27
NY:112404.3
PRIVATE EQUITY LINE OF CREDIT AGREEMENT
Between
Paradigm Medical Industries, Inc.
And
Triton West Group, Inc.
PRIVATE EQUITY LINE OF CREDIT AGREEMENT dated as of June 30, 2000 (the
"Agreement"), between Triton West Group, Inc., a British Virgin Islands
corporation (the "Investor") and Paradigm Medical Industries, Inc., 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 contained herein, the Company shall issue and sell to Investor from
time to time as provided herein, and Investor shall purchase, up to $20,000,000
(subject to adjustment below)(the "Aggregate Purchase Price") of the Common
Stock (as defined below); and
WHEREAS, such investments will be made by the Investor as statutory
underwriter of a registered indirect primary offering of such Common Stock by
the Company.
NOW, THEREFORE, in consideration of the foregoing premises, and the
promises and covenants herein contained, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties, intending to be
legally bound, hereby agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Capital Shares" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.2 "Capital Shares Equivalents" shall mean any securities, rights, or
obligations that are convertible into or exchangeable for or give any right to
subscribe for any Capital Shares of the Company or any warrants, options or
other rights to subscribe for or purchase Capital Shares or any such convertible
or exchangeable securities.
Section 1.3 "Closing" shall mean one of the closings of a purchase and sale of
the Common Stock pursuant to Section 2.1.
Section 1.4 "Closing Date" shall mean, with respect to a Closing, the fifth
Trading Day following the end of the Valuation Period related to such Closing,
provided all conditions to such Closing have been satisfied on or before such
Trading Day.
Section 1.5 "Commitment Amount" shall mean an amount up to $20,000,000 which the
Investor has agreed to provide to the Company in order to purchase the Put
Shares pursuant to the terms and conditions of this Agreement, and in the event
the Company obtains clearance by the Food and Drug Administration to begin sales
of its laser cataract product within 6 months of the initial Closing Date, such
Commitment Amount shall increase to $30,000,000.
Section 1.6 "Commitment Period" shall mean 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 $20,000,000 (or, if applicable, $30,000,000)
of Put Shares pursuant to this Agreement, (y) the date this Agreement is
terminated pursuant to Section 2.4, or (z) the date occurring thirty-six (36)
months from the date of commencement of the Commitment Period.
Section 1.7 "Common Stock" shall mean the Company's common stock, par value
$0.001 per share.
Section 1.8 "Condition Satisfaction Date" shall have the meaning set forth in
Section 7.2.
Section 1.9 "Effective Date" shall mean, if applicable, the date on which the
SEC first declares effective a Registration Statement registering the sale by
the Company and resale by the Investor of the Registrable Securities as set
forth in Section 7.2(f).
Section 1.10 "Escrow Agent" shall mean the escrow agent designated in the Escrow
Agreement.
Section 1.11 "Escrow Agreement" shall mean the escrow agreement in the form
attached hereto as Exhibit A.
Section 1.12 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
Section 1.13 "Investment Amount" shall mean the dollar amount to be invested by
the Investor to purchase Put Shares with respect to any Put Date as notified by
the Company to the Investor, all in accordance with Section 2.2 hereof.
Section 1.14 "Market Price" on any given date shall mean the lowest closing bid
price (as reported by Bloomberg L.P.) of the Common Stock on the Principal
Market during the Valuation Period applicable to such date.
Section 1.15 "Material Adverse Effect" shall mean any effect on the business,
closing bid price, operations, properties, prospects, or financial condition of
the Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement, the
Registration Rights Agreement or the Escrow Agreement in any material respect.
Section 1.16 "Maximum Put Amount" shall mean $2,000,000 per Put, subject to
adjustments according to the following table:
25,000-50,000 Avg. 50,001-100,000 Avg. 100,001-150,000 Avg. 150,001-Above Avg.
Stock Closing Bid Price 30 Trading Day Volume 30 Trading Day Volume 30 Trading Day Volume 30 Trading Day Volume
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
2.00-3.00 $750,000 $750,000 $1,000,000 $1,000,000
3.01-5.00 $750,000 $1,000,000 $1,000,000 $1,250,000
5.01-7.00 $1,000,000 $1,000,000 $1,250,000 $1,250,000
7.01-9.00 $1,000,000 $1,250,000 $1,250,000 $1,500,000
9.01-11.00 $1,250,000 $1,250,000 $1,500,000 $1,500,000
11.01-13.00 $1,250,000 $1,500,000 $1,500,000 $1,750,000
13.00-above $1,500,000 $1,500,000 $1,750,000 $2,000,000
Section 1.17 "NASD" shall mean the National Association of Securities Dealers,
Inc.
Section 1.18 "Outstanding" when used with reference to shares of Common Stock or
Capital Shares (collectively the "Shares"), shall mean, at any date as of which
the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.19 "Person" shall mean an individual, a corporation, a partnership, a
limited liability company, an association, a trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
Section 1.20 "Principal Market" shall mean 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. Principal Market shall not include the OTC Bulletin Board
without the express written consent of the Investor.
Section 1.21 "Purchase Price" shall mean with respect to Put Shares,
eighty-eight percent (88%) (the "Purchase Price Percentage") of the Market Price
on the Trading Day immediately following the Valuation Period related to a Put
(or such other date on which the Purchase Price is calculated in accordance with
the terms and conditions of this Agreement); provided, however, that the
Purchase Price Percentage shall be reduced to eighty-five percent (85%) for Puts
relating to a Special Activity.
Section 1.22 "Put" shall mean each occasion the Company elects to exercise its
right to tender a Put Notice requiring the Investor to purchase shares of the
Company's Common Stock, subject to the terms of this Agreement.
Section 1.23 "Put Date" shall mean the Trading Day during the Commitment Period
that a Put Notice to sell Common Stock to the Investor is deemed delivered
pursuant to Section 2.2(b) hereof.
Section 1.24 "Put Notice" shall mean a written notice to the Investor setting
forth the Investment Amount that the Company intends to sell to the Investor in
the form attached hereto as Exhibit B.
