PURCHASE AGREEMENT
This Purchase Agreement (this "AGREEMENT") is dated as of April 4, 2005
among Calypte Biomedical Corporation, a Delaware corporation (the "COMPANY"),
and the investors identified on the signature pages hereto (each an "INVESTOR"
and, collectively, the "INVESTORS").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to borrow certain sums from each of the Investors and, in
consideration thereof issue certain convertible notes and warrants to each of
the Investors, and each Investor, severally and not jointly, desires to make a
loan to the Company and accept such notes and warrants from the Company, all
pursuant to the terms set forth herein.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
"ACTION" means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility.
"ADDITIONAL WARRANT" means the Common Stock purchase warrant, in the
form of Exhibit D, issuable to each Investor at the Closing.
"AFFILIATE" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 144.
"BANKRUPTCY EVENT" means any of the following events: (a) the
Company or any Subsidiary commences a proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Subsidiary thereof; (b) there is commenced against the Company or
any Subsidiary any such case or proceeding that is not dismissed within 60 days
after commencement; (c) the Company or any Subsidiary is adjudicated by a court
of competent jurisdiction insolvent or bankrupt or any order of relief or other
order approving any such case or proceeding is entered; (d) the Company or any
Subsidiary suffers any appointment of any custodian or the like for it or any
substantial part of its property that is not discharged or stayed within 60
days; (e) under applicable law the Company or any Subsidiary makes a general
assignment for the benefit of creditors; (f) the Company or any Subsidiary fails
to pay, or states that it is unable to pay or is unable to pay, its debts
generally as they become due; (g) the Company or any Subsidiary calls a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (h) the Company or any Subsidiary, by any act or
failure to act, expressly indicates its consent to, approval of or acquiescence
in any of the foregoing or takes any corporate or other action for the purpose
of effecting any of the foregoing.
"BASIC AMOUNT" shall have the meaning set forth in Section 4.4.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or Multiemployer
Plan and which is maintained or otherwise contributed by the Company.
"BENEFIT PLAN" has the meaning set forth in Section 3.1(aa)(ii).
"BUSINESS DAY" means any day except Saturday, Sunday and any day
that is a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
"CLOSING" means the closing of the purchase and sale of Notes and
Warrants contemplated by Section 2.1.
"CLOSING DATE" means the Business Day immediately following the date
on which all of the conditions set forth in Section 2.1(d) and 2.1(e) have been
satisfied, or such other date as the parties may agree.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par value $.03
per share, and any securities into which such common stock may hereafter be
reclassified, converted or exchanged.
"COMMON STOCK EQUIVALENTS" means any securities of the Company or
any Subsidiary which entitle the holder thereof to acquire Common Stock at any
time, including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"COMPANY COUNSEL" means Coudert Brothers LLP.
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"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person in respect of the
deferred purchase price of property or services (including contingent payment,
earn-out and similar obligations but excluding current accounts payable incurred
in the ordinary course of business), (iv) all obligations of such Person as
lessee which (y) are capitalized in accordance with GAAP or (z) arise pursuant
to sale-leaseback transactions, (v) all reimbursement obligations of such Person
in respect of letters of credit or other similar instruments, (vi) all
obligations, contingent or otherwise, of such Person in respect of bankers'
acceptances, (vii) obligations of such Person to pay a specified purchase price
for goods or services whether or not delivered or accepted (e.g., take or pay
obligations) or similar obligations, (viii) all obligations and liabilities of
others of the foregoing types ("indebtedness") secured by a Lien on any asset of
such Person, whether or not such Debt is otherwise an obligation of such Person,
and (ix) any obligation, contingent or otherwise, of such Person guaranteeing or
having the economic effect of guaranteeing or agreeing to pay or become
responsible for any indebtedness of any other Person in any manner, whether
directly or indirectly, including without limitation any obligation of such
Person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
indebtedness, (b) to purchase property or services for the purpose of assuring
the owner of such indebtedness of its payment, or (c) to maintain the solvency,
working capital, equity, cash flow, fixed charge or other coverage ratio, or any
other financial condition of the primary obligor so as to enable the primary
obligor to pay any indebtedness or to comply with any agreement relating to any
indebtedness or obligation, provided that the term "indebtedness" shall not
include endorsements for collection or deposit in the ordinary course of
business. The Debt of any Person shall include the Debt of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Debt expressly provide that such Person is not liable therefor.
