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EXHIBIT 4.4
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SECURITIES PURCHASE AGREEMENT
Among
INTERNATIONAL ISOTOPES INC.
and
THE PURCHASERS LISTED ON SCHEDULE I
Dated as of May 18, 1999
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated
as of May 18, 1999 among International Isotopes Inc., a Texas corporation (the
"Company"), and the various purchasers identified and listed on Schedule I
hereto (each referred to herein as a "Purchaser" and, collectively, the
"Purchasers.")
WHEREAS, the Company and the Purchasers are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D as promulgated by the
United States Securities and Exchange Commission (the "Commission") under
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, 5,000 shares of the Company's
Series A 5% Convertible Redeemable Preferred Stock, par value $.01 per share,
liquidation value $1,000 per share (the "Preferred Stock"), at an aggregate
purchase price of $5,000,000 issued pursuant to a Certificate of Designation of
Preferences and Rights ("Certificate of Designation") in the form of Exhibit A
annexed hereto, and a stock purchase warrant or warrants (each, a "Warrant"), in
the form of Exhibit B annexed hereto, to purchase an aggregate amount of 205,000
shares of the Company's common stock, par value $0.01 per share (the "Common
Stock");
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form of Exhibit C attached hereto (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities laws; and
WHEREAS, at each of the Second Closing and Third Closing (as
defined in Sections 1.2(b) and 1.2(c)), the parties hereto shall execute and
deliver a Registration Rights Agreement substantially in the form of Exhibit C
attached hereto pursuant to which the Company shall agree to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter, the Company and the Purchasers hereby
agree as follows:
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ARTICLE I.
PURCHASE AND SALE
1.1 Purchase and Sale.
a. On the First Closing Date (as defined below), subject to the terms
and conditions set forth herein, the Company shall issue and sell to each
Purchaser and each Purchaser, severally and not jointly, shall purchase from the
Company the number of shares of Preferred Stock as set forth on Schedule I and a
Warrant or Warrants exercisable for the amount of Common Stock, par value $0.01
per share ("Common Stock"), as set forth on Schedule I for such Purchaser. The
aggregate purchase price of the shares of Preferred Stock purchased by the
Purchasers shall be $5,000,000, the aggregate number of shares Preferred Stock
purchased by the Purchasers shall be 5,000, and the aggregate number of Common
Stock for which the Warrant or Warrants will be exercisable shall be 205,000
shares of Common Stock.
b. On the Second Closing Date (as defined below), subject to the terms
and conditions set forth herein, the Company shall issue and sell to the
Purchasers (1) an additional 5,000 shares of Preferred Stock at an aggregate
purchase price of $5,000,000 and (2) an additional Warrant exercisable for an
aggregate amount of 205,000 shares of Common Stock.
c. On the Third Closing Date (as defined below), subject to the terms
and conditions set forth herein, the Company shall issue and sell to the
Purchasers (1) an additional 8,000 shares of Preferred Stock for an aggregate
purchase price of $8,000,000 and (2) an additional Warrant for an aggregate
350,000 shares of Common Stock.
1.2 Closings.
a. The First Closing. The closing of the purchase and sale of the
initial 5,000 Shares of Preferred Stock at an aggregate purchase price of
$5,000,000 and Warrants for an aggregate of 205,000 shares of Common Stock (the
"First Closing") shall take place at the offices of Akin, Gump, Strauss, ▇▇▇▇▇ &
▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or by transmission
by facsimile and overnight courier, immediately following the execution hereof
or such later date or different location as the parties shall agree, but not
prior to the date that the conditions set forth in Section 4.1 have been
satisfied or waived by the appropriate party (the "First Closing Date"). At the
First Closing:
(i) Each Purchaser shall deliver, as directed by the Company, its
portion of the purchase price as set forth next to its name on Schedule I in
United States dollars in immediately available funds to an account or accounts
designated in writing by the Company;
(ii) The Company shall deliver a Preferred Stock certificate(s)
representing the number of shares of Preferred Stock purchased by each Purchaser
as set forth next to such Purchaser's name on Schedule I, registered in the name
of such Purchaser, each in form satisfactory to the Purchaser and issued
pursuant to the Certificate of Designation with a Conversion Price (as defined
therein) equal to $11.86;
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(iii) The Company shall deliver a Warrant(s), in the form of
Exhibit B hereto and with the Exercise Price (as defined therein) equal to
$11.86 representing the number of shares of Common Stock as set forth next to
such Purchaser's name on the Schedule I, registered in the name of such
Purchaser; and
(iv) The parties shall execute and deliver each of the documents
referred to in Section 4.1.
b. Second Closing. Subject to the terms and conditions set forth in
Section 4.2 and elsewhere in this Agreement, the closing and sale of an
additional 5,000 shares of Preferred Stock for an aggregate purchase price of
$5,000,000 and Warrants for an aggregate of 205,000 shares of Common Stock shall
take place on October 15, 1999 in the same manner as the First Closing (the
"Second Closing Date"); provided that in no case shall the Second Closing take
place unless and until the conditions listed in Section 4.2 have been satisfied
or waived by the appropriate party. At the Second Closing:
(i) Each Purchaser shall deliver, as directed by the Company, its
portion of the purchase price as set forth next to its name on a schedule
similar to Schedule I (the "Second Closing Schedule"), to be delivered to the
Company by the Purchasers two days before the Second Closing Date, in United
States dollars in immediately available funds to an account or accounts
designated in writing by the Company;
(ii) The Company shall deliver a Preferred Stock certificate(s)
representing the number of shares of Preferred Stock purchased by each Purchaser
as set forth next to such Purchaser's name on the Second Closing Schedule,
registered in the name of such Purchaser, each in form satisfactory to the
Purchaser and issued pursuant to the Certificate of Designation with a
Conversion Price equal to $11.86;
(iii) The Company shall deliver a Warrant(s), in the form of
Exhibit B hereto and with the Exercise Price equal to $11.86 representing the
number of shares of Common Stock as set forth next to such Purchaser's name on
the Second Closing Schedule, registered in the name of such Purchaser; and
(iv) The parties shall execute and deliver each of the documents
referred to in Section 4.2.
c. Third Closing. Subject to the terms and conditions set forth in
Section 4.3 and elsewhere in this Agreement, the Purchasers shall have the right
(the "Purchasers Call Option") at any time within a two-year period commencing
on the First Closing Date to deliver a written notice to the Company (a
"Purchasers Call Option Notice") requiring the Company to issue and sell on the
same terms and conditions and at the same purchase price as at the First Closing
(1) an additional principal amount of 8,000 shares of Preferred Stock at an
aggregate purchase price of $8,000,000 and (2) an additional Warrant for an
aggregate amount of up to 350,000 shares of the Common Stock. The closing of the
purchase and sale of the additional shares of Preferred Stock and Warrant(s)
(such closing or the closing under the Company Put Option Notice (defined
below), the "Third Closing") under the Purchasers Call Option Notice shall take
place in the same manner as the First Closing, within two (2) business days of
the date after delivery of
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the Purchasers Call Option Notice (such date or the date of the Third Closing
under the Company Put Option Notice, the "Third Closing Date"); provided that in
no case shall the Third Closing take place unless and until the conditions
listed in Section 4.3 have been satisfied or waived by the appropriate party and
provided further that, if the Company has filed a registration statement under
the Securities Act relating to an Underwritten Offering (as defined in the
Registration Rights Agreement) and if the Company, after consultation with the
managing underwriter(s) or underwriter(s), should reasonably determine that the
Third Closing would materially adversely affect the offering contemplated in
such registration statement, then the Third Closing shall be delayed until
thirty (30) days after the closing of such offering or until after the
cancellation of such offering. At the Third Closing:
(i) Each Purchaser shall deliver, as directed by the Company, its
portion of the purchase price as set forth next to its name on a schedule
similar to Schedule I (the "Third Closing Schedule"), to be attached to the
Purchasers Call Option Notice, in United States dollars in immediately available
funds to an account or accounts designated in writing by the Company;
(ii) The Company shall deliver a Preferred Stock certificate(s)
representing the number of shares of Preferred Stock purchased by each Purchaser
as set forth next to such Purchaser's name on the Third Closing Schedule,
registered in the name of such Purchaser, each in form satisfactory to the
Purchaser and issued pursuant to the Certificate of Designation, except that
Section 4.2(b) thereof shall be omitted, with a Conversion Price equal to
$11.86.
(iii) The Company shall deliver a Warrant(s), in the form of
Exhibit B hereto representing the Warrant(s) with an Exercise Price (as defined
therein) equal to 110% of the Average Price on the Third Closing Date being
purchased by each Purchaser as set forth next to such Purchaser's name on the
Third Closing Schedule, registered in the name of such Purchaser; and
(iv) The parties shall execute and deliver each of the documents
referred to in Section 4.3.
d. Company Put Option. Subject to the terms and conditions in Section
4.3 and elsewhere in this Agreement, after exercise by the Company of the
Optional Redemption of the shares of Preferred Stock (as defined in Section 8.1
of the Certificate of Designation) and the Optional Redemption of the Warrants
(as defined in Section 7 of the Warrants) or the conversion of all the shares of
Preferred Stock and the exercise of all the Warrants issued at both of the First
Closing and the Second Closing, the Company shall have the one time right (the
"Company Put Option") at any time within the two-year period commencing on the
First Closing to deliver a written notice to the Purchasers (a "Company Put
Option Notice") requiring the Purchasers to exercise the Purchasers Call Option.
