EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of May 27, 1999,
by and among Aastrom Biosciences, Inc., a Michigan corporation, with
headquarters located at 24 ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Company"), and each of the purchasers set forth on the signature pages hereto
(the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
B. The Company has authorized a new series of preferred stock, designated
as the 1999 Series III Convertible Preferred Stock (the ASeries III Preferred
Stock"), having the rights, preferences and privileges set forth in the
Certificate of Designations, Rights and Preferences attached hereto as Exhibit
"A" (the "Certificate of Designation");
C. The Preferred Stock is convertible into shares of common stock, no par
value, of the Company (the "Common Stock"), upon the terms and subject to the
limitations and conditions set forth in the Certificate of Designation and
pursuant to the notice of conversion attached hereto as Exhibit "E";
D. The Company has authorized the issuance to the Buyers of two Warrants,
in the form attached hereto as Exhibits "B-1" and "B-2", to purchase an
aggregate of Three Hundred Thousand (300,000) shares of Common Stock (the
"Warrants");
E. The Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement, an aggregate of
Three Thousand (3,000) shares of Series III Preferred Stock (such shares,
together with any Series III Preferred Stock issued in replacement thereof or as
a dividend thereon or otherwise with respect thereto in accordance with the
terms thereof, being hereinafter collectively referred to as the "Preferred
Shares") and (ii) Warrants to purchase Three Hundred Thousand (300,000) shares
of Common Stock, for an aggregate purchase price of Three Million Dollars
($3,000,000).
F. Each Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, the number of Preferred Shares and number of Warrants as is set
forth immediately below its name on the signature pages hereto;
G. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as Exhibit "C" (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws; and
NOW THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
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a. Purchase of Preferred Shares and Warrants. The Company shall
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issue and sell to each Buyer and each Buyer severally agrees to purchase from
the Company such number of Preferred Shares and number of Warrants as is set
forth immediately below such Buyer's name on the signature pages hereto.
b. Form of Payment. On the Closing Date (as defined below),
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(i) each Buyer shall pay the purchase price for the Preferred Shares and the
Warrants to be issued and sold to it at the Closing (as defined below) (the
"Purchase Price") by wire transfer of immediately available funds to the
Company, in accordance with the Company's written wiring instructions, against
delivery of duly executed certificates representing such number of Preferred
Shares and Warrants which such Buyer is purchasing and (ii) the Company shall
deliver such certificates duly executed on behalf of the Company, to the Buyer,
against delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver) of
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the conditions thereto set forth in Section 6 and Section 7 below, the date and
time of the issuance and sale of the Preferred Shares and Warrants pursuant to
this Agreement (the "Closing Date") shall be 12:00 noon Eastern Standard Time on
May 27, 1999 or such other mutually agreed upon time. The closing of the
transaction contemplated by this Agreement (the "Closing") shall occur on the
Closing Date at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other location as may be agreed to
be the parties.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally
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(and not jointly) represents and warrants to the Company solely as to such Buyer
that:
a. Investment Purpose. As of the date hereof, the Buyer is
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purchasing the Preferred Shares and the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Preferred Shares (including, without
limitation, such additional shares of Common Stock as are issuable as a result
of the events described in Articles VI, VIII.D(b) or VIII.E of the Certificate
of Designation and Section 2(c) of the Registration Rights Agreement) (such
shares of Common Stock being referred to herein as the "Conversion Shares") and
the Warrants and the shares of Common Stock issuable upon exercise of or
otherwise pursuant to the Warrants (the
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"Warrant Shares" and, collectively with the Preferred Shares, Warrants and
Conversion Shares, the "Securities") for its own account and not with a present
view towards the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the 1933 Act; provided, however,
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that by making the representations herein, the Buyer does not agree to hold any
of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. The Buyer is an "accredited
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investor" as that term is defined in Rule 501(a) of Regulation D (an "Accredited
Investor").
c. Reliance on Exemptions. The Buyer understands that the
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Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. Information. The Buyer and its advisors, if any, have been
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furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Buyer or its advisors. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer's right to rely on the Company's representations and warranties
contained in Section 3 below. The Buyer has reviewed the risk factors discussed
in the Company's SEC Documents (as defined below) and understands that its
investment in the Securities involves a significant degree of risk.
e. Governmental Review. The Buyer understands that no United
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States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Re-sale. The Buyer understands that (i)
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except as provided in the Registration Rights Agreement, the sale or re-sale of
the Securities has not been and is not being registered under the 1933 Act or
any applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to the Company
an opinion of counsel (which opinion shall be reasonably acceptable to the
Company) to the effect that the Securities to be sold or transferred may be sold
or transferred pursuant to an exemption from such registration, (c) so long as
the Buyer otherwise complies with applicable securities laws, the Securities are
sold or transferred to an "affiliate"(as defined in Rule 144 promulgated under
the 1933 Act (or a successor rule) ("Rule 144")) or (d) the Securities are sold
pursuant to Rule 144; (ii) any
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sale of such Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any re-sale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the ▇▇▇▇ ▇▇▇) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to the Registration Rights
Agreement). Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement. Except for transfers by a
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Buyer (i) to its "affiliates" (as defined in Rule 144) or (ii) to the holders of
interests in a Buyer upon a liquidation of a Buyer's assets in accordance with
its governing documents, the Preferred Shares may be transferred by a Buyer only
with the prior written consent of the Company, which consent will not be
unreasonably withheld.