"DISCLOSURE MATERIALS" has the meaning set forth in Section 3.1(h).
"EFFECTIVE DATE" means the date that the Registration Statement
required by Section 2(a) of the Registration Rights Agreement is first declared
effective by the Commission.
"ELIGIBLE MARKET" means any of the New York Stock Exchange, American
Stock Exchange, NASDAQ National Market or NASDAQ SmallCap Market.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute.
"ERISA GROUP" means the Company and each Subsidiary and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under the Code.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means U.S. generally accepted accounting principles.
"INITIAL WARRANT" means the Common Stock purchase warrant, in the
form of Exhibit C, issuable to each Investor at the Closing.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in Section
3.1(p).
"INVESTMENT AMOUNT" means, with respect to each Investor, the
investment amount indicated below such Investor's signature to this Agreement.
"INVESTOR DELIVERABLES" has the meaning set forth in Section 2.1(c).
"INVESTOR PARTY" has the meaning set forth in Section 4.12.
"LIEN" means any lien, charge, encumbrance, security interest, right
of first refusal or other restrictions of any kind.
"LOSSES" has the meaning set forth in Section 4.12.
"MATERIAL ADVERSE EFFECT" means any of (i) a material and adverse
effect on the legality, validity or enforceability of any Transaction Document,
(ii) a material and adverse effect on the results of operations, assets,
prospects, business or condition (financial or otherwise) of the Company and the
Subsidiaries or (iii) an adverse impairment to the Company's ability to timely
perform its obligations under any Transaction Document.
"NEW YORK COURTS" means the state and federal courts sitting in the
City of New York, Borough of Manhattan.
"NOTES" means the secured convertible promissory notes issuable by
the Company to the Investors at Closing in the Form of Exhibit A, due on the
three year anniversary of the Closing Date.
"NOTICE OF ACCEPTANCE" shall have the meaning set forth in Section
4.4.
"OFFER" shall have the meaning set forth in Section 4.4.
"OFFERED SECURITIES" shall have the meaning set forth in Section
4.4.
"OUTSIDE DATE" means April 6, 2005.
"PBGC" means the Pension Benefit Guarantee Corporation or any entity
succeeding to any or all of its functions under ERISA.
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"PERMITTED FOREIGN SUBSIDIARY DEBT" means Debt of all foreign
Subsidiaries and guarantees by the Company of such Debt, in an aggregate
principal amount (without duplication) not to exceed $5,000,000 at any time
outstanding.
"PERMITTED INDEBTEDNESS" means: (a) Debt in existence on the date
hereof, as shown on Schedule 5.3, including any extensions or renewals thereof,
provided, there is no increase in the principal amount thereof or other
significant change in the terms thereof, (b) trade payables incurred and paid in
the ordinary course of business, (c) the Vencore Purchase Money Financing, (d)
Debt of the Company incurred to finance the purchase of equipment or other
personal property, which is secured by the property being purchased (including
obligations of the Company as lessee which are capitalized in accordance with
GAAP or arise pursuant to sale-leaseback transactions) in an aggregate principal
amount not to exceed $3,000,000 at any time outstanding (excluding the Vencore
Purchase Money Financing), provided that such Debt is incurred promptly after
the acquisition of such equipment or personal property, but in no event later
than 90 days thereafter, (e) unsecured Debt of the Company in connection with
transactions involving acquisitions, equipment or real property leases, sale and
leasebacks, strategic partnering, or licensing arrangements, provided that (i)
the aggregate principal amount of such Debt shall not exceed $3,000,000 at any
time outstanding and (ii) such Debt is subordinated to the Obligations pursuant
to subordination agreements in form and substance acceptable to the Investors,
(f) unsecured Debt of the Company incurred in connection with any financing
arrangement with ▇▇▇▇ Technologies BV in an aggregate principal amount not to
exceed $5,500,000 at any time outstanding and (g) the Permitted Foreign
Subsidiary Debt.