Section 1.25 "Put Shares" shall mean all shares of Common Stock or other
securities issued or issuable pursuant to a Put that has occurred or may occur
in accordance with the terms and conditions of this Agreement.
Section 1.26 "Registrable Securities" shall mean the Put Shares and the Warrant
Shares until (i) all Put Shares and Warrant Shares have been disposed of
pursuant to the Registration Statement, (ii) all Put Shares and Warrant Shares
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, (iii) all Put Shares and Warrant Shares have been
otherwise transferred to persons 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 (iv) such time as, in the opinion of counsel to the Company, all Put Shares
and Warrant Shares may be sold without any time, volume or manner limitations
pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act.
Section 1.27 "Registration Rights Agreement" shall mean the agreement regarding
the filing of a further Registration Statement, if applicable, for the sale and
resale of the Registrable Securities annexed hereto as Exhibit C.
Section 1.28 "Registration Statement" shall mean the registration statement
filed on January 6, 2000 on Form S-3 or any subsequent registration statement,
if required pursuant to the Registration Rights Agreement, on Form S-3 (if use
of such form is then available to the Company pursuant to the rules of the SEC
and, if not, on such other form promulgated by the SEC, such as Form S-1 or
SB-2, for which the Company then qualifies and which counsel for the Company
shall deem appropriate, and which form shall be available for the resale by the
Investor of the Registrable Securities to be registered thereunder in accordance
with the provisions of this Agreement, the Registration Rights Agreement, and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable Securities under
the Securities Act.
Section 1.29 "SEC" shall mean the Securities and Exchange Commission.
Section 1.30 "Securities Act" shall mean the Securities Act of 1933, as amended.
Section 1.31 "SEC Documents" shall mean the Company's latest Form 10-K or 10-KSB
as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed thereafter,
and the Proxy Statement for its latest fiscal year as of the time in question
until such time as the Company no longer has an obligation to maintain the
effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
Section 1.32 "Special Activity" shall mean any one time charge the Company
expects to incur for any reason, including, without limitation, in connection
with the acquisition of another business.
Section 1.33 "Threshold Price" is the lowest Market Price at which the Company
will sell its Common Stock with respect to this Agreement.
Section 1.34 "Trading Cushion" shall mean the mandatory fifteen (15) Trading
Days between Put Dates, unless waived by the Investor. Notwithstanding the
foregoing, in the event the Company gives the Investor twenty-one (21) days
notice of a Special Activity, the Trading Cushion shall be adjusted to seven (7)
Trading Days for a period of seven (7) consecutive weeks.
Section 1.35 "Valuation Event" shall mean an event in which the Company at any
time prior to the end of the Commitment Period takes any of the following
actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend on its Capital Shares or makes
any other distribution of its Capital Shares;
(c) issues any additional Capital Shares ("Additional
Capital Shares"), otherwise than as provided in the foregoing Subsections (a)
and (b) above or (d) and (e) below, at a price per share less, or for other
consideration lower, than the closing bid price in effect immediately prior to
such issuance, or without consideration (other than pursuant to this Agreement);
(d) issues any warrants, options or other rights to
subscribe for or purchase any Additional Capital Shares and the price per share
for which Additional Capital Shares may at any time thereafter be issuable
pursuant to such warrants, options or other rights shall be less than the
closing bid price in effect immediately prior to such issuance;
(e) issues any securities convertible into or
exchangeable for Capital Shares and the consideration per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to the
terms of such convertible or exchangeable securities shall be less than the
closing bid price in effect immediately prior to such issuance;
(f) makes a distribution of its assets or evidences
of indebtedness to the holders of its Capital Shares as a dividend in
liquidation or by way of return of capital or other than as a dividend payable
out of earnings or surplus legally available for dividends under applicable law
or any distribution to such holders made in respect of the sale of all or
substantially all of the Company's assets (other than under the circumstances
provided for in the foregoing subsections (a) through (e); or
(g) takes any action affecting the number of
Outstanding Capital Shares, other than an action described in any of the
foregoing Subsections (a) through (f) hereof, inclusive, which in the opinion of
the Company's Board of Directors, determined in good faith, would have a
Material Adverse Effect upon the rights of the Investor at the time of a Put.
Section 1.36 "Valuation Period" shall mean the period of five (5) Trading Days
beginning two (2) Trading Days before the Trading Day on which a Put Notice is
deemed to be delivered and ending two (2) Trading Days after such date;
provided, however, that if a Valuation Event occurs during a Valuation Period, a
new Valuation Period shall begin on the Trading Day immediately after the
occurrence of such Valuation Event and end on the fifth (5th) Trading Day
thereafter.
Section 1.37 "Warrants" shall mean the 50,000 Common Stock Purchase Warrants in
the form of Exhibit D hereto to be delivered to the Investor at the initial
Closing. "Warrant Shares" shall mean the shares of Common Stock issuable upon
exercise of the Warrants.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Investments.
-----------
(a) Puts. Upon the terms and conditions set forth herein (including, without
limitation, the provisions of Article VII hereof), on any Put Date the Company
may make a Put by the delivery of a Put Notice. The number of Put Shares that
the Investor shall receive pursuant to such Put shall be determined by dividing
the Investment Amount specified in the Put Notice by the Purchase Price for such
Valuation Period. In connection with each Valuation Period, the Company may set
the Threshold Price, if any, in the Put Notice. If the Market Price is less than
the Threshold Price, the Company shall not sell and the Purchaser shall not be
obligated to purchase the Shares otherwise to be purchased for such Put, except
that, the Investor, in its sole discretion, may purchase such shares at the
Threshold Price.