If the Company determines to exercise the Company Put Option, it shall notify
the Purchasers 10 business days prior to the exercise of such right and of the
amount of Preferred Stock the Company intends to issue at the Third Closing. If
the Company does not issue 8,000 shares of Preferred Stock, the aggregate number
of shares of Common Stock issuable upon the exercise of the Warrants shall be
reduced proportionately The Third Closing under this Company Put Option Notice
shall take place on such date indicated in
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the Company Put Option Notice but no earlier than 10 business days after the
Purchasers' receipt of the Company Put Option Notice; provided that in no case
shall the Third Closing take place unless and until the conditions listed in
Section 4.3 have been satisfied or waived by the appropriate party. Five
business days after receipt of the Company Put Option Notice, the Purchasers
shall deliver to the Company a Third Closing Schedule, indicating (1) the number
of shares of Preferred Stock that each Purchaser shall purchase and (2) the
number of shares of Common Stock for which each Warrant, to be bought by
Purchasers at the Third Closing, may be exercised. At the Third Closing under
the Company Put Option Notice:
(i) Each Purchaser shall deliver, as directed by the Company, its
portion of the purchase price as set forth next to its name on the Third Closing
Schedule, in United States dollars in immediately available funds to an account
or accounts designated in writing by the Company;
(ii) The Company shall deliver a Preferred Stock certificate(s)
representing the number of shares of Preferred Stock purchased by each Purchaser
as set forth next to such Purchaser's name on the Third Closing Schedule,
registered in the name of such Purchaser, each in form satisfactory to the
Purchaser and issued pursuant to the Certificate of Designation, except that
Section 4.2(b) thereof shall be omitted, with a Conversion Price equal to
$11.86;
(iii) The Company shall deliver a Warrant(s), in the form of
Exhibit B hereto representing the Warrant(s) with an Exercise Price (as defined
therein) equal to 110% of the Average Price on the Third Closing Date being
purchased by each Purchaser as set forth next to such Purchaser's name on the
Third Closing Schedule, registered in the name of such Purchaser; and
(iv) The parties shall execute and deliver each of the documents
referred to in Section 4.3.
e. Purchasers' Damages. In addition to any other rights available to
the Purchasers, if the Company fails to deliver to each Purchaser the shares of
Preferred Stock and Warrants required to be delivered at the Second or Third
Closing, the Company shall pay each such Purchaser, upon the Purchaser's demand,
an amount calculated according to the formula below as liquidated damages by
cash or wire transfer in immediately available funds to the account of such
Purchaser, or as otherwise directed by such Purchaser:
[(MP-CP) x CSPS] + [(MP-EP) x CSW]
where MP is the Per Share Market Price (as defined in the Registration Rights
Agreement) on the applicable Closing Date;
where CSPS is the number shares of Common Stock into which the shares of
Preferred Stock that should have been delivered at the applicable Closing could
have been converted;
where CSW is the number of shares of Common Stock for which the Warrants that
should have been delivered at the applicable Closing could have been exercised;
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where CP is the Conversion Price (as defined in the Certificate of Designation)
of the shares of Preferred Stock; and
where EP is the Exercise Price (as defined in the Warrants) of the Warrants.
f. Company Damages. In the event that any Purchaser shall fail to
purchase the shares of Preferred Stock and Warrant that it is required to
purchase at the Second or Third Closing, then, as partial relief for the damages
to the Company by reason of any delay in or failure of such purchase (which
remedy shall not be exclusive of any other remedies available at law or in
equity), such Purchaser shall pay to the Company an amount in cash equal to the
aggregate purchase price of the shares of Preferred Stock such Purchaser
purchased at the First Closing multiplied by two hundredths (.020) times the sum
of: (i) number of months (prorated for partial months) after the applicable
Closing and prior to the date such Purchaser purchases the shares of Preferred
Stock and Warrant required to be purchased at the applicable Closing
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The Company
hereby makes the following representations and warranties to each of the
Purchasers:
a. Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Texas, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Except as set forth on Schedule 2.1(a), the Company has no subsidiaries
(collectively, the "Subsidiaries"). Each of the Subsidiaries (which for purposes
of this Agreement means any entity in which the Company, directly or indirectly,
owns the majority of such entity's capital stock or holds an equivalent equity
or similar interest) is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the full corporate power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. Each of the Company and the Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not,
individually or in the aggregate, (x) adversely affect the legality, validity or
enforceability of any of this Agreement or the Transaction Documents (as defined
in Section 2.1(b)) or any of the transactions contemplated hereby or thereby,
(y) have or result in a material adverse effect on the results of operations,
assets, prospects, or financial condition of the Company and its Subsidiaries,
taken as a whole or (z) impair the Company's ability to perform fully on a
timely basis its obligations under any Transaction Document (any of (x), (y) or
(z), being a "Material Adverse Effect"). The Company has furnished to each of
the Purchasers true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the "Certificate
of Incorporation"), and the Company's Bylaws, as in effect on the date hereof
(the "Bylaws"), and the true, complete
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and accurate copies of documents evidencing all classes of securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.
b. Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the Certificate of Designation, the Warrants
and the Registration Rights Agreement (collectively, the "Transaction
Documents"), and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of each of this Agreement and the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action and no further action is required by the Company, its
Board of Directors or its stockholders. Each of this Agreement and the
Transaction Documents has been duly executed by the Company and when delivered
in accordance with the terms hereof will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application and except that rights to
indemnification and contribution may be limited by Federal or state securities
laws or public policy relating thereto. Neither the Company nor any Subsidiary
is in any material violation of any of the provisions of its respective
certificate of incorporation, bylaws or other charter documents such that any
right of a holder of shares of Preferred Stock would be affected.
c. Capitalization. As of the date hereof, the authorized capital stock
of the Company is as set forth in Schedule 2.1(c). All of such outstanding
shares of capital stock have been, or upon issuance will be, validly authorized
and issued, fully paid and nonassessable and were issued in accordance with the
registration or qualification provisions of the Securities Act, or pursuant to
valid exemptions therefrom. Except as disclosed in Schedule 2.1(c), (i) no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company, nor is any holder of the Common Stock entitled to preemptive or similar
rights arising out of any agreement or understanding with the Company by virtue
of any Transaction Document, (ii) 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 or exchangeable for, or
giving any Person (as defined below) any right to subscribe for or acquire, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iii) there are no outstanding debt
securities, (iv) there are no agreements or arrangements under which the Company
or any of its Subsidiaries is obligated to register the sale of any of their
securities under the Securities Act (except the Registration Rights Agreement),
(v) there are no outstanding securities of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries, (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the shares of Common
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Stock as described in this Agreement, (vii) the Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any similar plan
or agreement and (viii) except as specifically disclosed in the SEC Documents
(as defined in Section 2.1(k)), no Person (as defined below) or group of related
Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or
has the right to acquire by agreement with or by obligation binding upon the
Company beneficial ownership of in excess of 5% of the Common Stock. "Person"
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
d. Authorization and Validity; Issuance of Shares. The shares of
Common Stock issuable upon conversion of the Preferred Stock and exercise of the
Warrants (collectively, the "Underlying Shares") are and will at all times
hereafter continue to be duly authorized and reserved for issuance and the
shares of Common Stock issued upon conversion of the Preferred Stock (the
"Conversion Shares") and exercise of the Warrants (the "Warrant Shares") and the
Shares of Preferred Stock and will be validly issued, fully paid and
non-assessable, free and clear of all liens, encumbrances and Company rights of
first refusal, other than liens and encumbrances created by the Purchasers
(collectively, "Liens") and will not be subject to any preemptive or similar
rights. The issuance by the Company of the Preferred Stock, the Warrants and the
Underlying Shares is exempt from registration under the Securities Act.
e. No Conflicts. The execution, delivery and performance of this
Agreement and each of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including the issuance of the Underlying Shares) do not and will not (i)
conflict with or violate any provision of the Certificate of Incorporation,
Bylaws or other organizational documents of the Company or any of the
Subsidiaries, (ii) subject to obtaining the consents referred to in Section
2.1(f), conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument (evidencing a Company
or Subsidiary debt or otherwise) to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or any Subsidiary is subject
(including Federal and state securities laws and regulations and the rules and
regulations of the principal market or exchange on which the Common Stock is
traded or listed) applicable to the Company or any of its Subsidiaries, or by
which any material property or asset of the Company or any Subsidiary is bound
or affected.
f. Consents and Approvals. Except as specifically set forth on
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, regulatory or self regulatory agency, or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement or the Transaction Documents, other than (i) the filing of a
registration statement with the Commission, which shall be filed in accordance
with and in the time periods set forth in the
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Registration Rights Agreement, (ii) the application(s) or any letter(s)
acceptable to the Nasdaq SmallCap Market ("Nasdaq") and the Boston Stock
Exchange ("BSE") for the listing of the Underlying Shares with Nasdaq and the
BSE (and with any other national securities exchange or market on which the
Common Stock is then listed), and (iii) any filings, notices or registrations
under applicable state securities laws (together with the consents, waivers,
authorizations, orders, notices and filings referred to on Schedule 2.1(f), the
"Required Approvals").
g. Litigation; Proceedings. Except as specifically set forth on
Schedule 2.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of this Agreement or the Transaction Documents or (ii) could reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect.
h. No Default or Violation. Neither the Company nor any Subsidiary (i)
is in default under or in violation of any indenture, loan or other credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound and which is required to be included
as an exhibit to any SEC Document (as defined in Section 2.1(k)) or will be
required to be included as an exhibit to the Company's next filing under either
the Securities Act or Exchange Act (ii) is in violation of any order of any
court, arbitrator or governmental body applicable to it, (iii) is in violation
of any statute, rule or regulation of any governmental authority to which it is
subject, (iv) is in default under or in violation of its Certificate of
Incorporation, Bylaws or other organizational documents, respectively, or (v) is
in default under or in violation of any of the listing requirements of Nasdaq or
the BSE as in effect on the date hereof and is not aware of any facts which
would reasonably lead to delisting or suspension of the Common Stock by Nasdaq
or, the BSE in the foreseeable future. The business of the Company and its
Subsidiaries is not being conducted, and shall not be conducted, in violation of
any law, ordinance, rule or regulation of any governmental entity, except where
such violations have not resulted or would not reasonably result, individually
or in the aggregate, in a Material Adverse Effect. Neither the Company nor any
of its Subsidiaries is in breach of any agreement where such breach,
individually or in the aggregate, would have a Material Adverse Effect
i. Disclosure; Absence of Certain Changes. None of this Agreement, the
Schedules to this Agreement, the Transaction Documents, the SEC Documents or any
other written or formally presented information, report, financial statement,
exhibit, schedule or document furnished by or on behalf of the Company in
connection with the negotiation of the transactions contemplated hereby
contained, contains, or will contain at the time it was or is so furnished any
untrue statement of a material fact or omitted, omits or will omit at such time
to state any material fact necessary in order to make the statements made herein
and therein, in light of the circumstances under which they were made, not
misleading. Except as disclosed on Schedule 2.1(i) or in SEC Documents filed on
▇▇▇▇▇ at least five business days prior to the date hereof, since December 31,
1998, there has been no material adverse change and no material adverse
development in the business, properties, operations, financial condition,
liabilities or results of operations or, insofar as can reasonably be foreseen,
prospects of the Company or the
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Subsidiaries. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does
the Company or any of its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy proceedings. No
event, liability, development or circumstance has occurred or exists, or is
contemplated to occur, with respect to the Company or its Subsidiaries or their
respective businesses, properties, operations or financial condition or, insofar
as can reasonably be foreseen, prospects, that would be required to be disclosed
by the Company under applicable securities laws on a registration statement
(including by way of incorporation by reference) filed with the Commission, on
the date this representation is made or deemed to be made, relating to an
issuance and sale by the Company of its Common Stock and which has not been
publicly disclosed.
j. Private Offering. The Company and all Persons acting on its behalf
have not made, directly or indirectly, and will not make, offers or sales of any
securities or solicited any offers to buy any security under circumstances that
would require registration of the Preferred Stock, the Warrants, the Conversion
Shares, the Warrant Shares or the Underlying Shares or the issuance of such
securities under the Securities Act. The offer, sale and issuance of the
Preferred Stock, the Warrants, the Conversion Shares and the Warrant Shares to
the Purchasers will not be integrated with any other offer, sale and issuance of
the Company's securities (past, current, or future) under the Securities Act or
any regulations of any exchange or automated quotation system on which any of
the securities of the Company are listed or designated or for purposes of any
stockholder approval provision applicable to the Company or its securities.
