EXHIBIT 10.1
COMMON STOCK PURCHASE AGREEMENT
BY AND BETWEEN
KINGSBRIDGE CAPITAL LIMITED
AND
AKSYS, LTD.
DATED AS OF OCTOBER 15, 2002
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.......................................................................2
Section 1.01. "Blackout Shares"............................................................2
Section 1.02. "Closing Date"...............................................................2
Section 1.03. "Commission".................................................................2
Section 1.04. "Commission Documents".......................................................2
Section 1.05. "Commitment Period"..........................................................2
Section 1.06. "Common Stock"...............................................................2
Section 1.07. "Condition Satisfaction Date"................................................2
Section 1.08. "Damages"....................................................................2
Section 1.09. "Draw Down"..................................................................2
Section 1.10. "Draw Down Amount"...........................................................2
Section 1.11. "Draw Down Discount Price"...................................................2
Section 1.12. "Draw Down Exercise Date"....................................................2
Section 1.13. "Draw Down Notice"...........................................................2
Section 1.14. "Draw Down Pricing Period"...................................................2
Section 1.15. "Effective Date".............................................................3
Section 1.16. "Exchange Act"...............................................................3
Section 1.17. "Knowledge"..................................................................3
Section 1.18. "Legend".....................................................................3
Section 1.19. "Make Whole Amount"..........................................................3
Section 1.20. "Material Adverse Effect"....................................................3
Section 1.21. "Maximum Commitment Amount"..................................................3
Section 1.22. "Maximum Draw Down Amount"...................................................3
Section 1.23. "Minimum Draw Down Amount"...................................................3
Section 1.24. "NASD".......................................................................3
Section 1.25. "Other Financing"............................................................3
Section 1.26. "Permitted Transaction"......................................................3
Section 1.27. "Person".....................................................................3
Section 1.28. "Principal Market"...........................................................4
Section 1.29. "Prohibited Transaction".....................................................4
Section 1.30. "Prospectus".................................................................4
Section 1.31. "Registrable Securities".....................................................4
Section 1.32. "Registration Rights Agreement"..............................................4
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 1.33. "Registration Statement".....................................................4
Section 1.34. "Regulation D"...............................................................4
Section 1.35. "Section 4(2)"...............................................................4
Section 1.36. "Securities Act".............................................................4
Section 1.37. "Settlement Date"............................................................4
Section 1.38. "Shares".....................................................................4
Section 1.39. "Threshold Price"............................................................4
Section 1.40. "Trading Day"................................................................5
Section 1.41. "Underwriter"................................................................5
Section 1.42. "VWAP".......................................................................5
Section 1.43. "Warrant"....................................................................5
Section 1.44. "Warrant Shares".............................................................5
ARTICLE II PURCHASE AND SALE OF COMMON STOCK.................................................5
Section 2.01. Purchase and Sale of Stock...................................................5
Section 2.02. Closing......................................................................5
Section 2.03. Registration Statement and Prospectus........................................5
Section 2.04. Warrant......................................................................5
Section 2.05. Blackout Shares..............................................................6
ARTICLE III DRAW DOWN TERMS...................................................................6
Section 3.01. Draw Down Notice.............................................................6
Section 3.02. Number of Shares.............................................................6
Section 3.03. Limitation on Draw Downs.....................................................6
Section 3.04. Trading Cushion..............................................................6
Section 3.05. Expiration of Draw Downs.....................................................6
Section 3.06. Settlement...................................................................6
Section 3.07. Delivery of Shares; Payment of Draw Down Amount..............................7
Section 3.08. Threshold Price..............................................................7
Section 3.09. Other Issuances..............................................................7
Section 3.10. Failure to Deliver Shares....................................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................................8
Section 4.01. Organization, Good Standing and Power........................................8
Section 4.02. Authorization; Enforcement...................................................8
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 4.03. Capitalization...............................................................8
Section 4.04. Issuance of Shares...........................................................9
Section 4.05. No Conflicts.................................................................9
Section 4.06. Commission Documents, Financial Statements..................................10
Section 4.07. No Material Adverse Change..................................................10
Section 4.08. No Undisclosed Liabilities..................................................10
Section 4.09. No Undisclosed Events or Circumstances......................................11
Section 4.10. Actions Pending.............................................................11
Section 4.11. Compliance with Law.........................................................11
Section 4.12. Certain Fees................................................................11
Section 4.13. Disclosure..................................................................11
Section 4.14. Material Non-Public Information.............................................11
Section 4.15. Exemption from Registration; Valid Issuances................................12
Section 4.16. No General Solicitation or Advertising in Regard to this Transaction........12
Section 4.17. No Integrated Offering......................................................12
Section 4.18. Acknowledgment Regarding Investor's Purchase of Shares......................12
ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR........................12
Section 5.01. Organization and Standing of the Investor...................................12
Section 5.02. Authorization and Power.....................................................13
Section 5.03. No Conflicts................................................................13
Section 5.05. Information.................................................................13
Section 5.06. Selling Restrictions........................................................14
ARTICLE VI COVENANTS OF THE COMPANY.........................................................14
Section 6.01. Securities..................................................................14
Section 6.02. Reservation of Common Stock.................................................14
Section 6.03. Registration and Listing....................................................14
Section 6.04. Registration Statement......................................................14
Section 6.05. Compliance with Laws........................................................15
Section 6.06. Reporting Requirements......................................................15
Section 6.07. Other Financing.............................................................15
Section 6.08. Prohibited Transactions.....................................................15
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 6.09. Corporate Existence.........................................................16
Section 6.10. Non-Disclosure of Non-Public Information....................................16
Section 6.11. Notice of Certain Events Affecting Registration; Suspension of Right to
Request a Draw Down.........................................................16
Section 6.12. Amendments to the Registration Statement....................................16
Section 6.13. Prospectus Delivery.........................................................16
Section 6.14. Expectations Regarding Draw Downs...........................................16
ARTICLE VII CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN...............17
Section 7.01. Accuracy of the Company's Representations and Warranties....................17
Section 7.02. Performance by the Company..................................................17
Section 7.03. Compliance with Law.........................................................17
Section 7.04. Effective Registration Statement............................................17
Section 7.05. No Knowledge................................................................17
Section 7.06. No Suspension...............................................................18
Section 7.07. No Injunction...............................................................18
Section 7.08. No Proceedings or Litigation................................................18
Section 7.09. Section 16 Limitation.......................................................18
Section 7.10. Sufficient Shares Registered for Resale.....................................18
Section 7.11. Warrant.....................................................................18
Section 7.12. Opinion of Counsel..........................................................18
ARTICLE VIII LEGENDS..........................................................................18
Section 8.01. Legends.....................................................................19
Section 8.02. No Other Legend or Stock Transfer Restrictions..............................20
ARTICLE IX TERMINATION......................................................................20
Section 9.01. Termination by Mutual Consent...............................................20
Section 9.02. Other Termination...........................................................20
Section 9.03. Effect of Termination.......................................................21
ARTICLE X INDEMNIFICATION..................................................................21
Section 10.01. Indemnification.............................................................21
Section 10.02. Notification of Claims for Indemnification..................................22
Section 10.03. Dispute Resolution..........................................................23
ARTICLE XI MISCELLANEOUS....................................................................24
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 11.01. Fees and Expenses...........................................................24
Section 11.02. Reporting Entity for the Common Stock.......................................24
Section 11.03. Brokerage...................................................................24
Section 11.04. Notices.....................................................................24
Section 11.05. Assignment..................................................................25
Section 11.06. Amendment; No Waiver........................................................26
Section 11.07. Entire Agreement............................................................26
Section 11.08. Severability................................................................26
Section 11.09. Title and Subtitles.........................................................26
Section 11.10. Counterparts................................................................26
Section 11.11. Choice of Law...............................................................26
Section 11.12. Specific Enforcement, Consent to Jurisdiction...............................26
Section 11.13. Survival....................................................................27
Section 11.14. Publicity...................................................................27
Section 11.15. Further Assurances..........................................................27
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COMMON STOCK PURCHASE AGREEMENT
BY AND BETWEEN
KINGSBRIDGE CAPITAL LIMITED
AND
AKSYS, LTD.
dated as of October 15, 2002
This
COMMON STOCK PURCHASE AGREEMENT is entered into as of the 15th day
of October (this "AGREEMENT"), by and between Kingsbridge Capital Limited, an
entity organized and existing under the laws of the British Virgin Islands (the
"INVESTOR") and AKSYS, LTD., a corporation organized and existing under the laws
of the State of Delaware (the "COMPANY").