(b) Maximum Aggregate Amount of Puts. Anything in this Agreement to the contrary
notwithstanding, (i) at no time will the Company request a Put which would
result in the issuance of an aggregate number of shares of Common Stock pursuant
to this Agreement which exceeds 19.9% of the number of shares of Common Stock
issued and outstanding on any Closing Date without obtaining stockholder
approval of such excess issuance, and (ii) the Company may not make a Put to the
extent that, after such purchase by the Investor, the sum of the number of
shares of Common Stock and Warrants beneficially owned by the Investor and its
affiliates would result in beneficial ownership by the Investor and its
affiliates of more than 9.9% of the then outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities and Exchange Act
of 1934, as amended.
Section 2.2 Mechanics.
--------- -
(a) Put Notice. At any time during the Commitment
Period, the Company may deliver a Put Notice to the Investor, subject to the
conditions set forth in Section 7.2; provided, however, that the Investment
Amount for each Put as designated by the Company in the applicable Put Notice
shall be neither less than $500,000 nor more than the Maximum Put Amount.
(b) Date of Delivery of Put Notice. A Put Notice
shall be deemed delivered on (i) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 12:00 noon Eastern
Time, or (ii) the immediately succeeding Trading Day if it is received by
facsimile or otherwise after 12:00 noon Eastern Time on a Trading Day or at any
time on a day which is not a Trading Day. No Put Notice may be deemed delivered
on a day that is not a Trading Day.
Section 2.3 Closings. On or before each Closing Date for a Put the Investor
shall deliver the Investment Amount specified in the Put Notice by wire transfer
of immediately available funds to the Escrow Agent. In addition, on or prior to
the Closing Date, each of the Company and the Investor shall deliver to the
Escrow Agent all documents, instruments and writings required to be delivered or
reasonably requested by either of them pursuant to this Agreement in order to
implement and effect the transactions contemplated herein. Upon receipt of
notice from the Escrow Agent that the Escrow Agent has possession of the
Investment Amount, the Company shall, if possible, deliver the Put Shares to the
Investor's account through the Depository Trust Company DWAC system, per written
account instructions delivered by the Investor to the Company, and if the
Company is not eligible to participate in the DWAC system, to deliver to the
Escrow Agent one or more certificates, as requested by the Investor,
representing the Put Shares to be purchased by the Investor pursuant to Section
2.1 herein, registered in the name of the Investor or, at the Investor's option,
registered in the name of such account or accounts as may be designated by the
Investor. Payment of funds to the Company and delivery of the certificates to
the Investor (unless delivered by DWAC) shall occur out of escrow in accordance
with the Escrow Agreement, provided, however, that to the extent the Company has
not paid the fees, expenses, and disbursements of the Investor's counsel in
accordance with Section 13.7, the amount of such fees, expenses, and
disbursements shall be paid in immediately available funds, at the direction of
the Investor, to Investor's counsel with no reduction in the number of Put
Shares issuable to the Investor on such Closing Date.
Section 2.4 Termination of Investment Obligation.
------------------------------------
(a) The obligation of the Investor to purchase shares
of Common Stock shall terminate permanently (including with respect to a Closing
Date that has not yet occurred) in the event that (i) there shall occur any stop
order or suspension of the effectiveness of the Registration Statement for an
aggregate of thirty (30) Trading Days during the Commitment Period, for any
reason other than deferrals or suspensions in accordance with the Registration
Rights Agreement as a result of corporate developments subsequent to the
Effective Date that would require such Registration Statement to be amended to
reflect such event in order to maintain its compliance with the disclosure
requirements of the Securities Act or (ii) the Company shall at any time fail to
comply with the requirements of Section 6.2, 6.3 or 6.5.
(b) The obligation of the Company to sell Put Shares
to the Investor shall terminate if the Investor fails to honor any Put Notice
within two (2) Trading Days of the Closing Date scheduled for such Put, or
otherwise becomes in breach of any material representation, warranty, covenant
or other obligation under this Agreement including, without limitation, all
exhibits attached hereto, and the Company notifies Investor of such termination.
Upon such termination, the Company shall maintain the Registration Statement in
effect for such reasonable period, not to exceed forty-five (45) days, as the
Investor may request in order to dispose of any remaining Put Shares. Such
termination shall be the Company's sole remedy for the Investor's failure to
honor a Put. However, if Investor fails to honor any Put Notice within two (2)
Trading Days of such Closing Date, and the Company has notified Investor of such
termination, Investor shall return a proportionate amount of the 5,000 shares of
Common Stock and Warrants still held by the Investor delivered to Investor at
the initial Closing if the aggregate amount of Put Shares which the Investor
shall have purchased as of such termination has not exceeded $5,000,000. The
amount of Common Stock and Warrants still held by the Investor to be returned to
the Company shall be determined as follows:
(i) If the aggregate amount of Put Shares which Investor shall
have purchased at such termination is less than $1,250,000,
Investor shall return 5,000 shares of Common Stock all of the
Warrants still held by the Investor;
(ii) If the aggregate amount of Put Shares which Investor
shall have purchased at such termination is $1,250,000 or
greater, but less than $2,500,000, Investor shall return 3,750
shares of Common Stock and 37,500 Warrants, or if less than
37, 500 Warrants are still held by the Investor, all of the
remaining Warrants;
(iii) If the aggregate amount of Put Shares which Investor
shall have purchased at such termination is $2,500,000 or
greater, but less than $3,750,000, Investor shall return 2,500
shares of Common Stock and 25,000 Warrants, or if less than
25,000 Warrants are still held by Investor, all of the
remaining Warrants; and
(iv) If the aggregate amount of Put Shares which Investor
shall have purchased at such termination is $3,750,000 or
greater, but less than $5,000,000, Investor shall return
1,2500 shares of Common Stock and 12,500 Warrants, or if less
than 12,500 Warrants are still held by Investor, all of the
remaining Warrants.