Subject to the accuracy and completeness of the representations and warranties
of the respective Purchasers contained in Section 2.2, the offer, sale and
issuance by the Company to the Purchasers of the Preferred Stock, the Warrants
and the Underlying Shares is exempt from the registration requirements of the
Securities Act.
k. SEC Documents; Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(b) of the Exchange Act. The Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the Commission pursuant to the reporting requirements of
the Exchange Act, including pursuant to Section 13, 14 or 15(d) thereof (the
foregoing materials and all exhibits included therein and financial statements
and schedules thereto and documents (other than exhibits to such documents)
incorporated by reference therein being collectively referred to herein as the
"SEC Documents"), on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC Documents prior to the expiration of
any such extension. The Company has delivered to each of the Purchasers or its
representatives true, complete and accurate copies of the SEC Documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, 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. All agreements to which the Company or any
Subsidiary is a party or to which the property or assets of the Company or any
Subsidiary are subject and which are required to be filed as exhibits to the SEC
Documents have been filed as exhibits to the SEC Documents as required and
neither the Company nor any Subsidiary is in breach of any such agreement. As of
their respective dates, the financial statements of the
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Company included in the SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial year-end audit adjustments.
No other information provided by or on behalf of the Company to the Purchasers
which is not included in the SEC Documents, including, without limitation,
information referred to in Section 2.1(i) of this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading. Neither the Company nor any of its
Subsidiaries or any of their officers, directors, employees or agents have
provided the Purchasers with any material, nonpublic information, except as set
forth in Schedule 2.1(k). The Company acknowledges that the Purchasers will be
trading in the securities of the Company in reliance on the foregoing
representation and warranty.
l. Investment Company. The Company is not, and is not controlled by or
under common control with an affiliate (an "Affiliate") of an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
m. Broker's Fees. No fees or commissions or similar payments with
respect to the transactions contemplated by this Agreement or the Transaction
Documents have been paid or will be payable by the Company to any broker,
financial advisor, finder, investment banker, or bank, other than as set forth
in Schedule 2.1(m). The Purchasers shall have no obligation with respect to any
fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section 2.1(m) that may be due in connection
with the transactions contemplated by this Agreement and the Transaction
Documents.
n. Form S-3 Eligibility. The Company is, and at the Closing Date will
be, eligible to register securities (including the Underlying Shares) for resale
with the Commission under Form S-3 (or any successor form) promulgated under the
Securities Act.
o. Listing and Maintenance Requirements Compliance. The principal
markets on which the Common Stock is currently traded are Nasdaq and the BSE.
Except as disclosed on Schedule 2.1(o), the Company has not in the three years
preceding the date hereof received notice (written or oral) from Nasdaq or the
BSE (or any stock exchange, market or trading facility on which the Common Stock
is or has been listed (or on which it has been quoted)) to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such market or exchange. The Company is not aware of any facts that would
reasonably lead to delisting or suspension of the Common Stock by Nasdaq or the
BSE. After giving effect to the transactions contemplated by this Agreement and
the Transaction Documents, the Company is and will be in compliance with all
such maintenance requirements.
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p. Intellectual Property Rights. The Company and each of its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trademark applications, trade names and service marks, whether or not
registered, and all patents, patent applications, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and intellectual
property rights (collectively, "Intellectual Property Rights") which are
necessary for use in connection with their respective businesses as now
conducted and as described in the SEC Documents. Except as set forth on Schedule
2.1(p), none of the Company's Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate within two years from the
date of this Agreement. Neither the Company nor any of its Subsidiaries has
infringed or is infringing on any of the Intellectual Property Rights of any
Person and, except as set forth on Schedule 2.1(p), there is no claim, action or
proceeding which has been made or brought against, or to the Company's
knowledge, is being made, brought or threatened against, the Company or its
Subsidiaries regarding the infringement of any of the Intellectual Property
Rights, and the Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing, except where any of
the foregoing would not have a Material Adverse Effect. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
q. Employee Relations. Neither the Company nor any of its Subsidiaries
is involved in any union labor dispute nor, to the knowledge of the Company or
any of its Subsidiaries, is any such dispute threatened. Neither the Company nor
any of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that relations with their employees are
good. Except as set forth on Schedule 2.1(q), since December 31, 1998 no
executive officer (as defined in Rule 501(f) under the Securities Act) has
notified the Company that such officer intends to leave the Company or otherwise
terminate such officer's employment with the Company.
r. Registration Rights; Rights of Participation. Except as described
on Schedule 2.1(r) hereto, (i) the Company has not granted or agreed to grant to
any Person any rights (including "piggy-back" registration rights) to have any
securities of the Company registered with the Commission or any other
governmental authority which has not been satisfied and (ii) no Person,
including, but not limited to, current or former stockholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any Transaction Document.
s. Title. Except as disclosed on Schedule 2.1(s), the Company and each
of its Subsidiaries have good and marketable title in fee simple to all real
property and personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all Liens,
except for Liens that do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company and the Subsidiaries. Any real property and facilities held under lease
by the Company and the Subsidiaries are held by them under valid, subsisting
and, to the Company's best knowledge, enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and the Subsidiaries.
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t. Permits. The Company and each of its Subsidiaries possess all
certificates, authorizations, licenses, easements, consents, approvals, orders
and permits necessary to own, lease and operate their respective properties and
to conduct their respective businesses as currently conducted except where the
failure to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("Material Permits"), and there is no proceeding
pending, or, to the knowledge of the Company, threatened relating to the
revocation, modification, suspension or cancellation of any Material Permit.
Neither the Company nor any of the Subsidiaries is in conflict with or default
or violation of any Material Permit.
u. 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 any reason to believe
that it will not be able to renew its existing insurance coverages as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business, at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries, taken as a whole.
v. Internal Accounting Controls. The Company and each of the
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 United States 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.
w. Tax Status; Firpta. Except as set forth on Schedule 2.1(w), the
Company and each of its Subsidiaries has made or filed all federal and state
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 and each of its Subsidiaries 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 (which are set forth on
Schedule 2.1(w)), and has set aside on it 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
is not a "United States real property holding corporation" within the meaning of
Section 847(c)(2) of the Internal Revenue Code of 1986, as amended.
x. Transactions With Affiliates. Except as set forth on Schedule
2.1(c) or Schedule 2.1(x), none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as
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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 entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
y. Application to Takeover Protection. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the Certificate of Incorporation, Bylaws
or the laws of the state of incorporation which is or could become applicable to
the Purchasers or the Transaction Documents as a result of the transactions
contemplated by this Agreement or the Transaction Documents. None of the
transactions contemplated by this Agreement or the Transaction Documents,
including the conversion of the shares of Preferred Stock and the exercise of
the Warrants, will trigger any poison pill provisions of any of the Company's
stockholders' rights or similar agreements.
z. Environmental Laws. Except as set forth on Schedule 2.1(z), the
Company and its Subsidiaries (i) are in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permits, licenses or
other approvals except where the failure of any of the foregoing would not
result in a Material Adverse Effect.
aa. Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
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 form corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
bb. Solicitation Materials. The Company has not (i) distributed any
offering materials in connection with the offering and sale of the Preferred
Stock or the Warrants, other than the SEC Documents, the Schedules to this
Agreement, any amendments and supplements thereto and the materials listed on
Schedule 2.1(bb), or (ii) solicited any offer to buy or sell the Preferred Stock
or the Warrants by means of any form of general solicitation or advertising.
Neither the Company, nor any of its Affiliates, nor any Person acting on its or
their behalf, has engaged or will engage 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 the Preferred Stock or Warrants.
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cc. Acknowledgement of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares and Warrant Shares upon conversion of the
Preferred Stock or exercise of the Warrants. The Company further acknowledges
that its obligation to issue Conversion Shares and Warrant Shares upon
conversion of the Preferred Stock or exercise of the Warrants 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.
dd. Acknowledgement Regarding Purchasers' Purchase of Preferred Stock.
The Company acknowledges and agrees that the Purchasers 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
Purchaser 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 any statement made by any Purchaser 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 Purchasers' purchase of the securities. The Company further
represents to each Purchaser that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
ee. 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 the Company has no information that would lead it to reasonably
conclude that the Company would not have the ability to, 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 does not anticipate or know of any basis upon which its
auditors might issue a qualified opinion in respect of its current fiscal year.
ff. Seniority; Exclusivity. No class of equity securities of the
Company will be senior to the Preferred Stock in right of payment, whether upon
liquidation, dissolution or otherwise. So long as any Preferred Stock issued
hereunder remains outstanding, the Company shall not exchange, redeem or covert
any of the Company's capital stock for indebtedness, including convertible debt,
of the Company. The Company shall not issue and sell any shares of Preferred
Stock, other than to the Purchasers pursuant to this Agreement, without the
prior written consent of each of the Purchasers.
gg. Other Agreements. The Company has not, directly or indirectly,
made any agreements with any Purchasers relating to the terms and conditions of
the transactions contemplated by the Transaction Documents except as set forth
in the Transaction Documents.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
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a. Organization; Authority. Such Purchaser is a corporation or a
limited duration company or a limited liability company or limited partnership
duly formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with the requisite power and
authority, corporate or otherwise, to enter into and to consummate the
transactions contemplated hereby and by the Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The purchase by such
Purchaser of the shares of Preferred Stock and the Warrants hereunder has been
duly authorized by all necessary action on the part of such Purchaser. Each of
this Agreement and the Registration Rights Agreement has been duly executed and
delivered by such Purchaser and constitutes the valid and legally binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity.
b. Investment Intent. Such Purchaser is acquiring the shares of
Preferred Stock and the Warrants for its own account and not with a present view
to or for distributing or reselling the shares of Preferred Stock, the Warrants,
the Conversion Shares or the Warrant Shares or any part thereof or interest
therein in violation of the Securities Act; provided, however, that by making
the representations herein, such Purchaser does not agree to hold any of the
shares of Preferred Stock, the Warrants, the Conversion Shares or the Warrant
Shares for any minimum or other specific term and reserves the right to dispose
of the shares of Preferred Stock at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act.
c. Purchaser Status. At the time such Purchaser was offered the
Preferred Stock and the Warrants, and at the Closing Date, (i) it was and will
be an "accredited investor" as defined in Rule 501 under the Securities Act and
(ii) such Purchaser, either alone or together with its representatives, had and
will have such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Preferred Stock and the Warrants.
d. Reliance. Such Purchaser understands and acknowledges that (i) the
Preferred Stock and the Warrants are being offered and sold to such Purchaser
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under Section 4(2)
of the Securities Act or Regulation D promulgated thereunder and (ii) the
availability of such exemption depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the representations set forth in this
Section 2.2 and such Purchaser hereby consents to such reliance.
e. Information. Such Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Stock and Warrants which have been requested by such Purchaser or its advisors.
