SECURITIES PURCHASE
Confidential
Treatment has been requested for portions of this exhibit. The copy filed
herewith omits the information subject to the confidentiality
request. Omissions are designated as “***”. A complete version of
this exhibit has been filed separately with the Securities and Exchange
Commission.
SECURITIES
PURCHASE
AGREEMENT
Dated
as of __________, 2009
by
and among
GENTA
INCORPORATED
and
THE
PURCHASERS LISTED ON EXHIBIT A
This
SECURITIES PURCHASE AGREEMENT dated as of ___________, 2009 (this “Agreement”) by and
among Genta Incorporated, a Delaware corporation (the “Company”), and each
of the purchasers of the senior secured convertible promissory notes and
warrants of the Company whose names are set forth on Exhibit A attached
hereto (each a “Purchaser” and
collectively, the “Purchasers”).
The
parties hereto agree as follows:
ARTICLE
1
PURCHASE
AND SALE OF NOTES
1.1 Purchase and Sale of Notes
and Warrants. Upon the following terms and conditions, the Company
shall issue and sell to the Purchasers, and the Purchasers shall purchase from
the Company, 8% senior secured convertible promissory notes in the aggregate
principal amount of up to $12,000,000, convertible into shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”), in
substantially the form attached hereto as Exhibit B (the
“Notes”) and
corresponding warrants to purchase common stock, in substantially the form
attached hereto as Exhibit C (the “Warrants”). The
Company and the Purchasers are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration
afforded by Section 4(2) of the U.S. Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the “Securities Act”),
including Regulation D (“Regulation D”),
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
to be made hereunder.
1.2 Purchase Price and
Closings. Subject to the terms and conditions hereof, the Company agrees
to issue and sell to the Purchasers and, in consideration of and in express
reliance upon the representations, warranties, covenants, terms and conditions
of this Agreement, the Purchasers, severally but not jointly, agree to purchase
the Notes and Warrants for an aggregate purchase price of up to $12,000,000 (the
“Purchase
Price”). At each Closing (as defined below), each Purchaser shall deliver
the applicable portion of the Purchase Price by wire transfer of immediately
available funds to the Company.
(a) The
first closing under this Agreement (the “First Closing”) shall
take place on or before ___________, 2009 (the “First Closing Date”).
The First Closing shall take place at the offices of Tang Capital Partners LP
(the “Lead
Purchaser”), ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ at
10:00 a.m. Pacific Standard Time; provided, that all of
the conditions set forth in Article IV hereof and applicable to the First
Closing shall have been fulfilled or waived in accordance herewith. Subject to
the terms and conditions of this Agreement, at the First Closing the Purchasers
shall purchase and the Company shall issue and deliver or cause to be delivered
to each Purchaser Notes for the principal amount and the number of Warrants set
forth opposite the name of such Purchaser on Exhibit A
hereto.
(b) For
purposes of this Agreement, “Expiration Date”
shall mean the earlier of (i) the third anniversary of the First Closing and
(ii) the date that is three months following the Company’s delivery to each of
the Purchasers of a notice of the earlier of the European Agency for the
Evaluation of Medicinal Products or the United States Food and Drug
Administration approval of Genasense. At any time and from time to
time on or prior to the Expiration Date, each of the Purchasers shall have the
option (the “Purchase
Option”), in each such Purchaser’s sole discretion, to purchase
additional Notes up to the amount set forth opposite such Purchaser’s name on
Exhibit A in
one or more closings (each an “Additional Closing”,
and along with the First Closing, each a “Closing”). At
each such Additional Closing, the Company shall issue to each purchaser a
three-year warrant to purchase a number of shares of Common Stock, equal to 25%
of the number of shares of Common Stock underlying the principal amount of the
Notes purchased at such Additional Closing the exercise price of which is equal
to $0.01 per share. The issuance of such additional Notes and Warrants at any
Additional Closing, shall be made on the terms and conditions set forth in this
Agreement, and the
representations and warranties of the Company set forth in Article 3 and the
representations and warranties of the Purchasers in Article 4 hereof shall speak
as of the date of such Additional Closing. Any Notes and Warrants issued
pursuant to this Section 1.2(b) shall be deemed to be “Notes” and
“Warrants” for all purposes under this Agreement.
1.3 Conversion Shares.
Within 105 days of the First Closing Date, the Company shall amend its
Certificate (as defined below) to effect a reverse stock split of the Company’s
Common Stock in a ratio of between 25:1 and 50:1 (the “Reverse Split” and
the date of the effectiveness of such amendment, the “Authorization Date”).
On and after the Authorization Date, the Company shall at all times reserve (and
hereby covenants to continue to reserve), free of preemptive rights and other
similar contractual rights, a number of its authorized but unissued shares of
Common Stock equal to 125% of the aggregate number of shares of Common Stock
then issuable upon conversion or exercise of or otherwise in respect of the
Notes (including any Notes issued in payment of interest thereunder) and
Warrants. Any shares of Common Stock issuable upon conversion or otherwise in
respect of the Notes are herein referred to as the “Conversion
Shares”. Any shares of Common Stock issuable upon exercise of
the Warrants are herein referred to as the “Warrant Shares”. The
Notes (including any Notes issued in payment of interest thereunder), the
Warrants, the Conversion Shares and the Warrant Shares are sometimes
collectively referred to herein as the “Securities”.
ARTICLE
2
REPRESENTATIONS
AND WARRANTIES
2.1 Representations and
Warranties of the Company. The Company hereby represents and warrants to
the Purchasers, as of the date hereof and as of the First Closing Date and the
date of any Additional Closing (each a “Closing Date”)
(except as set forth in the Public Filings (as defined below) or on the Schedule
of Exceptions attached hereto with each numbered Schedule corresponding to the
section number herein), as follows:
3.
(a) Organization, Good Standing
and Power. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power to own, lease and operate its properties and
assets and to conduct its business as it is now being conducted. The Company
does not have any direct or indirect Subsidiaries (as defined in Section 2.1(g))
or own securities of any kind in any other entity except as set forth on Schedule 2.1(g)
hereto. The Company and each such Subsidiary (as defined in Section 2.1(g)) is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary except for any jurisdiction(s)
(alone or in the aggregate) in which the failure to be so qualified will not
have a Material Adverse Effect. For the purposes of this Agreement, “Material Adverse
Effect” means any material adverse effect on the business, operations,
properties, prospects, or financial condition of the Company and its
Subsidiaries and/or any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of the Company to
perform any of its obligations under this Agreement or any of the Transaction
Documents in any material respect.
(b) Authorization;
Enforcement. Each of the Company and its Subsidiaries (as applicable) has
the requisite corporate power and authority to enter into and perform this
Agreement, the Notes, the Warrants, the Amended and Restated General Security
Agreement by and among the Company and its Subsidiaries, on the one hand, and
the Agent (as defined in the Amended Security Agreement), on the other hand,
dated as of the date hereof, substantially in the form of Exhibit D attached
hereto (the “Amended
Security Agreement”), the Amended and Restated Intellectual Property
Security Agreement by and among the Company and its Subsidiaries, on the one
hand, and the Agent (as defined in the Amended Security Agreement), on the other
hand, dated as of the date hereof, substantially in the form of Exhibit E attached
hereto (the “Amended
IP Security Agreement”), the Officer’s Certificate to be delivered by the
Company, dated as of the Closing Date, substantially in the form of Exhibit F attached
hereto (the “Officer’s
Certificate”) and the Irrevocable Transfer Agent Instructions (as defined
in Section 3.16 hereof) (collectively, the “Transaction
Documents”) and to issue and sell the Securities in accordance with the
terms hereof. The execution, delivery and performance of the Transaction
Documents by the Company and each Subsidiary of the Company party thereto and
the consummation by it of the transactions contemplated thereby have been duly
and validly authorized by all necessary corporate action, and, except as set
forth on Schedule
2.1(b), no further consent or authorization of the Company, any
Subsidiary or their respective Boards of Directors or stockholders is required.
When executed and delivered by the Company and each Subsidiary of the Company
party thereto, each of the Transaction Documents shall constitute a valid and
binding obligation of the Company and each Subsidiary, as applicable,
enforceable against the Company and each Subsidiary, as applicable, in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, 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.
4.
(c) Capitalization. The
authorized capital stock and the issued and outstanding shares of capital stock
of the Company as of the Closing Date is set forth on Schedule 2.1(c)
hereto. All of the outstanding shares of the Common Stock and any other
outstanding security of the Company have been duly and validly authorized.
