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EXHIBIT 10.2
CLASS A COMMON STOCK
INVESTMENT AGREEMENT
between
Promethean Investment Group, L.L.C.
and
AVANIR Pharmaceuticals
Dated as of January 22, 1999
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CLASS A COMMON STOCK INVESTMENT AGREEMENT (this "AGREEMENT"), dated as
of January 22, 1999, by and among AVANIR Pharmaceuticals (formerly known as
LIDAK Pharmaceuticals), a California corporation with headquarters located at
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "COMPANY"),
and Promethean Investment Group, L.L.C., a limited liability company organized
and existing under the laws of the State of New York (together with its
successors in interest and assigns or its designees, the "INVESTOR").
WHEREAS:
A. The Company and the Investor are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) under the Securities Act of 1933, as amended (the "1933 ACT");
B. The parties desire that, upon the terms and subject to the conditions
contained herein, the Investor shall invest up to $10,000,000 (subject to
increase up to $13,000,000 as set forth in Section 1(d)) in shares (including
the Commitment Shares (as defined in Section 10(b)(i)), the "SHARES") of the
Company's Class A common stock, no par value per share (the "CLASS A COMMON
STOCK"); and
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit A (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act, and the rules and regulations
promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Investor hereby agree as follows:
1. PURCHASE AND SALE OF CLASS A COMMON STOCK
a. Purchase and Sale of Class A Common Stock. Upon the terms and
conditions set forth herein, the Company shall issue and sell to the Investor,
and the Investor shall purchase from the Company, up to those number of Shares
having an aggregate Purchase Price (as defined in Section 1(g)) of $10,000,000
(subject to increase up to $13,000,000 as set forth in Section 1(d)).
b. Delivery of Put Notices. Subject to the satisfaction of the
conditions set forth in this Section 1, at any time and from time to time during
the period beginning on and including the Business Day (as defined below)
immediately following the date on which the initial Registration Statement (as
defined in the Registration Rights Agreement) filed pursuant to the Registration
Rights Agreement is declared effective (the "EFFECTIVE DATE") by the Securities
and Exchange Commission (the "SEC") and ending on the earlier of (i) the date
which is 24 months after the Effective Date and (ii) termination of this
Agreement in accordance with Section 8 (the "OPEN PERIOD"), the Company may, in
its sole discretion, deliver a written notice to the Investor (each such notice
hereinafter referred to as a "PUT NOTICE") stating a dollar amount (the "DOLLAR
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AMOUNT") of Shares which the Company intends to sell to the Investor during the
period beginning on the Business Day immediately following the date which the
Investor receives the Put Notice (the "PUT NOTICE DATE") and ending on and
including the date which is 25 Business Days after such Put Notice Date (the
"PURCHASE PERIOD"). In addition, the Dollar Amount designated by the Company in
a Put Notice shall be in increments of $100,000. During the Open Period, Put
Notices may be delivered no more frequently than once in each period of 26
consecutive Business Days, such that a Put Notice may not be given during a
Purchase Period. The Company may, at its option, designate in a Put Notice a
minimum purchase price per Share at which the Investor may purchase Shares
pursuant to such Put Notice during the related Purchase Period (a "COMPANY
DESIGNATED MINIMUM PRICE"). For purposes of this Agreement, "BUSINESS DAY" shall
mean any day other than a Saturday, Sunday or a day on which commercial banks in
the City of New York are authorized or required by law or executive order to
remain closed or on which the Principal Market (as defined in Section 1(f)) for
the Class A Common Stock is not open for trading. For purposes of this
Agreement, "TRIGGER PRICE" for any Purchase Period shall mean 106.38% of the
greater of (i) the Company Designated Minimum Price, if any, for such Purchase
Period and (ii) $1.00 (equitably adjusted for stock splits, stock dividends,
combinations and similar transactions). Prior to 12 months from the Effective
Date, the Company shall deliver such number of Put Notices as allows the
Investor to purchase Shares having an aggregate Purchase Price of at least
$2,500,000; provided, however, that if the Company fails to deliver such number
of Put Notices as allows the Investor to purchase such minimum dollar amount of
Shares by the first anniversary of the Effective Date, the Company shall deliver
to the Investor on such date an amount equal to $150,000 by wire transfer of
immediately available funds, which amount shall be Investor's sole remedy for
the Company's failure to deliver such number of Put Notices. If the Company
fails to pay to the Investor such $150,000 when due, the Company shall pay to
the Investor, on the first Business Day following the date such payment was due
(in addition to and not in lieu of any remedy the Investor may have in law or
equity) an amount equal to $3,000, in cash by wire transfer, plus compounded
annual interest of 18% on such $150,000 amount during the period, beginning on
the Business Day after such amount was due, during which such amount, or any
portion thereof, is outstanding.
c. Delivery of Preliminary Put Notices. At least 15 days but not more
than 30 days prior to the Company's delivery of a Put Notice to the Investor,
the Company shall deliver written notice to the Investor (a "PRELIMINARY PUT
NOTICE") stating that the Company may deliver a Put Notice to the Investor. The
Company shall not be obligated to deliver a Put Notice following its delivery of
a Preliminary Put Notice; provided, however, that if on two occasions the
Company fails to deliver a Put Notice within 30 days after its delivery of a
Preliminary Put Notice then on each subsequent occasion that the Company
delivers a Preliminary Put Notice the Company shall be obligated to deliver a
Put Notice within 30 days after its delivery of such Preliminary Put Notice. The
Company shall reimburse the Investor for reasonable due diligence costs
(including legal due diligence costs) of the Investor up to $15,000 on each
occasion that the Company delivers a Preliminary Put Notice. Investor shall be
responsible for its due diligence costs in excess of $15,000 on each occasion
that the Company delivers a Preliminary Put Notice.
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d. Investor Obligation and Right to Purchase Shares. Subject to the
conditions set forth in this Agreement, following the Investor's receipt of a
validly delivered Put Notice, the Investor shall be required to purchase from
the Company during the related Purchase Period a number of Shares having an
aggregate Purchase Price equal to the lesser of (i) the Dollar Amount set forth
in the Put Notice (subject to reduction during the Purchase Period as
hereinafter provided), (ii) $1,000,000 (subject to reduction during the Purchase
Period as hereinafter provided) and (iii) 12% of the sum of the Daily Trading
Dollar Volume (as defined below) of the Class A Common Stock on each of the
trading days on which the Applicable Trading Price (as defined in Section 1(f))
is greater than or equal to the Trigger Price during the 20 consecutive Business
Days immediately following the Put Notice Date (the lesser of (i), (ii) or (iii)
above shall be referred to herein as the "REQUIRED DOLLAR AMOUNT"). In addition,
the Investor shall have the right, but not the obligation, solely at its
election to purchase during each and any such Purchase Period a number of Shares
from the Company having an aggregate Purchase Price equal to up to 30% of the
Dollar Amount set forth in the Put Notice. The Investor shall not in any event
be required to purchase pursuant to this Agreement a number of Shares having an
aggregate Purchase Price which is greater than $10,000,000 (excluding additional
purchases which may be made at the election or option of the Investor pursuant
to the immediately preceding sentence). The amount provided in clause (i) in the
first sentence of this Section 1(d) shall be in effect at the beginning of each
Purchase Period but shall be reduced during such Purchase Period by an amount
equal to one-twentieth of the Dollar Amount in effect at the beginning of such
Purchase Period for each trading day during such Purchase Period on which the
Applicable Trading Price of the Class A Common Stock is less than the Trigger
Price. The amount provided in clause (ii) of the first sentence of this Section
1(d) shall be in effect at the beginning of each Purchase Period but shall be
reduced during such Purchase Period by $50,000 for each trading day during such
Purchase Period on which the Applicable Trading Price of the Class A Common
Stock is less than the Trigger Price. For purposes of this Agreement, "DAILY
TRADING DOLLAR VOLUME" shall mean the number of shares of Class A Common Stock
traded on such day on the Principal Market on which the Class A Common Stock is
traded multiplied by such day's Applicable Trading Price of the Class A Common
Stock (as reported by Bloomberg Financial Markets ("BLOOMBERG"), provided that
individual trades of at least 15,000 shares of Class A Common Stock on any
trading day shall, for this purpose, be treated as a trade of 15,000 shares of
Class A Common Stock).