Such Purchaser and its advisors, if any, have been afforded the opportunity to
ask questions of the Company. Neither such inquiries nor any other due diligence
investigation conducted by Purchaser or any of its advisors or representatives
shall modify, amend or affect Purchaser's right to rely on the Company's
representations and warranties contained in Section 2.1 above or representations
and warranties of the Company contained in
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any other transaction document. Such Purchaser understands that its investment
in the Preferred Stock and Warrants involves a significant degree of risk.
f. Governmental Review. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Preferred Stock
or Warrants.
g. Residency. Such Purchaser is a resident of the jurisdiction set
forth immediately below such Purchaser's name on Schedule II hereto.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III.
OTHER AGREEMENTS
3.1 Transfer Restrictions.
a. If any Purchaser should decide to dispose of shares of the
Preferred Stock, the Warrants, the Conversion Shares or the Warrant Shares held
by it, such Purchaser understands and agrees that it may do so only pursuant to
an effective registration statement under the Securities Act, to the Company or
pursuant to an available exemption from the registration requirements of the
Securities Act or Rule 144 promulgated under the Securities Act ("Rule 144").
The Company shall announce any material non-public information that it legally
is required to announce on or prior to the Effectiveness Date (as defined in the
Registration Rights Agreement) of the registration statement filed pursuant to
the Registration Rights Agreement and shall not enter into any subsequent
non-disclosure agreements that would prevent it from announcing an such
information that otherwise legally could have been announced on or prior to the
Effectiveness Date, unless confidential treatment for such information is
granted by the Commission. In connection with any transfer of any shares of the
Preferred Stock, Warrants, Conversion Shares or Warrant Shares other than
pursuant to an effective registration statement, Rule 144 or to the Company, the
Company may require the transferor thereof to provide to the Company a written
opinion of counsel experienced in the area of United States securities laws
selected by the transferor, the form and substance of which
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opinion shall be customary for opinions of counsel in comparable transactions,
to the effect that such transfer does not require registration of such
transferred securities under the Securities Act; provided, however, that if the
Preferred Stock, Warrants, Conversion Shares or Warrant Shares may be sold
pursuant to Rule 144(k), no written opinion of counsel shall be required from
the Purchaser if such Purchaser provides reasonable assurances that such
security can be sold pursuant to Rule 144(k). Notwithstanding the foregoing, the
Company hereby consents to and agrees to register any transfer by any Purchaser
to an Affiliate of such Purchaser, provided that the transferee certifies to the
Company that it is an "accredited investor" as defined in Rule 501(a) under the
Securities Act. Any such transferee shall agree in writing to be bound by the
terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Transaction Documents. If a Purchaser provides the Company
with an opinion of counsel, the form and substance of which opinion shall be
customary for opinions of counsel in comparable transactions, to the effect that
a public sale, assignment or transfer of the Preferred Stock, the Conversion
Shares, the Warrants and the Warrant Shares may be made without registration
under the Securities Act or the Purchaser provides the Company with reasonable
assurances that the Preferred Stock, the Warrants, the Conversion Shares and the
Warrant 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, the Company shall permit the transfer, and, in the case of the
Conversion Shares and the Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by such Purchaser and without any restrictive legend. Notwithstanding
the foregoing or anything else contained herein to the contrary, the Preferred
Stock, the Warrants, the Conversion Shares and the Warrant Shares may be pledged
as collateral in connection with a bona fide margin account or other lending
arrangement.
b. Each Purchaser agrees to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Preferred Stock
certificates, the Warrants, the Conversion Shares and the Warrant Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
Neither the Preferred Stock certificates, the Warrants, the Conversion
Shares, nor the Warrant Shares shall contain the legend set forth above (or any
other legend) (i) at any time while a registration statement is effective under
the Securities Act covering such security, (ii) if in the written opinion of
counsel to the Company experienced in the area of United States securities laws
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission) or (iii) if such shares of Preferred Stock, Warrants, Conversion
Shares or Warrant Shares may be sold pursuant to Rule 144(k). The Company agrees
that it will provide each Purchaser, upon request, with a certificate or
certificates representing shares of Preferred Stock, Warrants, Conversion Shares
or Warrant Shares, free from such legend at such time as such legend is no
longer required hereunder. If such certificate or certificates had previously
been issued with such a legend or any other legend, the Company shall, upon
request, receive such certificate or certificates free of any legend.
3.2 Stop Transfer Instruction. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company which enlarge
the restrictions on transfer set forth in Section 3.1.
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3.3 Furnishing of Information. As long as any Purchaser owns shares of the
Preferred Stock, the Warrants, the Conversion Shares or the Warrant Shares, the
Company will cause the Common Stock to continue at all times to be registered
under Section 12(g) of the Exchange Act, will timely file (or obtain extensions
in respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13, 14 or 15(d) of the Exchange Act and promptly furnish, but in no event later
than two (2) business days after the filing thereof with the Commission, the
Purchasers with true and complete copies of all such filings, and will not take
any action or file any document (whether or not permitted by the Exchange Act or
the rules thereunder) to terminate or suspend such reporting and filing
obligations. As long as any Purchaser owns shares of the Preferred Stock, the
Warrants, the Conversion Shares or the Warrant Shares, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act,
it will prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any holder of the shares of Preferred Stock, the Warrants, the
Conversion Shares or the Warrant Shares may reasonably request, all to the
extent required from time to time to enable such Person to sell the shares of
Preferred Stock, the Warrants, the Conversion Shares, or the Warrant Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in Section 3.1(b). Upon the request of any
such Person, the Company shall deliver to such Person a written certification of
a duly authorized officer as to whether it has complied with such requirements.
3.4 Blue Sky Laws. In accordance with the Registration Rights Agreement,
the Company shall (i) qualify the Conversion Shares and the Warrant Shares under
the securities or "blue sky" laws of such jurisdictions as the Purchasers may
request (or to obtain an exemption from such qualification), (ii) shall provide
evidence of any such action so taken to each Purchaser on or before the
Effectiveness Date (as defined in the Registration Rights Agreement) and (iii)
shall continue such qualification at all times through the resale of all
Conversion Shares or Warrant Shares, but in any event not past the fourth
anniversary of the Closing Date.
3.5 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Preferred Stock, the Warrants, the Conversion Shares or the Warrant
Shares in a manner that would require the registration under the Securities Act
of the sale of the Preferred Stock, the Warrants, the Conversion Shares or the
Warrant Shares to any Purchaser or cause the offering of such 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.
3.6 Listing and Reservation of Conversion Shares and Warrant Shares.
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a. The Company shall (i) not later than ten (10) business days after
the Closing Date prepare and file with Nasdaq and the BSE (as well as any other
national securities exchange or market on which the Common Stock is then listed)
additional shares listing applications or letters acceptable to Nasdaq and the
BSE covering and listing a number of shares of Common Stock which is at least
equal to 120% the maximum number of Underlying Shares then issuable, assuming
that the payment of all future dividends on such shares then outstanding were
made in shares of Common Stock, (ii) take all steps necessary to cause the
Underlying Shares to be approved for listing on Nasdaq and the BSE (as well as
on any other national securities exchange or market on which the Common Stock is
then listed) as soon as possible thereafter, (iii) maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all such
Underlying Shares, and (iv) provide to the Purchasers evidence of such listing.
Neither the Company nor any of its Subsidiaries shall take any action that may
result in the delisting or suspension of the Common Stock on Nasdaq or the BSE.
The Company shall promptly provide to each Purchaser copies of any notices it
receives from Nasdaq or BSE regarding the continued eligibility of the Common
Stock for listing on such automated quotation system, so long as such notice
does not include material, nonpublic information. The Company shall pay all fees
and expenses in connection with satisfying its obligations under this Section
3.6(a).
b. The Company at all times shall reserve a sufficient number of
shares of its authorized but unissued Common Stock to provide for 1.2 times the
full conversion of the outstanding shares of Preferred Stock (including the
payment of all dividends thereon) and exercise of the outstanding Warrants.
Shares of Common Stock reserved for issuance upon conversion of the shares of
Preferred Stock and the exercise of the Warrants shall be allocated pro rata to
each of the Purchasers in accordance with the number of shares of Preferred
Stock and Warrants issued and delivered to such Purchaser at the Closing. If at
any time the number of shares of Common Stock authorized and reserved for
issuance is insufficient to cover 100% of the number of Conversion Shares and
Warrant Shares issued and issuable upon conversion of the shares of Preferred
Stock and exercise of the Warrants (based on the Conversion Price (as defined in
the Certificate of Designation) of the shares of Preferred Stock in effect from
time to time and the Exercise Price (as defined in the Warrants) of the Warrants
in effect from time to time) without regard to any limitation on conversions or
exercises, the Company will promptly take all corporate action necessary to
authorize and reserve 120% of such shares pursuant to Section 3(b) of the
Registration Rights Agreement, including, without limitation, calling a special
meeting of stockholders to authorize additional shares to meet the Company's
obligations under this Section 3.6(b), in the case of an insufficient number of
authorized shares, and using best efforts to obtain stockholder approval of an
increase in such authorized number of shares. In addition, if, at any time
within the 45-day period preceding a reset or adjustment (a "reset") of the
Conversion Price pursuant to the terms of the Certificate of Designation, the
closing bid price per share of the Common Stock on Nasdaq or the BSE (or any
Subsequent Market (as defined in Certificate of Designation) on which the Common
Stock is then listed, or if there is no such price on such date, then the
Average Price (as defined in the Certificate of Designation) is less than
$11.86, the Company shall be required to file within five (5) business days
after such five (5) Trading Day period a registration statement covering the
greater of (a) the product of (i) 1.2 and (ii) the aggregate number of
Underlying Shares that would be issuable based on a Conversion Price equal to
the average closing bid price during such five (5) Trading Day period, less the
number of Underlying Shares for which a registration statement is then effective
or (b) the aggregate number of Underlying Shares, calculated as if the
Conversion Price (as defined in the
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Certificate of Designation) was reset on such fifth day pursuant to the
Certificate of Designation; provided, however, that if on the actual reset date
(pursuant to the Certificate of Designation) the registration statements are
insufficient to register all Underlying Shares (after giving effect to such
reset), the Company shall immediately, but in no more than five (5) business
days thereafter, file a registration statement sufficient to register such
additional shares of Common Stock. All calculations of the above amount shall be
made without regard to any limitation on conversions of shares of Preferred
Stock or exercises of Warrants.