Except as set forth in this Agreement, the Public Filings (as defined in Section
2.1(f)) or as set forth on Schedule 2.1(c)
hereto, no shares of Common Stock or any other security of the Company are
entitled to preemptive rights or registration rights and 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. Furthermore,
except as set forth in this Agreement and as set forth on Schedule 2.1(c)
hereto, there are no equity plans, 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 shares of capital stock of the Company. Except for customary
transfer restrictions contained in agreements entered into by the Company in
order to sell restricted securities or as provided on Schedule 2.1(c)
hereto, the Company is not a party to or bound by any agreement or understanding
granting registration or anti-dilution rights to any person with respect to any
of its equity or debt securities. Except as set forth on Schedule 2.1(c), the
Company is not a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital
stock of the Company. The Company has not made any representations regarding
equity incentives to any officer, employee, director or consultant that are not
disclosed in the Public Filings.
(d) Issuance of
Securities. The amendment of the Certificate to effect the Reverse Split
in connection with this Agreement requires the approval of a majority of the
outstanding shares of Common Stock. The Notes and Warrants to be issued at each
Closing have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Notes and Warrants
shall be validly issued and outstanding, free and clear of all liens,
encumbrances and rights of refusal of any kind. When the Conversion Shares and
Warrant Shares are issued in accordance with the terms of this Agreement and as
set forth in the Notes and Warrants, such shares will be duly authorized by all
necessary corporate action and validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of refusal
of any kind and the holders shall be entitled to all rights accorded to a holder
of Common Stock.
(e) No Conflicts. The
execution, delivery and performance of the Transaction Documents by the Company
and its Subsidiaries (as applicable), the performance by the Company of its
obligations under the Notes and Warrants, and the consummation by the Company
and its Subsidiaries of the transactions contemplated hereby and thereby, and
the issuance of the Securities as contemplated hereby, do not and will not (i)
violate or conflict with any provision of the Company’s Certificate of
Incorporation (the “Certificate”) or
Bylaws (the “Bylaws”), each as
amended to date, or any Subsidiary’s comparable charter documents, subject to
the filing of an amendment to the Certificate to increase the authorized shares,
(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, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries’
respective properties or assets are bound, (iii) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, 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 or affected, or (iv) create or
impose a lien, mortgage, security interest, charge or encumbrance of any nature
on any property or asset of the Company or its Subsidiaries under any agreement
or any commitment to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries is bound or by which any of
their respective properties or assets are bound, except, in the case of clause
(ii), for such conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries
is 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 the Transaction Documents, issue
and sell the Securities in accordance with the terms hereof (other than the
filing of a Form D pursuant to Regulation D and counterpart filings under
applicable state securities laws, rules or regulations) or grant and perfect the
security interest in accordance with the Amended Security Agreement and Amended
IP Security Agreement. The business of the Company and its Subsidiaries is not
being conducted in violation of any laws, ordinances or regulations of any
governmental entity.
5.
(f) Commission Documents,
Financial Statements. The Common Stock of the Company is registered
pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), and the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the Securities
Exchange Commission (“SEC”) pursuant to the
reporting requirements of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the “Commission
Documents”). At the times of their respective filings, the Form 10-K for
the fiscal year ended December 31, 2008 (the “Form 10-K”, and
together with any other report, schedule, form, statement or other document
filed by the Company with the SEC pursuant to the reporting requirements of the
Exchange Act subsequent to the filing of the Form 10-K and prior to the date of
this Agreement, the “Public Filings”)
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the SEC promulgated thereunder and other federal,
state and local laws, rules and regulations applicable to such documents, and
the 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, the financial statements of
the Company included in the Commission Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles (“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).
6.
(g) Subsidiaries. Schedule 2.1(g)
hereto sets forth each Subsidiary of the Company, showing the jurisdiction of
its incorporation or organization and showing the percentage of each person’s
ownership of the outstanding stock or other interests of such Subsidiary. For
the purposes of this Agreement, “Subsidiary” shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other Subsidiaries. All of the outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly issued, and are
fully paid and nonassessable. Except as set forth on Schedule 2.1(g)
hereto, there are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon any
Subsidiary for the purchase or acquisition of any shares of capital stock of any
Subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Neither
the Company nor any Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any Subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence except as set forth
on Schedule
2.1(g) hereto. Neither the Company nor any Subsidiary is party to, nor
has any knowledge of, any agreement restricting the voting or transfer of any
shares of the capital stock of any Subsidiary. None of the Subsidiaries owns any
assets or conduct any operations.
(h) No Material Adverse
Change. Since December 31, 2008, the Company has not experienced or
suffered any Material Adverse Effect, except as disclosed on Schedule 2.1(h)
hereto.
(i)
No Undisclosed
Liabilities. Except as disclosed on Schedule 2.1(i)
hereto, neither the Company nor any of its Subsidiaries has incurred any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) other than
those incurred in the ordinary course of the Company’s or its Subsidiaries’
respective businesses or which, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect.
(j)
No Undisclosed Events
or Circumstances. Since December 31, 2008, except as disclosed on Schedule 2.1(j)
hereto, no event or circumstance has occurred or exists with respect to the
Company or its Subsidiaries or their respective businesses, properties,
prospects, 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.
(k) Indebtedness. Schedule 2.1(k)
hereto sets forth as of the applicable Closing Date all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this Agreement,
“Indebtedness” shall include, without limitation, (a) any liabilities for
borrowed money or other amounts owed, (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company’s balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) all leases required to be capitalized in accordance with GAAP. Neither the
Company nor any Subsidiary is in default with respect to any
Indebtedness.
(l)
Title to
Assets. Each of the Company and the Subsidiaries has good and valid title
to all of its real and personal property reflected in the Public Filings, free
and clear of any mortgages, pledges, charges, liens, security interests or other
encumbrances, except for those indicated on Schedule 2.1(l)
hereto or such that, individually or in the aggregate, do not cause a Material
Adverse Effect. Any leases of the Company and each of its Subsidiaries are valid
and subsisting and in full force and effect.
7.
(m) Actions Pending.
There is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or other proceeding pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary which questions the
validity of this Agreement or any of the other Transaction Documents or any of
the transactions contemplated hereby or thereby or any action taken or to be
taken pursuant hereto or thereto. Except as set forth in the Public Filings or
on Schedule
2.1(m) hereto, there is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other 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, which
individually or in the aggregate, would reasonably be expected, if adversely
determined, to have a Material Adverse Effect. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any Subsidiary or any
officers or directors of the Company or Subsidiary in their capacities as such,
which individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(n) Compliance with Law.
The Company and its Subsidiaries have been and are presently conducting their
respective businesses in accordance with all applicable federal, state and local
governmental laws, rules, regulations and ordinances, except such that,
individually or in the aggregate, the noncompliance therewith could not
reasonably be expected to have a Material Adverse Effect. 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 unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. The Company
and each of the Subsidiaries has accurately prepared and filed all federal,
state and other tax returns required by law to be filed by it, has paid or made
provisions for the payment of all taxes shown to be due and all additional
assessments, and adequate provisions have been and are reflected in the
financial statements of the Company and the Subsidiaries for all current taxes
and other charges to which the Company or any Subsidiary is subject and which
are not currently due and payable. Except as disclosed on Schedule 2.1(o)
hereto or in the Public Filings, to the best of the Company’s knowledge, none of
the federal income tax returns of the Company or any Subsidiary have been
audited by the Internal Revenue Service. Except as disclosed on Schedule 2.1(o)
hereto or in the Public Filings, the Company has no knowledge of any additional
assessments, adjustments or contingent tax liability (whether federal or state)
of any nature whatsoever, whether pending or threatened against the Company or
any Subsidiary for any period, nor of any basis for any such assessment,
adjustment or contingency.
(p) Certain Fees. Except
as set forth on Schedule 2.1(p)
hereto, the Company has not employed any broker or finder or incurred any
liability for any brokerage or investment banking fees, commissions, finders’
structuring fees, financial advisory fees or other similar fees in connection
with the Transaction Documents.
8.
(q) Disclosure. Except
for the information concerning the transactions contemplated by this Agreement,
the Company confirms that neither it nor any other person acting on its behalf
has provided any of the Purchasers or their agents or counsel with any
information that constitutes or might constitute material, nonpublic
information. To the best of the Company’s knowledge, neither this Agreement or
the Schedules hereto nor any other documents, certificates or instruments
furnished to the Purchasers 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.
(r) Operation of
Business. Except as set forth on Schedule 2.1(r)
hereto, the Company and each of the Subsidiaries owns or possesses the rights to
all patents, trademarks, domain names (whether or not registered) and any
patentable improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct of
its business as now conducted without any conflict with the rights of
others.
(s) Environmental
Compliance. The Company and each of its Subsidiaries have obtained all
material approvals, authorization, certificates, consents, licenses, orders and
permits or other similar authorizations of all governmental authorities, or from
any other person, that are required under any Environmental Laws. “Environmental
Laws” shall mean all applicable laws relating to the protection of the
environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. The Company has
all necessary governmental approvals required under all Environmental Laws as
necessary for the Company’s business or the business of any of its subsidiaries.