"PERMITTED LIENS" means: (a) Liens for taxes, assessments or
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and for which adequate reserves in accordance with GAAP
are maintained on the books of the Company or the applicable Subsidiary; (b)
Liens arising out of deposits in connection with workers' compensation,
unemployment insurance, old age pensions, social security or retirement benefits
legislation incurred in the ordinary course of business; (c) deposits or pledges
to secure bids, tenders, contracts (other than contracts for the payment of
money), leases, statutory obligations, surety and appeal bonds, and other
obligations of like nature arising in the ordinary course of business of the
Company or a Subsidiary; (d) Liens imposed by law, such as mechanics', workers',
materialmens', carriers' or other like liens arising in the ordinary course of
business of the Company or a Subsidiary which secure the payment of obligations
which are not past due or which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
are maintained on the books of the Company or the applicable Subsidiary; (e)
Liens existing on the date hereof and specified on Schedule 3.1(dd), provided
that each such Lien does not apply to other property or asset of the Company or
any Subsidiary and such Lien shall secure only those obligations its secures on
the date hereof (including any extensions or renewals thereof that do not
increase in the principal amount thereof); (f) Liens on the assets of foreign
Subsidiaries securing Permitted Foreign Subsidiary Debt, (g) Liens of commercial
depository institutions, arising in the ordinary course of business,
constituting a statutory or common law right of setoff against amounts on
deposit with such institution; (h) rights of way, zoning restrictions, easements
and similar encumbrances affecting the Company's real property which do not
materially interfere with the use of such property; (i) Liens on fixed or
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capital assets acquired by the Company, provided that (1) such Lien secures in
connection with Debt described in clause (c) or (d) of the definition of
Permitted Indebtedness, (2) such Lien and the Debt secured thereby are incurred
within 90 days after such acquisition, (3) the Debt secured thereby does not
exceed the cost of acquiring such assets and (4) such Lien shall not apply to
any other assets or property of the Company or any Subsidiary; and (j) Liens
created under the Security Agreement.
"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"PLAN" means at any time an employee pension plan benefit plan which
is covered by Title IV of ERISA or subject to the minimum funding standards
under the Code and either (i) is maintained, or contributed to, by any member of
the ERISA group for employees of any member of the ERISA group or (ii) has at
any time within the preceding five years been maintained, or contributed to, by
any Person which was at such time a member of the ERISA Group for employees of
any Person which was at such time a member of the ERISA group.
"PRIOR PLACEMENTS" means that certain Securities Purchase Agreement,
dated May 28, 2004, and that certain Securities Purchase Agreement, dated July
9, 2004, as each have been amended pursuant to that certain Amendment to
Securities Purchase Agreement, dated as of the date hereof ("AMENDMENT").
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"REFUSED SECURITIES" shall have the meaning set forth in Section
4.4.
"REGISTRATION STATEMENT" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Investors of the Underlying Shares and Warrant Shares.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Investors, in the form of Exhibit B hereto.
"REQUIRED INVESTORS" means one or more Investors representing
greater than 50% of the aggregate principal amount of all Notes then
outstanding.
"REQUIRED MINIMUM" means, as of any date, the maximum aggregate
number of shares of Common Stock then issued or potentially issuable in the
future pursuant to the Transaction Documents that the Company is obligated to
issue, whether contingently or otherwise, including, without limitation, any
Underlying Shares issuable upon conversion in full of all Notes and Warrant
Shares issuable upon exercise in full of all Warrants (without regard to any
otherwise applicable conversion or exercise restrictions contained therein)
(assuming for such purpose that the Conversion Price (as defined in the Notes)
and the Exercise Price (as defined in the Warrants) equals 75% of the Conversion
Price and Exercise Price in effect on the Closing Date).