3.7 Notice of Breaches.
a. The Company and each Purchaser shall give prompt written notice to
the other of any breach by it of any representation, warranty or other agreement
contained in this Agreement or in the Transaction Documents, as well as any
events or occurrences arising after the date hereof and prior to the Closing
Date, which would reasonably be likely to cause any representation or warranty
or other agreement of such party, as the case may be, contained herein to be
incorrect or breached as of the Closing Date provided such notice will not
constitute material non-public information. However, no disclosure by either
party pursuant to this Section 3.7 shall be deemed to cure any breach of any
representation, warranty or other agreement contained herein or in the
Transaction Documents.
b. Notwithstanding the generality of Section 3.7(a), the Company shall
promptly notify, provided such notification will not constitute material
non-public information, each Purchaser of any notice or claim (written or oral)
that it receives from any lender of the Company or any Subsidiary to the effect
that the consummation of the transactions contemplated hereby and by the
Registration Rights Agreement violates or would violate any written agreement or
understanding between such lender and the Company or any Subsidiary, and the
Company shall promptly furnish by facsimile to the Purchasers a copy of any
written statement in support of or relating to such claim or notice.
c. The default by any Purchaser of any of its obligations,
representations or warranties under this Agreement or the Transaction Documents
shall not be imputed to, and shall have no effect upon, any other Purchaser or
affect the Company's obligations under this Agreement or any Transaction
Document to any non-defaulting Purchaser.
3.8 Form D. The Company agrees to file a Form D with respect to the
Preferred Stock and Warrants as required by Rule 506 under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing.
3.9 Future Financings.
a. Except for (i) issuance of the Underlying Shares; (ii) shares of
Common Stock deemed to have been issued by the Company in connection with any
plan which has been approved by the Board of Directors of the Company prior to
the date hereof, pursuant to which the Company's securities may be issued to any
employee, officer, director or consultant of the Company; (iii) shares of Common
Stock issuable upon the exercise of any options or warrants outstanding on the
date hereof and listed in Schedule 2.1(c) hereto; (iv) the securities to be
issued in the transactions set forth on such Schedule 2.1(c); (v) an
Underwritten Offering (as defined in
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the Registration Rights Agreement) occurring before December 31, 2000; or (vi)
shares of Common Stock issued or deemed to have been issued as consideration for
an acquisition by the Company of a division, assets or business (or stock
constituting any portion thereof) from another Person, if the Company agrees to
issue shares of Common Stock or other securities convertible into or
exchangeable or exercisable for Common Stock (the "New Security") while any
shares of Preferred Stock are outstanding at (a) an effective price per share
which is less or may be less (including, without limitation, any security which
is convertible into or exchangeable or exercisable for Common Stock at a price
which may change with the market price of the Common Stock) than the Conversion
Price (as defined in the Certificate of Designation) of the shares of Preferred
Stock as of the date thereof or (b) an effective price per share greater than
the Conversion Price but less than the Average Price (as defined in the
Certificate of Designation) on the date of such issuance or sale (either of (a)
or (b) a "Future Financing"), the Company shall provide to the Purchasers by
5:00 p.m. (New York time) on or before the third (3rd) Trading Day (as defined
below) after the decision to issue the New Security has been made, written
notice of the Future Financing containing in reasonable detail (i) the proposed
terms of the Future Financing, (ii) the amount of the proceeds that will be
raised and (iii) the Person with whom such Future Financing shall be effected,
and attached to which shall be a term sheet or similar document relating thereto
(the "Future Financing Notice"). Upon receiving the Future Financing Notice,
each Purchaser shall have the pro rata right (based on the purchase price of the
shares of Preferred Stock held by such Purchaser relative to the aggregate
purchase price of shares of Preferred Stock) to purchase, on the same terms as
the Future Financing, an amount of New Securities having a purchase price which
shall not exceed the sum of (i) aggregate purchase price paid by such Purchaser
for the shares of Preferred Stock and the Warrants purchased by such Purchaser.
In the event a Purchaser desires to exercise the right granted under this
Section 3.9, such Purchaser must notify the Company on or prior to the fifth
(5th) Trading Day after such Purchaser has received the Future Financing Notice.
In the event the terms and conditions of a proposed Future Financing are amended
in any respect after delivery of the Future Financing Notice but prior to the
closing of the proposed Future Financing to which such Future Financing Notice
relates, the Company shall deliver a new notice to each Purchaser describing the
amended terms and conditions of the proposed Future Financing and each Purchaser
thereafter shall have an option during the five (5) Trading Days period
following delivery of such new notice to purchase its pro rata share (based on
the Purchaser's percentage of the aggregate purchase price of the outstanding
shares of Preferred Stock such Purchaser owns) of the New Securities being
offered on the same terms as contemplated by such proposed Future Financing, as
amended. The foregoing sentence shall apply to successive amendments to the
terms and conditions of any proposed Future Financing. In the event one or more
Purchasers elects not to exercise its rights granted hereby, the Company shall
permit those Purchasers electing to exercise the right granted under this
Section 3.9 to purchase, on a pro rata basis equal to its percentage ownership
of the then outstanding number of shares of Preferred Stock, the sum of the
number of shares of Common Stock that the other Purchaser(s) were eligible to
purchase, if they had exercised their right hereunder. Those Purchasers desiring
to purchase additional shares of Common Stock must notify the Company of their
intention to do so within five (5) Trading Days after the Company has informed
the Purchasers of their right to purchase additional shares of Common Stock.
Within five (5) Trading Days of the termination of the final notice period, the
transactions contemplated by this Section 3.9 shall close, subject to the
completion of mutually satisfactory documentation, and the Company shall tender
to each
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Purchaser certificates representing the New Securities that it agreed to
purchase and the Purchasers shall make payment for the entire purchase price in
immediately available funds at the closing of such sale; provided, however, that
each Purchaser, in lieu of providing cash as consideration for the purchase
price, may tender shares of Preferred Stock valued at the greater of the
Conversion Price then in effect or the Average Price on the date of tender
multiplied by the number of shares of Common Stock issuable upon conversion of
such Preferred Stock as payment of the purchase price for the shares of Common
Stock that it desires to purchase pursuant to this Section 3.9. Each Person who
purchases any New Security in such a Future Financing other than a Purchaser,
shall enter into a lock-up agreement with the Company, in form satisfactory to
the Purchasers, that such Person shall not sell or transfer any New Securities
purchased for a period of at least 180 calendar days after the closing date of
the Future Financing. The Company may not register any New Securities sold in
the Future Financing under the Securities Act except for those New Securities
sold and issued to any Purchaser. "Trading Day" shall mean a day on which the
Nasdaq or the BSE (or in the event the Common Stock is not traded on Nasdaq or
the BSE, such other securities market on which the Common Stock is listed) is
open for trading.
b. If the Company shall enter into a transaction to issue any New
Securities prior to (6) months from Closing Date (a "Subsequent Transaction"),
each Purchaser shall have the right to have such Purchaser's Transaction
Documents amended to reflect the terms of such Subsequent Transaction and the
Company shall, if requested, issue new shares of Preferred Stock and Warrants to
such Purchaser reflecting the terms of the Subsequent Transaction.
3.10 Use of Proceeds. The Company shall use the proceeds from the sale of
the Preferred Stock and the exercise of the Warrants to acquire assets, reduce
debt and for working capital.
3.11 Transactions with Affiliates. So long as any Preferred Stock or
Warrants are outstanding, the Company shall not, and shall cause each of its
Subsidiaries not to, enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors or persons who were officers or directors at any time during
the previous two years, stockholders who beneficially own 5% or more of the
Common Stock, or Affiliates or any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a "Related Party"),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment or arrangement on
an arms-length basis on terms no less favorable than terms which would have been
obtainable from a Person other than such Related Party, or (c) any agreement,
transaction, commitment or arrangement which is approved by a majority of the
disinterested directors of the Company. For purposes hereof, any director who is
also an officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" for purposes of this section only means,
with respect to any person or entity, another person or entity that, directly or
indirectly, (i) has a 5% or more equity interest in that person or entity, (ii)
has 5% or more common ownership with that person or entity, (iii) controls that
person or entity, or (iv) shares common control with that person or entity.
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"Control" or "Controls" for purposes of this section means that a person or
entity has the power, direct or indirect, to conduct or govern the policies of
another person or entity.
3.12 Transfer Agent Instructions. At each Closing the Company shall issue
irrevocable instructions to its transfer agent (and shall issue to any
subsequent transfer agent as required), to issue certificates, registered in the
name of each such Purchaser or its respective nominee(s), for the Conversion
Shares and/or the Warrant Shares in such amounts as specified from time to time
by each Purchaser to the Company in a form acceptable to such Purchasers (the
"Irrevocable Transfer Agent Instructions"). So long as required pursuant to
Section 3.1(b), all such certificates shall bear the restrictive legend
specified in Section 3.1(b) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.12, and stop transfer instructions to give effect to Section
3.1 (in the case of the Conversion Shares and the Warrant Shares, prior to
registration of the Conversion Shares under the Securities Act) will be given by
the Company to its transfer agent and that the Preferred Stock, the Warrants,
the Conversion Shares and the 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 Transaction Documents. If a Purchaser
provides the Company with an opinion of counsel, the form and substance of which
opinion shall be customary for opinions of counsel in comparable transactions,
to the effect that a public sale, assignment or transfer of the Preferred Stock,
the Conversion Shares, the Warrants and the Warrant Shares may be made without
registration under the Securities Act or the Purchaser provides the Company with
reasonable assurances that the Warrants, the Conversion Shares and the Warrant
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, the Company shall permit the transfer, and, in the case of the Conversion
Shares and the Warrant Shares, promptly instruct its transfer agent to issue one
or more certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Purchasers by violating 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 Section 3.12 will be inadequate and agrees,
in the event of a beach or threatened breach by the Company of the provisions of
this Section 3.12, that the Purchasers, shall be entitled, in addition to all
other available remedies, to an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
3.13 Press Release; Filing of Form 8-K. Subject to the provisions of
Section 6.10, prior to the opening of Nasdaq and the BSE on May 19, 1999, the
Company shall file a press release in form and substance acceptable to the
Purchasers. On or before the 3rd business day following the Closing Date, the
Company shall file a Form 8-K with the Commission describing the terms of the
transaction contemplated by this Agreement and the Transaction Documents in the
form required by the Exchange Act.
3.14 Financial Information. The Company agrees to send the following to
each Purchaser prior to and during the Effectiveness Period (as defined in the
Registration Rights Agreement): (i) within three (3) business days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on
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Form 8-K and any registration statements or amendments (other than on Form S-8)
filed pursuant to the Securities Act, (ii) on the same day as the release
thereof, facsimile copies of all press releases issued by the Company or any of
its Subsidiaries, and (iii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.
3.15 Ordinary Course Brokerage and Trading. Subject to compliance with all
applicable securities laws, Nasdaq regulations and BSE regulations, no Purchaser
shall be prohibited from engaging in its ordinary course brokerage and trading
activities in respect of the Company's Common Stock; provided that the personnel
engaged in such activities have not been involved with the transactions
contemplated hereby and have not been provided with confidential information
with respect to the Company; provided further that Purchasers shall not engage
in any ordinary course brokerage or trading activities in respect of the
Company's Common Stock during the six-month period commencing on the Closing
Date, unless the Average Price (as defined in the Certificate of Designation) on
any given date as calculated on the basis of 22 consecutive Trading Days rises
above 200% of the Conversion Price (as defined in the Certificate of
Designation).