WHEREAS, the parties desire that, upon the terms and subject
to the conditions set forth herein, the Company may issue and sell to the
Investor, from time to time as provided herein, and the Investor shall purchase
from the Company, Common Stock (as defined below) for an aggregate of up to $15
million; and
WHEREAS, such investments will be made in reliance upon the
provisions of Section 4(2) ("SECTION 4(2)") and Regulation D ("REGULATION D") of
the United States Securities Act of 1933, as amended and the rules and
regulations promulgated thereunder (the "SECURITIES ACT"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments in Common Stock to be
made hereunder; and
WHEREAS, in consideration for the Investor's execution and
delivery of, and its performance of its obligations under, this Agreement, the
Company is concurrently issuing to the Investor a Warrant (as defined below)
pursuant to which the Investor may purchase from the Company up to 200,000
shares of Common Stock, upon the terms and subject to the conditions set forth
therein; and
WHEREAS, the parties hereto are concurrently entering into a
Registration Rights Agreement (as defined below) pursuant to which the Company
shall register the Common Stock issued and sold to the Investor under this
Agreement and under the Warrant, upon the terms as subject to the conditions set
forth therein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 "BLACKOUT SHARES" shall have the meaning assigned to such
term in the Registration Rights Agreement.
Section 1.02 "CLOSING DATE" means the date on which this Agreement is
executed and delivered by the Company and the Investor.
Section 1.03 "COMMISSION" means the United States Securities Exchange
Commission.
Section 1.04 "COMMISSION DOCUMENTS" shall have the meaning assigned to
such term in Section 4.06 hereof.
Section 1.05 "COMMITMENT PERIOD" means the period commencing on the
Effective Date and expiring on the earliest to occur of (x) the date on which
the Investor shall have purchased Shares pursuant to this Agreement for an
aggregate purchase price equal to the Maximum Commitment Amount, (y) the date
this Agreement is terminated pursuant to Article IX hereof, and (z) the date
occurring 24 months from the Effective Date.
Section 1.06 "COMMON STOCK" means the common stock of the Company, $0.01
par value per share.
Section 1.07 "CONDITION SATISFACTION DATE" shall have the meanin
assigned to such term in Article VII hereof.
Section 1.08 "DAMAGES" means any loss, claim, damage, liability, costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses and costs and reasonable expenses of expert witnesses and
investigation).
Section 1.09 "DRAW DOWN" shall have the meaning assigned to such term in
Section 3.01 hereof.
Section 1.10 "DRAW DOWN AMOUNT" means the actual amount of a Draw Down
paid to the Company.
Section 1.11 "DRAW DOWN DISCOUNT PRICE" means (i) 90% of the VWAP on
any Trading Day during the Draw Down Pricing Period when the VWAP is equal to
or exceeds $2.00 but is less than $10.00, and (ii) 92% of the VWAP on any
Trading Day during the Draw Down Pricing Period when the VWAP is equal to or
exceeds $10.00.
Section 1.12 "DRAW DOWN EXERCISE DATE" shall have the meaning assigned to
such term in Section 7.01(a) hereof.
Section 1.13 "DRAW DOWN NOTICE" shall have the meaning assigned to such
term in Section 3.01 hereof.
Section 1.14 "DRAW DOWN PRICING PERIOD" shall mean, with respect to each
Draw Down, a period of fifteen (15) consecutive Trading Days beginning on the
first Trading Day
2
specified in a Draw Down Notice, or such other period of consecutive Trading
Days as is mutually agreed upon by the Company and the Investor.
Section 1.15 "EFFECTIVE DATE" means the first Trading Day immediately
following the date on which the Registration Statement is declared effective by
the Commission.
Section 1.16 "EXCHANGE ACT" means the U.S. Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.17 "KNOWLEDGE" means the actual knowledge of the Chief Executive
Officer, Chief Financial Officer or any Senior Vice President of the Company.
Section 1.18 "LEGEND" shall have the meaning specified in Section 8.1.
Section 1.19 "MAKE WHOLE AMOUNT" shall have the meaning specified in
Section 3.10.
Section 1.20 "MATERIAL ADVERSE EFFECT" means any effect on the business,
operations, properties or financial condition of the Company and its
consolidated subsidiaries that is material and adverse to the Company and such
subsidiaries, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Warrant in any material respect; PROVIDED, that either of the
following shall not constitute a "Material Adverse Effect": (i) the effects of
conditions or events that are generally applicable to the capital, financial,
banking or currency markets and (ii) any changes or effects resulting from the
announcement or consummation of the transactions contemplated by this Agreement,
including, without limitation, any changes or effects associated with any
particular Draw Down.
Section 1.21 "MAXIMUM COMMITMENT AMOUNT" means $15 million in aggregate
Draw Down Amounts.
Section 1.22 "MAXIMUM DRAW DOWN AMOUNT" means 2.5% of the Company's Market
Capitalization (as defined and calculated in accordance with Annex A) at the
time of the Draw Down; PROVIDED, HOWEVER, that such amount shall not exceed $5
million in respect of any Draw Down.
Section 1.23 "MINIMUM DRAW DOWN AMOUNT" means $250,000.
Section 1.24 "NASD" means the National Association of Securities
Dealers, Inc.
Section 1.25 "OTHER FINANCING" shall have the meaning assigned to such
term in Section 6.07 hereof.
Section 1.26 "PERMITTED TRANSACTION" shall have the meaning assigned to
such term in Section 6.07 hereof.
Section 1.27 "PERSON" means any individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including any government or political subdivision or an agency or
instrumentality thereof.
3
Section 1.28 "PRINCIPAL MARKET" means the Nasdaq National Market, the
Nasdaq SmallCap Market, the American Stock Exchange or the
New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.
Section 1.29 "PROHIBITED TRANSACTION" shall have the meaning assigned to
such term in Section 6.08 hereof.
Section 1.30 "PROSPECTUS" as used in this Agreement means the prospectus in
the form included in the Registration Statement, as supplemented from time to
time pursuant to Rule 424(b) of the Securities Act.
Section 1.31 "REGISTRABLE SECURITIES" means (i) the Shares, (ii) the
Warrant Shares, (iii) any Blackout Shares and (iv) any securities issued or
issuable with respect to any of the foregoing by way of exchange, stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (w) the Registration Statement has been declared
effective by the SEC and such Registrable Securities have been disposed of
pursuant to the Registration Statement, (x) such Registrable Securities have
been sold under circumstances under which all of the applicable conditions of
Rule 144 (or any similar provision then in force) under the Securities Act
("RULE 144") are met, (y) such time as such Registrable Securities have been
otherwise transferred to holders who may trade such shares without restriction
under the Securities Act, and the Company has delivered a new certificate or
other evidence of ownership for such securities not bearing a restrictive legend
or (z) in the opinion of counsel to the Company such Registrable Securities may
be sold without registration and without any time, volume or manner limitations
pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act.
Section 1.32 "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement between the Investor and the Company in the form of EXHIBIT A hereto.
Section 1.33 "REGISTRATION STATEMENT" shall have the meaning assigned to
such term in the Registration Rights Agreement.
Section 1.34 "REGULATION D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.35 "SECTION 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.36 "SECURITIES ACT" means the U.S. Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
Section 1.37 "SETTLEMENT DATE" shall have the meaning assigned to such
term in Section 3.06 hereof.
Section 1.38 "SHARES" means the shares of Common Stock of the Company that
are and/or may be purchased hereunder.
Section 1.39 "THRESHOLD PRICE" means the lowest "Draw Down Discount Price"
(as specified in a Draw Down Notice) at which the Company will agree to sell
Shares during the
4
applicable Draw Down Pricing Period, which price shall not be less than $2.00
per share, unless agreed upon in writing by the Investor.
Section 1.40 "TRADING DAY" means any day other than a Saturday or a Sunday
on which the Principal Market is open for trading in equity securities.
Section 1.41 "UNDERWRITER" shall mean any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor pursuant to
the Registration Statement.
Section 1.42 "VWAP" means the volume weighted average price of the Common
Stock during any Trading Day as reported by Bloomberg, L.P. using the AQR
function.
Section 1.43 "WARRANT" means the warrant to purchase up to 200,000 shares
of Common Stock first exercisable beginning on the six-month anniversary of the
Closing Date and expiring on the fifth anniversary thereafter issued by the
Company to the Investor on the Closing Date in the form attached hereto as
EXHIBIT B hereto.
Section 1.44 "WARRANT SHARES" means the shares of Common Stock issuable to
the Investor upon exercise of the Warrant.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.01 PURCHASE AND SALE OF STOCK. Upon the terms and subject to
the conditions set forth in this Agreement, the Company shall issue and sell
to the Investor and the Investor shall purchase from the Company Common Stock
for an aggregate (in Draw Down Amounts) of up to the Maximum Commitment
Amount, consisting of purchases based on Draw Downs in accordance with Article
III hereof.
Section 2.02 CLOSING. In consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Company agrees to issue and sell to the Investor, and the Investor agrees to
purchase from the Company, that number of the Shares to be issued in connection
with each Draw Down. The closing of the execution and delivery of this Agreement
(the "CLOSING") shall take place at the offices of ▇▇▇▇▇▇▇▇ Chance US LLP, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ at 11:00 a.m. local time on October __, 2002, or
at such other time and place or on such date as the Investor and the Company may
agree upon (the "CLOSING DATE"). Each party shall deliver all documents,
instruments and writings required to be delivered by such party pursuant to this
Agreement at or prior to the Closing.
Section 2.03 REGISTRATION STATEMENT AND PROSPECTUS. Promptly after the
Closing, the Company shall prepare and file with the Commission the Registration
Statement (including the Prospectus) in accordance with the provisions of the
Securities Act and the Registration Rights Agreement.