To the best of the Company’s knowledge, the Company and each of its subsidiaries
are also in compliance with all other limitations, restrictions, conditions,
standards, requirements, schedules and timetables required or imposed under all
Environmental Laws. Except for such instances as would not individually or in
the aggregate have a Material Adverse Effect, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating to
or in any way affecting the Company or its Subsidiaries that violate or may
violate any Environmental Law after each Closing Date or that may give rise to
any environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
9.
(t) Books and Records; Internal
Accounting Controls. The records and documents of the Company and its
Subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the Subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or any Subsidiary. The
Company is in material compliance with all provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
of 2002 which are applicable to it as of the applicable Closing Date. The
Company and its Subsidiaries 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 GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company in the
reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules
and forms. The Company’s certifying officers have evaluated the effectiveness of
the Company’s disclosure controls and procedures as of the end of the period
covered by the Company’s most recently filed periodic report under the Exchange
Act (such date, the “Evaluation Date”).
The Company presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no changes in the
Company’s internal control over financial reporting (as such term is defined in
the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
(u) Material Agreements.
Except as disclosed in the Public Filings or as set forth on Schedule 2.1(u)
hereto, or as would not be reasonably likely to have a Material Adverse Effect,
(i) the Company and each of its Subsidiaries have performed all obligations
required to be performed by them to date under any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, filed or
required to be filed with the SEC (the “Material
Agreements”), (ii) neither the Company nor any of its Subsidiaries has
received any notice of default under any Material Agreement and, (iii) to the
best of the Company’s knowledge, neither the Company nor any of its Subsidiaries
is in default under any Material Agreement now in effect.
(v) Transactions with
Affiliates. Except as set forth on Schedule 2.1(v)
hereto or in the Public Filings and otherwise contemplated by this Agreement,
there are no loans, leases, agreements, contracts, royalty agreements,
management contracts or arrangements or other continuing transactions between
(a) the Company, any Subsidiary or any of their respective customers or
suppliers on the one hand, and (b) on the other hand, any officer, employee,
consultant or director of the Company, or any of its Subsidiaries, or any person
owning at least 5% of the outstanding capital stock of the Company or any
Subsidiary or any member of the immediate family of such officer, employee,
consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder which, in each case, is required to be disclosed in the
Commission Documents or in the Company’s most recently filed definitive proxy
statement on Schedule 14A, that is not so disclosed in the Commission Documents
or in such proxy statement.
10.
(w) Securities Act of
1933. The Company has complied and will comply with all applicable
federal and state securities laws in connection with the offer, issuance and
sale of the Securities hereunder. Neither the Company nor anyone acting on its
behalf, directly or indirectly, has or will sell, offer to sell or solicit
offers to buy any of the Securities or similar securities to, or solicit offers
with respect thereto from, or enter into any negotiations relating thereto with,
any person, or has taken or will take any action so as to bring the issuance and
sale of any of the Securities under the registration provisions of the
Securities Act and applicable state securities laws, and neither the Company nor
any of its affiliates, nor any person acting on its or their behalf, has engaged
in any form of general solicitation or general advertising (within the meaning
of Regulation D under the Securities Act) in connection with the offer or sale
of any of the Securities.
(x) Employees. Neither
the Company nor any Subsidiary has any collective bargaining arrangements or
agreements covering any of its employees, except as set forth on Schedule 2.1(x)
hereto. Except as set forth on Schedule 2.1(x)
hereto or in the Public Filings, neither the Company nor any Subsidiary has any
employment contract, agreement regarding proprietary information,
non-competition agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or restrictive covenant, relating to
the right of any officer, employee or consultant to be employed or engaged by
the Company or such Subsidiary required to be disclosed in the Commission
Documents that is not so disclosed. No officer, consultant or key employee of
the Company or any Subsidiary whose termination, either individually or in the
aggregate, would be reasonably likely to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
Subsidiary.
(y) Absence of Certain
Developments. Except as set forth in the Public Filings or provided on
Schedule 2.1(y)
hereto or as otherwise contemplated by this Agreement, since December 31, 2008,
neither the Company nor any Subsidiary has:
(i) issued
any stock, bonds or other corporate securities or any right, options or warrants
with respect thereto;
(ii) borrowed
any amount in excess of $10,000 or incurred or become subject to any other
liabilities in excess of $10,000 (absolute or contingent) except current
liabilities incurred in the ordinary course of business which are comparable in
nature and amount to the current liabilities incurred in the ordinary course of
business during the comparable portion of its prior fiscal year, as adjusted to
reflect the current nature and volume of the business of the Company and its
Subsidiaries;
(iii) discharged
or satisfied any lien or encumbrance in excess of $10,000 or paid any obligation
or liability (absolute or contingent) in excess of $10,000, other than current
liabilities paid in the ordinary course of business;
11.
(iv) declared
or made any payment or distribution of cash or other property to stockholders
with respect to its stock, or purchased or redeemed, or made any agreements so
to purchase or redeem, any shares of its capital stock, in each case in excess
of $5,000 individually or $10,000 in the aggregate;
(v) sold,
assigned or transferred any other tangible assets, or canceled any debts or
claims, in each case in excess of $10,000, except in the ordinary course of
business;
(vi) sold,
assigned or transferred any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights in
excess of $10,000, or disclosed any proprietary confidential information to any
person except to customers in the ordinary course of business or to the
Purchasers or their representatives;
(vii) suffered
any material losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
prospective business;
(viii)
made any changes in employee compensation except in the ordinary course of
business and consistent with past practices;
(ix) made
capital expenditures or commitments therefor that aggregate in excess of
$10,000;
(x) entered
into any material transaction, whether or not in the ordinary course of
business;
(xi) made
charitable contributions or pledges in excess of $5,000;
(xii) suffered
any material damage, destruction or casualty loss, whether or not covered by
insurance;
(xiii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment; or
(xiv) entered
into an agreement, written or otherwise, to take any of the foregoing
actions.
(z) Investment Company Act
Status. The Company is not, and as a result of and immediately upon each
Closing will not be, an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended.
12.
(aa) Independent Nature of
Purchasers. The Company acknowledges that the obligations of each
Purchaser under the Transaction Documents are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance of the obligations of any other Purchaser under the
Transaction Documents. The Company acknowledges that the decision of each
Purchaser to purchase Securities pursuant to this Agreement has been made by
such Purchaser independently of any other purchase and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of its Subsidiaries
which may have made or given by any other Purchaser or by any agent or employee
of any other Purchaser, and no Purchaser or any of its agents or employees shall
have any liability to any Purchaser (or any other person) relating to or arising
from any such information, materials, statements or opinions. The Company
acknowledges that nothing contained herein, or in any Transaction Document, and
no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that for reasons of administrative convenience only, the Transaction Documents
have been prepared by counsel for one of the Purchasers and such counsel does
not represent all of the Purchasers but only such Purchaser and the other
Purchasers have retained their own individual counsel with respect to the
transactions contemplated hereby. The Company acknowledges that it has elected
to provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do so
by the Purchasers. The Company acknowledges that such procedure with respect to
the Transaction Documents in no way creates a presumption that the Purchasers
are in any way acting in concert or as a group with respect to the Transaction
Documents or the transactions contemplated hereby or thereby. The Company
acknowledges that each Purchaser shall be entitled to independently protect and
enforce its rights, including without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.
(bb) 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 under
circumstances that would cause the offering of the Securities pursuant to this
Agreement to be integrated with prior offerings by the Company for purposes of
the Securities Act which would prevent the Company from selling the Securities
pursuant to Regulation D and Rule 506 thereof under the Securities Act nor will
the Company or any of its affiliates or subsidiaries take any action or steps
that would cause the offering of the Securities to be integrated with other
offerings if to do so would prevent the Company from selling Securities pursuant
to Regulation D and Rule 506 thereof under the Securities Act or otherwise
prevent a completed offering of Securities hereunder. Except as set
forth on Schedule
2.1(bb) hereto, the Company does not have any registration statement
pending before the SEC or currently under the SEC’s review and since December
31, 2008, the Company has not offered or sold any of its equity securities or
debt securities convertible into shares of Common Stock.
(cc) Dilutive Effect. The
Company understands and acknowledges that its obligation to issue Conversion
Shares upon conversion of the Notes and the Warrant Shares upon exercise of the
Warrants in accordance with this Agreement and the Notes is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interest of other stockholders of the Company.
13.
(dd) DTC Status. Except as
set forth on Schedule
2.1(dd) hereto, the Company’s transfer agent is a participant in and the
Common Stock is eligible for transfer pursuant to the Depository Trust Company
Automated Securities Transfer Program. The name, address, telephone number, fax
number, contact person and email of the Company transfer agent is set forth
on Schedule
2.1(dd) hereto.