3.16 Best Efforts. Each of the parties hereto shall use its best efforts to
satisfy each of the conditions to be satisfied by it as provided in Article IV
of this Agreement.
3.17 Corporate Existence. Until such time as all of the Purchasers provide
the Company with written notice that they do not beneficially own any shares of
Preferred Stock 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 in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose common stock is listed for trading on the
Nasdaq, the New York Stock Exchange or the American Stock Exchange.
3.18 No Violation of Applicable Law. Notwithstanding any provision of this
Agreement to the contrary, if the redemption of shares of Preferred Stock or
Underlying Shares otherwise required under this Agreement or the Registration
Rights Agreement would be prohibited by the relevant provisions of the Texas
Business Corporation Act, such redemption shall be effected as soon as it is
permitted under such law; provided, however, that from the fifth (5th) day after
such Redemption Notice (as defined in the Certificate of Designation) until such
Redemption Price (as defined in the Certificate of Designation) is paid in full,
interest on any such unpaid amount shall accrue and be payable at the rate of
15% per annum in accordance with the Certificate of Designation.
3.19 Subsequent Registrations. Other than Underlying Shares and other
Registrable Securities (as defined in the Registration Rights Agreement) to be
registered in accordance with the Registration Rights Agreement, the securities
to be issued in the transactions set forth on Schedule 2.1(c), and any
securities in an Underwritten Offering (as defined in the Registration Rights
Agreement) before December 31, 2000, the Company shall not, for a period of not
less than 90 Trading Days after the date that the Registration Statement is
declared effective by the
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Commission, without the prior written consent of two-thirds of the Purchasers,
(i) issue or sell any of its or any of its Affiliates' equity or
equity-equivalent securities unless such issuance or sale is equal to or at a
premium to the Per Share Market Price (as defined in the Registration Rights
Agreement) on the date such issuance or sale, (ii) register for resale any
securities of the Company or (iii) have a registration statement declared
effective covering an issuance by the Company of any of its securities. Any days
that any Purchaser is unable to sell Underlying Shares under an Registration
Statement shall be added to such 90 Trading Day period for the purposes of (i),
(ii) and (iii) above.
ARTICLE IV.
CONDITIONS
4.1 First Closing.
a. Conditions Precedent to the Obligation of the Company to Sell the
Shares of Preferred Stock and Warrants. The obligation of the Company to sell
the shares of Preferred Stock and Warrants is subject to the satisfaction or
waiver (with prior written notice to each Purchaser) by the Company, at or
before the First Closing Date of each of the following conditions:
(i) Accuracy of the Purchasers' Representations and Warranties.
The representations and warranties of each Purchaser in this Agreement shall be
true and correct in all material respects as of the date when made and as of the
First Closing;
(ii) 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 such Purchaser at or before the First Closing; and
(iii) 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 or the Transaction Documents.
b. Conditions Precedent to the Obligation of the Purchasers to
Purchase the Shares of Preferred Stock and Warrants at the First Closing. The
obligation of each Purchaser hereunder to acquire and pay for the shares of
Preferred Stock and Warrants at the First Closing is subject to the satisfaction
or waiver by such Purchaser, at or before the First Closing Date, of each of the
following conditions:
(i) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company set forth in this Agreement and in
the Registration Rights Agreement shall be true and correct in all respects as
of the date when made and as of the First Closing Date;
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied in all respects with all covenants, agreements
and conditions
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required by this Agreement to be performed, satisfied or complied with by the
Company at or before the First Closing Date;
(iii) 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 and the Transaction Documents;
(iv) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission, on Nasdaq or
on the BSE (except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company);
(v) Listing of Common Stock. The Common Stock shall have been at
all times since the date of this Agreement and on the Closing Date listed for
trading on the Nasdaq and the BSE;
(vi) Required Approvals. All Required Approvals, other than those
relating solely to Closing Dates other than the First Closing Date, shall have
been obtained and copies thereof delivered to the Purchasers other than those
relating solely to Closing Dates other than the First Closing Date;
(vii) Shares of Common Stock. The Company shall have duly
reserved the number of Underlying Shares required by this Agreement and the
Transaction Documents to be reserved upon the exercise of the Warrants or the
conversion of the shares of Preferred Stock acquired by the Purchaser on the
First Closing Date;
(viii) Adverse Changes. Since the date of the financial
statements included in the Company's Quarterly Report on Form 10-Q or Annual
Report on Form 10-K, whichever is more recent, last filed prior to the date of
this Agreement, no event which had a Material Adverse Effect shall have occurred
which is not disclosed on any Schedule hereto (for purposes hereof, changes in
the market price of the Common Stock may be considered in determining whether
there has occurred an event which has had a Material Adverse Effect);
(ix) Litigation. No litigation shall have been instituted or
threatened against the Company which could reasonably be expected to,
individually or in the aggregate, have had a Material Adverse Effect;
(x) Change of Control. No Change of Control shall have occurred
between the date hereof and the First Closing Date. "Change of Control" means
the occurrence of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act), other than the Purchasers or any of their
Affiliates, of in excess of 40% of the voting securities of the Company, (ii) a
replacement of more than one-half of the members of the Company's Board of
Directors that is not approved by those individuals who are members of the Board
of Directors on the date hereof in one or a series of related transactions,
(iii) the merger of the Company with or into another entity, unless following
such transaction the Holders of the Issuer's securities continue to hold at
least 67% of such securities following such transaction, (iv) the consolidation
or sale of all or
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substantially all of the assets of the Company in one or a series of related
transactions or (v) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii), (iii) or (iv); and
(xi) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in a form acceptable to the Purchasers, shall have been delivered
to and acknowledged in writing by the Company's transfer agent with a copy
forwarded to each Purchaser.
c. Documents and Certificates. At the First Closing, the Company shall
have delivered to the Purchasers, the following in form and substance reasonably
satisfactory to the Purchasers:
(i) Opinion. An opinion of the Company's legal counsel in the
form attached hereto as Exhibit D dated as of the First Closing Date;
(ii) Preferred Stock Certificate. A Preferred Stock
certificate(s) representing the number of shares of Preferred Stock purchased by
each Purchaser as set forth next to such Purchaser's name on Schedule I,
registered in the name of such Purchaser, each in form satisfactory to the
Purchaser and issued pursuant to the Certificate of Designation with a
Conversion Price equal to $11.86;
(iii) Warrant. A Warrant(s), in the form of Exhibit B hereto and
with the Exercise Price equal to $11.86 representing the Warrant(s) being
purchased by each Purchaser as set forth next to such Purchaser's name on the
Schedule I, registered in the name of such Purchaser;
(iv) Registration Rights. The Company shall have executed and
delivered the Registration Rights Agreement;
(v) Officer's Certificate. An Officer's Certificate dated the
First Closing Date and signed by an executive officer of the Company confirming
the accuracy of the Company's representations, warranties and covenants as of
such First Closing Date and confirming the compliance by the Company with the
conditions precedent set forth in this Section 4.1(b) as of the First Closing
Date;
(vi) Secretary's Certificate. A Secretary's Certificate dated the
First Closing Date and signed by the Secretary or Assistant Secretary of the
Company certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the First Closing
Date, (B) that attached thereto is a true and complete copy of the by-laws of
the Company, as in effect on the First Closing Date and (C) that attached
thereto is a true and complete copy of the Resolutions duly adopted by the Board
of Directors of the Company authorizing the execution, delivery and performance
of this Agreement and of the Transaction Documents, and that such Resolutions
have not been modified, rescinded or revoked;
(vii) Certificates of Incorporation. The Company shall have
delivered to each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing
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of the Company and each Subsidiary, in such corporation's state of incorporation
issued by the Secretary of State of such state of incorporation as of a date
within ten days of the First Closing Date. The Company shall have delivered to
each of the Purchasers a copy of its Certificate of Incorporation as certified
by the Secretary of State of the State of Texas within ten days of the First
Closing Date;
(viii) Transfer Agent Letter. The Company shall have delivered to
each Purchaser a letter from the Company's transfer agent certifying the number
of shares of Common Stock outstanding as of a date within five days of the First
Closing Date; and
(ix) Other Documents. The Company shall have delivered to each
Purchaser such other documents relating to the transactions contemplated by the
Transaction Documents as the Purchasers or its counsel may reasonably request.
4.2 Second Closing.
a. Conditions Precedent to the Obligation of the Company to Sell the
shares of Preferred Stock and Warrants. The obligation of the Company to sell
the shares of Preferred Stock and Warrants at the Second Closing is subject to
the satisfaction or waiver (with prior written notice to each Purchaser) by the
Company, at or before the Second Closing Date of each of the following
conditions:
(i) Accuracy of the Purchasers' Representations and Warranties.
The representations and warranties of each Purchaser in this Agreement shall be
true and correct in all material respects as of the date when made and as of the
Second Closing;
(ii) 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 such Purchaser at or before the Second Closing; and
(iii) 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 or the Transaction Documents.
b. Conditions Precedent to the Obligation of the Purchasers to
Purchase. The obligation of each Purchaser hereunder to acquire and pay for the
shares of Preferred Stock and Warrants at the Second Closing is subject to the
satisfaction or waiver (with prior written notice to the Company and each other
Purchaser) by such Purchaser, at or before the Second Closing Date, of each of
the following conditions:
(i) First Closing. The First Closing shall have occurred;
(ii) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company set forth in this Agreement
and the Registration Rights Agreement shall be true and correct in all respects
as of the date when made and as of the
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Second Closing Date as though made at that time (except for representations and
warranties made as of a specific date);
(iii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Transaction
Documents to be performed, satisfied or complied with by the Company at or
before to the Second Closing;
(iv) 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 and the Transaction Documents;
(v) Registration Statements for Underlying ShareS from First
Closing. The Registration Statement with respect to the Underlying Shares of the
Warrants sold at the First Closing the Preferred Stock and shall have been
declared effective under the Securities Act by the SEC; and on the Second
Closing Date such Registration Statement shall be effective, not subject to any
stop order and not be subject to any suspension pursuant to Section 3(o) of the
Registration Rights Agreement, and shall have been effective and shall not have
been subject to any stop order for the thirty (30) business days prior to the
Second Closing Date and no stop order shall be pending or threatened as at the
Second Closing Date.