g. Legends. The Buyer understands that the Preferred Shares
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and the Warrants and, until such time as the Conversion Shares and Warrant
Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular date
that can then be immediately sold, the Conversion Shares and Warrant Shares, may
bear a restrictive legend in substantially the following form (and a stop-
transfer order may be placed against transfer of the certificates for such
Securities):
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended. The securities may not be sold, transferred or
assigned in the absence of an effective registration
statement for the securities under said Act, or an opinion
of counsel, in form, substance and scope reasonably
acceptable to the Company, that registration is not required
under said Act or unless sold pursuant to Rule 144 under
said Act."
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security upon which
it is stamped, if, unless otherwise required by applicable state securities
laws, (a) such Security is registered for sale under an effective registration
statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular date
that can then be immediately sold, or (b) such holder provides the Company with
an opinion of counsel, in form, substance and scope reasonably acceptable to the
Company, to the effect that a public sale or transfer of such Security may be
made without registration under the 1933 Act and such sale or transfer is
effected or (c) such holder provides the Company with reasonable assurances that
such Security can be sold pursuant to Rule 144. The Buyer agrees to sell all
Securities, including those represented by a certificate(s) from which the
legend has been removed, in compliance with applicable
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requirements for delivery of a prospectus, and the plan of distribution
described therein, contained in an effective registration statement, if any.
h. Authorization; Enforcement. This Agreement and the
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Registration Rights Agreement have been duly and validly authorized. This
Agreement has been duly executed and delivered on behalf of the Buyer, and this
Agreement constitutes, and upon execution and delivery of the Registration
Rights Agreement, such agreement will constitute, valid and binding agreements
of the Buyer enforceable in accordance with their terms.
i. Residency. The Buyer is a resident of the jurisdiction set
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forth immediately below such Buyer's name on the signature pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
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represents and warrants to each Buyer that:
a. Organization and Qualification. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.
The Company has no Subsidiaries (as defined below). The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership or use of property or the nature of
the business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. "Material Adverse Effect" means any material adverse effect on (i) the
Securities, (ii) the business, operations, assets, financial condition or
prospects of the Company and its Subsidiaries, if any, taken as a whole, or
(iii) on the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith. "Subsidiaries" means any
corporation or other organization, whether incorporated or unincorporated, in
which the Company owns, directly or indirectly, any equity or other ownership
interest.
b. Authorization; Enforcement. (i) The Company has all
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requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into and perform this
Agreement, the Registration Rights Agreement and the Warrants and to consummate
the transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by it of the transactions contemplated hereby and
thereby (including without limitation, the issuance of the Preferred Shares and
Warrants and the issuance and reservation for issuance of the Conversion Shares
and the Warrant Shares issuable upon conversion or exercise thereof) have been
duly authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its shareholders is
required, (iii) this Agreement has been duly
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executed and delivered by the Company, and (iv) this Agreement constitutes, and
upon execution and delivery by the Company of the Registration Rights Agreement
and the Warrants and upon execution and filing of the Certificate of
Designation, each of such agreements and instruments will constitute, a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms.
c. Capitalization. As of the date hereof, the authorized
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capital stock of the Company consists of (i) 40,000,000 shares of Common Stock
of which 16,930,167 shares are issued and outstanding, 1,568,476 shares are
reserved for issuance pursuant to the Company's stock option plans, 2,545,293
shares are reserved for issuance pursuant to securities (other than the
Preferred Shares and the Warrants) exercisable for, or convertible into or
exchangeable for shares of Common Stock and 4,155,556 (2x currently required)
shares are reserved for issuance upon conversion of the Preferred Shares and
exercise of the Warrants (subject to adjustment pursuant to the Company's
covenant set forth in Section 4(h) below); and (ii) 5,000,000 shares of
preferred stock, 4,000 of which shares are issued and outstanding, 5,000 of
which are designated as 1998 Series I Convertible Preferred Stock of which 4,000
are issued and outstanding and 3,000 of which are designated as the Preferred
Stock. All of such outstanding shares of capital stock are, or upon issuance
will be, duly authorized, validly issued, fully paid and nonassessable. Except
as disclosed on Schedule 3(c), no shares of capital stock of the Company are
subject to preemptive rights or any other similar rights of the stockholders of
the Company or any liens or encumbrances imposed through the actions or failure
to act of the Company. Except as disclosed in Schedule 3(c), as of the effective
date of this Agreement, (i) there are no outstanding options, warrants, scrip,
rights to subscribe for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for any shares of capital stock of the Company, or arrangements by which the
Company is or may become bound to issue additional shares of capital stock of
the Company, (ii) there are no agreements or arrangements under which the
Company is obligated to register the sale of any of its or their securities
under the 1933 Act (except the Registration Rights Agreement and the
Registration Rights Agreement dated July 2, 1998 by and among the Company and
the Buyers) and (iii) there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) that will be triggered by the issuance of the
Preferred Shares, the Warrants, the Conversion Shares or the Warrant Shares. The
Company has furnished to the Buyer true and correct copies of the Company's
Certificate of Incorporation as in effect on the date hereof ("Certificate of
Incorporation"), the Company's By-laws, as in effect on the date hereof (the
"By-laws"), and the terms of all securities convertible into or exercisable for
Common Stock of the Company and the material rights of the holders thereof in
respect thereto. The Company shall provide the Buyer with a written update of
this representation signed by the Company's Chief Executive or Chief Financial
Officer on behalf of the Company as of the Closing Date.