Section 2.04 WARRANT. On the Closing Date, the Company shall issue and
deliver the Warrant to the Investor.
5
Section 2.05 BLACKOUT SHARES. The Company shall issue and deliver any
Blackout Shares to the Investor in accordance with Section 1(e) of the
Registration Rights Agreement.
ARTICLE III
DRAW DOWN TERMS
Subject to the satisfaction of the conditions hereinafter set forth in
this Agreement, the parties agree as follows:
Section 3.01 DRAW DOWN NOTICE. The Company, may, in its sole
discretion, issue a Draw Down Notice with respect to a Draw Down up to a Draw
Down Amount equal to the Maximum Draw Down Amount (each, a "DRAW DOWN") during
the Commitment Period, which Draw Down the Investor will be obligated to accept.
The Company shall inform the Investor via facsimile transmission, with a copy to
the Investor's counsel, as to the Draw Down Amount the Company wishes to
exercise before commencement of trading on the first Trading Day of any Draw
Down Pricing Period (the "DRAW DOWN NOTICE"). In addition to the Draw Down
Amount, each Draw Down Notice shall specify the Threshold Price in respect of
the applicable Draw Down and shall designate the first Trading Day of the Draw
Down Pricing Period. In no event shall any Draw Down Amount be less than the
Minimum Draw Down Amount or exceed the Maximum Draw Down Amount. Each Draw Down
Notice shall be accompanied by a certificate, signed by the Chief Executive
Officer or Chief Financial Officer dated, as of the date of such Draw Down
Notice, in the form of EXHIBIT C hereof.
Section 3.02 NUMBER OF SHARES. The number of Shares to be issued in
connection with each Draw Down shall be equal to the sum of the quotients (for
each Trading Day of the Draw Down Pricing Period for which the Draw Down
Discount Price equals or exceeds the Threshold Price) of one fifteenth (1/15th)
of the Draw Down Amount divided by the applicable Draw Down Discount Price.
Section 3.03 LIMITATION ON DRAW DOWNS. Only one Draw Down shall be
permitted for each Draw Down Pricing Period.
Section 3.04 TRADING CUSHION. There shall be a minimum of five (5) Trading
Days between the expiration of any Draw Down Pricing Period and the beginning of
the next succeeding Draw Down Pricing Period.
Section 3.05 EXPIRATION OF DRAW DOWNS. Each Draw Down will expire on the
last Trading Day of each Draw Down Pricing Period.
Section 3.06 SETTLEMENT. The number of Shares purchased by the Investor
with respect to each Draw Down shall be determined and settled on a periodic
basis in respect of the applicable Draw Down Pricing Period. Settlement in
respect of each determination shall be made no later than the third Trading Day
after the fifth, tenth and fifteenth day of the Draw Down Pricing Period, and,
in the event that the Investor elects to extend any Draw Down Pricing Period in
accordance with Section 3.08, the third Trading Day after the end of such
extended Draw Down Pricing Period. Each date on which settlement of the purchase
and sale of Shares occurs hereunder being referred to as a "SETTLEMENT DATE."
The Investor shall provide the Company with delivery instructions for the Shares
to be issued at each Settlement Date at least two Trading Days in advance of
such Settlement Date (except to the extent previously provided). The number of
Shares actually issued shall be rounded to the nearest whole number of Shares.
6
Section 3.07 DELIVERY OF SHARES; PAYMENT OF DRAW DOWN AMOUNT. On each
Settlement Date, the Company shall deliver the Shares purchased by the Investor
to the Investor or its designees via book-entry through the Depositary Trust
Company to an account designated by the Investor, and upon receipt of the
Shares, the Investor shall cause payment therefor to be made to the Company's
designated account by wire transfer of immediately available funds, if the
Shares are received by the Investor no later than 1:00 p.m. (Eastern Time), or
next day available funds, if the Shares are received thereafter.
Section 3.08 THRESHOLD PRICE. For each Trading Day during a Draw Down
Pricing Period that the Draw Down Discount Price is less than the Threshold
Price, no Shares shall be purchased or sold on such Trading Day and the total
amount of the Draw Down Amount in respect of such Draw Down Pricing Period shall
be reduced by one fifteenth (1/15th); PROVIDED, HOWEVER, that the Investor may
elect prior to each respective Settlement Date during such Draw Down Pricing
Period, in its sole discretion, to either (i) purchase Shares in respect of any
such Trading Day at a price equal to the Threshold Price or (ii) extend such
Draw Down Pricing Period for the number of Trading Days during such Draw Down
Pricing Period that the Draw Down Discount Price was less than the Threshold
Price. At no time shall the Threshold Price be set below $2.00 unless agreed
upon by the Company and the Investor. If trading in the Company's Common Stock
is suspended for any reason for more than three (3) consecutive or
non-consecutive hours during any Trading Day during a Draw Down Pricing Period,
the Investor may elect in its sole discretion, to either (i) deem the Draw Down
Discount Price to be less than the Threshold Price for that Trading Day or (ii)
extend such Draw Down Pricing Period for an additional Trading Day in respect of
such Trading Day.
Section 3.09 OTHER ISSUANCES. If during any Draw Down Pricing Period, the
Company (with the consent of the Investor pursuant to Section 6.07 or 6.08
hereof, if applicable) shall issue any shares of Common Stock to any Person
other than the Investor (other than shares of Common Stock issued in connection
with a Permitted Transaction), the Investor may in its sole discretion (i)
purchase up to the Draw Down Amount of shares of Common Stock at the applicable
Draw Down Discount for such Draw Down Pricing Period in accordance with the
terms of this Agreement, or (ii) elect not to purchase any Shares during such
Draw Down Pricing Period. The Investor shall notify the Company of its election
not later than the Trading Day preceding the third Settlement Date in respect of
such Draw Down Pricing Period. In the event that the Investor elects not to
purchase any Shares in respect of such a Draw Down Pricing Period and one or
more Settlement Dates have occurred, the Investor shall promptly return to the
Company any and all Shares transferred to the Investor in respect of such
Settlement Date(s) and the Company shall promptly thereafter pay to the Investor
by wire transfer of immediately available funds to an account designated by the
Investor that portion of the applicable Draw Down Amount paid to the Company in
respect of such Settlement Date(s).
Section 3.10 FAILURE TO DELIVER SHARES. If on any Settlement Date, the
Company fails to deliver the Shares to be purchased by the Investor, and such
failure is not cured within ten (10) Trading Days following the date on which
the Investor delivered payment for such Shares, the Company shall pay to the
Investor on demand in cash by wire transfer of immediately available funds to an
account designated by the Investor the "MAKE WHOLE AMOUNT;" PROVIDED, HOWEVER,
that in the event that the Company is prevented from delivering Shares in
respect of any such Settlement Date in a timely manner by any fact or
circumstance that is reasonably within the control of, or directly attributable
to, the Investor, then such ten (10) Trading Day period shall be automatically
extended until such time as such fact or circumstance is cured. As used herein,
the Make Whole Amount shall be an amount equal to the sum of (i) the Draw Down
Amount actually paid by the Investor in respect of such Shares plus (ii) an
amount equal to actual loss suffered by
7
the Investor in respect of sales of such Shares to subsequent purchasers, which
shall be based upon documentation reasonably satisfactory to the Company
demonstrating the difference (if greater than zero) between (A) the price per
share paid by the Investor to purchase such number of shares of Common Stock
necessary for the Investor to meet its share delivery obligations to such
subsequent purchasers minus (B) the average Draw Down Discount Price during the
applicable Draw Down Pricing Period. In the event that the Make Whole Amount is
not paid within two (2) Trading Days following a demand therefor from the
Investor, the Make Whole Amount shall accrue interest compounded daily at a rate
of five percent (5%) per annum up to and including the date on which the Make
Whole Amount is actually paid. Notwithstanding anything to the contrary set
forth in this Agreement, in the event that the Company pays the Make Whole
Amount (plus interest, if applicable) in respect of any Settlement Date in
accordance with this Section 3.10, such payment shall be the Investor's sole
remedy in respect of the Company's failure to deliver Shares in respect of such
Settlement Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and warranties to
the Investor:
Section 4.01 ORGANIZATION, GOOD STANDING AND POWER. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Except as set forth in the Commission Documents (as defined below), the Company
does not own more than fifty percent (50%) of the outstanding capital stock of
or control any other business entity, other than any wholly-owned subsidiary
that is not "significant" within the meaning of Regulation S-X promulgated by
the Commission. The Company is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify or be in good
standing would not have a Material Adverse Effect.
Section 4.02 AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Registration Rights Agreement and the Warrant and to issue
the Shares, the Warrant, the Warrant Shares and any Blackout Shares (except to
the extent that the number of Blackout Shares required to be issued exceeds the
number of authorized shares of Common Stock under the Certrificate); (ii) the
execution and delivery of this Agreement and the Registration Rights Agreement,
and the execution, issuance and delivery of the Warrant, by the Company and
the consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required (other than as contemplated by Section 6.05); and (iii) each of this
Agreement and the Registration Rights Agreement has been duly executed and
delivered, and the Warrant has been duly executed, issued and delivered, by the
Company and constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.