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"RESTRICTED PAYMENT" means, with respect to any Person, (a) any
direct or indirect distribution, dividend or other payment (whether in cash,
securities or other property) on account of any equity interest in, or shares of
capital stock or other securities of, such Person, (b) any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such equity interest, (c) any payment of
principal or interest or any purchase, redemption, retirement, acquisition or
defeasance with respect to any Debt of such Person which is subordinated to the
payment of the Notes, unless such payment is expressly permitted by the terms of
the applicable subordination agreement, (d) other than as permitted by Section
5.10, the acquisition for value by such Person of any Debt or equity interest
issued by any Affiliate (other than a wholly-owned subsidiary) thereof, and (e)
any management, consulting or other similar fees, or any interest thereon,
payable by such Person to any Affiliate of such Person (other than the Company),
or to any other Person other than an unrelated third party; provided, however,
that Restricted Payments shall not include payments under consulting agreements
so long as such consulting agreements which contain equity components have been
approved by the Board of Directors of the Company.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC REPORTS" has the meaning set forth in Section 3.1(h).
"SECURITIES" means the Notes, the Warrants, the Underlying Shares
and the Warrant Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY AGREEMENT" has the meaning set forth in Section 2.1(b).
"SHORT SALES" include, without limitation, all "short sales" as
defined in Rule 3b-3 of the Exchange Act and Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, short sales, swaps and
similar arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated brokers.
"STRATEGIC TRANSACTION" means a transaction or relationship in which
the Company issues shares of Common Stock or other securities of the Company to
a Person which is, itself or through its subsidiaries, an operating company in a
business synergistic with the business of the Company and in which the Company
receives benefits in addition to the investment of funds, but shall not include
a transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is investing
in securities. Strategic Transaction includes bona fide equipment or real
property leases, sale and leaseback, or licensing agreements, provided that such
transaction is approved by the Board of Directors of the company and is not for
the purpose of raising capital.
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"SUBSEQUENT PLACEMENT" shall have the meaning set forth in Section
4.4.
"SUBSIDIARY" means any subsidiary of the Company now or hereafter
existing in which the Company, directly or indirectly, owns a majority of the
voting stock or other voting equity interests.
"TRADING DAY" means (i) a day on which the Common Stock is traded on
an Eligible Market, or (ii) if the Common Stock is not listed on an Eligible
Market, a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board or the National Quotation Bureau
Incorporated, or (iii) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.
"TRADING MARKET" means whichever of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ National Market, the NASDAQ SmallCap Market
or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
on the date in question.
"TRANSACTION DOCUMENTS" means this Agreement, the Notes, the
Registration Rights Agreement, the Warrants, the Security Agreement, the
Amendment, the Voting Agreement and any other documents or agreements executed
in connection with the transactions contemplated hereunder.
"UNDERLYING SHARES" means the shares of Common Stock issuable upon
conversion of the Notes and payment of interest thereunder.
"VENCORE PURCHASE MONEY FINANCING" means Debt of the Company
incurred in connection with the Vencore equipment financing line (whether
pursuant to a loan, capital lease obligation, sale/leaseback transaction or
otherwise) in an aggregate principal amount not to exceed one million dollars
($1,000,000) at any time outstanding, provided that such Debt is incurred within
90 days after such acquisition of such equipment.
"VOTING AGREEMENT" means that certain voting agreement, by and among
the Company and the stockholders identified therein, dated as of the date
hereof.
"VWAP" means, with respect to any date of determination, the daily
volume weighted average price (as reported by Bloomberg using the VAP function)
of the Common Stock on such date of determination, or if there is no such price
on such date of determination, then the daily volume weighted average price on
the date nearest preceding such date.
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"WARRANTS" means, collectively, the Initial Warrants and the
Additional Warrants.
"WARRANT SHARES" means the shares of Common Stock issuable upon
exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing.