d. Issuance of Shares. The Preferred Shares are duly
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authorized and, upon issuance in accordance with the terms of this Agreement
will be validly issued, fully paid and
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non-assessable, and free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of stockholders of the Company and will not impose personal
liability upon the holder thereof. The Conversion Shares and Warrant Shares are
duly authorized and reserved for issuance, and, upon conversion of the Preferred
Shares and exercise of the Warrants in accordance with the terms thereof, will
be validly issued, fully paid and non-assessable, and free from all taxes,
liens, claims and encumbrances and will not be subject to preemptive rights or
other similar rights of stockholders of the Company and will not impose personal
liability upon the holder thereof.
e. Acknowledgment of Dilution. The Company understands and
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acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares or Warrant Shares upon conversion or exercise
of the Preferred Shares or the Warrants. The Company further acknowledges that
its obligation to issue Conversion Shares and Warrant Shares in accordance with
this Agreement, the Certificate of Designation and the Warrants is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.
f. Series of Preferred Stock. The terms, designations, powers,
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preferences and relative, participating and optional or special rights, and the
qualifications, limitations and restrictions of each series of preferred stock
of the Company (other than the Preferred Stock) are as stated in the Certificate
of Incorporation and the previous certificates of designation, filed on or prior
to the date hereof, and the Bylaws. The terms, designations, powers,
preferences and relative, participating and optional or special rights, and the
qualifications, limitations and restrictions of the Preferred Stock are as
stated in the Certificate of Designations.
g. No Conflicts. The execution, delivery and performance of
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this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the filing of the Certificate
of Designation and the issuance and reservation for issuance of the Conversion
Shares and the Warrant Shares) will not (i) conflict with or result in a
violation of any provision of the Certificate of Incorporation or By-laws or
(ii) violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture, patent,
patent license or instrument to which the Company is a party, or (iii) result in
a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any self-
regulatory organizations to which the Company or its securities are subject)
applicable to the Company or by which any property or asset of the Company is
bound or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). The Company
is not in violation of its Certificate of Incorporation, By-laws or other
organizational documents and the Company is not in default (and no event has
occurred which with notice or lapse of time or both
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could put the Company in default) under, and the Company has not taken any
action or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company is a party or by which any property
or assets of the Company is bound or affected, except for possible defaults as
would not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company is not being conducted, and shall not be conducted so
long as a Buyer owns any of the Securities, in violation of any law, ordinance
or regulation of any governmental entity, which violations individually or in
the aggregate would have a Material Adverse Effect. Except (i) as specifically
contemplated by this Agreement and the Registration Rights Agreement, (ii) as
required under the 1933 Act and any applicable state securities laws, (iii) for
filings with Nasdaq (as defined below) and (iv) for filings with the Secretary
of State of the State of Michigan, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court, governmental agency, regulatory agency, or self regulatory organization
or stock market or third party in order for it to execute, deliver or perform
any of its obligations under this Agreement, the Registration Rights Agreement
in accordance with the terms hereof or thereof or to issue and sell the
Preferred Shares and Warrants in accordance with the terms hereof and to issue
the Conversion Shares upon conversion of or otherwise pursuant to the Preferred
Shares and the Warrant Shares upon exercise of or otherwise pursuant to the
Warrants. Except as disclosed in Schedule 3(g), all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company is not in violation of the listing requirements of
the Nasdaq National Market ("Nasdaq") applicable to continued listings and does
not reasonably anticipate that the Common Stock will be delisted by Nasdaq in
the foreseeable future. Except for anticipated losses as described in the SEC
Documents (as defined below), the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing.
h. SEC Documents; Financial Statements. Since February 6,
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1997, the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein, being hereinafter
referred to herein as the "SEC Documents"). The Company has delivered or made
available to each Buyer true and complete copies of the SEC Documents, except
for such exhibits and incorporated documents. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. None of the statements made in any such SEC
Documents is, or has been, required to be amended or updated under applicable
law (except for such statements as have been amended or updated in subsequent
filings prior to the date hereof). As of their respective dates, the
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financial statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to June 30, 1998 and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
such financial statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the Company.