Section 4.03 CAPITALIZATION. The authorized capital stock of the Company
and the shares thereof issued and outstanding as of September 30, 2002 are set
forth on SCHEDULE 4.03
8
attached. All of the outstanding shares of the Common Stock have been duly and
validly authorized and issued, and are fully paid and non-assessable. Except as
set forth in this Agreement or on SCHEDULE 4.03 attached hereto, as of the date
hereof no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into or exchangeable for or giving any
right to subscribe for, any shares of capital stock of the Company. Except as
set forth in this Agreement or on SCHEDULE 4.03, as of the date hereof, there
are no contracts, commitments, understandings, or arrangements by which the
Company is or may become bound to issue additional shares of the capital stock
of the Company or options, securities or rights convertible into or exchangeable
for or giving any right to subscribe for any shares of capital stock of the
Company. Except as set forth on SCHEDULE 4.03, as of the date hereof the Company
is not a party to any agreement granting registration rights to any Person with
respect to any of its equity or debt securities. Except as set forth on
SCHEDULE 4.03, as of the date hereof the Company is not a party to, and it has
no Knowledge of, any agreement restricting the voting or transfer of any shares
of the capital stock of the Company. The offer and sale of all capital stock,
convertible securities, rights, warrants, or options of the Company issued
during the twenty-four month period immediately prior to the Closing complied
with all applicable federal and state securities laws, and no stockholder has a
right of rescission or damages with respect thereto that could reasonably be
expected to have a Material Adverse Effect. The Company has furnished or made
available to the Investor true and correct copies of the Company's Restated
Certificate of Incorporation, as amended and in effect on the date hereof (the
"CERTIFICATE"), and the Company's Bylaws, as amended and in effect on the date
hereof (the "BYLAWS").
Section 4.04 ISSUANCE OF SHARES. The Shares, the Warrant and the Warrant
Shares have been, and any Blackout Shares will be, duly authorized by all
necessary corporate action (except to the extent that the number of Blackout
Shares required to be issued exceeds the number of authorized shares of Common
Stock under the Certificate) and, when issued and paid for in accordance with
the terms of this Agreement, the Registration Rights Agreement and the Warrant,
the Shares and the Warrant Shares shall be validly issued and outstanding, fully
paid and non-assessable, and the Investor shall be entitled to all rights
accorded to a holder of shares of Common Stock.
Section 4.05 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Warrant and any other document
or instrument contemplated hereby or thereby, by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not: (i) violate any provision of the Certificate or Bylaws, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party, (iii) create or impose a lien,
charge or encumbrance on any property of the Company under any agreement or any
commitment to which the Company is a party or by which the Company is bound or
by which any of its respective properties or assets are bound, or (iv) result in
a violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries are bound or
affected, except, in all cases, for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The Company is
not required under federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any
9
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, the
Registration Rights Agreement or the Warrant, or issue and sell the Shares, the
Warrant Shares or the Blackout Shares (except to the extent that the number of
Blackout Shares required to be issued exceeds the number of authorized shares of
Common Stock under the Certificate) in accordance with the terms hereof and
thereof (other than any filings that may be required to be made by the Company
with the Commission, the NASD/Nasdaq or state securities commissions subsequent
to the Closing, and, any registration statement (including any amendment or
supplement thereto) which may be filed pursuant hereto); PROVIDED that, for
purposes of the representation made in this sentence, the Company is assuming
and relying upon the accuracy of the relevant representations and agreements of
the Investor herein.
Section 4.06 COMMISSION DOCUMENTS, FINANCIAL STATEMENTS. The Common Stock
is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing, including
filings incorporated by reference therein, being referred to herein as the
"COMMISSION DOCUMENTS"). The Company has maintained all requirements for the
continued listing or quotation of its Common Stock, and such Common Stock is
currently listed or quoted on the Nasdaq National Market. The Company has made
available to the Investor true and complete copies of the Commission Documents
filed with the Commission since December 31, 2001 and prior to the Closing Date.
The Company has not provided to the Investor any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement. As of its date, the Company's Form
10-K for the year ended December 31, 2001 complied in all material respects with
the requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder applicable to such document, and, as of its
date, after giving effect to the information disclosed and incorporated by
reference therein, such Form 10-K did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. As of their respective dates, the
financial statements of the Company included in the Commission Documents filed
with the Commission since December 31, 2001 complied as to form and substance in
all material respects with applicable accounting requirements and the published
rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements), and fairly present in all material
respects the financial position of the Company and its subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
Section 4.07 NO MATERIAL ADVERSE CHANGE. Except as disclosed in the
Commission Documents, since December 31, 2001 no event or series of events has
or have occurred that would, individually or in the aggregate, have a Material
Adverse Effect on the Company.
Section 4.08 NO UNDISCLOSED LIABILITIES. Neither the Company nor any of
its subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated,
10
secured or unsecured, absolute, accrued, contingent or otherwise) that would be
required to be disclosed on a balance sheet of the Company or any subsidiary
(including the notes thereto) in conformity with GAAP and are not disclosed in
the Commission Documents, other than those incurred in the ordinary course of
the Company's or its subsidiaries respective businesses since December 31, 2001
and which, individually or in the aggregate, do not or would not have a Material
Adverse Effect on the Company.
Section 4.09 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or
circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective businesses, properties, operations or financial
condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company.
Section 4.10 ACTIONS PENDING. There is no action, suit, claim,
investigation or proceeding pending or, to the Knowledge of the Company,
threatened against the Company or any subsidiary which questions the validity
of this Agreement or the transactions contemplated hereby or any action taken or
to be taken pursuant hereto or thereto. Except as set forth in the Commission
Documents or on SCHEDULE 4.10, there is no action, suit, claim, investigation or
proceeding pending or, to the Knowledge of the Company, threatened, against or
involving the Company, any subsidiary or any of their respective properties or
assets that could be reasonably expected to have a Material Adverse Effect
on the Company. Except as set forth in the Commission Documents or on
SCHEDULE 4.10, no judgment, order, writ, injunction or decree or award has been
issued by or, so far as is known by the Company, requested of any court,
arbitrator or governmental agency which might result in a Material Adverse
Effect.
Section 4.11 COMPLIANCE WITH LAW. The businesses of the Company and its
subsidiaries have been and are presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or such that would
not reasonably be expected to cause a Material Adverse Effect. The Company and
each of its subsidiaries have all franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it, except for such
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, the failure to possess which, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
Section 4.12 CERTAIN FEES. Except as expressly set forth in this
Agreement, no brokers, finders or financial advisory fees or commissions will be
payable by the Company or any of its subsidiaries in respect of the transactions
contemplated by this Agreement.
Section 4.13 DISCLOSURE. To the best of the Company's Knowledge, neither
this Agreement nor the Schedules hereto nor any other documents, certificates or
instruments furnished to the Investor by or on behalf of the Company or any
subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading.
Section 4.14 MATERIAL NON-PUBLIC INFORMATION. Except for this Agreement
and the transactions contemplated hereby, neither the Company nor its agents
have disclosed to the Investor, any material non-public information that,
according to applicable law, rule or regulation,
11
should have been disclosed publicly by the Company prior to the date hereof but
which has not been so disclosed.
Section 4.15 EXEMPTION FROM REGISTRATION; VALID ISSUANCES. The issuance
and sale of the Shares, the Warrant, the Warrant Shares and any Blackout Shares
in accordance with the terms and on the bases of the representations and
warranties set forth in this Agreement, may and shall be properly issued
pursuant to Section 4(2), Regulation D and/or any other applicable federal and
state securities laws. Neither the sales of the Shares, the Warrant, the Warrant
Shares or any Blackout Shares pursuant to, nor the Company's performance of its
obligations under, this Agreement, the Registration Rights Agreement, or the
Warrant shall (i) result in the creation or imposition of any liens, charges,
claims or other encumbrances upon the Shares, the Warrant Shares, any Blackout
Shares or any of the assets of the Company, or (ii) entitle the holders of any
outstanding shares of capital stock of the Company to preemptive or other rights
to subscribe to or acquire the shares of Common Stock or other securities of the
Company. The Shares, the Warrant Shares and any Blackout Shares shall not
subject the Investor to personal liability by reason of the ownership thereof.
Section 4.16 NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates or any person acting
on its or their behalf (i) has conducted any general solicitation (as that term
is used in Rule 502(c) of Regulation D) or general advertising with respect to
any of the Shares, the Warrant, the Warrant Shares or any Blackout Shares or
(ii) has made any offers or sales of any security or solicited any offers to buy
any security under any circumstances that would require registration of the
Shares under the Securities Act.
Section 4.17 NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement and employee benefit
plans, under circumstances that would require registration under the Securities
Act of shares of the Common Stock issuable hereunder with any other offers or
sales of securities of the Company.
Section 4.18 ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF SHARES. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of an arm's length Investor with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Investor or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Investor's purchase of
the Shares.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR
The Investor hereby makes the following representations, warranties and
covenants to the Company:
Section 5.01 ORGANIZATION AND STANDING OF THE INVESTOR. The Investor is an
entity duly organized, validly existing and in good standing under the laws of
the British Virgin Islands.