(ee) Governmental
Approvals. Except for the filing of any notice prior or subsequent to the
applicable Closing that may be required under applicable state and/or federal
securities laws (which if required, shall be filed on a timely basis) and the
declaration of the effectiveness of any registration statements filed by the
Company pursuant to the Transaction Documents, no authorization, consent,
approval, license, exemption of, filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary for, or in connection with, the
execution or delivery of the Conversion Shares, or for the performance by the
Company of its obligations under the Transaction Documents.
(ff) Insurance. The
Company and each of its Subsidiaries 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 Subsidiaries 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 have a Material
Adverse Effect.
(gg) Trading
Activities. It is understood and acknowledged by the Company
that none of the Purchasers have been asked to agree, nor has any Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or “derivative” securities based on securities issued by the
Company or to hold the Securities for any specified term. The Company
further understands and acknowledges that one or more Purchasers may engage in
hedging and/or trading activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods
that the value of the Conversion Shares, the Warrant Shares, and the Interest
Shares are being determined and (b) such hedging and/or trading activities, if
any, can reduce the value of the existing stockholders’ equity interest in the
Company both at and after the time the hedging and/or trading activities are
being conducted. The Company acknowledges that such aforementioned
hedging and/or trading activities, assuming such trading and hedging activities
are in compliance with all applicable securities laws, do not constitute a
breach of this Agreement, the Notes, the Warrants or any of the documents
executed in connection herewith.
2.2 Representations and
Warranties of the Purchasers. Each of the Purchasers hereby represents
and warrants to the Company with respect solely to itself and not with respect
to any other Purchaser as follows as of the date hereof and as of each Closing
Date:
(a) Organization and Standing of
the Purchasers. If the Purchaser is an entity, such Purchaser is a
corporation, limited liability company or partnership duly incorporated or
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.
14.
(b) Authorization and
Power. Each Purchaser has the requisite power and authority to enter into
and perform the Transaction Documents and to purchase the Securities being sold
to it hereunder. The execution, delivery and performance of the Transaction
Documents by each Purchaser and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate or
partnership action, and no further consent or authorization of such Purchaser or
its Board of Directors, stockholders, or partners, as the case may be, is
required. When executed and delivered by the Purchasers, the other Transaction
Documents shall constitute valid and binding obligations of each Purchaser
enforceable against such Purchaser in accordance with their 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.
(c) Acquisition for
Investment. Each Purchaser is purchasing the Securities solely for its
own account and not with a view to or for sale in connection with distribution.
Each Purchaser does not have a present intention to sell any of the Securities,
nor a present arrangement (whether or not legally binding) or intention to
effect any distribution of any of the Securities to or through any person or
entity; provided, however, that by
making the representations herein, such Purchaser does not agree to hold the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with federal and state
securities laws applicable to such disposition. Each Purchaser acknowledges that
it (i) has such knowledge and experience in financial and business matters such
that Purchaser is capable of evaluating the merits and risks of Purchaser’s
investment in the Company, (ii) is able to bear the financial risks associated
with an investment in the Securities and (iii) has been given full access to
such records of the Company and the Subsidiaries and to the officers of the
Company and the Subsidiaries as it has deemed necessary or appropriate to
conduct its due diligence investigation.
(d) Rule 144. Each
Purchaser understands that the Securities must be held indefinitely unless such
Securities are registered under the Securities Act or an exemption from
registration is available. Each Purchaser acknowledges that such person is
familiar with Rule 144 of the rules and regulations of the SEC, as amended,
promulgated pursuant to the Securities Act (“Rule 144”), and that
such Purchaser has been advised that Rule 144 permits resales only under certain
circumstances. Each Purchaser understands that to the extent that Rule 144 is
not available, such Purchaser will be unable to sell any Securities without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(e) General. Each
Purchaser 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 the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of such Purchaser set forth herein in order to determine the applicability of
such exemptions and the suitability of such Purchaser to acquire the Securities.
Each Purchaser understands that no United States federal or state agency or any
government or governmental agency has passed upon or made any recommendation or
endorsement of the Securities. Commencing on the date that the Purchasers were
initially contacted regarding an investment in the Securities, none of the
Purchasers has engaged in any short sale of the Common Stock and will not engage
in any short sale of the Common Stock prior to public announcement of the
transactions contemplated by this Agreement pursuant to Section
3.10.
15.
(f) No General
Solicitation. Each Purchaser acknowledges that the Securities were not
offered to such Purchaser by means of any form of general or public solicitation
or general advertising, or publicly disseminated advertisements or sales
literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television or radio, or (ii) any seminar or meeting to which such
Purchaser was invited by any of the foregoing means of communications. Each
Purchaser, in making the decision to purchase the Securities, has relied upon
independent investigation made by it and has not relied on any information or
representations made by third parties, and was not solicited through Company’s
pending registration statement as described on Schedule 2.1(bb).
(g) Accredited Investor.
Each Purchaser is an “accredited investor” (as defined in Rule 501 of Regulation
D), and such Purchaser has such experience in business and financial matters
that it is capable of evaluating the merits and risks of an investment in the
Securities. Such Purchaser is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act and such Purchaser is not a broker-dealer.
Each Purchaser acknowledges that an investment in the Securities is speculative
and involves a high degree of risk.
(h) Certain Fees. The
Purchasers have not employed any broker or finder or incurred any liability for
any brokerage or investment banking fees, commissions, finders’ structuring
fees, financial advisory fees or other similar fees in connection with the
Transaction Documents.
(i) Independent
Investment. No Purchaser has agreed to act with any other Purchaser for
the purpose of acquiring, holding, voting or disposing of the Securities
purchased hereunder for purposes of Section 13(d) under the Exchange Act, and
each Purchaser is acting independently with respect to its investment in the
Securities.
ARTICLE
3
COVENANTS
Unless
otherwise specified in this Article, for so long as any Notes have not been paid
in full or converted in full, the Company covenants with each Purchaser as
follows, which covenants are for the benefit of each Purchaser and their
respective permitted assignees.
3.1 Securities
Compliance. The Company shall notify the SEC in accordance with its rules
and regulations, of the transactions contemplated by any of the Transaction
Documents and shall 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 Securities to the Purchasers, or their respective
subsequent holders.
16.
3.2 Registration and
Listing. The Company shall cause its Common Stock to continue to be
registered under Sections 12(b) or 12(g) of the Exchange Act, to comply in all
respects with its reporting and filing obligations under the Exchange Act and to
not take any action or file any document (whether or not permitted by the
Securities Act or the rules promulgated thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act. The Company will take all action
necessary to continue the listing or trading of its Common Stock on the Over the
Counter Bulletin Board (the “Principal Market”).
The Company further covenants that it will take such further action as the
Purchasers may reasonably request from time to time to enable the Purchasers to
sell the Securities without registration under the Securities Act pursuant to
the exemption provided by Rule 144 promulgated under the Securities Act. Upon
the request of the Purchasers, the Company shall deliver to the Purchasers a
written certification of a duly authorized officer as to whether it has complied
with such requirements.
3.3 Inspection Rights.
Provided the same would not be in violation of Regulation FD, the Company shall
permit, during normal business hours and upon reasonable request and reasonable
notice, each Purchaser or any employees, agents or representatives thereof, so
long as such Purchaser shall be obligated hereunder to purchase the Notes or
shall beneficially own any Conversion Shares, for purposes reasonably related to
such Purchaser’s interests as a stockholder, to examine the publicly available,
non-confidential records and books of account of, and visit and inspect the
properties, assets, operations and business of the Company and any Subsidiary,
and to discuss the publicly available, non-confidential affairs, finances and
accounts of the Company and any Subsidiary with any of its officers,
consultants, directors, and key employees.
3.4 Compliance with Laws.
The Company shall comply, and cause each Subsidiary to comply, with all
applicable laws, rules, regulations and orders, noncompliance with which would
be reasonably likely to have a Material Adverse Effect.
3.5 Keeping of Records and Books
of Account. The Company shall keep and cause each Subsidiary to keep
adequate records and books of account, in which complete entries will be made in
accordance with GAAP consistently applied, reflecting all financial transactions
of the Company and its Subsidiaries, and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection with its business shall be
made.
3.6 Reporting
Requirements. If the Company ceases to file its periodic reports with the
SEC, or if the SEC ceases making these periodic reports available via the
Internet without charge, then the Company shall furnish the following to each
Purchaser so long as such Purchaser shall be obligated hereunder to purchase the
Securities or shall beneficially own Securities:
(a) Quarterly
Reports on Form 10-Q (or an equivalent form), including financial statements,
promptly following the end of each quarter, and in any event within 45 days of
the end of each quarter, if such reports are no longer filed with the SEC or as
soon as practical after the document is filed with the SEC, and in any event
within five days after the document is filed with the SEC;
17.