(a) Subject to the terms and conditions set forth in this Agreement,
at the Closing the Company shall issue and sell to each Investor, and each
Investor shall, severally and not jointly, purchase from the Company, the Notes
and the Warrants representing such Investor's Investment Amount. The Closing
shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ at 4:30 p.m. (New York City time) on the Closing Date or at
such other location or time as the parties may agree.
(b) At the Closing, the Company shall deliver or cause to be
delivered to each Investor the following (the "COMPANY DELIVERABLES"):
(i) Notes in the aggregate principal amount of the Investment
Amount indicated below such Investor's name on its signature page of this
Agreement, registered in the name of such Investor;
(ii) Initial Warrants, registered in the name of such
Investor, pursuant to which such Investor shall have the right to acquire the
number of shares of Common Stock equal to 100% of the Underlying Shares issuable
upon an assumed conversion of the Notes issuable to such Investor in accordance
with Section 2.1(b)(i) (without regard to any conversion restrictions contained
thereunder);
(iii) Additional Warrants, registered in the name of such
Investor, pursuant to which such Investor shall have the right to acquire the
number of shares of Common Stock equal to 45% of the Underlying Shares issuable
upon an assumed conversion of the Notes issuable to such Investor in accordance
with Section 2.1(b)(i) (without regard to any conversion restrictions contained
thereunder);
(iv) the legal opinion of Company Counsel, in agreed form,
addressed to the Investors;
(v) the Registration Rights Agreement, duly executed by the
Company;
(vi) a security agreement, duly executed by the Company, in
the form attached hereto as Exhibit D (as amended, supplemented or otherwise
modified from time to time, the "SECURITY AGREEMENT");
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(vii) a certificate executed by a duly authorized officer of
the Company certifying that (i) all representations and warranties made by the
Company and information furnished by the Company in any schedules to this
Agreement, are true and correct in all material respects as of the Closing Date,
(ii) all covenants, agreements and obligations required by this Agreement to be
performed or complied with by the Company, prior to or at the Closing, have been
performed or complied with and (iii) the items referenced in Sections
2.1(d)(iv)-(vi) are true and correct as of the Closing Date;
(viii) lien and record search reports in form and substance
acceptable to the Investors showing that there are no Liens on the collateral
security granted under the Security Agreement, other than Liens expressly
permitted thereby; and
(ix) any other documents reasonably requested by such
Investor.
(c) At the Closing, each Investor shall deliver or cause to be
delivered to the Company the following (the "INVESTOR DELIVERABLES"):
(i) the Investment Amount indicated below such Investor's name
on its signature page of this Agreement, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose;
(ii) the Registration Rights Agreement, duly executed by such
Investor; and
(iii) the Security Agreement, duly executed by such Investor.
(d) Conditions Precedent to the Obligations of an Investor to
Purchase Notes and Warrants. The obligation of each Investor to acquire Notes
and Warrants and make loans at the Closing is subject to the satisfaction or
waiver by such Investor, at or before the Closing, of each of the following
conditions:
(i) Representations and Warranties. The representations and
warranties of the Company contained in the Transaction Documents shall be true
and correct as of the date when made and as of the Closing Date as though made
on and as of such date;
(ii) Performance. The Company shall have performed, satisfied
and complied with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by it at or
prior to the Closing;
(iii) Officer's Certificate. The officer's certificate
described in Section 2.1(b)(vii) hereof shall have been delivered;
(iv) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
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(v) Adverse Changes. Since the execution of this Agreement, no
event or series of events shall have occurred that has had or would reasonably
be expected to result in a Material Adverse Effect;
(vi) No Suspensions of Trading in Common Stock; Listing.
Trading in the Common Stock shall not have been suspended by the Commission or
any Trading Market (except for any suspensions of trading of not more than one
Trading Day solely to permit dissemination of material information regarding the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for trading on
an Eligible Market; and
(vii) Company Deliverables. The Company shall have delivered
the Closing Company Deliverables in accordance with Section 2.1(b).