12
Section 5.02 AUTHORIZATION AND POWER. The Investor has the requisite power
and authority to enter into and perform its obligations under this Agreement,
the Registration Rights Agreement and the Warrant and to purchase the Shares in
accordance with the terms hereof. The execution, delivery and performance of
this Agreement by Investor and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action,
and no further consent or authorization of the Investor, its Board of Directors
or stockholders is required. This Agreement has been duly executed and delivered
by the Investor and constitutes a valid and binding obligation of the Investor
enforceable against the Investor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of creditor's
rights and remedies or by other equitable principles of general application.
Section 5.03 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Warrant and any other document
or instrument contemplated hereby, by the Investor and the consummation of the
transactions contemplated thereby do not (i) violate any provision of the
Investor's charter documents or bylaws, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Investor is a party, (iii) create or impose a lien, charge or
encumbrance on any property of the Investor under any agreement or any
commitment to which the Investor is a party or by which the Investor is bound or
by which any of its respective properties or assets are bound or (iv) result in
a violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Investor or by which any property or asset of the
Investor are bound or affected, except in all cases, for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, prohibit or otherwise interfere
with the ability of the Investor to enter into and perform its obligations under
this Agreement in any material respect. The Investor is not required under
federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or to purchase the Shares in accordance with
the terms hereof, PROVIDED that, for purposes of the representation made in this
sentence, the Investor is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
Section 5.04 FINANCIAL CAPABILITY The Investor has the financial
capability to perform all of its obligations under this Agreement, including the
capability to purchase the Shares in accordance with the terms hereof.
Section 5.05 INFORMATION. The Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares which
have been requested by the Investor. The Investor and its advisors, if any, have
been afforded the opportunity to ask questions of the Company. The Investor has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Shares. The Investor understands that it (and not the Company) shall be
responsible for its own tax liabilities that may arise as a result of this
investment or the transactions contemplated by this Agreement.
13
Section 5.06 SELLING RESTRICTIONS. The Investor covenants that during the
Commitment Period, neither the Investor nor any of its affiliates nor any entity
managed by the Investor will ever (i) be in a short position with respect to
shares of the Common Stock in any accounts directly or indirectly managed by the
Investor or any affiliate of the Investor or any entity managed by the Investor
or (ii) engage in any transaction intended to reduce the economic risk of
ownership of shares of Common Stock (including, without limitation, the purchase
of any option or contract to sell) that would, directly or indirectly, have an
effect substantially equivalent to selling short such shares of Common Stock
that are subject to, underlie or may be deliverable in satisfaction of such
transaction or otherwise may be reasonably be expected to adversely affect the
market price of the Common Stock. Notwithstanding the foregoing, the Investor
shall have the right during any Draw Down Pricing Period to sell shares of the
Company's Common Stock equal in number to the aggregate number of the Shares to
be purchased pursuant to the applicable Draw Down Notice.
ARTICLE VI
COVENANTS OF THE COMPANY
The Company covenants with the Investor as follows, which covenants are
for the benefit of the Investor and its permitted assignees (as defined herein):
Section 6.01 SECURITIES. The Company shall notify the Commission and the
Principal Market, if and as applicable, in accordance with their rules and
regulations, of the transactions contemplated by this Agreement, and shall use
commercially reasonable efforts to take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Shares, the Warrant Shares
and the Blackout Shares, if any, to the Investor.
Section 6.02 RESERVATION OF COMMON STOCK. As of the date hereof, the
Company has available and the Company shall reserve and keep available at all
times, free of preemptive rights and other similar contractual rights of
stockholders, shares of Common Stock for the purpose of enabling the Company to
satisfy any obligation to issue the Shares in connection with all Draw Downs
contemplated hereunder and the Warrant Shares. The number of shares so reserved
from time to time, as theretofore increased or reduced as hereinafter provided,
may be reduced by the number of shares actually delivered hereunder.
Section 6.03 REGISTRATION AND LISTING. During the Commitment Period, the
Company shall use commercially reasonable efforts: (i) to take all action
necessary to cause its Common Stock to continue to be registered under Section
12(b) or 12(g) of the Exchange Act, (ii) to comply in all respects with its
reporting and filing obligations under the Exchange Act, (iii) to prevent the
termination or suspension such registration, or the termination or suspension of
its reporting and filing obligations under the Exchange Act or Securities Act
(except as expressly permitted herein). The Company shall use commercially
reasonable efforts necessary to maintain the listing and trading of its Common
Stock and the listing of the Shares purchased by Investor hereunder on the
Principal Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the NASD
and the Principal Market.
Section 6.04 REGISTRATION STATEMENT. Without the prior written consent of
the Investor, the Registration Statement shall be used solely in connection with
the transactions between the Company and the Investor contemplated hereby.
14
Section 6.05 COMPLIANCE WITH LAWS.
(a) The Company shall comply, and cause each subsidiary to comply
with all applicable laws, rules, regulations and orders, noncompliance with
which could, in the commercially reasonable judgment of the Company, be expected
to have a Material Adverse Effect.
(b) Without the consent of its stockholders in accordance with NASD
rules, the Company will not be obligated to issue, and the Investor will not be
obligated to purchase, any Shares which would result in the issuance under this
Agreement of Shares representing more than the applicable percentage under the
rules of the NASD that would require stockholder approval of the issuance
thereof.
Section 6.06 REPORTING REQUIREMENTS. Upon reasonable written request of
the Investor during the Commitment Period, the Company shall furnish copies of
the following to the Investor within three Trading Days of such request (but not
sooner than filed with or submitted to the Commission):
(a) Quarterly Reports on Form 10-Q;
(b) Annual Reports on Form 10-K;
(c) Periodic Reports on Form 8-K; and
(d) any other documents publicly furnished or submitted to the
Commission.
Section 6.07 OTHER FINANCING. During the term of this Agreement, the
Company shall not enter into any other financing agreement for the issuance,
sale or other disposition of equity or equity-linked securities, including,
without limitation, any securities or other instruments that are convertible
into or exchangeable for Common Stock or Preferred Stock ("OTHER FINANCING")
without the prior written consent of the Investor, which consent will not be
unreasonably withheld, conditioned or delayed; PROVIDED, HOWEVER, that without
the prior written consent of the Investor the Company may (i) establish stock
option or award plans or agreements (for directors, employees, consultants
and/or advisors) and amend such plans or agreements, including increasing the
number of shares available thereunder, (ii) use equity securities to finance the
acquisition of other companies, equipment, technologies or lines of business,
(iii) issue shares of Common Stock and/or Preferred Stock in connection with the
Company's option or award plans, stock purchase plans, rights plans, warrants or
options, (iv) issue shares of Common Stock and/or Preferred Stock in connection
with the acquisition of products, licenses, equipment or other assets and
strategic partnerships or joint ventures (the primary purpose of which is not to
raise equity capital); (v) issue shares of Common and/or Preferred Stock to
consultants and/or advisors as consideration for services rendered, (vi) issue
and sell shares in an underwritten public offering of Common Stock, and (vii)
issue shares of Common Stock to the Investor under any other agreement entered
into between the Investor and the Company (each a "PERMITTED TRANSACTION").
Section 6.08 PROHIBITED TRANSACTIONS. During the term of this Agreement,
the Company shall not enter into any Prohibited Transaction without the prior
written consent of the Investor, which consent may be withheld at the sole
discretion of the Investor. For the purposes of this Agreement, the term
"PROHIBITED TRANSACTION" shall refer to the issuance by the Company of any
"future priced securities," which shall be deemed to mean the issuance of shares
of Common Stock or securities of any type whatsoever that are, or may become,
convertible or
15
exchangeable into shares of Common Stock where the purchase, conversion or
exchange price for such Common Stock is determined using any floating or
otherwise adjustable discount to the market price of Common Stock, including,
without limitation, pursuant to any equity line or other financing that is
substantially similar to the financing provided for under this Agreement.
Section 6.09 CORPORATE EXISTENCE. The Company shall take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.10 NON-DISCLOSURE OF NON-PUBLIC INFORMATION. None of the
Company, its officers, directors, employees nor agents shall disclose material
non-public information to the Investor, its advisors or representatives.
Section 6.11 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION
OF RIGHT TO REQUEST A DRAW DOWN. Notwithstanding the provisions of SECTION 6.10,
the Company shall immediately notify the Investor upon the occurrence of any of
the following events in respect of the Registration Statement or the Prospectus
related to the offer, issuance and sale of the Shares, the Warrant Shares and
any Blackout Shares hereunder: (i) receipt of any request for additional
information by the Commission or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to the Registration Statement or the Prospectus; (ii)
the issuance by the Commission or any other federal or state governmental
authority of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose; and (iii)
receipt of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company shall not request a Draw Down during the continuation of
any of the foregoing events.