e. Limitation on Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, in no event shall
the Investor be required to purchase, and a Required Dollar Amount may not
include, an amount, which when added to the sum of (i) the additional number of
Shares which the Investor has the right to purchase with respect to such
Required Dollar Amount (as set forth in the second sentence of Section 1(d)) and
(ii) all other Shares acquired by the Investor pursuant to this Agreement during
the 61 days preceding the Put Notice Date with respect to which this
determination of the permitted Required Dollar Amount is being made, would
exceed 4.99% of the number of shares of Class A Common Stock outstanding on the
Put Notice Date for such Purchase Period, as determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934
ACT"). Each Put Notice shall include a representation of the Company as to the
number of shares of Class A Common Stock outstanding on the related Put Notice
Date as determined in accordance with Section 13(d) of the 1934 Act. In the
event that the number of shares of Class A Common Stock
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outstanding as determined in accordance with Section 13(d) of the 1934 Act is
different on any date during a Purchase Period than on the Put Notice Date
associated with such Purchase Period, then the number of shares of Class A
Common Stock outstanding on such date during such Purchase Period shall govern
for purposes of determining whether the Investor, when aggregating all purchases
of Shares made pursuant to this Agreement in the 61 calendar days preceding such
date, would have acquired more than 4.99% of the number of shares of Class A
Common Stock outstanding during such period.
f. Conditions to Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, the Company shall
not be entitled to deliver a Put Notice and require the Investor to purchase any
Shares at a Closing (as defined in Section 1(h)) unless each of the following
conditions are satisfied: (i) the Applicable Trading Price of the Class A Common
Stock on the Business Day immediately preceding the Put Notice Date shall not be
less than $1.00 (equitably adjusted for stock splits, stock dividends,
combinations and similar transactions); (ii) a Registration Statement shall have
been declared effective and shall remain effective and available for sale of all
the Registrable Securities (as defined in the Registration Rights Agreement) at
all times during the period beginning on the date of delivery of the related
Preliminary Put Notice and ending on and including the related Closing Date (as
defined in Section 1(h)); (iii) at all times during the period beginning on the
date that the Company delivers the related Preliminary Put Notice and ending on
and including the related Closing Date, the Class A Common Stock shall have been
listed on The American Stock Exchange, Inc. or The New York Stock Exchange, Inc.
or designated on the Nasdaq National Market (the "PRINCIPAL MARKET") and shall
not have been suspended from trading thereon and the Company shall not have been
notified of any pending or threatened proceeding or other action to delist or
suspend the Class A Common Stock; (iv) during the period beginning on the date
of this Agreement and ending on and including the applicable Closing Date, there
shall not have occurred a Major Transaction (as defined below) or the public
announcement of a pending Major Transaction which has not been abandoned or
terminated; and (v) the Company has complied with its obligations and is
otherwise not in breach of, or in default under, this Agreement and the
Registration Rights Agreement. If any of the events described in clauses (ii)
through (v) above occurs after an effective Put Notice is so delivered, and if
any such circumstance described above so occurs before the entire Required
Dollar Amount of Class A Common Stock covered by such Put Notice shall have been
purchased during the Purchase Period, then the Investor shall have no further
obligation to purchase the balance of such Required Dollar Amount of Class A
Common Stock during such Purchase Period; provided, however, that on any day
during the balance of such Purchase Period upon which such events described in
clauses (ii) through (v) above do not exist, the Investor may, in its sole
discretion, but shall not be required to, give the Company one or more Purchase
Notices (as defined in Section 1(h)) covering some or all of such balance of the
Required Dollar Amount, as well as some or all of the additional amounts of
Class A Common Stock which the Investor may elect to purchase during such
Purchase Period pursuant to Section 1(d) above. The "APPLICABLE TRADING PRICE"
with respect to the Class A Common Stock on any Business day, shall mean the
Weighted Average Price (as defined below) of the Class A Common Stock on such
Business Day. "WEIGHTED AVERAGE PRICE" means, for any security as of any date,
the dollar volume-weighted average price for such security on the Principal
Market (as reported by Bloomberg through its "Volume at Price" function) or, if
the Principal Market is not the principal securities exchange or trading market
for such security,
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the dollar volume-weighted average price of such security on the principal
securities exchange or trading market where such security is listed or traded
(as reported by Bloomberg through its "Volume at Price" function), or if the
foregoing do not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg, the average of the bid prices
of any market makers for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc. If the Weighted Average Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Weighted Average Price of such security on such date shall be the fair market
value as mutually determined by the Company and the Investor.
For purposes of this Agreement, a "MAJOR TRANSACTION" shall be deemed to
have occurred at the closing of any of the following events: (i) the
consolidation, merger or other business combination of the Company with or into
another person (other than pursuant to a migratory merger effected solely for
the purposes of changing the jurisdiction of incorporation of the Company); (ii)
the sale or transfer of all or substantially all of the Company's assets; or
(iii) the consummation of a purchase, tender or exchange offer made to, and
accepted by, the holders of more than 30% of the economic interest in, or the
combined voting power of all classes of voting stock of, the Company.
g. Purchase Price Per Share. For purposes of this Agreement, the
"PURCHASE PRICE" for each Share purchased by the Investor shall be equal to the
greater of (i) the product of (A) 94% and (B) the lowest Applicable Trading
Price of the Class A Common Stock for the six consecutive trading days ending on
and including the Purchase Notice Date (as defined in Section 1(h)) and (ii) the
Company Designated Minimum Price, if any, for the applicable Purchase Period.