(b) Annual
Reports on Form 10-K (or an equivalent form), including financial statements,
promptly following the end of each year, and in any event within 45 days of the
end of each year, if such reports are no longer filed with the SEC or as soon as
practical after the document is filed with the SEC, and in any event within five
days after the document is filed with the SEC; and
(c) Copies
of all notices, information and proxy statements in connection with any
meetings, that are, in each case, provided to holders of shares of Common Stock,
contemporaneously with the delivery of such notices or information to such
holders of Common Stock.
3.7 Other Agreements. The
Company shall not enter into any agreement in which the terms of such agreement
would restrict or impair the right or ability to perform of the Company or any
Subsidiary under any Transaction Document.
3.8 Use of Proceeds. The
proceeds from the sale of the Securities hereunder shall be used by the Company
for general corporate purposes. In no event shall the proceeds be used to redeem
any Common Stock or securities convertible, exercisable or exchangeable into
Common Stock or to settle any outstanding litigation.
3.9 Reporting
Status. So long as a Purchaser beneficially owns any of the
Securities, the Company shall timely file all reports required to be filed with
the SEC pursuant to the Exchange Act, and the Company shall not terminate its
status as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination.
3.10 Disclosure of
Transaction. The Company shall issue a press release describing the
material terms of the transactions contemplated hereby (the “Press Release”) on
the date of execution of this Agreement but in no event later than one hour
after the execution of this Agreement; provided, however, that if the
execution of this Agreement occurs after 4:00 P.M. Eastern Time on any Trading
Day, the Company shall issue the Press Release no later than 9:00 A.M. Eastern
Time on the first Trading Day following such date of execution. The Company
shall also file with the SEC a Current Report on Form 8-K (the “Form 8-K”) describing
the material terms of the transactions contemplated hereby and by the Consent
Agreement (and attaching as exhibits thereto this Agreement, the form of Note,
the Security Agreement, the Consent Agreement and the Press Release) as soon as
practicable following the First Closing Date but in no event more than one
Trading Day following the First Closing Date, which Press Release and Form 8-K
shall be subject to prior review and comment by the Purchasers. “Trading Day” means
any day during which the principal exchange on which the Common Stock is traded
shall be open for trading.
18.
3.11 Disclosure of Material
Information. The Company covenants and agrees that neither it nor any
other person acting on its behalf has provided or will provide any Purchaser or
its agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company. In the event of a breach of the foregoing covenant by the
Company, or any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents, in addition to any other remedy provided herein
or in the Transaction Documents, the Company shall publicly disclose any
material, non-public information in a Form 8-K within one business day of the
date that it discloses such information to any Purchaser. In the event that the
Company discloses any material, non-public information to a Purchaser and fails
to publicly file a Form 8-K in accordance with the above, a Purchaser shall have
the right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without the
prior approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Purchaser shall have any
liability to the Company, its Subsidiaries, or any of its or their respective
officers, directors, employees, stockholders or agents, for any such
disclosure.
3.12 Pledge of Securities.
The Company acknowledges that the Securities may be pledged by a Purchaser in
connection with a bona fide margin agreement
or other loan or financing arrangement that is secured by the Securities. The
pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Purchaser effecting a pledge of the Securities
shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or any other
Transaction Document; provided that a Purchaser and its pledgee shall be
required to comply with the provisions of Article V hereof in order to effect a
sale, transfer or assignment of Securities to such pledgee. At the Purchasers’
expense, the Company hereby agrees to execute and deliver such documentation as
a pledgee of the Securities may reasonably request in connection with a pledge
of the Securities to such pledgee by a Purchaser.
3.13 Amendments to Charter
Documents. The Company shall not, without the consent of Purchasers
holding at least 66 2/3% of the Notes then held by the Purchasers, amend or
waive any provision of the Certificate or Bylaws of the Company in any way that
would adversely affect exercise rights, voting rights, conversion rights,
prepayment rights or redemption rights of the holder of the
Securities.
3.14 Acquisition of
Assets. In the event the Company or any Subsidiary acquires any assets or
other properties, such assets or properties shall constitute a part of the
Collateral (as defined in the Security Agreement) and the Company shall take all
action necessary to perfect the Purchasers’ security interest in such assets or
properties pursuant to the Amended Security Agreement.
19.
3.15 Subsequent
Financings.
(a) At
any time after the First Closing Date and so long as any Note issued under this
Agreement remains outstanding, the Company covenants and agrees to promptly
notify (in no event later than five days after making or receiving an applicable
offer) in writing (a “Rights Notice”) the
holders of outstanding Notes (each a “Rights Holder”) of
the terms and conditions of any proposed offer or sale to, or exchange with (or
other type of distribution to) any third party, of Common Stock or any
securities convertible, exercisable or exchangeable into Common Stock, including
convertible debt securities, or any debt instrument (a “Subsequent
Financing”). The Rights Notice shall describe, in reasonable detail, the
proposed Subsequent Financing, the names and investment amounts of all investors
participating in the Subsequent Financing, the proposed closing date of the
Subsequent Financing, which shall be within 20 calendar days from the date of
the Rights Notice, and all of the terms and conditions thereof and proposed
definitive documentation to be entered into in connection therewith. The Rights
Notice shall provide each Rights Holder an option (the “Rights Option”)
during the 10 Trading Days following delivery of the Rights Notice (the “Option Period”) to
inform the Company whether such Rights Holder will purchase securities in such
Subsequent Financing equal to up to its pro rata portion of the securities being
offered in such Subsequent Financing on the same terms and conditions as
contemplated by such Subsequent Financing. If any Rights Holder elects not to
participate in such Subsequent Financing, the other Rights Holder may
participate on a pro-rata basis so long as such participation in the aggregate
does not exceed the total Purchase Price hereunder. For purposes of this
Section, all references to “pro rata” means, for any Rights Holder electing to
participate in such Subsequent Financing, the percentage obtained by dividing
(x) the principal amount of the Notes purchased by such Rights Holder at the
First Closing by (y) the total principal amount of all of the Notes purchased by
all of the participating Purchasers at the First Closing. Delivery of any
Rights Notice constitutes a representation and warranty by the Company that
there are no other material terms and conditions, arrangements, agreements or
otherwise except for those disclosed in the Rights Notice, to provide additional
compensation to any party participating in any proposed Subsequent Financing,
including, but not limited to, additional compensation based on changes in the
Purchase Price or any type of reset or adjustment of a purchase or conversion
price or to issue additional securities at any time after the closing date of a
Subsequent Financing. If the Company does not receive notice of exercise of the
Rights Option from the Rights Holders within the Option Period, the Company
shall have the right to close the Subsequent Financing on the scheduled closing
date with a third party; provided that all of
the material terms and conditions of the closing are substantially the same as
those provided to the Rights Holders in the Rights Notice. If the closing of the
proposed Subsequent Financing does not occur on that date, any closing of the
contemplated Subsequent Financing or any other Subsequent Financing shall be
subject to all of the provisions of this Section 3.15(a), including, without
limitation, the delivery of a new Rights Notice. The provisions of this Section
3.15(a) shall apply only to the first Subsequent Financing following the First
Closing Date, other than a Permitted Financing under clauses (1), (2), (4) or
(5) of Section 3.15(b).
(b) For
purposes of this Agreement, a Permitted Financing (as defined hereinafter) shall
not be considered a Subsequent Financing. A “Permitted Financing”
shall mean (1) issuances of shares of Common Stock or options to employees,
officers, directors or consultants of the Company pursuant to any stock or
option plan duly adopted by a majority of the non-employee members of the Board
of Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, duly approved by the
Company’s stockholders and described in the Public Filings, including up to
8,400,000 shares reserved for issuance under the 2007 Stock Incentive Plan; (2)
issuances of securities upon the exercise or exchange of or conversion of any
securities exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Agreement and described in the
Public Filings, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities or to decrease
the exercise, exchange or conversion price of any such securities (including the
Notes issued to the Purchasers pursuant to this Agreement); (3) securities
issued in any transaction that is approved in writing by the holders of more
than 66 2/3% of the then outstanding principal amount of the Notes; (4)
securities issued in any transaction or series of transactions within one year
of the First Closing Date, the aggregate consideration for which is less than
$1,000,000 and (5) the issuance of any Securities under the terms of this
Agreement or the Transaction Documents.
20.
(c) Notwithstanding anything to contrary herein, before the
Company sends a Rights Notice to a Rights Holder, the Company shall send written
notification to such Rights Holder that the Company intends to send a Rights
Notice to such Rights Holder (such notice, the “Pre-Notice”). If the Company receives, within three
business days from the date of the Pre-Notice, a written notice from such Rights
Holder stating that such Rights Holder does not wish to receive material
non-public information relating to the Company, then the Company shall not send
a Rights Notice to such Rights Holder and such Rights Holder’s rights under this
Section 3.15 shall terminate.
3.16 Number of Directors.
For so long as the Notes remain outstanding, the Company covenants and agrees to
maintain the number of directors comprising the Board of Directors of the
Company at no more than five.