i. Absence of Certain Changes. Except for operating losses
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incurred in the normal course of business and except as disclosed under the
heading "Certain Business Considerations" in Item 2 of the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999, since June 30, 1998,
there has been no material adverse change and no material adverse development in
the assets, liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company.
j. Absence of Litigation. There is no action, suit, claim,
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proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company, or its
officers or directors in their capacity as such, that could have a Material
Adverse Effect. Schedule 3(j) contains a complete list and summary description
of any pending or, to the Company's knowledge, threatened proceeding against or
affecting the Company, without regard to whether it would have a Material
Adverse Effect. Except as set forth on Schedule 3(j), the Company is unaware of
any facts or circumstances which might give rise to any of the foregoing.
k. Patents, Copyrights, etc. The Company and each of its
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Subsidiaries owns or possesses the requisite licenses or rights to use all
patents, patent applications, patent rights, inventions, know-how, trade
secrets, trademarks, trademark applications, service marks, service names, trade
names and copyrights ("Intellectual Property") necessary to enable it to conduct
its business as now operated (and, except as set forth in Schedule 3(k) hereof,
to the best of the Company's knowledge, as presently contemplated to be operated
in the future); there is no claim or action by any person pertaining to, or
proceeding pending, or to the Company's knowledge threatened which challenges
the right of the Company or of a Subsidiary with respect to any Intellectual
Property necessary to enable it to conduct its business as now operated (and,
except as
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set forth in Schedule 3(k) hereof, to the best of the Company's knowledge, as
presently contemplated to be operated in the future); to the best of the
Company's knowledge, the Company's or its Subsidiaries' current and intended
products, services and processes do not infringe on any Intellectual Property or
other rights held by any person; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and
each of its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of their Intellectual Property.
l. No Materially Adverse Contracts, Etc. The Company is not
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subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation which in the judgment of the Company's
officers has or is expected in the future to have a Material Adverse Effect.
Except as set forth on Schedule 3(l), the Company is not a party to any contract
or agreement which in the judgment of the Company's officers has or is expected
to have a Material Adverse Effect.
m. Tax Status. Except as set forth on Schedule 3(m), the
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Company has made or filed all federal, state and foreign income and all other
tax returns, reports and declarations required by any jurisdiction to which it
is subject (unless and only to the extent that the Company has set aside on its
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. Except as set forth on
Schedule 3(m), none of the Company's tax returns is presently being audited by
any taxing authority.
n. Certain Transactions. Except as set forth on Schedule 3(n)
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and except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
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o. Disclosure. All information relating to or concerning the
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Company set forth in this Agreement and provided to the Buyers pursuant to
Section 2(d) hereof and otherwise in connection with the transactions
contemplated hereby is true and correct in all material respects and the Company
has not omitted to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading. Other than the transactions contemplated by this
Agreement, no event or circumstance has occurred or exists with respect to the
Company or its business, properties, prospects, operations or financial
conditions, 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 (assuming for this purpose that the Company's reports
filed under the 1934 Act are being incorporated into an effective registration
statement filed by the Company under the 1933 Act).
p. Acknowledgment Regarding Buyers' Purchase of Securities. The
-------------------------------------------------------
Company acknowledges and agrees that the Buyers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Buyer is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the transactions
contemplated hereby and that any statement made by any Buyer or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Buyers' purchase of the Securities and has not been relied
upon by the Company, its officers or directors in any way. The Company further
represents to each Buyer that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
q. 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 require registration under the
1933 Act of the issuance of the Securities to the Buyers. The issuance of the
Securities to the Buyers will not be integrated with any other issuance of the
Company's securities (past, current or future) for purposes of any stockholder
approval provisions applicable to the Company or its securities.
r. No Brokers. The Company has taken no action which would
----------
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions contemplated
hereby, except for dealings with The Shemano Group, Inc., whose commissions and
fees will be paid for by the Company.
s. Permits; Compliance. The Company is in possession of all
-------------------
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the "Company Permits"), except where the failure to
possess such Company Permit would not have a Material Adverse Effect, and there
is no
-11-
action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits. The Company is not in
conflict with, or in default or violation of, any of the Company Permits, except
for any such conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
Since June 30, 1998, the Company has not received any notification with respect
to possible conflicts, defaults or violations of applicable laws, except for
notices relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.
t. Environmental Matters.
---------------------
(i) Except as set forth in Schedule 3(t), there are,
to the Company's knowledge, with respect to the Company or any predecessor of
the Company, no past or present violations of Environmental Laws (as defined
below), releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any common law environmental liability or any liability under
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
or similar federal, state, local or foreign laws and the Company has not
received any notice with respect to any of the foregoing, nor is any action
pending or, to the Company's knowledge, threatened in connection with any of the
foregoing. The term "Environmental Laws" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or
disposed of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or used by the
Company, and no Hazardous Materials were released on or about any real property
previously owned, leased or used by the Company during the period the property
was owned, leased or used by the Company, except in the normal course of the
Company's business.