The number of Shares so to be purchased pursuant to each Purchase Notice shall
be rounded to the nearest whole number so as to avoid the issuance of fractional
shares.
h. Mechanics of Purchase of Shares by Investor. To effect a purchase of
Shares during a Purchase Period the Investor shall deliver one or more written
notices to the Company (each a "PURCHASE NOTICE") at any time and from time to
time during the Purchase Period. Each Purchase Notice shall set forth (i) the
aggregate Purchase Price for the Shares being purchased by the Investor pursuant
to such Purchase Notice, (ii) the Purchase Price per Share as of the date of
delivery of such Purchase Notice and (iii) the number of Shares being purchased
pursuant to such Purchase Notice. The "PURCHASE NOTICE DATE" with respect to a
Purchase Notice shall be the date on which the Investor delivers a copy of such
Purchase Notice to the Company by facsimile transmission prior to 11:59 p.m.
Eastern Time on such date. If prior to the last day of a Purchase Period the
Investor shall not have delivered Purchase Notices covering the purchase of a
number of Shares with an aggregate Purchase Price equal to at least the Required
Dollar Amount with respect to such Purchase Period, then the Investor shall be
deemed to have delivered a Purchase Notice on the last day of such Purchase
Period covering the purchase of a number of Shares with an aggregate Purchase
Price equal to the difference of (x) the Required Dollar Amount with respect to
such Purchase Period minus (y) the aggregate Purchase Price of the Shares
covered by Purchase Notices delivered by the Investor to the Company during such
Purchase Period. Subject to the satisfaction of the conditions set forth in
Sections 1(f), 6 and 7, the closing of the purchase
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by the Investor of Shares (a "CLOSING") shall occur at 10:00 a.m. Central Time,
on the date which is three Business Days following the applicable Purchase
Notice Date (or such other time or later date as is mutually agreed to by the
Company and the Investor) (a "CLOSING DATE") at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ &
▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. On each
Closing Date, (A) the Company shall deliver to the Investor certificates
representing the Shares to be issued and sold to the Investor on such date and
registered in the name of the Investor or deposit such Shares into the
account(s) (with the Investor receiving confirmation that the Shares are in such
account(s)) designated by the Investor for the benefit of the Investor and (B)
the Investor shall deliver to the Company the Purchase Price to be paid for such
Shares (after receipt of confirmation of delivery of such Shares), determined as
aforesaid, by cashier's check or wire transfer in immediately available funds to
such account as shall be designated in writing by the Company. In addition, each
of the Company and the Investor shall deliver all documents, instruments and
writings required to be delivered by either of them pursuant to this Agreement
at or prior to each Closing. In the alternative to physical delivery of
certificates for Class A Common Stock, if delivery of the Shares may be
effectuated by electronic book-entry through The Depository Trust Company
("DTC"), then delivery of the Shares pursuant to such purchase shall, unless
requested otherwise by such Investor (or holder of such Shares), settle by
book-entry transfer through DTC by the third Business Day following the
Investor's delivery of a Purchase Notice to the Company. The parties agree to
coordinate with DTC to accomplish this objective.
i. Effect of Failure to Satisfy Closing Obligations. Subject to the
Company's compliance with all of the terms and conditions of this Agreement,
with respect to each Purchase Period, if the Investor shall fail to purchase the
entire Required Dollar Amount (subject to reduction as provided in Section 1(d))
by the third Business Day following the end of such Purchase Period, the
Investor shall, in addition to any other remedies under this Agreement, pay as
additional damages in cash to the Company, on the eighth Business Day following
the end of such Purchase Period and on each succeeding fifth Business Day
thereafter until the Required Dollar Amount is paid, an amount equal to one
percent (1%) of the balance of the Required Dollar Amount that was not paid to
the Company for such Purchase Period. Subject to the Investor's compliance with
all of the terms and conditions of this Agreement, with respect to each Closing,
if the Company shall fail to deliver to the Investor the Shares to be issued and
sold to the Investor by the third Business Day following delivery of a Purchase
Notice, whether by physical delivery of certificates or by book-entry transfer
through DTC for such Shares, the Company shall, in addition to any other
remedies under this Agreement, pay as additional damages in cash to the
Investor, by the eighth Business Day following the delivery of a Purchase Notice
and on each succeeding fifth Business Day thereafter until the Shares are
delivered, an amount equal to one percent (1%) of the value of the Shares not
delivered to the Investor by the third Business Day following the delivery of a
Purchase Notice.
j. Certain Adjustments. Daily Trading Dollar Volume, Applicable Trading
Price, Purchase Price per Share, the Company Designated Minimum Price, the
Trigger Price and the $1.00 amounts provided in Section 1(d) hereof shall be
adjusted appropriately to reflect stock splits, stock dividends, combinations
and like transactions affecting the Class A Common Stock.
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k. Delisting; Suspension. If at any time during the Open Period or
within 30 days after the end of the Open Period, (i) the Registration Statement,
after it has been declared effective, shall not remain effective and available
for sale of all the Registrable Securities, (ii) the Class A the Common Stock
shall not be listed on the Principal Market or shall have been suspended from
trading thereon (excluding suspensions of not more than one trading day
resulting from business announcements by the Company) or the Company shall have
been notified of any pending or threatened proceeding or other action to delist
or suspend the Class A Common Stock, or (iii) there shall have occurred a Major
Transaction or the public announcement of a pending Major Transaction which has
not been abandoned or terminated, the Investor shall have the right (the
"REPURCHASE OPTION"), as partial relief for the damages to the Investor by
reason of the occurrence of the events listed in clauses (i), (ii) or (iii)
above (which remedy shall not be exclusive of any other remedies available at
law or equity), in its sole discretion, which right shall be exercised within 30
days of such event or occurrence (a "REPURCHASE EVENT"), to sell to the Company,
and the Company agrees to buy, promptly upon the exercise of such right by the
Investor, but in any event within 10 calendar days of the exercise of such
right, and subject to the limitations imposed by the General Corporation Law of
California, all or any part of the Shares issued to the Investor within the 60
Business Days preceding the Investor's exercise of the Repurchase Option and
then held by the Investor at a price per Share equal to the highest Applicable
Trading Price during the period beginning on the date of the Repurchase Event
and ending on and including the date on which the Investor exercises its
Repurchase Option (the "PAYMENT AMOUNT"). If the Company fails to pay to the
Investor the full aggregate Payment Amount within 10 calendar days of the
Investor's exercise of the Repurchase Option hereunder, the Company shall pay to
the Investor, on the first Business Day following such tenth calendar day, in
addition to and not in lieu of the Payment Amount payable by the Company to the
Investor upon exercise of the Repurchase Option, an amount equal to 2% of the
aggregate Payment Amount then due and payable to the Investor, in cash by wire
transfer, plus compounded annual interest of 18% on such Payment Amount during
the period, beginning on the day following such tenth calendar day, during which
such Payment Amount, or any portion thereof, is outstanding.
l. Overall Limit on Class A Common Stock Issuable. Notwithstanding
anything contained herein to the contrary, the number of Shares issuable by the
Company and purchasable by the Investor hereunder shall not exceed 19.99% of the
shares of Class A Common Stock outstanding as of the date hereof, subject to
appropriate adjustment for stock splits, stock dividends, combinations or other
similar recapitalization affecting the Common Stock (the "MAXIMUM COMMON STOCK
ISSUANCE"), unless the issuance of Shares hereunder in excess of the Maximum
Common Stock Issuance shall first be approved by the Company's shareholders in
accordance with applicable law and the By-laws and Articles of Incorporation of
the Company. Without limiting the generality of the foregoing, such
shareholders' approval must duly authorize the issuance by the Company of shares
of Class A Common Stock totaling 19.99% or more of the shares of Class A Common
Stock outstanding on the date hereof. The parties understand and agree that the
Company's failure to seek or obtain such shareholder approval shall in no way
adversely affect the validity and due authorization of the issuance and sale of
Shares hereunder or the Investor's obligation in accordance with the terms and
conditions hereof to purchase a number of Shares in the aggregate up to the
Maximum Common Stock Issuance limitation, and
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that such approval pertains only to the applicability of the Maximum Common
Stock Issuance limitation provided in this Section 1(l).