3.17 Variable Rate
Securities. For so long as any Notes have not been paid in full or
converted in full and any Warrants remain outstanding, notwithstanding whether
or not an issuance of securities is an Permitted Financing, the Company shall
not issue or sell, or agree to issue or sell Variable Equity Securities (as
defined below) (the “Variable Equity Securities
Lock-Up”), without obtaining the prior written approval of Purchasers
then holding 66 2/3% of the then outstanding principal amount of the Notes. For
purposes hereof, the following shall be collectively referred to herein as, the
“Variable Equity
Securities”: (A) any debt or equity securities which are convertible
into, exercisable or exchangeable for, or carry the right to receive additional
shares of Common Stock either (1) at any conversion, exercise or exchange rate
or other price that is based upon and/or varies with the trading prices of or
quotations for Common Stock at any time after the initial issuance of such debt
or equity security, or (2) with a fixed conversion, exercise or exchange price
that is subject to being reset at some future date at any time after the initial
issuance of such debt or equity security due to a change in the market price of
the Company’s Common Stock since date of initial issuance, or (B) any amortizing
convertible security which amortizes prior to its maturity date, where the
Company is required to or has the option to (or the investor in such transaction
has the option to require the Company to) make such amortization payments in
shares of Common Stock (whether or not such payments in stock are subject to
certain equity conditions), or (C) any transaction involving a written agreement
between the Company and an investor or underwriter whereby the Company has the
right to “put” its securities to the investor or underwriter over an agreed
period of time and at an agreed price or price formula. For purposes of the
above, the “Market Price” shall mean the volume weighted average price, as
reported by Bloomberg, for the Company’s common stock for the 5 trading day
period immediately preceding the date in question. It is expressly agreed and
understood that the Variable Equity Securities Lock-Up shall apply in respect of
a Permitted Financing and that no issuance of Variable Equity Securities shall
be a Permitted Financing.
21.
3.18 Maintenance of
Insurance. The Company shall maintain, and cause each of its Subsidiaries
to maintain, insurance with responsible and reputable insurance companies or
associations (including, without limitation, comprehensive general liability,
hazard, rent and business interruption insurance) with respect to its properties
(including all real properties leased or owned by it) and business, in such
amounts and covering such risks as is required by any governmental authority
having jurisdiction with respect thereto or as is carried generally in
accordance with sound business practice by companies in similar businesses
similarly situated.
3.19 Subsidiaries. For so
long as any Notes and Warrants remain outstanding, the Company covenants and
agrees not to transfer any assets to any Subsidiary or to otherwise cause any
Subsidiary to acquire any assets or commence operations.
ARTICLE
4
CONDITIONS
4.1 Conditions Precedent to the
Obligation of the Company to Close and to Sell the Securities. The
obligation hereunder of the Company to close and issue and sell the Securities
to the Purchasers at each Closing is subject to the satisfaction or waiver, at
or before such Closing of the conditions set forth below. These conditions are
for the Company’s sole benefit and may be waived by the Company at any time in
its sole discretion.
(a) Accuracy of the Purchasers’
Representations and Warranties. The representations and warranties of
each Purchaser shall be true and correct in all material respects as of the date
when made and as of the applicable Closing Date as though made at that time,
except for representations and warranties that are expressly made as of a
particular date, which shall be true and correct in all material respects as of
such date.
(b) Performance by the
Purchasers. Each Purchaser shall have performed, satisfied and complied
in all material respects with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by the Purchasers
at or prior to the applicable Closing Date.
(c) 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.
(d) Delivery of Purchase
Price. The Purchase Price for the Securities shall have been delivered to
the Company on the applicable Closing Date.
(e) Delivery of Transaction
Documents. The Transaction Documents shall have been duly executed and
delivered by the Purchasers to the Company.
4.2 Conditions Precedent to the
Obligation of the Purchasers to Close and to Purchase the Securities. The
obligation hereunder of the Purchasers to purchase the Securities and consummate
the transactions contemplated by this Agreement is subject to the satisfaction
or waiver, at or before the applicable Closing, of each of the conditions set
forth below. These conditions are for the Purchasers’ sole benefit and may be
waived by the Purchasers at any time in their sole discretion.
22.
(a) Accuracy of the Company’s
Representations and Warranties. Each of the representations and
warranties of the Company and its Subsidiaries in this Agreement and the other
Transaction Documents shall be true and correct in all material respects as of
applicable Closing Date, except for representations and warranties that speak as
of a particular date, which shall be true and correct in all material respects
as of such date.
(b) Performance by the Company
and Subsidiaries. Each of the Company and its Subsidiaries shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company and its Subsidiaries at or prior to each
applicable Closing Date.
(c) No Suspension, Etc.
The shares of Common Stock (I) shall be designated for quotation or listed
on the Principal Market and (II) shall not have been suspended, as of each
Closing Date, by the SEC or the Principal Market from trading on the Principal
Market nor shall suspension by the SEC or the Principal Market have been
threatened, as of each Closing Date, either (A) in writing by the SEC or
the Principal Market or (B) by falling below the minimum listing
maintenance requirements of the Principal Market.
(d) 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.
(e) No Proceedings or
Litigation. No action, suit or proceeding before any arbitrator or any
governmental authority shall have been commenced, and no investigation by any
governmental authority shall have been threatened, against the Company or any
Subsidiary, or any of the officers, directors or affiliates of the Company or
any Subsidiary seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.
(f) Opinion of Counsel.
The Purchasers shall have received an opinion of counsel to the Company, dated
the date of the Closing, substantially in the form of Exhibit G hereto,
with such exceptions and limitations as shall be reasonably acceptable to
counsel to the Purchasers.
(g) Notes. At or prior to
each Closing, the Company shall have delivered to the Purchasers the Notes (in
such denominations as each Purchaser may request).
(h) Warrants. At or prior
to each Closing, the Company shall have delivered to the Purchasers the Warrants
(in such amounts as each Purchaser may request).
(i) Secretary’s
Certificate. The Company and each Subsidiary of the Company shall have
delivered to the Purchasers a secretary’s certificate, dated as of each Closing
Date, as to (i) the resolutions adopted by its Board of Directors approving the
transactions contemplated hereby, (ii) its certificate of incorporation, (iii)
its bylaws, each as in effect at the Closing Date, and (iv) the authority and
incumbency of the officers executing the Transaction Documents and any other
documents required to be executed or delivered in connection
therewith.
23.
(j) Officer’s
Certificate. On each Closing Date, the Company and each Subsidiary shall
have delivered to the Purchasers a certificate signed by an executive officer on
behalf of the Company and each Subsidiary, dated as of such Closing Date,
confirming the accuracy of the Company’s and each Subsidiary’s representations,
warranties and covenants as of such Closing Date and confirming the compliance
by the Company with the conditions precedent set forth in paragraphs (a)-(e) and
(k) of this Section 4.2 as of such Closing Date (provided that, with respect to
the matters in paragraphs (d) and (e) of this Section 4.2, such confirmation
shall be based on the knowledge of the executive officer after due
inquiry).
(k) Material Adverse
Effect. No Material Adverse Effect shall have occurred.
(l) Amended Security Agreement;
Amended IP Security Agreement. At the First Closing, the Company and each
of its Subsidiaries shall have executed and delivered the Amended Security
Agreement and the Amended IP Security Agreement to the Agent.
(m) UCC Financing
Statements. The Company and each of its Subsidiaries shall have
authorized the filing of all UCC financing statements in form and substance
satisfactory to the Purchasers at the appropriate offices to create a valid and
perfected security interest in the Collateral (as defined in the Security
Agreement), which filings are to be made promptly following the First Closing.
Without limiting the foregoing, the Company and each of its Subsidiaries shall
have taken such other actions as reasonably requested by the Agent to create a
valid and perfected security interest in the Collateral, including delivery of
original stock certificates and stock powers and execution and delivery of
account control agreements, which actions shall be taken promptly following the
First Closing.
(n) Change in Purchasers.
There shall have been no changes to Exhibit A (List of Purchasers) since
the execution of this Agreement.
(o) Revised
Budget. The Company shall have delivered to the Purchasers a
revised 2009 budget in a form reasonably acceptable to the Purchasers, which
budget shall not include any expenditures for the development of *** (the “Revised
Budget”).
ARTICLE
5
CERTIFICATE
LEGEND
5.1 Legend. Except as set
forth herein, each certificate representing the Securities shall be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required by applicable state securities or “blue sky”
laws):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.
24.
The
Company agrees to issue or reissue certificates representing any of the
Conversion Shares or Warrant Shares without the legend set forth above when
required to do so pursuant to the terms of the Notes and Warrants or if (x) the
holder thereof shall provide the Company with reasonable assurances that the
Conversion Shares can be sold pursuant to Rule 144 without any restriction as to
the number of securities acquired as of a particular date that can then be
immediately sold (which assurances shall not require an opinion of counsel) or
(y) the holder is selling such Conversion Shares in compliance with the
provisions of Rule 144.