(iii) To the Company's knowledge, there are no
underground storage tanks on or under any real property owned, leased or used by
the Company that are not in compliance with applicable law.
-12-
u. Title to Property. The Company has good and marketable
-----------------
title in fee simple to all real property and good and marketable title to all
personal property owned by it which is material to the business of the Company,
in each case free and clear of all liens, encumbrances and defects except such
as are described in Schedule 3(u) or such as would not have a Material Adverse
Effect. Any real property and facilities held under lease by the Company is held
by it under valid, subsisting and enforceable leases with such exceptions as
would not have a Material Adverse Effect.
v. Insurance. The Company is 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 is engaged. The Company has no 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.
w. Internal Accounting Controls. The Company maintains a
----------------------------
system of internal accounting controls sufficient, in the judgment of the
Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
x. Foreign Corrupt Practices. Neither the Company, nor any
-------------------------
director, officer, agent, employee or other person acting on behalf of the
Company has, in the course of his actions for, or on behalf of, the Company,
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
y. Solvency. The Company (both before and after giving effect
--------
to the transactions contemplated by this Agreement) is solvent (i.e., its assets
----
have a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently subject to Schedule 3(y), the Company has no information that would
lead it to reasonably conclude that the Company would not have, nor does it
intend to take any action that would impair, its ability to pay its debts from
time to time incurred in connection therewith as such debts mature. The Company
did not receive a qualified opinion from its auditors with respect to its most
recent fiscal year end and the Company expects to receive a non-qualified
opinion from its auditors in respect of its current fiscal year.
-13-
4. COVENANTS.
---------
a. Best Efforts. The parties shall use their best efforts to
------------
satisfy timely each of the conditions described in Section 6 and 7 of this
Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form
---------------------
D with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Buyers at the
applicable closing pursuant to this Agreement under applicable securities or
"blue sky" laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to each Buyer on or prior to the Closing Date.
c. Reporting Status; Eligibility to Use Form S-3. The Company's
---------------------------------------------
Common Stock is registered under Section 12(g) of the 1934 Act. So long as any
Buyer beneficially owns any of the Securities, the Company shall timely file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination. The Company currently meets, and will take all
necessary action to continue to meet, the "registrant eligibility" requirements
set forth in the general instructions to Form S-3.
d. Use of Proceeds. The Company shall use the proceeds from
---------------
the sale of the Preferred Shares in the manner set forth in Schedule 4(d)
attached hereto and made a part hereof and shall not, directly or indirectly,
use such proceeds for any loan to or investment in any other corporation,
partnership, enterprise or other person (except in connection with its currently
existing direct or indirect Subsidiaries).
e. Additional Equity Capital; Right To Purchase. Subject to
--------------------------------------------
the exceptions described below, the Company will not, without the prior written
consent of RGC International Investors, LDC ("RGC"), register (other than
pursuant to the Registration Rights Agreement) any equity financing (including
debt financing with an equity component) or otherwise allow any public resales
of equity interests in the Company's securities, issued after May 27, 1999,
pursuant to Rule 144 or otherwise during the period (the "Lock-up Period")
beginning on the Closing Date and ending one hundred eighty (180) days from the
date the Registration Statement (as defined in the Registration Rights
Agreement) is declared effective (plus any trading days after the Registration
Statement is declared effective and prior to such 180th day during which sales
cannot be made thereunder). In addition, subject to the exceptions described
below, the Company will not conduct any equity financing (including debt
financing with an equity component) ("Future Offerings") during the period
beginning on the Closing Date and ending one hundred eighty (180) days after the
end of the Lock-up Period (the "First Refusal Period"), unless it shall have
first delivered to RGC, at least fifteen (15) business days prior to the closing
of such Future Offering,
-14-
written notice describing the proposed Future Offering, including the terms and
conditions thereof and proposed definitive documentation to be entered into in
connection therewith, and providing each Buyer an option during the ten (10) day
period following delivery of such notice to purchase at least the percentage
equal to (a) the number of outstanding shares of Preferred Stock at the time of
the notice multiplied by 1,000, divided by (b) the Company's then current market
capitalization, of the securities being offered in the Future Offering on the
same terms as contemplated by such Future Offering (the limitations referred to
in this sentence and the preceding sentence are collectively referred to as the
"Capital Raising Limitations"). In the event the terms and conditions of a
proposed Future Offering are amended in any material respect after delivery of
the notice to RGC concerning the proposed Future Offering, the Company shall
deliver a new notice to RGC describing the amended terms and conditions of the
proposed Future Offering and RGC thereafter shall have an option during the ten
(10) day period following delivery of such new notice to purchase at least the
percentage equal to (a) the number of outstanding shares of Preferred Stock at
the time of the notice multiplied by 1,000, divided by (b) the Company's then
current market capitalization, of the securities being offered on the same terms
as contemplated by such proposed Future Offering, as amended. The foregoing
sentence shall apply to successive amendments to the terms and conditions of any
proposed Future Offering during the First Refusal Period. The Capital Raising
Limitations shall not apply to any transaction involving (i) issuances of
securities in a firm commitment underwritten public offering (excluding a
continuous offering pursuant to Rule 415 under the 1933 Act), (ii) issuances of
securities as consideration for a merger, consolidation or purchase of assets,
or in connection with any strategic partnership or joint venture (the primary
purpose of which is not to raise equity capital), or in connection with the
disposition or acquisition of a business, product or license by the Company or
(iii) the offering of securities issuable upon conversion of the Series I
Preferred Stock pursuant to the registration statement declared effective by the
SEC on October 13, 1998 (Registration No. 333-60125). The Capital Raising
Limitations also shall not apply to the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof or to the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option or stock purchase plan previously in effect or approved by a majority of
the Company's disinterested directors.