2. INVESTOR'S REPRESENTATIONS AND WARRANTIES.
The Investor represents and warrants to the Company that:
a. Investment Purpose. The Investor is acquiring the Shares for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, the Investor does not agree to hold any of
the Shares for any minimum or other specific term and reserves the right to
dispose of the Shares at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status; Sophisticated Investor. The
Investor is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D under the 1933 Act. The Investor has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the Shares.
c. Reliance on Exemptions. The Investor understands that the
Shares are being offered and sold to it in reliance on specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Company is relying in part upon the truth and accuracy of, and the
Investor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire such Shares.
d. 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. Neither such
inquiries nor any other due diligence investigations conducted by the Investor
or its advisors, if any, or its representatives shall modify, amend or affect
the Investor's right to rely on the Company's representations and warranties
contained in Section 3 below. The Investor understands that its investment in
the Shares involves a high degree of risk. 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.
e. No Governmental Review. The Investor understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Shares or
the fairness or suitability of the investment in the Shares nor have such
authorities passed upon or endorsed the merits of the offering of the Shares.
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f. Transfer or Resale. The Investor understands that except as
provided in the Registration Rights Agreement: (i) the Shares have not been and
are not being registered under the 1933 Act or any state securities laws, and
may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered for resale thereunder and sold, assigned or transferred
in accordance with an effective registration statement, (B) the Investor shall
have delivered to the Company an opinion of counsel, in a generally acceptable
form, to the effect that such Shares to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) the Investor provides the Company with assurance reasonably acceptable to
the Company that such Shares can be sold, assigned or transferred pursuant to
Rule 144 promulgated under the 1933 Act (or a successor rule thereto) ("RULE
144"); (ii) any sale of the Shares made in reliance on Rule 144 may be made only
in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Shares under circumstances in which the seller (or
the person through whom the sale is made) may be deemed to be an underwriter (as
that term is defined in the ▇▇▇▇ ▇▇▇) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to
register such Shares under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
g. Legends. The Investor understands that, until such time as
the resale of the Shares has been registered under the 1933 Act as contemplated
by the Registration Rights Agreement, the stock certificates representing the
Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED FOR RESALE UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE RESALE
OF THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL,
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Shares upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such Shares
are registered for resale under the 1933 Act, (ii) in connection with a sale
transaction, such holder provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that a public sale, assignment or
transfer of such Shares may be made without registration under the 1933 Act, or
(iii) such holder provides the Company with assurances reasonably acceptable to
the Company that such Shares can be sold pursuant to Rule 144 without any
restriction as to (A) the number of securities acquired as of a particular date
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that can then be immediately sold or (B) manner of sale. The Investor covenants
that, in connection with any transfer of Shares by it pursuant to an effective
registration statement under the 1933 Act, it will (i) comply with the
applicable prospectus delivery requirements of the 1933 Act, provided that
copies of a current prospectus relating to such effective registration statement
are or have been supplied to the Investor, and (ii) comply with the "Plan of
Distribution" section of the current prospectus relating to such effective
registration statement.
h. Authorization; Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of the Investor and is a
valid and binding agreement of the Investor enforceable against the Investor in
accordance with its terms, subject as to enforceability to general principles of
equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
i. Residency. The Investor is a resident of the State of New
York.
j. Section 9 of the 1934 Act. During the Open Period, the
Investor will comply with the provisions of Section 9 of the 1934 Act, and the
rules promulgated thereunder, with respect to transactions involving the Class A
Common Stock.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Investor that:
a. Organization and Qualification. The Company and its
"SUBSIDIARIES" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT"
means any material adverse effect on the business, properties, assets,
operations, results of operations, financial condition or prospects of the
Company and its Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements and instruments to be entered into in
connection herewith, or on the authority or ability of the Company to perform
its obligations under the Transaction Documents (as defined in Section 3(b)).
b. Authorization; Enforcement; Compliance with Other
Instruments. (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5) and each of
the other agreements entered into by the parties hereto in
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connection with the transactions contemplated by this Agreement (collectively,
the "TRANSACTION DOCUMENTS"), and to issue the Shares in accordance with the
terms hereof and thereof, (ii) the execution and delivery of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation the reservation
for issuance and the issuance of the Shares pursuant to this Agreement, have
been duly and validly authorized by the Company's Board of Directors and no
further consent or authorization is required by the Company, its Board of
Directors or its shareholders, (iii) the Transaction Documents have been duly
and validly executed and delivered by the Company and (iv) the Transaction
Documents constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies.
c. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 99,490,000 shares of Class A Common Stock,
of which as of the date hereof, 40,941,292 shares are issued and outstanding,
1,939,407 shares are issuable and reserved for issuance pursuant to the
Company's 1994 stock option and purchase plans, 1,875,000 shares are issuable
and reserved for issuance under the Company's proposed 1998 stock option plan
(which is scheduled to be voted upon by the Company's shareholders at the
Company's Annual Meeting to be held on February 19, 1999) and 7,678,794 shares
(other than the Shares issuable pursuant to this Agreement) are issuable and
reserved for issuance pursuant to securities exercisable or exchangeable for, or
convertible into, shares of Class A Common Stock, (ii) 510,000 shares of Class B
Common Stock, no par value per share, of which as of the date hereof, 49,000
shares are issued and outstanding and options to purchase 419,000 shares of
Class B Common Stock are issued and outstanding and (iii) 10,000,000 shares of
preferred stock, $1.00 par value per share, of which as of the date hereof, no
shares are issued and outstanding. All of such outstanding shares have been, or
upon issuance will be, validly issued and are fully paid and nonassessable.
Except as disclosed in Schedule 3(c), (i) no shares of the Company's capital
stock are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company, (ii) there are no
outstanding debt securities, (iii) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement), (v) there are no outstanding securities of the Company or any
of its Subsidiaries which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries, (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered
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by the issuance of the Shares as described in this Agreement, (vii) the Company
does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement and (viii) there is no dispute as to
the class of any shares of the Company's capital stock. The Company has
furnished to the Investor true and correct copies of the Company's Articles of
Incorporation, as in effect on the date hereof (the "ARTICLES OF
INCORPORATION"), and the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible into or exercisable for
Class A Common Stock and the material rights of the holders thereof in respect
thereto.
d. Issuance of Shares. A number of shares of Class A Common
Stock equal to at least 150% of the aggregate number of Shares issuable pursuant
to this Agreement but not more than 19.99% of the shares of Class A Common Stock
outstanding as of the date hereof, based on the Purchase Price per Share as of
the date hereof and an aggregate Purchase Price of $13,000,000 (regardless of
any limitation on the timing or amount of such purchases) initially has been
duly authorized and reserved for issuance (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(f) below) pursuant to this Agreement.