Section 2.5 Additional Shares. In the event that (a) within
five (5) Trading Days of any Closing Date, the Company gives notice to the
Investor of an impending "blackout period" in accordance with Section 3(f) of
the Registration Rights Agreement and (b) the closing bid price on the Trading
Day immediately preceding such "blackout period" (the "Old Closing price") is
greater than the closing bid price on the first Trading Day following such
"blackout period" (the "New Closing price") the Company shall issue to the
Investor a number of additional shares (the "Blackout Shares") equal to the
difference between (y) the product of the number of Registrable Securities
purchased by the Investor on such most recent Closing Date and still held by the
Investor during such "blackout period" that are not otherwise freely tradable
during such "blackout period" and the Old Closing price, divided by the New
Closing price and (z) the number of Registrable Securities purchased by the
Investor on such most recent Closing Date and still held by the Investor during
such "blackout period" that are not otherwise freely tradable during such
"blackout period". If any such issuance would result in the issuance of a number
of shares which exceeds the number set forth in Section 2.1(b), then in lieu of
such issuance, the Company shall pay Investor the closing ask price of the
Blackout Shares on the first Trading Day following the end of the blackout
period in cash within five Trading Days.
Section 2.5 Liquidated Damages. The parties hereto acknowledge and agree that
the obligation to issue Registrable Securities under Section 2.5 above shall
constitute liquidated damages and not penalties. The parties further acknowledge
that (a) the amount of loss or damages likely to be incurred is incapable or is
difficult to precisely estimate, (b) the amounts specified in such Sections bear
a reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by the Investor in connection with the
failure by the Company to timely cause the registration of the Registrable
Securities or in connection with a "blackout period" under the Registration
Rights Agreement, and (c) the parties are sophisticated business parties and
have been represented by legal and financial counsel and negotiated this
Agreement at arm's length.
ARTICLE III
Representations and Warranties of Investor
Investor represents and warrants to the Company that:
Section 3.1 Intent. The Investor is entering into this Agreement for its own
account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated investor (as
described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor (as
defined in Rule 501 of Regulation D), and Investor has such experience in
business and financial matters that it has the capacity to protect its own
interests in connection with this transaction and is capable of evaluating the
merits and risks of an investment in Common Stock. The Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.
Section 3.3 Authority. This Agreement has been duly authorized and validly
executed and delivered by the Investor and is a valid and binding agreement of
the Investor enforceable against it in accordance with its terms, subject to
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 3.4 Not an Affiliate. Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5 Organization and Standing. Investor is a corporation duly organized,
validly existing, and in good standing, and has all legal and corporate
authority to enter into and perform this Agreement in accordance with its terms,
under the laws of the British Virgin Islands.
Section 3.6 Absence of Conflicts. The execution and delivery of this Agreement
and any other document or instrument executed in connection herewith, and the
consummation of the transactions contemplated thereby, and compliance with the
requirements thereof, will not violate any law, rule, regulation, order, writ,
judgment, injunction, decree, administrative action or award binding on
Investor, or, to the Investor's knowledge, (a) violate any provision of any
indenture, instrument or agreement to which Investor is a party or is subject,
or by which Investor or any of its assets is bound; (b) conflict with or
constitute a material default thereunder; (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by Investor to
any third party; or (d) require the approval of any third-party (which has not
been obtained) pursuant to any material contract, agreement, instrument,
relationship or legal obligation to which Investor is subject or to which any of
its assets, operations or management may be subject.
Section 3.7 Disclosure; Access to Information.Investor has received and reviewed
all documents, records, books and other publicly available information
pertaining to Investor's investment in the Company that have been requested by
Investor. The Company is subject to the periodic reporting requirements of the
Exchange Act, and Investor has reviewed copies of any such reports that have
been requested by it.
Section 3.8 Manner of Sale. At no time was Investor presented with or solicited
by or through any leaflet, public promotional meeting, television advertisement
or any other form of general solicitation or advertising.
Section 3.9 Financial Capacity. Investor currently has the financial capacity to
meet its obligations to the Company hereunder, and the Investor has no present
knowledge of any circumstances which could cause it to become unable to meet
such obligations in the future.
Section 3.10 Underwriter Liability. Investor understands that it is the position
of the SEC that the Investor is an underwriter within the meaning of Section
2(11) of the Securities Act and that the Investor will be identified as an
underwriter of the Put Shares in the Registration Statement.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to the Investor that, except as set forth on
the Disclosure Schedule prepared by the Company and attached hereto:
Section 4.1 Organization of the Company. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries and does not own more that fifty percent (50%) of or control any
other business entity except as set forth in the SEC Documents. The Company is
duly qualified and is in good standing as a foreign corporation to do business
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate power and
corporate authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Warrants and to issue the Put Shares, the Warrants and the Warrant Shares
pursuant to their respective terms, (ii) the execution, issuance and delivery of
this Agreement, the Registration Rights Agreement, the Escrow Agreement and the
Warrants by the Company 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 Company or its Board of Directors
or stockholders is required, and (iii) this Agreement, the Registration Rights
Agreement, the Escrow Agreement and the Warrants have been duly executed and
delivered by the Company and at the initial Closing shall constitute valid and
binding obligations of the Company enforceable against the Company in accordance
with their 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. The Company has duly and validly authorized and reserved
for issuance shares of Common Stock sufficient in number for the issuance of the
Put Shares and for the exercise of the Warrants
Section 4.3 Capitalization. The authorized capital stock of the Company consists
of 20,000,000 shares of Common Stock, $0.001 par value per share, of which
10,083,990 shares are issued and outstanding and 5,000,000 shares of preferred
stock of which 500,000 are designated as Series A Preferred Stock of which 8,077
are issued and outstanding, of which 500,000 are designated as Series B
Preferred Stock of which 15,236 are issued and outstanding, of which 30,000 are
designated as Series C Preferred Stock of which none are issued and outstanding
and of which 1,140,000 are designated as Series D Preferred Stock of which
283,328 are issued and outstanding. The Company is not a party to any agreement
granting registration or anti-dilution rights to any person with respect to any
of its equity or debt securities. All of the outstanding shares of Common Stock
of the Company have been duly and validly authorized and issued and are fully
paid and non-assessable.
