon the satisfaction of the following conditions precedent on or
before the Closing Date (any or all of which may be waived by the Company in its
sole discretion):
(a) The receipt by the Company of the Buyer's executed signature page
to this Agreement and the Registration Rights Agreement;
(b) Delivery by the Buyer to the Company of good funds for payment of
100% of the Purchase Price for the Securities in accordance with Section 1
hereof; and
(c) The accuracy in all material respects on the Closing Date of the
representations and warranties of the Buyer contained in this Agreement as if
made on the Closing Date and the performance by the Buyer on or before the
Closing Date of all covenants and agreements of the Buyer required to be
performed on or before the Closing Date, and receipt by the Company of a
certificate, dated the Closing Date, of a duly authorized signatory of the Buyer
confirming such matters and such other matters as the Company may reasonably
request.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Shares and acquire the Warrants on the Closing Date is conditioned
upon the satisfaction of the following conditions precedent on or before the
Closing Date (any or all of which may be waived by the Buyer in its sole
discretion):
14
(a) The receipt by the Buyer of the Company's executed signature page
to this Agreement and the Registration Rights Agreement;
(b) The delivery by the Company to the Buyer (or its counsel) of the
Preferred Shares and the Warrants in accordance with this Agreement;
(c) The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as if
made on the Closing Date and the performance by the Company on or before the
Closing Date of all covenants and agreements of the Company required to be
performed on or before the Closing Date, and receipt by the Buyer of a
certificate, dated the Closing Date, of the Chief Executive Officer of the
Company confirming such matters and such other matters as the Buyer may
reasonably request;
(d) The receipt by the Buyer of a certificate, dated the Closing Date,
of the Secretary of the Company certifying (i) the Certificate of Incorporation,
as amended, and By-Laws of the Company as in effect on the Closing Date and (ii)
all resolutions of the Board of Directors (and committees thereof) of the
Company relating to this Agreement and the transactions contemplated hereby;
(e) The receipt by the Buyer on the Closing Date of an opinion of
Ropes & ▇▇▇▇, dated the Closing Date, in such form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in EXHIBIT 4
attached hereto.
(f) From the date hereof to the Closing Date, trading in the Company's
Common Stock shall not have been suspended by the SEC and trading in securities
generally as reported by Nasdaq shall not have been suspended or limited, and
the Common Stock shall be listed on Nasdaq.
(g) 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 any Transaction
Document. The NASD shall not have objected or indicated that it may object to
the consummation of any of the transactions contemplated by this Agreement.
(h) Evidence of the acceptance of the Certificate by the Secretary of
the State of Delaware.
(i) The Company shall have delivered to the Buyer such other documents
relating to the transactions contemplated by this Agreement as the Buyer or its
counsel may reasonably request.
8. MISCELLANEOUS.
(a) Governing Law. The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be
15
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
(b) COUNTERPARTS. This Agreement may be executed in counterparts and
by the parties hereto on separate counterparts, all of which together shall
constitute one and the same instrument. A facsimile transmission of this
Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party.
(c) HEADINGS, ETC. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
(e) AMENDMENTS. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Buyer or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific instance and for the purpose
for which given. No course of dealing between the parties hereto shall operate
as an amendment of this Agreement.
(f) WAIVERS. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, or any course of dealings between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(g) NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be delivered personally (which shall include
telephone line facsimile transmission with answer back confirmation) or by
courier and shall be effective upon receipt, in the case of the Company
addressed to the Company at its address shown in the introductory paragraph of
this Agreement, Attention: Chief Executive Officer (telephone line facsimile
16
transmission number (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Ropes & ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Esq., (facsimile number (▇▇▇) ▇▇▇-▇▇▇▇), or, in the case of the Buyer, at its
address or telephone line facsimile transmission number shown on the signature
page of this Agreement, with a copy to Kleinberg, Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇, P.C.,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇) or such other address or telephone line
facsimile transmission number as a party shall have provided by notice to the
other party in accordance with this provision.