Upon issuance in accordance with this Agreement, the Shares will be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Class A Common Stock. The issuance by the Company of the
Shares is exempt from registration under the 1933 Act.
e. No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the Articles of Incorporation, any Certificate of Designations, Preferences
and Rights of any outstanding series of preferred stock of the Company or the
By-laws or (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, contract, indenture mortgage, indebtedness or instrument to
which the Company or any of its Subsidiaries is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree (including
United States federal and state securities laws and regulations and the rules
and regulations of the Principal Market or principal securities exchange or
trading market on which the Class A Common Stock is traded or listed) applicable
to the Company or any of its Subsidiaries or by which any property or asset of
the Company or any of its Subsidiaries is bound or affected. Except as disclosed
in Schedule 3(e), neither the Company nor its Subsidiaries is in violation of
any term of, or in default under, the Articles of Incorporation, any Certificate
of Designations, Preferences and Rights of any outstanding series of preferred
stock of the Company or the By-laws or their organizational charter or by-laws,
respectively, or any contract, agreement, mortgage, indebtedness, indenture,
instrument, judgment, decree or order or any statute, rule or regulation
applicable to the Company or its Subsidiaries, except for possible conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
that would not individually or in the aggregate have a Material Adverse Effect.
The business of the Company and its Subsidiaries is not being conducted, and
shall not be conducted, in violation of any law, statute, ordinance, rule, order
or regulation of any governmental authority or agency, regulatory or
self-regulatory agency, or court, except for possible violations the sanctions
for which either
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individually or in the aggregate would not have a Material Adverse Effect.
Except as specifically contemplated by this Agreement and as required under the
1933 Act, the Company is not required to obtain any consent, authorization,
permit or order of, or make any filing or registration with, any court,
governmental authority or agency, regulatory or self-regulatory agency or other
third party in order for it to execute, deliver or perform any of its
obligations under, or contemplated by, the Transaction Documents in accordance
with the terms hereof or thereof. All consents, authorizations, permits, orders,
filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the date
hereof and are in full force and effect as of the date hereof. Except as
disclosed in Schedule 3(e), the Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing. The
Company is not, and will not be, in violation of the listing requirements of the
Principal Market as in effect on the date hereof and on each of the Closing
Dates and is not aware of any facts which would reasonably lead to delisting of
the Class A Common Stock by the Principal Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since September 30, 1996,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC DOCUMENTS"). The Company has delivered to the Investor
or its representatives true and complete copies of the SEC Documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may 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 its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Investor which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading. Neither the Company nor any of its Subsidiaries or
any of their officers, directors, employees or agents have provided the Investor
with any material, nonpublic information which was not publicly disclosed prior
to the date hereof and any material, nonpublic information provided to the
Investor by the Company or its Subsidiaries or any of their
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officers, directors, employees or agents prior to any Closing Date shall be
publicly disclosed by the Company prior to such Closing Date.
g. Absence of Certain Changes. Except as disclosed in Schedule
3(g) or the SEC Documents filed at least five (5) days prior to the date hereof,
since September 30, 1997, there has been no change or development in the
business, properties, assets, operations, financial condition, results of
operations or prospects of the Company or its Subsidiaries which has had or
could have a Material Adverse Effect. The Company has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or its Subsidiaries have any knowledge or
reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. Absence of Litigation. Except as set forth in Schedule 3(h),
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, the Class A Common Stock or any of
the Company's Subsidiaries or any of the Company's or the Company's
Subsidiaries' officers or directors in their capacities as such, in which an
adverse decision could have a Material Adverse Effect.
i. Acknowledgment Regarding Investor's Purchase of Shares. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby. 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 the Transaction
Documents and the transactions contemplated hereby and thereby and any advice
given by the Investor or any of its respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to the Investor's purchase of the
Shares. The Company further represents to the Investor that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, assets, prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration statement filed with
the SEC relating to an issuance and sale by the Company of its Class A Common
Stock and which has not been publicly announced.
k. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale of the
Shares.
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l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration under the
1933 Act of the Company's sale and issuance of the Shares to the Investor or
cause this offering of Shares to the Investor to be integrated with prior
offerings by the Company for purposes of the 1933 Act or any applicable
shareholder approval provisions, including, without limitation, under the rules
and regulations of the Principal Market, nor will the Company or any of its
Subsidiaries take any action or steps that would require registration under the
1933 Act of the Company's sale and issuance of the Shares to the Investor or
cause the offering of the Shares to be integrated with other offerings.
m. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. Neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that relations with
their employees are good. No executive officer (as defined in Rule 501(f) of the
▇▇▇▇ ▇▇▇) has notified the Company that such officer intends to leave the
Company's employ or otherwise terminate such officer's employment with the
Company.
n. Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service ▇▇▇▇ registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 3(n), none of the
Company's trademarks, trade names, service marks, service ▇▇▇▇ registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights necessary to conduct its business as now or as proposed to be
conducted have expired or terminated, or are expected to expire or terminate
within two years from the date of this Agreement. The Company and its
Subsidiaries do not have any knowledge of any infringement by the Company or its
Subsidiaries of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service ▇▇▇▇
registrations, trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others and, except as set forth on Schedule 3(n), there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its Subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service names,
service marks, service ▇▇▇▇ registrations, trade secret or other infringement;
and the Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties.
o. Environmental Laws. The Company and its Subsidiaries (i) are
in compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all
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permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the three foregoing cases, the failure to so comply would
have, individually or in the aggregate, a Material Adverse Effect.
p. Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(p) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company or any of
its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
q. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
r. Regulatory Permits. The Company and its Subsidiaries have in
full force and effect all certificates, approvals, authorizations and permits
from the appropriate federal, state, local or foreign regulatory authorities,
including, with limitation, the U.S. Food and Drug Administration and comparable
foreign regulatory agencies, necessary to own, lease or operate their respective
properties and assets and conduct their respective businesses, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, approval,
authorization or permit, except for such certificates, approvals, authorizations
or permits which if not obtained, or such revocations or modifications which,
would not have a Material Adverse Effect.
s. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
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t. No Materially Adverse Contracts, Etc. Neither the Company nor
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
u. Tax Status. The Company and each of its Subsidiaries has made
or filed all United States federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.
v. Certain Transactions. Except as set forth on Schedule 3(v)
and in the SEC Documents filed at least ten days prior to the date hereof and
except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
w. Dilutive Effect. The Company understands and acknowledges
that the number of Shares issuable upon purchases pursuant to this Agreement
will increase in certain circumstances. The Company further acknowledges that,
subject to such limitations as are expressly set forth in the Transaction
Documents, its obligation to issue Shares upon purchases pursuant to this
Agreement is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Company.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
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b. Blue Sky. The Company shall, on or before each of the Closing
Dates, take such action as the Company shall reasonably determine is necessary
to qualify the Shares for, or obtain exemption for the Shares for, sale to the
Investor at each of the Closings pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States, and shall
provide evidence of any such action so taken to the Investor on or prior to the
Closing Date. The Company shall make all filings and reports relating the offer
and sale of the Shares required under the applicable securities or "Blue Sky"
laws of the states of the United States following each of the Closing Dates.