f. Expenses. The Company shall reimburse ▇▇▇▇ ▇▇▇▇ Capital
--------
Management, L.P. ("▇▇▇▇ ▇▇▇▇") for all expenses incurred by it in connection
with the negotiation, preparation, execution, delivery and performance of this
Agreement and the other agreements to be executed in connection herewith,
including, without limitation, attorneys' and consultants' fees and expenses.
The Company's obligation to reimburse Rose Glen's expenses under this Section
4(f) and the Registration Rights Agreement shall be limited to an aggregate of
Twenty-Five Thousand Dollars ($25,000) of which Five Thousand Dollars ($5,000)
was advanced previously.
g. Financial Information. The Company agrees to send the
---------------------
following reports to each Buyer until such Buyer transfers, assigns, or sells
all of the Securities: (i) within one (1) day after release, copies of all press
releases issued by the Company or any of its Subsidiaries;
-15-
and (ii) contemporaneously with the making available or giving to the
stockholders of the Company, copies of any notices or other information the
Company makes available or gives to such stockholders.
h. Reservation of Shares. The Company shall at all times have
---------------------
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion and exercise of the
outstanding Preferred Shares and Warrants and issuance of the Conversion Shares
and Warrant Shares in connection therewith (based on the lesser of the Variable
Conversion Price in effect from time to time and the Fixed Conversion Price
(each as defined in the Certificate of Designation) and the Exercise Price of
the Warrants in effect from time to time). The Company shall not reduce the
number of shares of Common Stock reserved for issuance upon conversion of
Preferred Shares and exercise of the Warrants without the consent of each Buyer.
The Company shall use its best efforts at all times to maintain the number of
shares of Common Stock so reserved for issuance at no less than two (2) times
the number that is then actually issuable upon full conversion of the Preferred
Shares and exercise of the Warrants (based on the lesser of the Variable
Conversion Price in effect from time to time and the Fixed Conversion Price
(each as defined in the Certificate of Designation) and the Exercise Price of
the Warrants in effect from time to time). If at any time the number of shares
of Common Stock authorized and reserved for issuance is below the number of
Conversion Shares and Warrant Shares issued and issuable upon conversion of the
Preferred Shares and exercise of the Warrants (based on the lesser of the
Variable Conversion Price in effect from time to time and the Fixed Conversion
Price (each as defined in the Certificate of Designation) and the Exercise Price
of the Warrants in effect from time to time), the Company will promptly take all
corporate action necessary to authorize and reserve a sufficient number of
shares, including, without limitation, calling a special meeting of shareholders
to authorize additional shares to meet the Company's obligations under this
Section 4(h), in the case of an insufficient number of authorized shares, and
using its best efforts to obtain shareholder approval of an increase in such
authorized number of shares.
i. Listing. The Company shall promptly secure the listing of
-------
the Conversion Shares and Warrant Shares upon each national securities exchange
or automated quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares and Warrant Shares from time to time issuable upon conversion
of the Preferred Shares or exercise of the Warrants. The Company will obtain and
maintain the listing and trading of its Common Stock on Nasdaq, the Nasdaq
SmallCap Market ("Nasdaq SmallCap"), the New York Stock Exchange ("NYSE"), or
the American Stock Exchange ("AMEX") and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the National Association of Securities Dealers ("NASD") and such exchanges, as
applicable. The Company shall promptly provide to each Buyer copies of any
notices it receives from Nasdaq and any other exchanges or quotation systems on
which the Common Stock is then listed regarding the continued eligibility of the
Common Stock for listing on such exchanges and quotation systems.