(h) ASSIGNMENT. Prior to the Closing Date, the Buyer may not assign
its rights and obligations under this Agreement. Any transfer of the Securities
or Underlying Shares by the Buyer after the Closing Date shall be made in
accordance with Section 4. After the Closing Date, the Buyer shall have the
right to assign its rights and obligations under this Agreement in connection
with any transfer of the Securities and Underlying Shares upon execution by any
transferee of an instrument reasonably satisfactory to the Company pursuant to
which the transferee agrees with the Company to be bound as a Buyer by the terms
and conditions of this Agreement.
(i) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations, warranties, covenants and agreements of the Buyer and the
Company contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall survive the delivery of and
payment for the Preferred Shares and shall remain in full force and effect
regardless of any investigation made by or on behalf of them or any person
controlling or advising any of them.
(j) ENTIRE AGREEMENT. This Agreement and its Schedules and Exhibits,
the Transaction Documents and the transactions contemplated hereby and thereby
set forth the entire agreement between the parties hereto with respect to the
subject matter hereof.
(k) FURTHER ASSURANCES. Each party to this Agreement will perform any
and all acts and execute any and all documents as may be necessary and proper
under the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
(l) PUBLIC STATEMENTS, PRESS RELEASES, ETC. The Company and the Buyer
shall have the right to approve before issuance any press releases or any other
public statements with respect to the transactions contemplated hereby;
PROVIDED, HOWEVER, that the Company shall be entitled, without the prior
approval of the Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law or Nasdaq
regulation (although the Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release and
shall be provided with a copy thereof).
(m) CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
(n) INDEMNIFICATION. In consideration of the Buyer's execution and
delivery of this Agreement, the Registration Rights Agreement and acquiring the
Preferred Shares hereunder
17
and in addition to all of the Company's other obligations under this Agreement
or the transaction documents contemplated hereby, the Company shall defend,
protect, indemnify and hold harmless the Buyer and all of its partners,
officers, directors, employees, members and direct or indirect investors and any
of the foregoing person's agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "INDEMNITEES") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement or the other
transaction documents contemplated hereby or any other certificate or document
contemplated hereby or thereby, (ii) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement or the other transaction
documents contemplated herein or any other certificate or document contemplated
hereby or thereby, (iii) any cause of action, suit or claim brought or made
against such Indemnitee by a third party and arising out of or resulting from
(A) the execution, delivery, performance, breach by the Company or enforcement
of this Agreement or the other transaction documents contemplated hereby or any
other certificate, instrument or document contemplated hereby or thereby, (B)
any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Underlying Shares or (C)
the status of the Buyer or holder of the Securities or Underlying Shares as an
investor in the Company and (iv) the enforcement of this Section.
Notwithstanding the foregoing, Indemnified Liabilities shall not include any
liability of any Indemnitee arising solely out of such Indemnitee's gross
negligence, willful misconduct or fraudulent action(s). To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
Except as otherwise set forth herein, the mechanics and procedures with respect
to the rights and obligations under this section shall be the same as those set
forth in the Registration Rights Agreement, including, without limitation, those
procedures with respect to the settlement of claims and Company's right to
assume the defense of claims.
[SIGNATURE PAGE FOLLOWS]
18
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer and
the Company by their respective officers or other representatives thereunto duly
authorized on the respective dates set forth below.
NUMBER OF PREFERRED SHARES: 5,000
PRICE PER SHARE: $1,000.00
NUMBER OF WARRANT SHARES: 350,877
AGGREGATE PURCHASE PRICE: $5,000,000.00
WARRANT EXERCISE PRICE: $3.42
RIVERVIEW GROUP, L.L.C.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Operating Officer
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
STEMCELLS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President and CEO
19
SCHEDULES
Disclosure Schedule
EXHIBITS
Exhibit 1 Form of Certificate
Exhibit 2 Form of Warrants
Exhibit 3 Form of Registration Rights Agreement
Exhibit 4 Form of Opinion of Counsel to Be Delivered on Closing Date
Exhibit 5 Form of Press Release
20