Section 6.12 AMENDMENTS TO THE REGISTRATION STATEMENT. When the
Registration Statement is declared effective by the Commission, the Company
shall not (i) file any amendment to the Registration Statement or make any
amendment or supplement to the Prospectus of which the Investor shall not
previously have been advised or to which the Investor shall reasonably object
after being so advised or (ii) so long as, in the reasonable opinion of counsel
for the Investor, a Prospectus is required to be delivered in connection with
sales of the Shares by the Investor, file any information, documents or reports
pursuant to the Exchange Act without delivering a copy of such information,
documents or reports to the Investor promptly following such filing.
Section 6.13 PROSPECTUS DELIVERY. From time to time for such period as in
the opinion of counsel for the Investor a prospectus is required by the
Securities Act to be delivered in connection with sales by the Investor, the
Company will expeditiously deliver to the Investor, without charge, as many
copies of the Prospectus (and of any amendment or supplement thereto) as the
Investor may reasonably request. The Company consents to the use of the
Prospectus (and of any amendment or supplement thereto) in accordance with the
provisions of the Securities Act and state securities laws in connection with
the offering and sale of the Shares, the Warrant Shares and the Blackout Shares,
if any, and for such period of time thereafter as the Prospectus is required by
the Securities Act to be delivered in connection with sales of the Shares, the
Warrant Shares and any Blackout Shares.
Section 6.14 EXPECTATIONS REGARDING DRAW DOWNS. Within ten (10) calendar
days after the commencement of each calendar quarter occurring subsequent to the
date hereof, the Company shall notify the Investor as to its reasonable
expectations as to the dollar amount it
16
intends to raise during such calendar quarter, if any, through the issuance of
Draw Down Notices. Such notification shall constitute only the Company's good
faith estimate with respect to such calendar quarter and shall in no way
obligate the Company to raise such amount during such calendar quarter or
otherwise limit its ability to deliver Draw Down Notices during such calendar
quarter. The failure by the Company to comply with this provision can be cured
by the Company's notifying the Investor at any time as to its reasonable
expectations with respect to the current calendar quarter.
ARTICLE VII
CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN
The obligation of the Investor hereunder to accept a Draw Down Notice and to
acquire and pay for the Shares in accordance therewith is subject to the
satisfaction or waiver, at each Condition Satisfaction Date, of each of the
conditions set forth below. The conditions are for the Investor's sole benefit
and may be waived by the Investor at any time in its sole discretion. As used in
this Agreement, the term "CONDITION SATISFACTION DATE" shall mean, with respect
to each Draw Down, the date on which the applicable Draw Down Notice is
delivered to the Investor and each Settlement Date in respect of the applicable
Draw Down Pricing Period.
Section 7.01 ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
Each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made as though made at that
time, except for representations and warranties that are expressly made as of a
particular date.
Section 7.02 PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement, the Registration Rights Agreement and
the Warrant to be performed, satisfied or complied with by the Company.
Section 7.03 COMPLIANCE WITH LAW. The Company shall have complied in all
material respects with all applicable federal, state and local governmental
laws, rules, regulations and ordinances in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.
Section 7.04 EFFECTIVE REGISTRATION STATEMENT. Upon the terms and subject
to the conditions as set forth in the Registration Rights Agreement, the
Registration Statement shall have previously become effective and shall remain
effective and (i) neither the Company nor the Investor shall have received
notice that the Commission has issued or intends to issue a stop order with
respect to the Registration Statement or that the Commission otherwise has
suspended or withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
Commission's concerns have been addressed and the Investor is reasonably
satisfied that the Commission no longer is considering or intends to take such
action), and (ii) no other suspension of the use or withdrawal of the
effectiveness of the Registration Statement or the Prospectus shall exist.
Section 7.05 NO KNOWLEDGE. The Company shall have no Knowledge of any
event more likely than not to have the effect of causing the Registration
Statement with respect to the resale of the Registrable Securities by the
Investor to be suspended or otherwise ineffective
17
(which event is more likely than not to occur within fifteen Trading Days
following the Trading Day on which a Draw Down Notice is delivered).
Section 7.06 NO SUSPENSION. Trading in the Company's Common Stock shall
not have been suspended by the Commission, the Principal Market or the NASD and
trading in securities generally as reported on the Principal Market shall not
have been suspended or limited.
Section 7.07 NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
Section 7.08 NO PROCEEDINGS OR LITIGATION. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to enjoin, prevent or change
the transactions contemplated by this Agreement.
Section 7.09 SECTION 16 LIMITATION. On each Settlement Date, the number of
Shares then to be purchased by the Investor shall not exceed the number of such
shares that, when aggregated with all other Registrable Securities then owned by
the Investor beneficially or deemed beneficially owned by the Investor, would
result in the Investor owning more than 9.9% of all of such Common Stock as
would be outstanding on such Settlement Date, as determined in accordance with
Section 16 of the Exchange Act. For purposes of this Section 7.09, in the event
that the amount of Common Stock outstanding as determined in accordance with
Section 16 of the Exchange Act and the regulations promulgated thereunder is
greater on a Settlement Date than on the date upon which the Draw Down Notice
associated with such Settlement Date is given, the amount of Common Stock
outstanding on such Settlement Date shall govern for purposes of determining
whether the Investor, when aggregating all purchases of Common Stock made
pursuant to this Agreement and, if any, Warrant Shares and Blackout Shares,
would own more than 9.9% of the Common Stock following such Settlement Date.
Section 7.10 SUFFICIENT SHARES REGISTERED FOR RESALE. The Company shall
have sufficient Shares, calculated using the closing trade price of the Common
Stock as of the Trading Day immediately preceding such Draw Down Notice,
registered under the Registration Statement to issue and sell such Shares in
accordance with such Draw Down Notice.
Section 7.11 WARRANT. The Warrant shall have been duly executed, delivered
and issued to the Investor, and the Company shall not be in default in any
material respect under any of the provisions thereof, PROVIDED that any refusal
by or failure of the Company to issue and deliver Warrant Shares in respect of
any exercise (in whole or in part) thereof shall be deemed to be material for
the purposes of this Section 7.11.
Section 7.12 OPINION OF COUNSEL. The Investor shall have received an
opinion of counsel to the Company, dated as of the Effective Date, in form and
substance reasonably satisfactory to the Investor and its counsel.
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ARTICLE VIII
LEGENDS
Section 8.01 LEGENDS. Each of the Warrant and, unless otherwise provided
below, each certificate representing Registrable Securities will bear the
following legend (the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT
FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS
CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY
SET FORTH IN A PRIVATE EQUITY LINE AGREEMENT BETWEEN AKSYS, LTD. AND
KINGSBRIDGE CAPITAL LIMITED DATED AS OF OCTOBER 15, 2002. A COPY OF THE
PORTION OF THE AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE
OBTAINED FROM THE COMPANY'S EXECUTIVE OFFICES.
As soon as practicable after the execution and delivery hereof, but in any event
within five (5) Trading Days hereafter, the Company shall issue to the transfer
agent for its Common Stock (and to any substitute or replacement transfer agent
for its Common Stock upon the Company's appointment of any such substitute or
replacement transfer agent) instructions, with a copy to the Investor. Such
instructions shall be irrevocable by the Company from and after the date hereof
or from and after the issuance thereof to any such substitute or replacement
transfer agent, as the case may be, except as otherwise expressly provided in
the Registration Rights Agreement. It is the intent and purpose of such
instructions, as provided therein, to require the transfer agent for the Common
Stock from time to time upon transfer of Registrable Securities by the Investor
to issue certificates evidencing such Registrable Securities free of the Legend
during the following periods and under the following circumstances and without
consultation by the transfer agent with the Company or its counsel and without
the need for any further advice or instruction or documentation to the transfer
agent by or from the Company or its counsel or the Investor, unless an opinion
of Investor's counsel is reasonably required by the Transfer Agent or the
Company:
(a) At any time after the Effective Date to the extent accompanied
by a notice requesting the issuance of certificates free of the Legend; provided
that (i) the Company is reasonably able to confirm to the transfer agent that
the Registration Statement shall then be effective and (ii) if reasonably
requested by the transfer agent the Investor confirms to the transfer agent that
the Investor has complied with the prospectus delivery requirement under the
Securities Act.
(b) At any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the
19
issuance of new certificates free of the Legend to replace those surrendered and
containing representations that (i) the Investor is permitted to dispose of such
Registrable Securities without limitation as to amount or manner of sale
pursuant to Rule 144(k) under the Securities Act and there is no requirement for
the Investor to deliver a prospectus or (ii) the Investor has sold, pledged or
otherwise transferred or agreed to sell, pledge or otherwise transfer such
Registrable Securities in a manner other than pursuant to an effective
registration statement, to a transferee who shall upon such transfer be entitled
to freely tradeable securities.
Section 8.02 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend
other than the one specified in Section 8.1 has been or shall be placed on the
share certificates representing the Common Stock issued to the Investor
and no instructions or "stop transfer orders," so called "stock transfer
restrictions," or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Article VIII.
ARTICLE IX
TERMINATION
Section 9.01 TERMINATION BY MUTUAL CONSENT. This Agreement shall terminate
upon expiration of the Commitment Period. This Agreement may be terminated at
any time by mutual written consent of the parties.
Section 9.02 OTHER TERMINATION.