-16-
j. Corporate Existence. Subject to the Company's right to
-------------------
exercise the right described in Article IV.B(i) of the Certificate of
Designations, so long as a Buyer beneficially owns any Preferred Shares or
Warrants, the Company shall maintain its corporate existence and shall not sell
all or substantially all of the Company's assets, except in the event of a
merger or consolidation or sale of all or substantially all of the Company's
assets, where the surviving or successor entity (and, if an entity different
from the surviving or successor entity, the entity whose securities into which
the Preferred Shares shall become convertible and the Warrants exercisable) in
such transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) if the
consideration to be received for such transaction is equity securities, is a
publicly traded corporation whose Common Stock is listed for trading on Nasdaq,
Nasdaq SmallCap, NYSE or AMEX.
k. No Integration. The Company shall not make any offers or
--------------
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
1933 Act or cause the offering of Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
l. Trading Restrictions. Each Buyer covenants and agrees that,
--------------------
during any Pricing Period (as defined in the Certificate of Designations) during
which a Conversion Price (as defined in the Certificate of Designations) is
computed, if a Buyer (or others acting on its behalf) engages in short sale
transactions or other hedging activities which involve, among other things,
sales of shares of Common Stock, such Buyer will place its sale orders for
Common Stock in the course of such activities so as not to complete or effect
any such sale on any Trading Day (as defined in the Certificate of Designation)
during such period at a price which is lower than the lowest sale effected on
such day by persons other than the Buyers (or others acting on their behalf).
m. Conversion Limitations. Each Buyer covenants and agrees
----------------------
that, subject to the exceptions described below, such Buyer may convert only up
to that percentage of such Buyer's shares of 1998 Series I Convertible Preferred
Stock of the Company (the "Series I Preferred Stock") outstanding on the Closing
Date as is specified below during the time period set forth opposite such
percentage.
Percentage Time Period
---------- -----------
50% 0-90 days following the Closing Date
75% 91-120 days following the Closing Date
100% 121 days following the Closing Date
The restrictions on conversion set forth above shall not apply to conversions
taking place on any Conversion Date (as defined in the Certificate of
Designations, Preferences and Rights of 1998 Series I Convertible Preferred
Stock of the Company (the "Series I Certificate of Designation")) (i) on which
the Common Stock trades on Nasdaq or the principal trading market on which the
Common Stock is then listed as reported by Bloomberg (as defined in the Series I
Certificate of
-17-
Designation) at a price greater than or equal to (a) 117% of the Market Price
(as defined in the Series I Certificate of Designation) in effect on such
Conversion Date (as defined in the Series I Certificate of Designation) or (b)
the Fixed Conversion Price (as defined in the Series I Certificate of
Designation) or (ii) occurring on or after the date the Company makes a public
announcement that it intends to merge or consolidate with any other corporation
or sell or transfer substantially all of the assets of the Company or (iii)
occurring on or after the date any person, group or entity (including the
Company) publicly announces a tender offer to purchase 50% or more of the
Company's Common Stock or otherwise publicly announces an intention to replace a
majority of the Company's Board of Directors by waging a proxy battle or
otherwise or (iv) occurring on or after the date on which there is a material
adverse change in the business, operation, assets, financial condition or
prospects of the Company or its subsidiaries, taken as a whole, or (v) occurring
on or after the occurrence of a Redemption Event (as defined in the Series I
Certificate of Designation) or on or after the delivery by the Company of an
Optional Redemption Notice (as defined in the Series I Certificate of
Designation).
5 TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
---------------------------
instructions to its transfer agent to issue certificates, registered in the name
of each Buyer or its nominee, for the Conversion Shares and Warrant Shares in
such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Preferred Shares or exercise of the Warrants in accordance
with the terms thereof (the "Irrevocable Transfer Agent Instructions"). Prior
to registration of the Conversion Shares and Warrant Shares under the 1933 Act
or the date on which the Conversion Shares or Warrant Shares may be sold
pursuant to Rule 144 without any restriction as to the number of securities as
of a particular date that can then be immediately sold, all such certificates
shall bear the restrictive legend specified in Section 2(g) of this Agreement.
The Company warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 5, and stop transfer instructions
to give effect to Section 2(f) hereof (in the case of the Conversion Shares and
Warrant Shares, prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares or Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of securities as of a particular date that can then be immediately sold), will
be given by the Company to its transfer agent and that the Conversion Shares and
Warrant Shares shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement set forth in Section 2(g) hereof to comply
with all applicable prospectus delivery requirements, if any, upon resale of the
Conversion Shares and Warrant Shares and to comply with the plan of distribution
portion of the prospectus contained in the Registration Statement (as defined in
the Registration Rights Agreement). If a Buyer provides the Company with (i) an
opinion of counsel, reasonably satisfactory to the Company in form, substance
and scope, to the effect that a public sale or transfer of such Securities may
be made without registration under the 1933 Act and such sale or transfer is
effective or (ii) the Buyer provides reasonable assurances that the securities
can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in
the case of the Conversion Shares and Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates, free from any restrictive
legend, in such name and in such denominations as specified by such Buyer.