(vi) Adverse Changes. Since the date of the financial statements
included in the Company's Quarterly Report on Form 10-Q or Annual Report on Form
10-K, whichever is more recent, last filed prior to the date of this Agreement,
no event which had a Material Adverse Effect shall have occurred which is not
disclosed on any Schedule hereto or otherwise in writing to each of the
Purchasers;
(vii) Litigation. No litigation shall have been instituted or
threatened against the Company which could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect;
(viii) Management. There shall have been no substantial changes
in the position or responsibilities of the Chief Executive Officer and the Chief
Financial Officer of the Company;
(ix) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission, on Nasdaq or
on the BSE (except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company);
(x) Listing of Common Stock. The Underlying Shares shall on the
Second Closing Date be, listed for trading on Nasdaq, on the BSE, or other
exchange acceptable to Purchasers;
(xi) Required Approvals. All Required Approvals shall have been
obtained and copies thereof delivered to the Purchasers.
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(xii) Shares of Common Stock. The Company shall have duly
reserved the number of Underlying Shares required by this Agreement to be
reserved for issuance upon exercise of the Warrants purchased on the First
Closing Date and on the Second Closing Date or the conversion of the shares of
Preferred Stock purchased on the First Closing Date and on the Second Closing
Date.
(xiii) Performance of Conversion/Exercise Obligations. The
Company shall have delivered Underlying Shares upon any demand for conversion of
any of the shares of Preferred Stock or exercise of the Warrant(s) and otherwise
performed its obligations in accordance with the terms, conditions and timing
requirements of the Transaction Documents.
(xiv) Change of Control. No Change of Control in the Company
shall have occurred; and
(xv) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in a form acceptable to the Purchasers, shall have been delivered
to and acknowledged by the Company's transfer agent with a copy forwarded to
each Purchaser.
c. Documents and Certificates. On the Second Closing Date, the Company
shall have delivered to the Purchasers, the following in form and substance
reasonably satisfactory to the Purchasers:
(i) Registration Rights Agreement. The Company and each of the
Purchasers shall have executed and delivered a Registration Rights Agreement
substantially in the form of Exhibit C attached hereto pursuant to which the
Company shall agree to provide certain registration rights under the Securities
Act and the rules and regulations promulgated thereunder and applicable state
laws with respect to the shares of Common Stock issuable upon the conversion of
the shares of Preferred Stock, and upon the exercise of the Warrants, to be
issued at the Second Closing;
(ii) Opinion. An opinion of the Company's legal counsel, in
substantially the form attached hereto as Exhibit D dated as of the Second
Closing Date;
(iii) Preferred Stock Certificate. A Preferred Stock
certificate(s) representing the number of shares of Preferred Stock purchased by
each Purchaser as set forth next to such Purchaser's name on the Second Closing
Schedule, registered in the name of such Purchaser, each in form satisfactory to
the Purchaser and issued pursuant to the Certificate of Designation with a
Conversion Price equal to $11.86;
(iv) Warrant. A Warrant(s), in the form of Exhibit B hereto and
with the Exercise Price equal to $11.86 representing the Warrant(s) being
purchased by each Purchaser as set forth next to such Purchaser's name on the
Second Closing Schedule, registered in the name of such Purchaser;
(v) Officer's Certificate. The Company shall deliver to the
Purchasers an Officer's Certificate dated the Second Closing Date and signed by
an executive officer of the Company confirming the accuracy of the Company's
representations, warranties and covenants
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as of such Second Closing Date and confirming the compliance by the Company with
the conditions precedent set forth in Section 4.2(b) as of the Second Closing
Date.
(vi) Secretary's Certificate. A Secretary's Certificate dated the
Second Closing Date and signed by the Secretary or Assistant Secretary of the
Company certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the Second Closing
Date, (B) that attached thereto is a true and complete copy of the bylaws of the
Company, as in effect on the Second Closing Date and (C) that attached thereto
is a true and complete copy of the resolutions duly adopted by the Board of
Directors of the Company authorizing the execution, delivery and performance of
the Agreement and the Transaction Documents and that such resolutions have not
been modified, rescinded or revoked.
(vii) Certificates of Incorporation. The Company shall have
delivered to each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing of the Company and each Subsidiary, in such
corporation's state of incorporation issued by the Secretary of State of such
state of incorporation as of a date within ten days of the Second Closing Date.
The Company shall have delivered to each of the Purchasers a copy of its
Certificate of Incorporation as certified by the Secretary of State of the State
of Texas within ten days of the Second Closing Date;
(viii) Transfer Agent Letter. The Company shall have delivered to
each Purchaser a letter from the Company's transfer agent certifying the number
of shares of Common Stock outstanding as of a date within five days of the
Second Closing Date; and
(ix) Other Documents. The Company shall have delivered to each
Purchaser such other documents relating to the transactions contemplated by the
Transaction Documents as the Purchasers or its counsel may reasonably request.
4.3 Third Closing.
a. Conditions Precedent to the Obligation of the Company to Sell the
Shares of Preferred Stock and Warrants. The obligation of the Company to sell
the shares of Preferred Stock and Warrants at the Third Closing is subject to
the satisfaction or waiver (with prior written notice to each Purchaser) by the
Company, at or before the Third Closing Date of each of the following
conditions:
(i) Accuracy of the Purchasers' Representations and Warranties.
The representations and warranties of each Purchaser in this Agreement shall be
true and correct in all material respects as of the date when made and as of the
Third Closing;
(ii) 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 such Purchaser at or before the Third Closing; and
(iii) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or
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governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement or the
Transaction Documents.
b. Conditions Precedent to the Obligation of the Purchasers to
Purchase. The obligation of each Purchaser hereunder to acquire and pay for the
shares of Preferred Stock and Warrants at the Third Closing is subject to the
satisfaction or waiver (with prior written notice to the Company and each other
Purchaser) by such Purchaser, at or before the Third Closing Date, of each of
the following conditions:
(i) First and Second Closings. The First and Second Closings
shall have occurred;
(ii) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company set forth in this Agreement
and the Registration Rights Agreement shall be true and correct in all respects
as of the date when made and as of the Third Closing Date as though made at that
time (except for representations and warranties made as of a specific date);
(iii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Transaction
Documents to be performed, satisfied or complied with by the Company at or
before to the Third Closing;
(iv) 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 and the Transaction Documents;
(v) Registration Statements for Underlying Shares of Preferred
Stock and Warrants issued at First and Second Closings. The Registration
Statement with respect to the Underlying Shares with respect to the Warrants and
Preferred Stock sold at the First Closing and the Second Closing shall have been
declared effective under the Securities Act by the SEC and such Registration
Statement shall be effective, not subject to any stop order and not be subject
to any suspension pursuant to Section 3(o) of the Registration Rights Agreement,
and shall have been effective and shall not have been subject to any stop order
for the thirty (30) business days prior to the Third Closing Date and no stop
order shall be pending or threatened as at the Third Closing Date.
(vi) Adverse Changes. Since the date of the financial statements
included in the Company's Quarterly Report on Form 10-Q or Annual Report on Form
10-K, whichever is more recent, last filed prior to the date of this Agreement,
no event which had a Material Adverse Effect shall have occurred which is not
disclosed on any Schedule hereto or otherwise in writing to each of the
Purchasers;
(vii) Litigation. No litigation shall have been instituted or
threatened against the Company which could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect;
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(viii) Management. There shall have been no substantial changes
in the position or responsibilities of the Chief Executive Officer and the Chief
Financial Officer of the Company;
(ix) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission, on Nasdaq or
on the BSE (except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company);
(x) Listing of Common Stock. The Underlying Shares shall on the
Third Closing Date be listed for trading on Nasdaq, on the BSE, or other
exchange acceptable to Purchasers;
(xi) Required Approvals. All Required Approvals shall have been
obtained and copies thereof delivered to the Purchasers.
(xii) Shares of Common Stock. The Company shall have duly
reserved the number of Underlying Shares required by this Agreement to be
reserved for issuance upon exercise of the Warrants, purchased on the First
Closing Date, the Second Closing Date and the Third Closing Date, and the
conversion of the Preferred Stock, purchased on the First Closing Date, the
Second Closing Date, and the Third Closing Date.
(xiii) Performance of Conversion/Exercise Obligations. The
Company shall have delivered Underlying Shares upon any demand for conversion of
any of the Preferred Stock or exercise of the Warrant(s) and otherwise performed
its obligations in accordance with the terms, conditions and timing requirements
of the Transaction Documents.
(xiv) Change of Control. No Change of Control in the Company
shall have occurred; and
(xv) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in a form acceptable to the Purchasers, shall have been delivered
to and acknowledged by the Company's transfer agent with a copy forwarded to
each Purchaser.
c. Documents and Certificates. On the Third Closing Date, the Company
shall have delivered to the Purchasers, the following in form and substance
reasonably satisfactory to the Purchasers:
(i) Registration Rights Agreement. The Company and each of the
Purchasers shall have executed and delivered a Registration Rights Agreement
substantially in the form of Exhibit C attached hereto pursuant to which the
Company shall agree to provide certain registration rights under the Securities
Act and the rules and regulations promulgated thereunder and applicable state
laws with respect to the shares of Common Stock issuable upon the conversion of
the Preferred Stock, and upon the exercise of the Warrants to be issued at the
Third Closing;
(ii) Opinion. An opinion of the Company's legal counsel, in
substantially the form attached hereto as Exhibit D dated as of the Third
Closing Date;
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(iii) Preferred Stock Certificate. A Preferred Stock
certificate(s) representing the number of shares of Preferred Stock purchased by
each Purchaser as set forth next to such Purchaser's name on the Third Closing
Schedule, registered in the name of such Purchaser, each in form satisfactory to
the Purchaser and issued pursuant to the Certificate of Designation, except that
Section 5.1(b) thereof shall be omitted, with a Conversion Price equal to
$11.86;
(iv) Warrant. A Warrant(s), in the form of Exhibit B hereto
representing the Warrant(s) with an Exercise Price (as defined therein) equal to
110% of the Average Price on the Third Closing Date being purchased by each
Purchaser as set forth next to such Purchaser's name on the Third Closing
Schedule, registered in the name of such Purchaser;
(v) Officer's Certificate. The Company shall deliver to the
Purchasers an Officer's Certificate dated the Third Closing Date and signed by
an executive officer of the Company confirming the accuracy of the Company's
representations, warranties and covenants as of such Third Closing Date and
confirming the compliance by the Company with the conditions precedent set forth
in Section 4.3(b) as of the Third Closing Date.
(vi) Secretary's Certificate. A Secretary's Certificate dated the
Third Date and signed by the Secretary or Assistant Secretary of the Company
certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the Third Closing
Date, (B) that attached thereto is a true and complete copy of the bylaws of the
Company, as in effect on the Third Closing Date and (C) that attached thereto is
a true and complete copy of the resolutions duly adopted by the Board of
Directors of the Company authorizing the execution, delivery and performance of
the Agreement and the Transaction Documents and that such resolutions have not
been modified, rescinded or revoked.
(vii) Certificates of Incorporation. The Company shall have
delivered to each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing of the Company and each Subsidiary, in such
corporation's state of incorporation issued by the Secretary of State of such
state of incorporation as of a date within ten days of the Third Closing Date.