c. Reporting Status. Until the earlier of (i) the first date
which is after the date this Agreement is terminated pursuant to Section 8 and
on which the Holders (as that term is defined in the Registration Rights
Agreement) may sell all of the Shares acquired pursuant to this Agreement
without restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto), or (ii) the date on which (A) the Holders shall have sold
all the Shares issuable hereunder and (B) this Agreement has been terminated
pursuant to Section 8 (the "REGISTRATION PERIOD"), the Company shall file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Shares for general corporate and working capital purposes.
e. Financial Information. The Company agrees to send the
following to the Investor during the Registration Period: (i) within five (5)
Business Days after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on
Form 8-K and any registration statements or amendments (other than on Form S-8)
filed pursuant to the 1933 Act; (ii) on the same day as the release thereof,
facsimile copies of all press releases issued by the Company or any of its
Subsidiaries, (iii) copies of any notices and other information made available
or given to the shareholders of the Company generally, contemporaneously with
the making available or giving thereof to the shareholders and (iv) within two
(2) days of filing or delivery thereof, copies of all documents filed with, and
all correspondence sent to, the Principal Market, any securities exchange or
market, or the National Association of Securities Dealers, Inc.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 150% of the number of shares of Class A Common Stock
needed to provide for the issuance of all the Shares hereunder at the then
current Purchase Price. In the event that, notwithstanding the foregoing, the
Company determines that it does not have a sufficient number of authorized
shares of Class A Common Stock to reserve and keep available for issuance as
described in this Section 4(f), the Company shall use its best efforts to
increase the number of authorized shares of Class A Common Stock by seeking
shareholder approval for the authorization of such additional shares.
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g. Listing. The Company shall promptly secure the listing of all
of the Registrable Securities (as defined in the Registration Rights Agreement)
upon the Principal Market and each other national securities exchange and
automated quotation system, if any, upon which shares of Class A Common Stock
are then listed (subject to official notice of issuance) and shall maintain, so
long as any other shares of Class A Common Stock shall be so listed, such
listing of all Registrable Securities from time to time issuable under the terms
of the Transaction Documents. The Company shall maintain the Class A Common
Stock's authorization for quotation on the Principal Market. Neither the Company
nor any of its Subsidiaries shall take any action which would be reasonably
expected to result in the delisting or suspension of the Class A Common Stock on
the Principal Market (excluding suspensions of not more than one trading day
resulting from business announcements by the Company). The Company shall
promptly provide to the Investor copies of any notices it receives from the
Principal Market regarding the continued eligibility of the Class A Common Stock
for listing on such automated quotation system or securities exchange. The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(g).
h. Transactions With Affiliates. The Company shall not, and
shall cause each of its Subsidiaries not to, enter into, amend, modify or
supplement, or permit any Subsidiary to enter into, amend, modify or supplement,
any agreement, transaction, commitment or arrangement with any of its or any
Subsidiary's officers, directors, persons who were officers or directors at any
time during the previous two years, shareholders who beneficially own 5% or more
of the Class A Common Stock, or affiliates or with any individual related by
blood, marriage or adoption to any such individual or with any entity in which
any such entity or individual owns a 5% or more beneficial interest (each a
"RELATED PARTY"), except for (i) customary employment arrangements and benefit
programs on reasonable terms, (ii) any agreement, transaction, commitment or
arrangement on an arms-length basis on terms no less favorable than terms which
would have been obtainable from a person other than such Related Party, or (iii)
any agreement, transaction, commitment or arrangement which is approved by a
majority of the disinterested directors of the Company. For purposes hereof, any
director who is also an officer of the Company or any Subsidiary of the Company
shall not be a disinterested director with respect to any such agreement,
transaction, commitment or arrangement. "AFFILIATE" for purposes hereof means,
with respect to any person or entity, another person or entity that, directly or
indirectly, (i) has a 5% or more equity interest in that person or entity, (ii)
has 5% or more common ownership with that person or entity, (iii) controls that
person or entity, or (iv) shares common control with that person or entity.
"CONTROL" or "CONTROLS" for purposes hereof means that a person or entity has
the power, direct or indirect, to conduct or govern the policies of another
person or entity.
i. Filing of Form 8-K. On or before the date which is three
Business Days after the date hereof, the Company shall file a Current Report on
Form 8-K with the SEC describing the terms of the transaction contemplated by
the Transaction Documents in the form required by the 1934 Act.
j. Corporate Existence. The Company will take all steps
reasonably necessary to preserve and continue the corporate existence of the
Company.
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5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of the Investor or its respective nominee(s), for the Shares in such
amounts as specified from time to time by the Investor to the Company upon
delivery of a Purchase Notice (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS").
The Irrevocable Transfer Agent Instructions shall have been delivered by the
Company to, and acknowledged in writing by, the Company's transfer agent prior
to the Company's delivery of the first Preliminary Put Notice hereunder. Prior
to registration of the Shares under the 1933 Act, all such certificates shall
bear the restrictive legend specified in Section 2(g) of this Agreement. The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5 and stop transfer instructions to
give effect to Sections 2(f) and 2(g) hereof prior to registration of the Shares
under the 1933 Act, will be given by the Company to its transfer agent and that
the Shares shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section 5 shall affect in any way the
Investor's obligations and agreements set forth in Section 2(g) to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Shares. If the Investor provides the Company with an opinion of counsel, in
generally acceptable form, that registration of a resale by such Investor of any
of such Shares is not required under the 1933 Act, the Company shall permit the
transfer, and, in the case of the Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by the Investor and without any restrictive legends. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Investor by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Investor shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.
The obligation hereunder of the Company to issue and sell the
Shares to the Investor is further subject to the satisfaction, at or before each
Closing, of each of the following conditions set forth below. These conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion.
a. The Investor shall have executed each of this Agreement and
the Registration Rights Agreement and delivered the same to the
Company.
b. The Investor shall have delivered to the Company the Purchase
Price for the Shares being purchased by the Investor at the
Closing (after receipt of confirmation of delivery of such
Shares) by cashier's check or wire transfer of
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immediately available funds pursuant to the wire instructions
provided by the Company.
c. The representations and warranties of the Investor shall be
true and correct as of the date when made and as of the
applicable Closing Date as though made at that time (except for
representations and warranties that speak as of a specific
date), and the Investor shall have performed, satisfied and
complied with the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or
complied with by the Investor at or prior to such Closing Date.
d. 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.
7. CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.
The obligation of the Investor hereunder to purchase Shares is
subject to the satisfaction, at or before each Closing, of each of the following
conditions set forth below. These conditions are for the Investor's sole benefit
and may be waived by the Investor at any time in its sole discretion.
a. The Company shall have executed each of the Transaction
Documents and delivered the same to the Investor.
b. The Class A Common Stock shall be authorized for quotation on
the Principal Market and trading in the Class A Common Stock
shall not have been suspended by the Principal Market or the
SEC, at any time beginning on the date hereof and through and
including the respective Closing Date (excluding suspensions of
not more than one trading day resulting from business
announcements by the Company, provided that such suspensions
occur prior to the Company's delivery of the Preliminary Put
Notice related to such Closing).
c. The representations and warranties of the Company shall be
true and correct as of the date when made and as of the
applicable Closing Date as though made at that time (except for
(i) representations and warranties that speak as of a specific
date and (ii) with respect to the representations made in
Sections 3(g), (h) and (j) and the third sentence of Section
3(m) hereof, events which occur on or after the date of this
Agreement and are disclosed in SEC filings made by the Company
at least ten Business Days prior to the applicable Put Notice
Date) and the Company shall have performed, satisfied and
complied with the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to such Closing Date.
The Investor shall have received a certificate, executed by the
Chief Executive Officer and Chief
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Financial Officer of the Company, dated as of the applicable
Closing Date, in the form of Exhibit B attached hereto, to the
foregoing effect and as to such other matters as may be
reasonably requested by the Investor including, without
limitation, an update as of such Closing Date regarding the
representation contained in Section 3(c) above.
d. Such Investor shall have received the opinion of the
Company's counsel dated as of such Closing Date, in the form of
Exhibit C attached hereto.
e. The Company shall have executed and delivered to the Investor
the certificates representing, or have executed electronic
book-entry transfer of, the Shares (in such denominations as
such Investor shall request) being purchased by the Investor at
such Closing.
f. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form
reasonably acceptable to the Investor (the "RESOLUTIONS") and
such Resolutions shall not have been amended or rescinded prior
to such Closing Date.
g. At the first Closing to occur in each Purchase Period, the
Investor shall have received a letter of the type, in the form
and with the substance of the letter described in Section 3(s)
of the Registration Rights Agreement from the Company's
auditors.
h. The Irrevocable Transfer Agent Instructions, in the form of
Exhibit D attached hereto, shall have been delivered to, and
acknowledged in writing by, the Company's transfer agent.
i. The Company shall have delivered to the Investor a
certificate evidencing the due incorporation and good standing
of the Company and each Subsidiary in such corporation's state
of incorporation issued by the Secretary of State of such state
of incorporation as of a date within 10 days of such Closing
Date.
j. The Company shall have delivered to the Investor a copy of
its Articles of Incorporation, as amended and in effect on such
Closing Date, certified by the Secretary of State of the State
of California within 10 days of such Closing Date.
k. The Company shall have delivered to the Investor a
secretary's certificate, dated as of such Closing Date, in the
form of Exhibit E attached hereto, as to (i) the Resolutions
described in Section 7(f), (ii) the Articles of Incorporation
and (iii) the Bylaws, each as in effect at such Closing.
l. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or
endorsed by any court or
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governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this
Agreement.
m. The Registration Statement shall be effective at the time of
each Closing and no stop order suspending the effectiveness of
the Registration Statement shall be in effect or shall be
pending or threatened.
n. At the time of each Closing, the Registration Statement
(including information or documents incorporated by reference
therein) and any amendments or supplements thereto shall 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.
o. There shall have been no filing of a petition in bankruptcy,
either voluntarily or involuntarily, with respect to the Company
and there shall not have been commenced any proceedings under
any bankruptcy or insolvency laws, or any laws relating to the
relief of debtors, readjustment of indebtedness or
reorganization of debtors, and there shall have been no calling
of a meeting of creditors of the Company or appointment of a
committee of creditors or liquidating agents or offering of a
composition or extension to creditors by, for, with or without
the consent or acquiescence of the Company.
p. If applicable, the shareholders of the Company shall have
approved the issuance of any Shares in excess of the Maximum
Common Stock Issuance Shares in accordance with Section 1(1).
q. The conditions to such Closing set forth in Section 1(f)
shall have been satisfied on or before such Closing Date.
r. The Company shall have delivered to the Investor a letter
from the Transfer Agent certifying the number of shares of
Common Stock outstanding as of a date within five days of such
Closing Date.
s. The Company shall have delivered to such Investor such other
documents relating to the transactions contemplated by this
Agreement as such Investor or its counsel may reasonably request
upon reasonable advance notice.
8. Termination.
a. Optional Termination. This Agreement may be terminated at any
time by the mutual written consent of the Company and the Investor. The
representations, warranties and covenants contained in or incorporated into this
Agreement, insofar as applicable to the transactions consummated hereunder prior
to such termination, shall survive its termination for the period of any
applicable statute of limitations.
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b. Automatic Termination. This Agreement shall automatically
terminate without any further action of either party hereto upon the earlier of
(i) when the Investor has purchased an aggregate of $10,000,000 in the Class A
Common Stock of the Company pursuant to this Agreement, apart from additional
amounts which may be purchased pursuant to Section 1(d); provided that the
representations, warranties and covenants contained in this Agreement insofar as
applicable to the transactions consummated hereunder prior to such termination,
shall survive the termination of this Agreement for the period of any applicable
statute of limitations, (ii) on the date which is 24 months after the Effective
Date or (iii) on the date which is 27 months after the date hereof.
All representations, warranties and covenants shall survive the
termination of this Agreement.