Section 4.4 Common Stock. The Company has registered its Common Stock pursuant
to Section 12(b) or (g) of the Exchange Act and is in full compliance with all
reporting requirements of the Exchange Act, and the Company is in compliance
with all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on, the Principal
Market. As of the date hereof, the Principal Market is the NASDAQ SmallCap
Market and the Company has not received any notice regarding, and to its
knowledge there is no threat, of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
Section 4.5 SEC Documents. The Company has made available to the Investor true
and complete copies of the SEC Documents. The Company has not provided to the
Investor any information that, according to applicable law, rule or regulation,
should have been disclosed publicly prior to the date hereof by the Company, but
which has not been so disclosed. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act, and
rules and regulations of the SEC promulgated thereunder and the SEC Documents
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. The financial statements of the Company included in the SEC
Documents complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles 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 exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the ordinary course of
business consistent with the Company's past practices since the last date of
such financial statements.
Section 4.6 Valid Issuances. When issued and paid for in accordance with the
terms hereof or of the Warrants, the Put Shares and the Warrant Shares will be
duly and validly issued, fully paid, and non-assessable. Neither the sales of
the Put Shares, the Warrants or the Warrant Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement, the Registration
Rights Agreement, the Escrow Agreement or the Warrants will (i) result in the
creation or imposition by the Company of any liens, charges, claims or other
encumbrances upon the Put Shares, the Warrants or the Warrant Shares or, except
as contemplated herein, any of the assets of the Company, or (ii) entitle the
holders of Outstanding Capital Shares to preemptive or other rights to subscribe
for or acquire the Capital Shares or other securities of the Company. The Put
Shares, the Warrants and the Warrant Shares shall not subject the Investor to
personal liability to the Company or its creditors by reason of the possession
thereof.
Section 4.7 No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Put
Shares, the Warrants and the Warrant Shares, do not and will not (i) result in a
violation of the Company's Articles of Incorporation or By-Laws or (ii) conflict
with, or constitute a material default (or an event that 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,
indenture or instrument, or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state or local law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any material property or
asset of the Company is bound or affected, nor is the Company otherwise in
violation of, conflict with or default under any of the foregoing (except in
each case for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not have, individually or in the
aggregate, a Material Adverse Effect). The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate
would not have a Material Adverse Effect. The Company is not required under any
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 issue and sell the Put Shares or the
Warrants in accordance with the terms hereof (other than any SEC, Principal
Market or state securities filings that may be required to be made by the
Company subsequent to the initial Closing, any registration statement that may
be filed pursuant hereto, and any shareholder approval required by the rules
applicable to companies whose common stock trades on the Principal Market);
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 4.8 No Material Adverse Change. Since March 31, 2000 no Material Adverse
Effect has occurred or exists with respect to the Company, except as disclosed
in the SEC Documents.
Section 4.9 No Undisclosed Events or Circumstances. Since March 31, 2000, no
event or circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
Section 4.10 Litigation and Other Proceedings. Except as disclosed in the SEC
Documents, there are no lawsuits or proceedings pending or, to the knowledge of
the Company, threatened, against the Company or any subsidiary, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which could reasonably be expected to have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, to the knowledge of the
Company, requested of any court, arbitrator or governmental agency which could
result in a Material Adverse Effect.
Section 4.11 No Misleading or Untrue Communication. The Company and, to the
knowledge of the Company, any person representing the Company, or any other
person selling or offering to sell the Put Shares or the Warrants in connection
with the transaction contemplated by this Agreement, have not made, at any time,
any oral communication in connection with the offer or sale of the same which
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
Section 4.12 Material Non-Public Information. The Company has not disclosed to
the Investor any material non-public information that (i) if disclosed publicly,
would reasonably be expected to have a material effect on the price of the
Common Stock or (ii) according to applicable law, rule or regulation, should
have been disclosed publicly by the Company prior to the date hereof but which
has not been so disclosed.
Section 4.13 Insurance. The Company and each subsidiary maintains property and
casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound and
reputable insurers that is adequate, consistent with industry standards and the
Company's historical claims experience. The Company has not received notice
from, and has no knowledge of any threat by, any insurer (that has issued any
insurance policy to the Company) that such insurer intends to deny coverage
under or cancel, discontinue or not renew any insurance policy presently in
force.
Section 4.14 Tax Matters.
------------
The Company and each subsidiary has filed all Tax
Returns which it is required to file under applicable
laws; all such Tax Returns are true and accurate and has been prepared in
compliance with all applicable laws; the Company has paid all Taxes due and
owing by it or any subsidiary (whether or not such Taxes are required to be
shown on a Tax Return) and have withheld and paid over to the appropriate taxing
authorities all Taxes which it is required to withhold from amounts paid or
owing to any employee, stockholder, creditor or other third parties; and since
December 31, 1998, the charges, accruals and reserves for Taxes with respect to
the Company (including any provisions for deferred income taxes) reflected on
the books of the Company are adequate to cover any Tax liabilities of the
Company if its current tax year were treated as ending on the date hereof.
No claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax returns
that the Company or any subsidiary is or may be subject to taxation by that
jurisdiction. There are no foreign, federal, state or local tax audits or
administrative or judicial proceedings pending or being conducted with respect
to the Company or any subsidiary; no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority; and, except
as disclosed above, no written notice indicating an intent to open an audit or
other review has been received by the Company or any subsidiary from any
foreign, federal, state or local taxing authority. There are no material
unresolved questions or claims concerning the Company's Tax liability. The
Company (A) has not executed or entered into a closing agreement pursuant to ss.
7121 of the Internal Revenue Code or any predecessor provision thereof or any
similar provision of state, local or foreign law; and (B) has not agreed to or
is required to make any adjustments pursuant to ss. 481 (a) of the Internal
Revenue Code or any similar provision of state, local or foreign law by reason
of a change in accounting method initiated by the Company or any of its
subsidiaries or has any knowledge that the IRS has proposed any such adjustment
or change in accounting method, or has any application pending with any taxing
authority requesting permission for any changes in accounting methods that
relate to the business or operations of the Company. The Company has not been a
United States real property holding corporation within the meaning of ss.