(e) Conditions Precedent to the Obligations of the Company to
sell Notes and Warrants. The obligation of the Company to sell Notes and
Warrants at the Closing is subject to the satisfaction or waiver by the Company,
at or before the Closing, of each of the following conditions:
(i) Representations and Warranties. The representations and
warranties of each Investor contained herein shall be true and correct as of the
date when made and as of the Closing Date as though made on and as of such date;
(ii) Performance. Each Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by such Investor at or prior to the Closing;
(iii) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents; and
(iv) Investors Deliverables. Each Investor shall have
delivered its Investor Deliverables in accordance with Section 2.1(c).
(f) American Stock Exchange Approval. The American Stock Exchange
shall have orally approved the American Stock Exchange Additional Listing
Application submitted by the Company (in a form acceptable to the Investors)
with respect to the transactions contemplated by the Transaction Documents.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to each Investor:
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(a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than as specified in the SEC Reports. Except as disclosed in Schedule
3.1(a), the Company owns, directly or indirectly, all of the capital stock of
each Subsidiary free and clear of any and all Liens (other than Permitted
Liens), and all the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights.
(b) Organization and Qualification. The Company and each Subsidiary
are duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. The Company and each Subsidiary are duly
qualified to conduct its respective businesses and are in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
12
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect. Except as
set forth in Schedule 3.1(d), payments of cash on account of principal of or
interest under the Notes, upon any Event of Default under the Notes, as a result
of liquidated damages under any Transaction Document or upon a Buy-In under and
as such term is defined in a Warrant will not require the consent of, any
payment to, or the springing of any Lien in favor of any lender to or creditor
of the Company or any Subsidiary (under a credit facility, loan agreement or
otherwise) and will not result in a default under any such credit facilities,
loans or other agreements.
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) the filing with the Commission of one or more Registration
Statements in accordance with the requirements Registration Rights Agreement,
(ii) filings required by state securities laws, (iii) the filing of a Notice of
Sale of Securities on Form D with the Commission under Regulation D of the
Securities Act (iv) the filings required in accordance with Section 4.7 and
4.10, and (iv) those that have been made or obtained prior to the date of this
Agreement.
(f) Issuance of the Securities. The Securities have been duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens. The Company has reserved from its duly authorized
capital stock a number of shares of Common Stock issuable upon conversion of the
Notes and upon exercise of the Warrants, which number of reserved shares is not
less than the Required Minimum calculated as of the date hereof.
(g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company, and all shares of Common
Stock reserved for issuance under the Company's various option and incentive
plans, is specified in the SEC Reports. Except as specified in the SEC Reports,
no securities of the Company are entitled to preemptive or similar rights, and
no Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as specified in the SEC
Reports, and except in connection with the issuance of Anti-Dilution
Entitlements and New Entitlements (each as defined in the Amendment), there are
no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
Except in connection with the issuance of Anti-Dilution Entitlements and New
13
Entitlements, the issue and sale of the Securities will not, immediately or with
the passage of time, obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Investors) and will not result in
a right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities.
(h) SEC Reports; Financial Statements. The Company has filed all
reports, forms or other information required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the twelve months preceding the date hereof (or such shorter
period as the Company was required by law to file such reports) (the foregoing
materials being collectively referred to herein as the "SEC REPORTS" and,
together with the Schedules to this Agreement (if any), the "DISCLOSURE
MATERIALS") on a timely basis or has timely filed a valid extension of such time
of filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present
in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments. For
purposes of this Agreement, any reports, forms or other information provided to
the Commission whether by filing, furnishing or otherwise providing, is included
in the term "filed" (or any derivations thereof).
(i) Press Releases. The press releases disseminated by the Company
during the twelve months preceding the date of this Agreement taken as a whole
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading.
(j) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables, accrued expenses and other liabilities incurred
in the ordinary course of business consistent with past practice and (B)
liabilities (not to exceed $50,000) not required to be reflected in the
Company's financial statements pursuant to GAAP or required to be disclosed in
filings made with the Commission, (iii) the Company has not altered its method
of accounting or the identity of its auditors, (iv) the Company has not declared
14
or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock, and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company stock option plans and consistent with past practice. The Company does
not have pending before the Commission any request for confidential treatment of
information.