The Company shall have delivered to each of the Purchasers a copy of its
Certificate of Incorporation as certified by the Secretary of State of the State
of Texas within ten days of the Third Closing Date;
(viii) Transfer Agent Letter. The Company shall have delivered to
each Purchaser a letter from the Company's transfer agent certifying the number
of shares of Common Stock outstanding as of a date within five days of the Third
Closing Date; and
(ix) Other Documents. The Company shall have delivered to each
Purchaser such other documents relating to the transactions contemplated by the
Transaction Documents as the Purchasers or its counsel may reasonably request.
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ARTICLE V.
INDEMNIFICATION
5.1 Indemnification. Except to the extent that matters which could be
covered by this Section 5 are covered by Section 5 of the Registration Rights
Agreement, in consideration of the Purchasers execution and delivery of this
Agreement and the Transaction Documents and acquiring the Preferred Stock,
Conversion Shares, Warrants and Warrant Shares thereunder and in addition to all
of the Company's other obligations under this Agreement and the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Purchaser, its past and present Affiliates and their successors and assigns (in
accordance with the provisions of Section 6.5), each other holder of the
Underlying Shares and all of their stockholders, officers, directors, employees
and direct or indirect investors and any of the foregoing Person's agents or
other representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the "Indemnities") from and against any and all actions, causes of action,
suits, claims, losses, proceedings, costs (as incurred), penalties, fees
(including legal fees and expenses), liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnity is a party to
the action for which indemnification hereunder is sought), and including
interest, penalties and attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by any Indemnity as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in this Agreement or in the Transaction Documents,
or any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in this Agreement or the Transaction Documents, or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made, other than by the Company, against such
Indemnity and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of this Agreement or the Transaction Documents, (ii)
any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Preferred Stock or Warrants
or (iii) solely the status of such Purchasers or holder of the Preferred Stock,
the Conversion Shares, the Warrants or the Warrant Shares as an investor in the
Company. The indemnification obligations of the Company under this paragraph
shall be in addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any affiliate of the
Purchasers and partners, directors, agents, employees and controlling Persons
(if any), as the case may be, of the Purchasers and any such affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company, the Purchasers and any such
affiliate and any such Person. The Company also agrees that neither the
Purchasers nor any such Affiliates, partners, directors, agents, employees or
controlling Persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of this Agreement or any of the Transaction
Documents except to the extent that any losses, claims, damages, liabilities or
expenses incurred by the Company result from the gross negligence or willful
misconduct of such Purchaser or entity in connection with the transactions
contemplated by this Agreement or the Transaction Documents. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law.
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ARTICLE VI.
MISCELLANEOUS
6.1 Entire Agreement. This Agreement, together with the Exhibits and
Schedules hereto and the Transaction Documents contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
6.2 Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party (if received by 7:00 p.m. EST where such
notice is received) or the first business day following such delivery (if
received after 7:00 p.m. EST where such notice is received); or (iii) one
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
International Isotopes Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇ ▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇ LLC
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇)▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Transfer Agent:
American Stock Transfer & Trust Company
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇)▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
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If to ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Growth Fund, Ltd. to:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
If to ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Growth Fund, L.P. to:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
With a copy, in the case of Notice to ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic
Growth Fund, Ltd., or ▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Growth Fund, L.P., to:
Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Each party shall provide written notice to the other party of any change in
address or facsimile number in accordance with the provisions hereof.
6.3 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter. Notwithstanding the
foregoing, no such amendment shall be effective to the extent that it applies to
less than all of the holders of the shares of Preferred Stock outstanding. The
Company shall not offer or pay any consideration to a Purchaser for consenting
to such an amendment or waiver unless the same consideration is offered to each
Purchaser and the same consideration is paid to each Purchaser which consents to
such amendment or waiver.
6.4 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
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6.5 References. References herein to Sections are to Sections of this
Agreement, unless otherwise expressly provided.
6.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Purchasers. The Purchasers may
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Company, provided, that any assignees must make the
representations and warranties set forth in Section 2.2 and otherwise comply
with the terms of this Agreement otherwise applicable to its assignor. This
provision shall not limit a Purchaser's right to transfer securities in
accordance with all of the terms of this Agreement or the Transaction Documents.
6.7 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.
6.8 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
6.9 Survival. The representations and warranties of the Company and the
Purchasers contained in Sections 2.1 and 2.2, the agreements and covenants set
forth in Section 3, and the indemnification provisions set forth in Section 5,
shall survive the Closing and any conversion of the shares of Preferred Stock or
exercise of the Warrants regardless of any investigation made by or on behalf of
the such Purchaser or by or on behalf of the Company, except that, in the case
of representations and warranties such survival shall be limited to the period
of four (4) years following the Closing Date on which they were made or deemed
to have been made (other than with respect to any claim by a third party against
the party to this Agreement who seeks to assert a claim based on such
representations and warranties). This section shall have no effect on the
survival of the indemnification provisions of the Registration Rights Agreement.
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6.10 Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
6.11 Publicity. The Company and the Purchasers shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of any of the Purchasers
without each such Purchaser's prior written consent. The Purchasers and their
affiliated companies shall, without further cost, have the right to use in its
advertising, marketing or other similar materials all or parts of the Company's
press releases that focus on the Transaction forming the subject matter of this
Agreement or which make reference to the Transaction. The Purchasers understand
that this grant by the Company only waives objections that the Company might
have to the use of such materials by the Purchasers and in no way constitutes a
representation by the Company that references in such materials to the
activities of third-parties have been cleared or constitute a fair use.
6.12 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
6.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
this Agreement or the Transaction Documents without the showing of economic loss
and without any bond or other security being required. Each of the Company and
the Purchasers (severally and not jointly) agree that monetary damages would not
be adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.
6.14 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a
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joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by this Agreement. Each Purchaser shall be
entitled to protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the 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.
6.15 Payment Set Aside. To the extent that the Company makes a payment or
payments to the Purchasers hereunder or pursuant to the Transaction Documents or
the Purchasers enforce or exercise their rights hereunder or thereunder, and
such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
6.16 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.
6.17 Fees and Expenses. Except as set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, 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 the
Purchasers an aggregate fee of $30,000 at the First Closing. The Company shall
pay all stamp and other taxes and duties levied in connection with the issuance
of the Preferred Stock, Warrants and Underlying Shares pursuant hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
INTERNATIONAL ISOTOPES INC.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
44
▇▇▇▇▇ ▇▇▇▇▇▇▇ STRATEGIC
GROWTH FUND, LTD.
By:
---------------------------------
Name:
Title:
▇▇▇▇▇ ▇▇▇▇▇▇▇ STRATEGIC
GROWTH FUND, L.P.
By:
---------------------------------
Name:
Title:
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SCHEDULE I
Number of Shares of
Preferred Stock at First Number of shares
Name of Purchaser Closing Purchase Price underlying Warrant
----------------- ------- -------------- ------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic 1,850 $1,850,000 75,850
Growth Fund, ▇.▇.
▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic 3,150 $3,150,000 129,150
Growth Fund, Ltd.
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SCHEDULE II
Name of Purchaser Address
----------------- -------
▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Growth Fund, Ltd. ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Residence: Grand Cayman, Cayman Islands
▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Growth Fund, L.P. ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Residence: New York, New York
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Exhibit A
[Form of Certificate of Designation]
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Exhibit B
[Form of Warrant]
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Exhibit C
[Registration Rights Agreement]
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Exhibit D
[Company's Legal Opinion]
1. Each of the Company(1) and its Subsidiaries is a corporation, duly
incorporated, validly existing and in good standing under the laws of
the jurisdiction of its incorporation, with the requisite corporate
power and authority to own and use its properties and assets and to
carry on its business as currently conducted. The Company has no
subsidiaries other than the Subsidiaries. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property owned by it makes such
qualification necessary.
2. The Company has the requisite corporate power and authority to enter
into and consummate the transactions contemplated by each of the
Transaction Documents(2) and otherwise to carry out its obligations
thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all
necessary action on the part of the Company. Each of the Transaction
Documents has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application.
3. The execution, delivery and performance of the Transaction Documents
by the Company and the consummation by the Company of the transactions
contemplated by such agreements do not and will not (i) conflict with
or violate any provision of its Certificate of Incorporation or
Bylaws, (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the
Company is a party and which is required to be included as an exhibit
to the SEC Documents (as defined herein), or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction,
decree or other restrictions of any court or governmental authority to
which the Company is subject (including Federal and state securities
laws and regulations), or by which any property or asset of the
Company is bound or affected. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any
governmental authority.
--------------------------
(1) The opinion letter should state that capitalized terms not otherwise defined
have the meanings assigned to them in the Purchase Agreement.
(2) The term Transaction Documents means the Purchase Agreement, the
Registration Rights Agreement, the Certificate of Designation and the Warrants.
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4. Neither the Company nor any Subsidiary is required to obtain any
consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other Federal,
state, local or other governmental authority or other person in
connection with the execution, delivery and performance by the Company
of the Transaction Documents. Based on the representations and
warranties of the Company set forth in Section 2.1 of the Purchase
Agreement and assuming the accuracy of the representations and
warranties of the Purchasers set forth in Section 2.2 of the Purchase
Agreement, the offer, issuance and sale of the shares of Preferred
Stock and the Warrants to the Purchasers pursuant to the Purchase
Agreement and the Warrant are exempt from the registration
requirements of the Securities Act.
5. To my knowledge, the Company has filed all reports required to be
filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the three years preceding the date hereof
(the "SEC Documents") on a timely basis. As of their respective dates,
the SEC Documents complied in all material respects as to form with
the requirements of the Securities Act and the Exchange Act and the
rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
6. There is no pending or threatened action, suit or proceeding before
any court or governmental agency, authority or body or any arbitrator
involving the Company or any of its Subsidiaries which, if adversely
decided, could reasonably be expected to have a material adverse
effect on the issuance of the shares of Preferred Stock or the
Conversion Shares, or the issuance or exercise of the Warrants or
Warrant Shares, or the consummation of the transactions contemplated
by the Transaction Documents.
7. All of the Company's issued and outstanding capital stock has been
duly authorized, validly issued and is fully paid and non-assessable
as of the date hereof.
8. The Company has full corporate power and authority to issue, sell and
deliver the Preferred Stock, Conversion Shares, Warrants and Warrant
Shares pursuant to the Transaction Documents.
9. The Company has duly authorized and reserved for issuance such number
of shares of Common Stock as are issuable upon conversion of the
Preferred Stock and exercise of the Warrants (the "Underlying Shares")
in accordance with the terms of the Preferred Shares and the Warrants.
When issued by the Company in accordance with the terms of the
Preferred Shares and the Warrants, the Underlying Shares will be
validly issued, fully paid and non-assessable. When issued by the
Company in accordance with the terms of the Securities Purchase
Agreement, the shares of Preferred Stock will be validly issued, fully
paid and non-assessable.
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