897(c)(2) of the Internal Revenue Code during the applicable period specified in
ss. 897(c)(1)(A)(ii) of the Internal Revenue Code.
The Company has not made an election underss. 341(f)
of the Internal Revenue Code. The Company is not liable for the Taxes of another
person that is not a subsidiary of the Company under (A) Treas. Reg. ss.
1.1502-6 (or comparable provisions of state, local or foreign law), (B) as a
transferee or successor, (C) by contract or indemnity or (D) otherwise. The
Company is not a party to any tax sharing agreement. The Company has not made
any payments, is obligated to make payments or is a party to an agreement that
could obligate it to make any payments that would not be deductible under ss.
280G of the Internal Revenue Code.
For purposes of this Section 4.14:
"IRS" means the United States Internal Revenue
Service.
Tax" or "Taxes" means federal, state, county, local,
foreign, or other income, gross receipts, ad valorem,
franchise, profits, sales or use, transfer, registration,
excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or
other withholding, employment, social security, severance,
stamp, occupation, alternative or add-on minimum, estimated
and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and
interest attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or
filing with respect to Taxes, including any schedules attached
thereto and including any amendment thereof.
Section 4.15 Property. Neither the Company nor any of its subsidiaries owns any
real property. Each of the Company and its subsidiaries has good and marketable
title to all personal property owned by it, free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not materially interfere with the use made and proposed to
be made of such property by the Company; and to the Company's knowledge any real
property and buildings held under lease by the Company as tenant are held by it
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and intended to be made of such
property and buildings by the Company.
Section 4.16 Licensing and Permits. The Company holds all necessary licenses and
permits for the conduct of its business, including licenses with the FDA. All of
such licenses and permits are in good standing and the Company is not in
material default of any of the conditions thereof.
Section 4.17 Intellectual Property. Each of the Company and its subsidiaries
owns or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") necessary for the conduct of its
business as now being conducted. To the Company's knowledge, except as disclosed
in the SEC Documents neither the Company nor any of its subsidiaries is
infringing upon or in conflict with any right of any other person with respect
to any Intangibles. Except as disclosed in the SEC Documents, no adverse claims
have been asserted by any person to the ownership or use of any Intangibles and
the Company has no knowledge of any basis for such claim.
Section 4.18 Internal Controls and Procedures. The Company maintains books and
records and internal accounting controls which provide reasonable assurance that
(i) all transactions to which the Company or any subsidiary is a party or by
which its properties are bound are executed with management's authorization;
(ii) the recorded accounting of the Company's consolidated assets is compared
with existing assets at regular intervals; (iii) access to the Company's
consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
Section 4.19 Payments and Contributions. Neither the Company, any subsidiary,
nor any of its directors, officers or, to its knowledge, other employees has (i)
used any Company funds for any unlawful contribution, endorsement, gift,
entertainment or other unlawful expense relating to political activity; (ii)
made any direct or indirect unlawful payment of Company funds to any foreign or
domestic government official or employee; (iii) violated or is in violation of
any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other similar
payment to any person with respect to Company matters.
Section 4.20 No Misrepresentation. The representations and warranties of the
Company contained in this Agreement, any schedule, annex or exhibit hereto and
any agreement, instrument or certificate furnished by the Company to the
Investor pursuant to this Agreement, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE V
Covenants of the Investor
Investor covenants with the Company that:
Section 5.1 Compliance with Law. The Investor's trading activities with respect
to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed. Without limiting the generality of the foregoing, the Investor agrees
that it will, whenever required by federal securities laws, deliver the
prospectus included in the Registration Statement to any purchaser of Put Shares
from the Investor.
Section 5.2 No Short Sales. The Investor and its affiliates shall not engage in
short sales of the Company's Common Stock (as defined in applicable SEC and NASD
rules) during the Commitment Period.
ARTICLE VI
Covenants of the Company
Section 6.1 Registration Rights. The Company shall cause the Registration Rights
Agreement to remain in full force and effect and the Company shall comply in all
material respects with the terms thereof.
Section 6.2 Listing of Common Stock. The Company hereby agrees to maintain the
listing of the Common Stock on a Principal Market, and as soon as practicable
(but in any event prior to the commencement of the Commitment Period) to list
the Put Shares and the Warrant Shares. The Company further agrees, if the
Company applies to have the Common Stock traded on any other Principal Market,
it will include in such application the Put Shares and the Warrant Shares and
will take such other action as is necessary or desirable in the opinion of the
investor to cause the Common Stock to be listed on such other Principal Market
as promptly as possible. The Company will take all action to continue the
listing and trading of its Common Stock on the Principal Market (including,
without limitation, maintaining sufficient net tangible assets) and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the Principal Market and shall provide Investor with
copies of any correspondence to or from such Principal Market which questions or
threatens delisting of the Common Stock, within one Trading Day of the Company's
receipt thereof.
Section 6.3 Exchange Act Registration. The Company will cause its Common Stock
to continue to be registered under Section 12(g) or 12(b) of the Exchange Act,
will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act.
Section 6.4 Legends. The certificates evidencing the Common Stock to be sold to
the Investor shall be free of restrictive legends.
Section 6.5 Corporate Existence. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.
Section 6.6 Additional SEC Documents. During the Commitment Period, the Company
will deliver to the Investor, as and when the originals thereof are submitted to
the SEC for filing, copies of all SEC Documents so furnished or submitted to the
SEC, or else notify the Investor that such documents are available on the ▇▇▇▇▇
system.
Section 6.7 Notice of Certain Events Affecting Registration; Suspension of Right
to Make a Put. The Company will immediately notify the Investor upon the
occurrence of any of the following events in respect of a registration statement
or related prospectus in respect of an offering of Registrable Securities; (i)
receipt of any request for additional information from the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement the response to which would require any amendments or
supplements to the registration statement or related prospectus; (ii) the
issuance by the SEC 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; (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; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; and the Company
will promptly make available to the Investor any such supplement or amendment to
the related prospectus. The Company shall not deliver to the Investor any Put
Notice during the continuation of any of the foregoing events.