(a) The Investor may terminate this Agreement upon (x) one
(1) day's notice if the Company enters into any Other Financing as set forth in
Section 6.08 or any Prohibited Transaction as set forth in Section 6.09 without
the Investor's prior written consent, or (y) one (1) day's notice within ten
(10) Trading Days after the Investor obtains actual knowledge that an event
resulting in a Material Adverse Effect has occurred; PROVIDED, HOWEVER, that the
Investor shall be deemed to possess such actual knowledge within five (5)
Trading Days after such event has been publicly disclosed by the Company in
accordance with its periodic reporting requirements under the Exchange Act.
(b) The Investor may terminate this Agreement upon one (1) day's
notice to the Company at any time in the event that the Registration Statement
is not declared effective in accordance with the Registration Rights Agreement.
(c) The Company may terminate this Agreement upon one (1) day's
notice; PROVIDED, HOWEVER, that the Company shall not terminate this Agreement
pursuant to this SECTION 9.02(c) effective during any Draw Down Pricing Period;
PROVIDED FURTHER; that, in the event of any termination of this Agreement by the
Company hereunder, so long as the Investor owns Shares purchased hereunder,
Blackout Shares issued under the Registration Rights Agreement and/or Warrant
Shares, unless all of such shares of Common Stock may be resold by the Investor
without registration and without any time, volume or manner limitations pursuant
to Rule 144(k) (or any similar provision then in effect) under the Securities
Act, the Company shall not suspend or withdraw the Registration Statement or
otherwise cause the Registration Statement to become ineffective, or delist the
Common Stock from the Principal Market.
(d) Each of the parties hereto may terminate this Agreement upon
one (1) day's notice if the other party has breached a material representation,
warranty or covenant to this
20
Agreement and such breach is not remedied within ten (10) Trading Days after
notice of such breach is delivered to the breaching party.
(e) The obligation of the Investor to purchase shares of Common
Stock shall terminate permanently in the event that there shall occur any stop
order or suspension of effectiveness of the Registration Statement for an
aggregate of thirty (30) calendar days during the Commitment Period.
Section 9.03 EFFECT OF TERMINATION. In the event of termination by the
Company or the Investor, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 9.01 or 9.02 herein, this Agreement shall
become void and of no further force and effect, except as provided in Section
11.13. Nothing in this Section 9.03 shall be deemed to release the Company or
the Investor from any liability for any breach under this Agreement, or to
impair the rights of the Company and the Investor to compel specific performance
by the other party of its obligations under this Agreement.
ARTICLE X
INDEMNIFICATION
Section 10.01 INDEMNIFICATION.
(a) Except as otherwise provided in this Article X, unless disputed
as set forth in Section 10.02, the Company agrees to indemnify, defend and hold
harmless the Investor and its affiliates and their respective officers,
directors, agents, employees, subsidiaries, partners, members and controlling
persons (each, an "INVESTOR INDEMNIFIED PARTY"), to the fullest extent permitted
by law from and against any and all Damages directly resulting from or directly
arising out of any breach of any representation or warranty, covenant or
agreement by the Company in this Agreement, the Registration Rights Agreement or
the Warrant; PROVIDED, HOWEVER, that the Company shall not be liable under this
Article X to an Investor Indemnified Party to the extent that such Damages
resulted or arose from the breach by an Investor Indemnified Party of any
representation or warranty of an Investor Indemnified Party contained in this
Agreement or the gross negligence, recklessness, willful misconduct or bad faith
of an Investor Indemnified Party. The parties intend that any Damages subject to
indemnification pursuant to this Article X will be net of insurance proceeds.
Accordingly, the amount which the Company is required to pay to any Investor
Indemnified Party hereunder (a "COMPANY INDEMNITY PAYMENT") will be reduced by
any insurance proceeds actually recovered by or on behalf of any Investor
Indemnified Party in reduction of the related Damages. In addition, if an
Investor Indemnified Party receives a Company Indemnity Payment required by this
Article X in respect of any Damages and subsequently receives any such insurance
proceeds, then the Investor Indemnified Party will pay to the Company an amount
equal to the Company Indemnity Payment received less the amount of the Company
Indemnity Payment that would have been due if the insurance proceeds had been
received, realized or recovered before the Company Indemnity Payment was made.
(b) Except as otherwise provided in this Article X, unless disputed
as set forth in Section 10.02, the Investor agrees to indemnify, defend and hold
harmless the Company and its affiliates and their respective officers,
directors, agents, employees, subsidiaries, partners, members and controlling
persons (each, a "COMPANY INDEMNIFIED PARTY"), to the fullest extent permitted
by law from and against any and all Damages directly resulting from or directly
arising out of any breach of any representation or warranty, covenant or
agreement by the Investor in this
21
Agreement; PROVIDED, HOWEVER, that the Investor shall not be liable under this
Article X to a Company Indemnified Party to the extent that such Damages
resulted or arose from the breach by a Company Indemnified Party of any
representation or warranty of a Company Indemnified Party contained in this
Agreement or gross negligence, recklessness, willful misconduct or bad faith of
a Company Indemnified Party. The parties intend that any Damages subject to
indemnification pursuant to this Article X will be net of insurance proceeds.
Accordingly, the amount which the Investor is required to pay to any Company
Indemnified Party hereunder (a "INVESTOR INDEMNITY PAYMENT") will be reduced by
any insurance proceeds theretofore actually recovered by or on behalf of any
Company Indemnified Party in reduction of the related Damages. In addition, if a
Company Indemnified Party receives a Investor Indemnity Payment required by this
Article X in respect of any Damages and subsequently receives insurance such
proceeds, then the Company Indemnified Party will pay to the Investor an amount
equal to the Investor Indemnity Payment received less the amount of the Investor
Indemnity Payment that would have been due if the insurance proceeds had been
received, realized or recovered before the Investor Indemnity Payment was made.
Section 10.02 NOTIFICATION OF CLAIMS FOR INDEMNIFICATION. Each party
entitled to indemnification under this Article X (an "INDEMNIFIED PARTY") shall,
promptly after the receipt of notice of the commencement of any claim against
such Indemnified Party in respect of which indemnity may be sought from the
party obligated to indemnify such Indemnified Party under this Article X (the
"INDEMNIFYING PARTY"), notify the Indemnifying Party in writing of the
commencement thereof. Any such notice shall describe the claim in reasonable
detail. The failure of any Indemnified Party to so notify the Indemnifying Party
of any such action shall not relieve the Indemnifying Party from any liability
which it may have to such Indemnified Party (a) other than pursuant to this
Article X or (b) under this Article X unless, and only to the extent that, such
failure results in the Indemnifying Party's forfeiture of substantive rights or
defenses or the Indemnifying Party is prejudiced by such delay. The procedures
listed below shall govern the procedures for the handling of indemnification
claims.
(a) Any claim for indemnification for Damages that do not result
from a Third Party Claim as defined in the following paragraph, shall be
asserted by written notice given by the Indemnified Party to the Indemnifying
Party. Such Indemnifying Party shall have a period of thirty (30) days after the
receipt of such notice within which to respond thereto. If such Indemnifying
Party does not respond within such thirty (30) day period, such Indemnifying
Party shall be deemed to have refused to accept responsibility to make payment
as set forth in Section 10.01. If such Indemnifying Party does not respond
within such thirty (30) day period or rejects such claim in whole or in part,
the Indemnified Party shall be free to pursue such remedies as specified in this
Agreement, including the dispute resolution provisions set forth in Section
10.03 below.
(b) If an Indemnified Party shall receive notice or otherwise learn
of the assertion by a person or entity not a party to this Agreement of any
threatened legal action or claim (collectively a "THIRD PARTY CLAIM"), with
respect to which an Indemnifying Party may be obligated to provide
indemnification, the Indemnified Party shall give such Indemnifying Party
written notice thereof within twenty (20) days after becoming aware of such
Third Party Claim.