ARTICLE
6
INDEMNIFICATION
6.1 General Indemnity.
The Company agrees to indemnify and hold harmless the Purchasers (and their
respective directors, officers, affiliates, members, managers, employees,
agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys’ fees, charges and disbursements) incurred by
the Purchasers as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company
herein.
6.2 Indemnification
Procedure. Any party entitled to indemnification under this Article 6 (an
“indemnified
party”) will give written notice to the indemnifying party of any matter
giving rise to a claim for indemnification; provided, that the failure of any
party entitled to indemnification hereunder to give notice as provided herein
shall not relieve the indemnifying party of its obligations under this Article 6
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action, proceeding or claim is brought
against an indemnified party in respect of which indemnification is sought
hereunder, the indemnifying party shall be entitled to participate in and,
unless in the reasonable judgment of the indemnifying party a conflict of
interest between it and the indemnified party exists with respect to such
action, proceeding or claim (in which case the indemnifying party shall be
responsible for the reasonable fees and expenses of one separate counsel for the
indemnified parties), to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. In the event that the indemnifying party
advises an indemnified party that it will contest such a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the indemnified party’s costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article 6 to the contrary, the indemnifying
party shall not, without the indemnified party’s prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification obligations to defend the indemnified party
required by this Article 6 shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred, so long as the
indemnified party shall refund such moneys if it is ultimately determined by a
court of competent jurisdiction that such party was not entitled to
indemnification. The indemnity agreements contained herein shall be in addition
to (a) any cause of action or similar rights of the indemnified party against
the indemnifying party or others, and (b) any liabilities the indemnifying party
may be subject to pursuant to the law.
25.
ARTICLE
7
MISCELLANEOUS
7.1 Purchasers’
Agent.
(a) Appointment. The
Purchasers hereby appoint Tang Capital Partners, LP, as the “Agent” for the
Purchasers under the Amended Security Agreement and the Amended IP Security
Agreement. The Agent shall have the right to take any and all actions
with respect to the Amended and Restated Security Agreement as are approved in
writing by at least 66 2/3% of the then outstanding
Notes. Notwithstanding anything to the contrary herein, the Agent may
be removed or replaced with the written consent of the Requisite Purchasers (as
defined in the Security Agreement).
(b) Powers and Duties of Agent,
Indemnity by Purchasers.
(i) Subject
to Section 7.1(a), each Purchaser hereby irrevocably authorizes the Agent to
take all actions, to make all decisions and to exercise all powers and remedies
on its behalf under the provisions of the Amended Security Agreement and the
Amended IP Security Agreement, including without limitation all such actions,
decisions and powers as are reasonably incidental thereto. The Agent may execute
any of its duties thereunder by or through agents, designees or
employees.
26.
(ii) Neither
the Agent nor any of its partners, directors, members, officers, agents,
designees or employees (collectively, “Indemnified Persons”)
shall be liable or responsible, unless such liability shall be caused by the
willful misconduct, bad faith or gross negligence of such Indemnified Persons,
to any Purchaser for any action taken or omitted to be taken by Agent or any
other such Indemnified Persons under the Amended Security Agreement, or the
Amended IP Security Agreement, or under any related agreement, instrument or
document, nor shall any Indemnified Person be liable or responsible to the
Purchasers for (i) the validity, effectiveness, sufficiency, enforceability
or enforcement of the Notes, the Warrants, the Amended Security Agreement or the
Amended IP Security Agreement, or any instrument or document delivered
thereunder or relating thereto; (ii) the title of the Company or any of its
Subsidiaries to any of the Collateral or the freedom of any of the Collateral
from any prior or other liens or security interests; (iii) the
determination, verification or enforcement of the Company’s or any of its
Subsidiaries’ compliance with any of the terms and conditions of the Amended
Security Agreement or the Amended IP Security Agreement; (iv) the failure
by the Company or any of its Subsidiaries to deliver any instrument, agreement,
financing statement or other document required to be delivered pursuant to the
terms thereof; or (v) the receipt, disbursement, waiver, extension or other
handling of payments or proceeds made or received with respect to the
Collateral, the servicing of the Collateral or the enforcement or the collection
of any amounts owing with respect to the Collateral.
(iii) Each
of the Purchasers agrees to pay to the Agent, promptly on demand, its ratable
share of all third-party fees, taxes and expenses incurred in connection with
the operation and enforcement of the Amended Security Agreement or the Amended
IP Security Agreement, the Notes, the Warrants or any related agreement or
document to the extent that the Agent is not reimbursed for such fees, taxes and
expenses by or on behalf of the Company; provided that, the Agent shall not
incur any such fees, taxes or expenses in excess of $50,000 without the prior
written consent of the Requisite Purchasers. Each of the Purchasers hereby
agrees to hold the Indemnified Persons harmless, and to indemnify the
Indemnified Persons from and against any and all loss, damage, taxes, expense or
liability which may be incurred by such Indemnified Persons under the Amended
Security Agreement or the Amended IP Security Agreement and the transactions
contemplated hereby and any related agreement or other instrument or document,
as the case may be, unless such liability shall be caused by the willful
misconduct, bad faith or gross negligence of such Indemnified Persons. The
undertakings in this Section shall survive the payment of all Liabilities (as
defined in the Security Agreement) and the resignation or replacement of
Agent.
(c) No Reliance. Each
Purchaser represents to the Agent that it has made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and credit worthiness of the Company and its Subsidiaries, and
made its own decision to enter into this Agreement and to purchase Notes from
the Company independently based on such documents and information as it has
deemed appropriate and without reliance upon the Agent or any of its partners,
directors, members, officers, agents, designees or employees. Each Purchaser
agrees that the Agent shall not have any duty or responsibility to provide any
Purchaser with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or credit
worthiness of the Company or any of its Subsidiaries.
27.
(d) Agent in Individual
Capacity. Tang Capital Partners, LP may make investments,
purchase notes and generally engage in any kind of business with the Company as
though Tang Capital Partners, LP were not the Agent under the Amended Security
Agreement and without notice to or consent of the Purchasers. The
Purchasers acknowledge that, pursuant to such activities, Tang Capital Partners,
LP, or its affiliates may receive information regarding the Company and their
subsidiaries and affiliates (including information that may be subject to
confidentiality obligations in favor of any of the foregoing entities) and
acknowledge that the Agent shall be under no obligation to provide such
information to them unless it receives such information in its capacity as
Agent. With respect to its Notes and Warrants, Tang Capital Partners, LP shall
have the same rights and powers under this Agreement as any other Purchaser and
may exercise the same as though it were not the Agent, and the terms “Purchaser”
and “Purchasers” include Tang Capital Partners, LP in its individual
capacity.
7.2 Fees and Expenses.
Each party shall pay the fees and expenses of its advisors, counsel, accountants
and other experts, if any, and all other expenses, incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement; provided, however, that the
Company shall pay all, documented, actual attorneys’ fees and expenses
(including disbursements and out-of-pocket expenses) incurred by the Lead
Purchaser in connection with (i) the preparation, negotiation, execution and
delivery of the Transaction Documents and the transactions contemplated
thereunder, which payment shall be made at the First Closing or if the Company
elects to enter into a alternative transaction before the First Closing, at the
time of such election by the Company (which payment shall not exceed $150,000
and may be withheld from the amount delivered to the Company by the Lead
Purchaser at the First Closing), and (ii) any amendments, modifications or
waivers of this Agreement or any of the other Transaction Documents. In
addition, the Company shall pay all reasonable fees and expenses incurred by the
Purchasers in connection with the enforcement of this Agreement or any of the
other Transaction Documents, including, without limitation, all reasonable
attorneys’ fees and expenses; provided, however, that in the event that the
enforcement of this Agreement is contested and it is finally judicially
determined that the Purchasers were not entitled to the enforcement of the
Agreement sought, then the Purchasers seeking enforcement shall reimburse the
Company for all fees and expenses paid pursuant to this sentence.
7.3 Specific Performance;
Consent to Jurisdiction; Venue.
(a) The
Company and the Purchasers acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement or the other
Transaction Documents 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 or the other Transaction Documents and to enforce
specifically the terms and provisions hereof or thereof without the requirement
of posting a bond or providing any other security, this being in addition to any
other remedy to which any of them may be entitled by law or equity.
(b) The
parties agree that venue for any dispute arising under this Agreement will lie
exclusively in the state or federal courts located in New York County, New York,
and the parties irrevocably waive any right to raise forum non conveniens or any
other argument that New York is not the proper venue. The parties irrevocably
consent to personal jurisdiction in the state and federal courts of the state of
New York. The Company and each Purchaser consent 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 7.3 shall affect or limit any right to serve
process in any other manner permitted by law. The Company and the Purchasers
hereby agree that the prevailing party in any suit, action or proceeding arising
out of or relating to the Securities, this Agreement or the other Transaction
Documents, shall be entitled to reimbursement for reasonable legal fees from the
non-prevailing party. The parties hereby waive all rights to a trial by
jury.