Section 6.8 Expectations Regarding Put Notices. Within ten (10) days after the
commencement of each calendar quarter occurring subsequent to the commencement
of the Commitment Period, the Company must notify the Investor, in writing, as
to its reasonable expectations as to the dollar amount it intends to raise
during such calendar quarter, if any, through the issuance of Put Notices. Such
notification shall constitute only the Company's good faith estimate and shall
in no way obligate the Company to raise such amount, or any amount, or otherwise
limit its ability to deliver Put Notices. The failure by the Company to comply
with this provision can be cured by the Company's notifying the Investor, in
writing, at any time as to its reasonable expectations with respect to the
current calendar quarter.
Section 6.9 Consolidation; Merger. The Company shall not, at any time after the
date hereof, effect any merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity (a "Consolidation Event") unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument or by operation of law
the obligation to deliver to the Investor such shares of stock and/or securities
as the Investor is entitled to receive pursuant to this Agreement.
Section 6.10 Limitation on Future Financing. The Company agrees that it will not
enter into any similar equity line of credit or common stock equity financing
for a period of three (3) years from the date hereof. As to any other future
financing, the Company agrees that it will not enter into any sale of its
securities for cash at a discount to its then-current closing bid price for a
one-year period commencing as of the date hereof without first offering the
right to place such securities to Investor, except for any sales (i) pursuant to
any presently existing employee benefit plan which plan has been approved by the
Company's stockholders, (ii) pursuant to any compensatory plan for a full-time
employee or key consultant, (iii) pursuant to any underwritten public offering
or (iv) with the prior approval of the Investor, which will not be unreasonably
withheld, in connection with a strategic partnership or other business
transaction, the principal purpose of which is not simply to raise money.
Further, the Investor shall have a right of first refusal, to elect to
participate, in such subsequent transaction in the case of (iii) above. Such
right of first refusal must be exercised in writing within seven (7) Trading
Days of the Investor's receipt of notice of the proposed terms of such
financing.
ARTICLE VII
Conditions to Delivery of Puts
and Conditions to Closing
Section 7.1 Conditions Precedent to the Obligation of the Company to Issue and
Sell Common Stock. The obligation hereunder of the Company to issue and sell the
Put Shares to the Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investor's Representation and
Warranties. The representations and warranties of the Investor shall be true and
correct in all material respects as of the date of this Agreement and as of the
date of each such Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Investor at or prior to such Closing, and
Investor shall provide a certificate to the Company, substantially in the form
of that delivered by the Investor.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver a Put
Notice and the Obligation of the Investor to Purchase Put Shares. The right of
the Company to deliver a Put Notice and the obligation of Investor hereunder to
acquire and pay for the Put Shares incident to a Closing is subject to the
satisfaction, on both (i) the date of delivery of such Put Notice and (ii) the
applicable Closing Date (each a "Condition Satisfaction Date"), of each of the
following conditions:
(a) Closing Certificate. All representations and
warranties of the Company contained herein shall remain true and correct as of
the Closing Date as though made as of such date and the Company shall have
delivered into escrow an Officer's Certificate signed by its Chief Executive
Officer certifying that all of the Company's representations and warranties
herein remain true and correct as of the Closing Date and that the Company has
performed all covenants and satisfied all conditions to be performed or
satisfied by the Company prior to such Closing;
(b) Blue Sky. The Company shall have obtained all
permits and qualifications required by any state for the offer and sale of the
Common Stock to the Investor and by the Investor as set forth in the
Registration Rights Agreement or shall have the availability of exemptions
therefrom;
(c) Delivery of Put Shares. Delivery into escrow or
to DTC of the Put Shares;
(d) Opinion of Counsel. Receipt by the Investor of an
opinion of counsel to the Company, in the form of Exhibit D hereto; and
(e) Transfer Agent. Delivery to the Company's
transfer agent of instructions to such transfer agent in form and substance
reasonably satisfactory to the Investor.
(f) Registration of the Common Stock with the SEC.
The Registration Statement shall have previously become effective and shall
remain effective and available for making resales of the Put Shares and Warrant
Shares by the Investor on each Condition Satisfaction Date and (i) neither the
Company nor the Investor shall have received notice that the SEC has issued or
intends to issue a stop order with respect to the Registration Statement or that
the SEC 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 SEC's concerns have been addressed and the
Investor is reasonably satisfied that the SEC 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 related
prospectus shall exist.
(g) Authority. The Company will satisfy all laws and
regulations pertaining to the sale and issuance of the Put Shares.
(h) 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 Escrow Agreement to be performed,
satisfied or complied with by the Company at or prior to each Condition
Satisfaction Date.
(i) 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 that prohibits or directly and adversely affects any of the
transactions contemplated by this Agreement, and no proceeding shall have been
commenced that may have the effect of prohibiting or adversely affecting any of
the transactions contemplated by this Agreement.
(j) Adverse Changes. Since the date of filing of the
Company's most recent SEC Document, no event that had or is reasonably likely to
have a Material Adverse Effect has occurred.
(k) No Suspension of Trading In or Delisting of
Common Stock. The trading of the Common Stock (including, without limitation,
the Put Shares) is not suspended by the SEC or the Principal Market, and the
Common Stock (including, without limitation, the Put Shares) shall have been
approved for listing or quotation on and shall not have been delisted from the
Principal Market. The issuance of shares of Common Stock with respect to the
applicable Closing, if any, shall not violate the shareholder approval
requirements of the Principal Market. The Company shall not have received any
notice threatening to delist the Common Stock from the Principal Market.
(l) No Knowledge. The Company has no knowledge of any
event more likely than not to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective (which event is reasonably
likely to occur within the thirty (30) Trading Days following the Trading Day on
which such Notice is deemed delivered).
(m) Trading Cushion. The Trading Cushion shall have
elapsed since the next preceding Put Date.