(c) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise) at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within thirty (30) days
after the receipt of notice from an Indemnified Party (or sooner if the nature
of such Third Party Claim so requires), the Indemnifying Party shall notify
22
the Indemnified Party whether the Indemnifying Party will assume responsibility
for defending such Third Party Claim, which election shall specify any
reservations or exceptions. If such Indemnifying Party does not respond within
such thirty (30) day period or rejects such claim in whole or in part, the
Indemnified Party shall be free to pursue such remedies as specified in this
Agreement, including the dispute resolution provisions set forth in Section
10.03 below. In case any such Third Party Claim shall be brought against any
Indemnified Party, and it shall notify the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled to assume the
defense thereof at its own expense, with counsel satisfactory to such
Indemnified Party in its reasonable judgment; provided, however, that at any
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense at its own expense. Notwithstanding the foregoing,
in any claim in which both the Indemnifying Party, on the one hand, and an
Indemnified Party, on the other hand, are, or are reasonably likely to become, a
party, such Indemnified Party shall have the right to employ separate counsel
and to control its own defense of such claim if, in the reasonable opinion of
counsel to such Indemnified Party, either (x) one or more defenses are available
to the Indemnified Party that are not available to the Indemnifying Party or (y)
a conflict or potential conflict exists between the Indemnifying Party, on the
one hand, and such Indemnified Party, on the other hand, that would make such
separate representation advisable; PROVIDED, HOWEVER, that the Indemnifying
Party (i) shall not be liable for the fees and expenses of more than one counsel
to all Indemnified Parties and (ii) shall reimburse the Indemnified Parties for
such reasonable fees and expenses of such counsel incurred in any such action
between the Indemnifying Party and the Indemnified Parties or between such
Indemnified Parties and any third party, as such expenses are incurred. The
Indemnifying Party agrees that it will not, without the prior written consent of
the Indemnified Party, settle, compromise or consent to the entry of any
judgment in any pending or threatened claim relating to the matters contemplated
hereby (if any Indemnified Party is a party thereto or has been actually
threatened to be made a party thereto) unless such settlement, compromise or
consent includes an unconditional release of such Indemnified Party from all
liability arising or that may arise out of such claim. The Indemnifying Party
shall not be liable for any settlement of any claim effected against an
Indemnified Party without the Indemnifying Party's written consent, which
consent shall not be unreasonably withheld, conditioned or delayed. The rights
accorded to an Indemnified Party hereunder shall be in addition to any rights
that any Indemnified Party may have at common law, by separate agreement or
otherwise; PROVIDED, HOWEVER, that notwithstanding the foregoing or anything to
the contrary contained in this Agreement, nothing in this Article X (other than
Section 10.03) shall restrict or limit any rights that any Indemnified Party may
have to seek equitable relief.
Section 10.03 DISPUTE RESOLUTION. Any dispute under this Agreement, the
Registration Rights Agreement or the Warrant shall be submitted to arbitration
(including, without limitation, pursuant to this Article X) and shall be finally
and conclusively determined by the decision of a board of arbitration consisting
of three (3) members (the "BOARD OF ARBITRATION") selected as hereinafter
provided. Each of the Indemnified Party and the Indemnifying Party shall select
one (1) member and the third member shall be selected by mutual agreement of the
other members, or if the other members fail to reach agreement on a third member
within twenty (20) days after their selection, such third member shall
thereafter be selected by the American Arbitration Association upon application
made to it for such purpose by the Indemnified Party. The Board of Arbitration
shall meet on consecutive business days in Chicago, Illinois or such other place
as a majority of the members of the Board of Arbitration determines more
appropriate, and shall reach and render a decision in writing (concurred in by a
majority of the members of the Board of Arbitration) with respect to the amount,
if any, which the Indemnifying Party is required to pay to the Indemnified Party
in respect of a claim filed by the Indemnified Party. In connection with
rendering its decisions, the Board of Arbitration shall adopt and follow such
rules and procedures
23
as a majority of the members of the Board of Arbitration deems necessary or
appropriate. To the extent practical, decisions of the Board of Arbitration
shall be rendered no more than thirty (30) calendar days following commencement
of proceedings with respect thereto. The Board of Arbitration shall cause its
written decision to be delivered to the Indemnified Party and the Indemnifying
Party. Any decision made by the Board of Arbitration (either prior to or after
the expiration of such thirty (30) calendar day period) shall be final, binding
and conclusive on the Indemnified Party and the Indemnifying Party and entitled
to be enforced to the fullest extent permitted by law and entered in any court
of competent jurisdiction. Each party to any arbitration shall bear its own
expense in relation thereto, including but not limited to such party's
attorneys' fees, if any, and the expenses and fees of the Board of Arbitration
shall be divided between the Indemnifying Party and the Indemnified Party in the
same proportion as the portion of the related claim determined by the Board of
Arbitration to be payable to the Indemnified Party bears to the portion of such
claim determined not to be so payable.
ARTICLE XI
MISCELLANEOUS
Section 11.01 FEES AND EXPENSES. Each party hereto shall be responsible
for its own fees and expenses; PROVIDED, HOWEVER, that the Company shall be
solely responsible for: (i) all reasonable attorneys fees and expenses incurred
by the Investor in connection with the preparation, negotiation, execution and
delivery of this Agreement, the Registration Rights Agreement (and any
registration contemplated thereunder) and the Warrant up to an aggregate maximum
of $70,000, (ii) all reasonable fees and expenses incurred by the Investor in
connection with any amendments, modifications or waivers of this Agreement or
incurred in connection with the Investor's enforcement of this Agreement,
including, without limitation, all reasonable attorneys fees and expenses, (C)
all reasonable due diligence expenses incurred by the Investor during the term
of this Agreement up to aggregate maximum amount of $10,000 per calendar
quarter, and (iv) all stamp or other similar taxes and duties, if any, levied in
connection with issuance of the Shares pursuant hereto.
Section 11.02 REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
Section 11.03 BROKERAGE. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party. The
Company on the one hand, and the Investor, on the other hand, agree to indemnify
the other against and hold the other harmless from any and all liabilities to
any Persons claiming brokerage commissions or finder's fees on account of
services purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
Section 11.04 NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written
24
notice given in accordance herewith. Any notice or other communication required
or permitted to be given hereunder shall be deemed effective (a) upon hand
delivery or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company:
Aksys, Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇▇
Attention: Chief Financial Officer
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, P.C.
if to the Investor:
Kingsbridge Capital Limited/ c/o Kingsbridge Corporate
Services Limited
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇-▇▇▇-▇▇▇
Facsimile: 011-353-45-482-003
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Director
with a copy (which shall not constitute notice) to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Either party hereto may from time to time change its address or facsimile number
for notices under this Section by giving at least ten (10) days' prior written
notice of such changed address or facsimile number to the other party hereto.
Section 11.05 ASSIGNMENT. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
Person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable
25
by, any private transferee of any of the Common Stock purchased or acquired by
the Investor hereunder with respect to the Common Stock held by such Person, and
(b) the Investor's interest in this Agreement may be assigned at any time, in
whole or in part, to any other Person or entity (including any affiliate of the
Investor) upon the prior written consent of the Company, which consent shall not
to be unreasonably withheld.
Section 11.06 AMENDMENT; NO WAIVER. No party shall be liable or bound to
any other party in any manner by any warranties, representations or covenants
except as specifically set forth in this Agreement or therein. Except as
expressly provided in this Agreement, neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by both parties hereto. The failure of the either party to
insist on strict compliance with this Agreement, or to exercise any right or
remedy under this Agreement, shall not constitute a waiver of any rights
provided under this Agreement, nor estop the parties from thereafter demanding
full and complete compliance nor prevent the parties from exercising such a
right or remedy in the future.
Section 11.07 ENTIRE AGREEMENT. This Agreement, the Registration Rights
Agreement and the Warrant set forth the entire agreement and understanding of
the parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written, relating to the subject matter hereof.
Section 11.08 SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; PROVIDED that, such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 11.09 TITLE AND SUBTITLES. The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.
Section 11.10 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.
Section 11.11 CHOICE OF LAW. This Agreement shall be construed under the
laws of the State of
New York.
Section 11.12 SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION.
(a) The Company and the Investor acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Subject to Section 10.03, each of the Company and the Investor
(i) hereby irrevocably submits to the jurisdiction of the United States District
Court and other courts
26
of the United States sitting in the State of
New York for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Investor consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
Section 11.13 SURVIVAL. The representations and warranties of the Company
and the Investor contained in Articles IV and V and the covenants contained in
Article V and Article VI shall survive the execution and delivery hereof and the
Closing until the termination of this Agreement, and the agreements and
covenants set forth in Article IX and Article X of this Agreement shall survive
the execution and delivery hereof and the Closing hereunder.
Section 11.14 PUBLICITY. Prior to the Closing, neither the Company nor the
Investor shall issue any press release or otherwise make any public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement. In the event the Company is required
by law, based upon an opinion of the Company's counsel, to issue a press release
or otherwise make a public statement or announcement with respect to this
Agreement prior to the Closing, the Company shall consult with the Investor on
the form and substance of such press release. Promptly after the Closing, each
party may issue a press release or otherwise make a public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement; PROVIDED that, prior to issuing any
such press release, making any such public statement or announcement, the party
wishing to make such release, statement or announcement consults and cooperates
in good faith with the other party in order to formulate such press release,
public statement or announcement in form and substance reasonably acceptable to
both parties.
Section 11.15 FURTHER ASSURANCES. From and after the date of this
Agreement, upon the request of the Investor or the Company, each of the Company
and the Investor shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officer as of the
date first written.
KINGSBRIDGE CAPITAL LIMITED
By: /s/ VALENTINE ▇'▇▇▇▇▇▇▇▇
--------------------------------------
Name: Valentine ▇'▇▇▇▇▇▇▇▇
Title: Director
AKSYS, LTD.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer
28
ANNEX A
MARKET CAPITALIZATION
The market capitalization of Aksys, Ltd. shall be calculated on the
Trading Day preceding the first Trading Day of the Draw Down Pricing Period and
shall be based upon the product of (x) the closing bid price of the Company's
Common Stock as reported by Bloomberg L.P. using the AQR function, (y) the
number of outstanding shares of Common Stock of the Company as reported by
Bloomberg L.P. using the DES function (such product, the "MARKET
CAPITALIZATION").