-18-
6 CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
----------------------------------------------
the Company hereunder to issue and sell the Preferred Shares and Warrants to a
Buyer at the Closing, is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions thereto, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion:
a. The applicable Buyer shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to the Company.
b. The applicable Buyer shall have delivered the Purchase Price
in accordance with Section 1(b) above.
c. The Certificate of Designation shall have been accepted for
filing with the Secretary of State of the State of Michigan.
d. The representations and warranties of the applicable Buyer
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date), and the applicable Buyer
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the applicable Buyer at or prior to the Closing
Date.
e. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
7 CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation
-------------------------------------------------
of each Buyer hereunder to purchase the Preferred Shares and Warrants at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for such Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion:
a. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.
-19-
b. The Company shall have delivered to such Buyer duly executed
certificates (in such denominations as the Buyer shall request) representing the
Preferred Shares and Warrants in accordance with Section 1(b) above.
c. The Certificate of Designation shall have been accepted for
filing with the Secretary of State of the State of Michigan, and a copy thereof
certified by such Secretary of State shall have been delivered to such Buyer.
d. The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to a majority-in-interest of the Buyers, shall have been
delivered to and acknowledged in writing by the Company's Transfer Agent.
e. The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date, and in each case subject
to the schedules referred to in such representations and warranties provided by
the Company as of the Closing Date) and the Company shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Buyer shall have
received a certificate or certificates, executed on behalf of the Company by the
chief executive officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Buyer including, but not limited to, those matters described in Section
3(c) above, and certificates with respect to the Company's Certificate of
Incorporation, By-laws and Board of Directors' resolutions relating to the
transactions contemplated hereby.
f. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
g. Trading in the Common Stock on Nasdaq shall not have been
suspended by the SEC or Nasdaq.
h. The Buyer shall have received opinions of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and in substantially the same form as Exhibit "D-1"
and Exhibit "D-2" attached hereto.
i. The Company shall have obtained waivers of any preemptive
rights and pari passu limitations in respect of the sale of the Preferred Shares
and Warrants to be issued at the Closing from the holders of shares of any other
existing series of the Company's preferred stock.
-20-
8 GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Michigan applicable to
agreements made and to be performed in the State of Michigan (without regard to
principles of conflict of laws). Both parties irrevocably consent to the
jurisdiction of the United States federal courts and the state courts located in
Delaware with respect to any suit or proceeding based on or arising under this
Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby and irrevocably agree that all
claims in respect of such suit or proceeding may be determined in such courts.
Both parties irrevocably waive the defense of an inconvenient forum to the
maintenance of such suit or proceeding. Both parties further agree that service
of process upon a party mailed by first class mail shall be deemed in every
respect effective service of process upon the party in any such suit or
proceeding. Nothing herein shall affect either party's right to serve process in
any other manner permitted by law. Both parties agree that a final non-
appealable judgment in any such suit or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
b. Counterparts; Signatures by Facsimile. This Agreement may
-------------------------------------
be executed in two or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
c. Headings. The headings of this Agreement are for
--------
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shallinvalid not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the
----------------------------
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given
-------
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile
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and shall be effective five days after being placed in the mail, if mailed by
regular United States mail, or upon receipt, if delivered personally or by
courier (including a recognized overnight delivery service) or by facsimile, in
each case addressed to a party. The addresses for such communications shall be:
If to the Company:
Aastrom Biosciences, Inc.
24 ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President & Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esquire
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
Each party shall provide notice to the other party of any change in
address.
g. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is defined
under the 1934 Act, without the consent of the Company.
h. 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.
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i. Survival. The representations and warranties of the
--------
Company and the agreements and covenants set forth in Sections 3, 4, 5 and 8
shall survive the Closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyers.
j. Publicity. The Company and each of the Buyers shall have
---------
the right to review a reasonable period of time before issuance of any press
releases, SEC, Nasdaq or NASD filings, or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
-------- -------
Company shall be entitled, without the prior approval of each of the Buyers, to
make any press release or SEC, Nasdaq or NASD filings with respect to such
transactions as is required by applicable law and regulations (although each of
the Buyers shall be consulted by the Company in connection with any such press
release prior to its release and shall be provided with a copy thereof and be
given an opportunity to comment thereon).
k. Further Assurances. Each party shall do and perform, or
------------------
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. No Strict Construction. The language used in this
----------------------
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
m. Remedies. The Company acknowledges that a breach by it of
--------
its obligations hereunder will cause irreparable harm to each Buyer, by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Agreement will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this
Agreement, that each Buyer shall be entitled, in addition to all other available
remedies in law or in equity, to an injunction or injunctions to prevent or cure
any breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions of this Agreement, without the necessity of showing
economic loss and without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
AASTROM BIOSCIENCES, INC.
By:_______________________________________________
R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Ph.D.
President & Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: ▇▇▇▇ ▇▇▇▇ Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., as General Partner
By:_______________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o ▇▇▇▇ ▇▇▇▇ Capital Management, L.P.
▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Preferred Shares: 3,000
Number of Warrants 300,000
Aggregate Purchase Price: $3,000,000
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