(k) Litigation. There is no Action which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) except as specifically disclosed in the SEC
Reports, would, if there were an unfavorable decision, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or officer
thereof (in his or her capacity as such), is or has been the subject of any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty, except as specifically
disclosed in the SEC Reports. There has not been, and to the knowledge of the
Company there is not pending, any investigation by the Commission involving the
Company or any current or former director or officer of the Company (in his or
her capacity as such). The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.
(l) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(m) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect. The Company is in compliance
with all effective requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended,
and the rules and regulations thereunder, that are applicable to it, except
where such noncompliance could not have or reasonably be expected to result in a
Material Adverse Effect.
(n) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such permits.
15
(o) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to their respective businesses and good and valid title in all personal
property owned by them that is material to their respective businesses, in each
case free and clear of all Liens, except for Permitted Liens. Any real property
and facilities held under lease by the Company and the Subsidiaries are held by
them under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance, except as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(p) Patents and Trademarks.
(i) Schedule 3.1(p) accurately sets forth all material
Intellectual Property that is used in the Company's business. The Company and
the Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material for use in
connection with their respective businesses as described in the SEC Reports and
which the failure to so have could, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect (collectively, the
"INTELLECTUAL PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person.
Except as set forth in the SEC Reports, to the knowledge of the Company, all
such Intellectual Property Rights (i) are enforceable and (ii) there is no
existing infringement by another Person of any of the Intellectual Property
Rights.
(ii) Except as set forth in Schedule 3.1(p), the Company has
not transferred any rights or interest in, or granted any exclusive license with
respect to, any of its Intellectual Property Rights, to any third party.
(iii) To the Company's knowledge, all Intellectual Property
Rights of the Company and its Subsidiaries are currently in compliance with all
legal requirements (including timely filings, proofs and payments of fees). To
the Company's knowledge, no Intellectual Property Rights of the Company or its
Subsidiaries which are necessary for the conduct of the Company's and each of
its Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted are involved in any cancellation, dispute or
litigation, and, to the Company's knowledge, no such action is threatened. No
patent of the Company or its Subsidiaries is involved in any interference,
reissue, re-examination or opposition proceeding.
(iv) All of the licenses and sublicenses and consent, royalty
or other agreements concerning Intellectual Property Rights which the Company
uses in its and each of its Subsidiaries' respective businesses as currently
conducted or as currently proposed to be conducted to which the Company or any
Subsidiary is a party or by which any of their assets are bound (other than
generally commercially available, non-custom, off-the-shelf software application
16
programs having a retail acquisition price of less than $10,000 per license)
(collectively, "License Agreements") are valid and binding obligations of the
Company or its Subsidiaries that are parties thereto and, to the Company's
knowledge, the other parties thereto, enforceable in accordance with their
terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally, and
which the failure to so have could, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect.
(vii) The consummation of the transactions contemplated hereby
and by the other Transaction Documents will not result in the alteration, loss,
impairment of or restriction on the Company's or any of its Subsidiaries'
ownership or right to use any of the Intellectual Property Rights which are
necessary for the conduct of Company's and each of its Subsidiaries' respective
businesses as currently conducted or as currently proposed to be conducted.
(viii) The Company and its Subsidiaries have taken reasonable
steps to protect the Company's and its Subsidiaries' Intellectual Property
Rights. Each employee, consultant and contractor who have access to material
confidential information which is necessary for the conduct of the Company's and
each of its Subsidiaries' respective businesses as currently conducted or as
currently proposed to be conducted has executed an agreement to maintain the
confidentiality of such confidential information and has executed appropriate
agreements that are substantially consistent with the Company's standard forms
thereof. Except under confidentiality obligations, the Company has not
materially disclosed any of the Company's or its Subsidiaries' confidential
information to any third party.