(n) Other. On each Condition Satisfaction Date, the
Investor shall have received and been reasonably satisfied with such other
certificates and documents as shall have been reasonably requested by the
Investor in order for the Investor to confirm the Company's satisfaction of the
conditions set forth in this Section 7.2.
ARTICLE VIII
Due Diligence Review; Non-Disclosure of Non-Public Information.
Section 8.1 Due Diligence Review. The Company shall make available for
inspection and review by the Investor, advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all SEC Documents and
other filings with the SEC, and all other publicly available corporate documents
and properties of the Company as may be reasonably necessary for the purpose of
such review, and cause the Company's officers, directors and employees to supply
all such publicly available information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 8.2 Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose non-public
information to the Investor, advisors to or representatives of the Investor
unless prior to disclosure of such information the Company identifies such
information as being non-public information and provides the Investor, such
advisors and representatives with the opportunity to accept or refuse to accept
such non-public information for review. The Company may, as a condition to
disclosing any non-public information hereunder, require the Investor's advisors
and representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investor.
(b) The Company represents that it does not
disseminate non-public information to any investors who purchase stock in the
Company in a public offering, to money managers or to securities analysts,
provided, however, that notwithstanding anything herein to the contrary, the
Company will, as hereinabove provided, immediately notify the advisors and
representatives of the Investor and, if any, underwriters, of any event or the
existence of any circumstance (without any obligation to disclose the specific
event or circumstance) of which it becomes aware, constituting non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.2 shall be construed to mean that such persons or entities
other than the Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE IX
Transfer Agent Instructions
Section 9.1 Transfer Agent Instructions. Upon each Closing, the Company will
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 to deliver
the Put Shares without restrictive legends to the Escrow Agent.
Section 9.2 No Legend or Stock Transfer Restrictions. No legend shall be placed
on the share certificates representing the Put Shares 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.
Section 9.3 Investor's Compliance. Nothing in this Article shall affect in any
way the Investor's obligations under any agreement to comply with all applicable
securities laws upon resale of the Put Shares.
ARTICLE X
Choice of Law
Section 10.1 Governing Law/Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made in Delaware by persons domiciled in Delaware and without regard
to its principles of conflicts of laws. Any dispute under this Agreement or any
Exhibit attached hereto shall be submitted to arbitration under the American
Arbitration Association (the "AAA") in San Francisco, California, and shall be
finally and conclusively determined by the decision of a board of arbitration
consisting of three (3) members (hereinafter referred to as the "Board of
Arbitration") selected as according to the rules governing the AAA. The Board of
Arbitration shall meet on consecutive business days in San Francisco,
California, 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 losing party is required to pay to the other party in respect
of a claim filed. In connection with rendering its decisions, the Board of
Arbitration shall adopt and follow the laws of the State of Delaware. 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 all parties involved in the dispute. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. 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 parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. The prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.
ARTICLE XI
Assignment
Section 11.1 Assignment. Neither this Agreement nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person
except by operation of law. Notwithstanding the foregoing, upon the prior
written consent of the Company, which consent shall not unreasonably be withheld
or delayed in the case of an assignment to an affiliate of the Investor, 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)
who agrees to make the representations and warranties contained in Article III
and who agrees to be bound hereby.
ARTICLE XII
Notices
Section 12.1 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 notice. 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 reputable 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 : Paradigm Medical Industries, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
With a copy to:
(shall not constitute notice) Mackey Price & ▇▇▇▇▇▇▇▇
notice) to: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Investor: Triton West Group, Inc.
c/o Trinity Capital Advisors, Inc.
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▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(shall not constitute notice) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
ARTICLE XIII
Miscellaneous
Section 13.1 Counterparts/ Facsimile/ Amendments. 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. Except as otherwise
stated herein, in lieu of the original documents, a facsimile transmission or
copy of the original documents shall be as effective and enforceable as the
original. This Agreement may be amended only by a writing executed by all
parties.
Section 13.2 Entire Agreement. This Agreement, the Exhibits hereto, which
include, but are not limited to the Escrow Agreement, the Registration Rights
Agreement and the Warrants, 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. The terms and
conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
Section 13.3 Survival; Severability. The representations, warranties, covenants
and agreements of the parties hereto shall survive each Closing hereunder. 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 13.4 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 13.5 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 13.6 Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Put Shares and (ii) in the case of
any such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company (which shall not exceed that required by the Company's transfer
agent in the ordinary course) or (iii) in the case of any such mutilation, on
surrender and cancellation of such certificate, the Company at its expense will
execute and deliver, in lieu thereof, a new certificate of like tenor.
Section 13.7 Fees and Expenses. Each of the Company and the Investors agrees to
pay its own expenses incident to the performance of its obligations hereunder,
except that the Company shall pay the fees, expenses and disbursements of
Investors' counsel in the amount of $5,000 plus $500 per Closing of a Put.
Section 13.8 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 other than Triton
West Group, Inc. whose fee shall be paid by the Company. 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 person 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 13.9 Publicity. The Company agrees that it will not issue any
press release or other public announcement of the transactions contemplated by
this Agreement without the prior consent of the Investor, which shall not be
unreasonably withheld nor delayed by more than two (2) Trading Days from its
receipt of such proposed release; provided, however, that if the Company is
advised by its outside counsel that it is required by law or the applicable
rules of any Principal Market to issue any such press release or public
announcement, then, it may do so without the prior consent of the Investor,
although it shall be required to provide prior notice (which may be by
telephone) to the Investor that it intends to issue such press release or public
announcement. No release shall name the Investor without its express consent.
Section 13.10 Effectiveness of Agreement. This Agreement shall become
effective only upon satisfaction of the conditions precedent to the Initial
Closing set forth in Article I of the Escrow Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Line of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
Dated: June ___, 2000
PARADIGM MEDICAL INDUSTRIES, INC.
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman & CEO
Triton West Group, Inc.
By:/s/ E. ▇▇▇▇▇▇ ▇▇▇▇
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E. ▇▇▇▇▇▇ ▇▇▇▇, Authorized Signatory