28.
7.4 Entire Agreement;
Amendment. This Agreement and the Transaction Documents contain the
entire understanding and agreement of the parties with respect to the matters
covered hereby and, except as specifically set forth herein or in the other
Transaction Documents, neither the Company nor any Purchaser make any
representation, warranty, covenant or undertaking with respect to such matters,
and they supersede all prior understandings and agreements with respect to said
subject matter, all of which are merged herein. No provision of this Agreement
may be waived or amended on behalf of all Purchasers other than by a written
instrument signed by the Company and the Purchasers holding at least 66 2/3% of
the principal amount of the Notes then held by the Purchasers; provided that if any Purchaser
is materially adversely affected by such waiver or amendment on behalf of all
Purchasers in a manner that not similar in all material respects to the affect
on the other Purchasers, such waiver or amendment shall not be effective without
the written consent of the adversely affected
Purchaser. Notwithstanding the foregoing, nothing provided in this
Section 7.4 shall limit an individual Purchaser’s right to waive or amend any
provision of this Agreement on its own behalf. The Purchasers
acknowledge that any amendment or waiver effected in accordance with this
Section 7.4 shall be binding upon each Purchaser (and their permitted assigns)
and the Company, including, without limitation, an amendment or waiver that has
an adverse effect on any or all Purchasers.
7.5 Notices. Any notice,
demand, request, waiver or other communication required or permitted to be given
hereunder shall be in writing and shall be effective (a) upon hand delivery by
telecopy or facsimile 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:
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If
to the Company or its Subsidiaries:
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Genta
Incorporated
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Attention:
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Telecopy
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with
copies to:
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▇▇▇▇▇▇,
▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
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Attention:
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29.
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If
to any Purchaser:
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At
the address of such Purchaser set forth on Exhibit A to
this Agreement, with copies to Purchaser’s counsel as set forth on Exhibit A or as
specified in writing by such Purchaser, with a copy to:
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With
a copy to:
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Godward Kronish LLP
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Attention:
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Telephone
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Any party
hereto may from time to time change its address for notices by giving written
notice of such changed address to the other party hereto.
7.6 Waivers. No waiver by
either party of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right accruing to it
thereafter. No consideration shall be offered or paid to any
Purchaser to amend or waive or modify any provision of this Agreement unless the
same consideration is also offered to all of the parties to this Agreement then
holding Notes. This provision constitutes a separate right granted to
each Purchaser by the Company and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the purchase
disposition or voting of Securities or otherwise.
7.7 Headings. The
article, section and subsection headings in this Agreement are for convenience
only and shall not constitute a part of this Agreement for any other purpose and
shall not be deemed to limit or affect any of the provisions
hereof.
7.8 Successors and
Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and assigns. After the expiration or the option
to purchase additional Notes set forth in Section 1.2(b), the assignment by a
party to this Agreement of any rights hereunder shall not affect the obligations
of such party under this Agreement. The Purchasers may assign the Securities and
its rights under this Agreement and the other Transaction Documents and any
other rights hereto and thereto without the consent of the Company.
7.9 No Third Party
Beneficiaries. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other
person.
30.
7.10 Governing Law. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts of
law principles which would result in the application of the substantive law of
another jurisdiction. This Agreement shall not be interpreted or construed with
any presumption against the party causing this Agreement to be
drafted.
7.11 Survival. The
representations and warranties of the Company and the Purchasers shall survive
the execution and delivery hereof and the First Closing until the third
anniversary of the First Closing Date, except the agreements and covenants set
forth in Articles 1, 3, 5, 6 and 7 of this Agreement shall survive the execution
and delivery hereof and each Closing hereunder.
7.12 Counterparts. This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and shall become effective
when counterparts have been signed by each party and delivered to the other
parties hereto, it being understood that all parties need not sign the same
counterpart.
7.13 Publicity. The
Company agrees that it will not disclose, and will not include in any public
announcement, the names of the Purchasers without the consent of the Purchasers,
which consent shall not be unreasonably withheld or delayed, or unless and until
such disclosure is required by law, rule or applicable regulation, and then only
to the extent of such requirement. Notwithstanding the foregoing, the Purchasers
consent to being identified in any filings the Company makes with the SEC to the
extent required by law or the rules and regulations of the SEC.
7.14 Severability. The
provisions of this Agreement are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or
part of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement and this Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible.
7.15 Further Assurances.
From and after the date of this Agreement, upon the request of the Purchasers or
the Company, the Company and each Purchaser 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 and the other Transaction Documents
7.16 Representation of Lead
Purchaser. It is acknowledged by each Purchaser that the Lead Purchaser
has retained Cooley Godward Kronish LLP to act as its counsel in connection with
the transactions contemplated by the Transaction Documents and that Cooley
Godward Kronish LLP has not acted as counsel for any Purchaser, other than the
Lead Purchaser, in connection with the transactions contemplated by the
Transaction Documents and that none of such Purchasers has the status of a
client for conflict of interest or any other purposes as a result
thereof.
31.
7.17 Sharing of Payments.
Each Purchaser severally agrees that if it receives (i) payment of principal on
the Maturity Date (as defined in the Notes) or (ii) payment of the Prepayment
Price (as defined in the Notes) in an amount that is ratably more than any other
Purchaser (based on the principal amount of the Notes held by such Purchaser
relative to the principal amount of the Notes outstanding), then: (a) the
Purchaser receiving such payment shall purchase, and shall be deemed to have
simultaneously purchased, from the other Purchasers a participation in the Notes
held by the other Purchasers (in the case of (i) above) or the Notes held by the
other Purchasers being prepaid at such time (in the case of (ii) above) and
shall pay to the other Purchasers a purchase price in an amount so that the
share of the Notes held by each Purchaser after the receipt of such payment
shall be in the same proportion that existed prior to the receipt of such
payment; and (b) such other adjustments and purchases of participations shall be
made from time to time as shall be equitable to ensure that all Purchasers share
any such payment ratably as aforesaid; provided that, if all or any portion of a
disproportionate payment obtained as a result of such payment is thereafter
recovered from the purchasing Purchaser by the Company or any Person claiming
through or succeeding to the rights of Company, the purchase of a participation
shall be rescinded and the purchase price thereof shall be restored to the
extent of the recovery, but without interest. Each Purchaser that purchases a
participation pursuant to this Section shall from and after the purchase have
the right to give all notices, requests, demands, directions and other
communications under this Agreement and the other Transaction Documents with
respect to the portion of the Notes purchased to the same extent as though the
purchasing Purchaser were the original owner of the Notes purchased. The Company
expressly consents to the foregoing arrangements and agrees that any Purchaser
holding a participation in a Note so purchased may exercise any and all rights
with respect to the participation as fully as if such Purchaser were the
original owner of the Note purchased.
7.18 Independent Nature of
Purchasers’ Obligations and Rights. The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance of the obligations of any other Purchaser under any
Transaction Document. Nothing contained herein or in any other
Transaction Document, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchaser as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser confirms that it has
independently participated in the negotiation of the transaction contemplated
hereby with the advice of its own counsel and advisors. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or out
of any other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
32.
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized officers as of the
date first above written.
|
GENTA
INCORPORATED
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By:
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Name:
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Title:
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[SIGNATURE
PAGES CONTINUE]
33.
[PURCHASER
SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name of
Purchaser:
_____________________________________________________________________
Signature of Authorized Signatory of
Purchaser: _______________________________________________
Name of
Authorized Signatory:
_________________________________________________________________
Title of
Authorized Signatory:
__________________________________________________________________
Email
Address of
Purchaser:_____________________________________________________________
Fax
Number of Purchaser:
_____________________________________________________________
Address
for Notice of Purchaser:
Address
for Delivery of Securities for Purchaser (if not same as address for
notice):
Subscription
Amount: $_________________
Question: Are
you a “qualified institutional buyer” as defined in Rule 144A promulgated under
the Securities Act of 1933, as amended? Yes_____ No
______
EIN
Number: [PROVIDE THIS UNDER
SEPARATE COVER]
[SIGNATURE
PAGES CONTINUE]
34.
EXHIBIT
A
LIST
OF PURCHASERS
|
Names and Addresses of Purchasers
|
Investment
Amount
|
Warrant
Shares
|
||||||
35.
EXHIBIT
B
FORM
OF SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
36.
EXHIBIT
C
FORM
OF WARRANT
37.
EXHIBIT
D
FORM
OF AMENDED SECURITY AGREEMENT
38.
EXHIBIT
E
FORM
OF AMENDED IP SECURITY AGREEMENT
39.
EXHIBIT
F
FORM
OF OFFICER’S CERTIFICATE
40.
EXHIBIT
G
OPINION
OF COUNSEL TO COMPANY
41.