9. INDEMNIFICATION.
In consideration of the Investor's execution and delivery of the
this Agreement and the Registration Rights Agreement and acquiring the Shares
hereunder and in addition to all of the Company's other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless the Investor and all of their shareholders, officers, directors,
employees and direct or indirect investors and any of the foregoing person's
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "INDEMNITEES") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party and arising out of or resulting
from the execution, delivery, performance or enforcement of the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (d) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Shares or (e)
the status of the Investor or holder of the Shares as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
10. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws. Each party hereby irrevocably submits to
the non-exclusive jurisdiction of the state and
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federal courts sitting in the City of New York, borough of Manhattan, and, if
the Company's principal place of business is in San Diego, California, the City
of San Diego, State of California, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
b. Fees and Expenses. (i) As an inducement to the Investor to
enter into this Agreement, the Company shall deliver to Investor on the date
hereof an amount equal to $100,000 by wire transfer of immediately available
funds. As a further inducement to the Investor to enter into this Agreement, (A)
if the Registration Statement is declared effective by the SEC on or before the
date which is 90 days after the date hereof, then within one Business Day of the
date that the Registration Statement is declared effective by the SEC, the
Company shall deliver to the Investor either (x) an amount equal to $150,000 by
wire transfer of immediately available funds or (y) stock certificates
representing the number of Shares (the "FIRST COMMITMENT SHARES") having an
aggregate price (based on a price per First Commitment Share equal to 94% of the
lowest Applicable Trading Price during the six consecutive trading days ending
on and including the date the Registration Statement is declared effective) of
$150,000, and (B) if the Registration Statement is not declared effective on or
before the date which is 90 days after the date hereof, then (x) the Company, on
the first Business Day after such 90th day, shall pay to the Investor an amount
equal to $50,000 by wire transfer of immediately available funds and (y) on the
earlier of the date on which the Registration Statement is declared effective by
the SEC and the date which is 120 days after the date hereof, the Company, on
the first Business Day after such date, shall deliver to the Investor either (i)
an amount equal to $100,000 by wire transfer of immediately available funds or
(ii) provided that the Registration Statement is declared effective by the SEC
on or before the date which is 120 days after the date hereof, stock
certificates representing the number of Shares (the "SECOND COMMITMENT SHARES"
and, collectively with the First Commitment Shares, the "COMMITMENT SHARES")
having an aggregate price (based on a price per Second Commitment Share equal to
94% of the lowest Applicable Trading Price during the six consecutive trading
days ending on and including the date the Registration Statement is declared
effective) of $100,000 (in any such case, and along with the amount described in
the first sentence of this Section 10(b)(i), the "COMMITMENT FEE"). The Company
shall notify the Investor of the Company's election to make the payments
described in the immediately preceding sentence in cash or in Commitment Shares
by delivering written notice to the Investor at least three Business Days prior
to the date that such payment is due. Notwithstanding anything herein to the
contrary, the Company may pay the portion of the Commitment Fee described in the
second sentence of this
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Section 10(b)(i) in Commitment Shares if, and only if, at the time of their
delivery, such Commitment Shares are registered for public resale under the 1933
Act and state securities laws and listed or quoted on the Principal Market. If
the Company fails to pay any portion of the Commitment Fee when due, then the
Company shall pay to the Investor, on the first Business Day following the date
such payment was due (in addition to and not in lieu of any remedy the Investor
may have in law or in equity) an amount equal to 2% of the Commitment Fee, in
cash by wire transfer, plus compounded annual interest of 18% on such portion of
the Commitment Fee during the period, beginning on the Business Day after such
portion of the Commitment Fee was due, during which such amount, or any portion
thereof, is outstanding. In the event that the Company elects to pay any the
portion of the Commitment Fee described in the second sentence of this Section
10(b)(i) in Commitment Shares, then to the extent possible the Company shall
deliver such Commitment Shares through DTC.
(ii) As a further inducement to the Investor to enter into this
Agreement and in addition to the reimbursement of due diligence costs pursuant
to Section 1(c), the Company agrees to reimburse the Investor or its designees
or clients, as applicable, for reasonable expenses (including legal expenses)
relating to the negotiation and execution of the Transaction Documents and any
Closings hereunder up to $35,000 in the aggregate. Such amounts are to be paid
promptly upon submission of an invoice by the Investor to the Company. Subject
to Section 1(c), Investor shall be responsible for such expenses relating to the
negotiation and execution of the Transaction Documents and any Closings
hereunder in excess of $35,000 in the aggregate.
(iii) Except as otherwise set forth in Section 10(b), Section 9
and Section 1(c), each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. Any attorneys' fees and expenses incurred by
either the Company or by the Investor in connection with the preparation,
negotiation, execution and delivery of any amendments to this Agreement or
relating to the enforcement of the rights of any party, after the occurrence of
any breach of the terms of this Agreement by another party or any default by
another party in respect of the transactions contemplated hereunder, shall be
paid on demand by the party which breached the Agreement and/or defaulted, as
the case may be. The Company shall pay all stamp and other taxes and duties
levied in connection with the issuance of any Shares issued pursuant hereto.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
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d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Investor, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
(including the other Transaction Documents) contain the entire understanding of
the parties with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, neither the Company nor the
Investor makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be amended other
than by an instrument in writing signed by the Company and the Investor, and no
provision hereof may be waived other than by an instrument in writing signed by
the party against whom enforcement is sought.
f. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one (1) day after
deposit with a nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
If to the Company:
AVANIR Pharmaceuticals
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇▇ Fargo Plaza
12th Floor
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
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If to the Transfer Agent:
American Stock Transfer & Trust
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If to the Investor:
Promethean Investment Group, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
E. ▇▇▇▇ ▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Zavis
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 312-902-1061
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns, including any purchasers of the Shares. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Investor, including by merger or consolidation. The
Investor may assign some or all of its rights hereunder to an entity in which it
has a greater than 50% equity interest, an entity which has a greater than 50%
equity interest in the Investor or an entity or fund which has the same
principal investment adviser as the Investor, without the consent of the
Company, and to others, with the consent of the Company; provided, however, that
any such assignment shall not release the Investor from its obligations
hereunder unless such obligations are assumed by such assignee and the Company
has consented to such assignment and assumption. Notwithstanding anything to the
contrary contained in the Transaction Documents, the Investor shall be entitled
to pledge the Shares in connection with a bona fide margin account.
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h. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. The representations and warranties of the Company
and the Investor contained in Sections 2 and 3, the agreements and covenants set
forth in Sections 4, 5 and 10, and the indemnification provisions set forth in
Section 9, shall survive each of the Closings. The Investor shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.
j. Publicity. The Company and the Investor shall have the right
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of the Investor, to
make any press release or other public disclosure with respect to such
transactions as is required by applicable law and regulations (although the
Investor shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).
k. Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Placement Agent. The Company acknowledges and warrants that
it has not engaged a placement agent in connection with the sale of the Shares.
The Company shall be responsible for the payment of any fees or commissions of
placement agents or brokers engaged by the Company in connection with the
purchase of the Shares by the Investor. The Company shall pay, and hold the
Investor harmless against, any liability, loss or expense (including, without
limitation, attorneys' fees and out-of-pocket expenses) arising in connection
with any such claim. The Investor shall be responsible for the payment of any
fees or commissions of brokers engaged by the Investor in connection with its
sale of the Shares.
m. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
n. Remedies. The Investor and each holder of the Shares shall
have all rights and remedies set forth in this Agreement and the Registration
Rights Agreement and all rights and remedies which such holders have been
granted at any time under any other agreement or contract and all of the rights
which such holders have under any law. Any person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
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o. Payment Set Aside. To the extent that the Company makes a
payment or payments to the Investor hereunder or the Registration Rights
Agreement or the Investor enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
p. Days. Unless the context refers to "Business Days" or
"trading days", all references herein to "days" shall mean calendar days.
* * * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Class A Common
Stock Investment Agreement to be duly executed as of the date and year first
above written.
COMPANY: INVESTOR:
AVANIR PHARMACEUTICALS PROMETHEAN INVESTMENT GROUP, L.L.C.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/E. ▇▇▇▇ ▇▇▇
-------------------------------- --------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: E. ▇▇▇▇ ▇▇▇
Its: Chief Financial Officer Its: Duly Authorized
33
LIST OF SCHEDULES
-----------------
Schedule 3(a) Subsidiaries
Schedule 3(c) Capitalization
Schedule 3(e) Conflicts
Schedule 3(g) Material Changes
Schedule 3(h) Litigation
Schedule 3(n) Intellectual Property
Schedule 3(p) Liens
Schedule 3(v) Certain Transactions
LIST OF SCHEDULES
-----------------
EXHIBIT A Registration Rights Agreement
EXHIBIT B Officers' Certificate
EXHIBIT C Opinion of Company's Counsel
EXHIBIT D Irrevocable Transfer Agent Instructions
EXHIBIT E Secretary's Certificate