(q) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. The Company has no reason to believe
that it will not be able to renew its and the Subsidiaries' 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 on terms
consistent with market for the Company's and such Subsidiaries' respective lines
of business.
(r) Transactions With Affiliates and Employees. Except as set forth
in the SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (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 entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(s) Internal Accounting Controls. The Company believes that it
maintains controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
17
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP 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. Based
on its status as a non-accelerated filer, the Company believes it has
established disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls
and procedures to ensure that material information relating to the Company,
including its Subsidiaries, is made known to the certifying officers by others
within those entities, particularly during the period in which the Company's
Form 10-KSB or 10-QSB, as the case may be, is being prepared. The Company's
certifying officers have evaluated the effectiveness of the Company's controls
and procedures in accordance with Item 307 of Regulation S-B under the Exchange
Act for the Company's most recently ended fiscal quarter or fiscal year-end
(such date, the "EVALUATION DATE"). The Company presented in its most recently
filed Form 10-KSB or Form 10-QSB the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no changes in the Company's internal controls that would be required to be
disclosed pursuant to Item 308(c) of Regulation S-B under the Exchange Act or,
to the Company's knowledge, in other factors that could reasonably be expected
to have a Material Adverse Effect on the Company's internal controls.
(t) Solvency. Based on the financial condition of the Company as of
the Closing Date and assuming that the Closing shall have occurred, the current
cash flow of the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its current liabilities when such amounts are required to be paid.
The Company has no current intention to incur debts beyond its ability to pay
such debts as they mature (taking into account the timing and amounts of cash to
be payable on or in respect of such liabilities).
(u) Certain Fees. Except as set forth in Schedule 3.1(u), no
brokerage or finder's fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Investors shall have no obligation with
respect to any fees or with respect to any claims (other than such fees or
commissions owed by a Investor pursuant to written agreements executed by such
Investor which fees or commissions shall be the sole responsibility of such
Investor) made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.
(v) Certain Registration Matters. Assuming the accuracy of the
Investors' representations and warranties set forth in Section 3.2(b)-(e), no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to the Investors under the Transaction Documents. The
Company is eligible to register the resale of its Common Stock for resale by the
Investors under Form SB-2 or Form S-3 promulgated under the Securities Act.
Except as specified in Schedule 3.1(v), the Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied or exercised.
18
(w) Listing and Maintenance Requirements. Except as specified in the
SEC Reports, the Company has not, in the two years preceding the date hereof,
received notice from any Trading Market to the effect that the Company is not in
compliance with the listing or maintenance requirements thereof. The Company is,
and has no reason to believe that it will not in the foreseeable future continue
to be, in compliance with the listing and maintenance requirements for continued
listing of the Common Stock on the Trading Market on which the Common Stock is
currently listed or quoted. The issuance and sale of the Securities under the
Transaction Documents does not contravene the rules and regulations of the
Trading Market on which the Common Stock is currently listed or quoted,
including, without limitation, the issuance and delivery to the Investors of the
Securities contemplated by the Transaction Documents, provided, that the
Company's stockholders will be required to approve any shares of Common Stock
issuable in connection with payments of interest on the principal of the Notes.
(x) Investment Company. The Company is not, and is not an Affiliate
of, and immediately following Closing will not have become, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(y) Application of Takeover Protections. The Company has taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Investors or
stockholders of the Company prior to any Closing Date as a result of the
Investors and the Company fulfilling their obligations or exercising their
rights under the Transaction Documents, including without limitation the
Company's issuance of the Securities and the Investors' ownership of the
Securities.
(z) No Additional Agreements. The Company does not have any
agreement or understanding with any Investor with respect to the transactions
contemplated by the Transaction Documents other than as specified in the
Transaction Documents.
(aa) Compliance with ERISA. (i) Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the Code with respect to
each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Code in respect of any Plan, (ii)
failed to make any required contribution or payment to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan
or Benefit Arrangement, which has resulted or could result in the imposition of
a Lien or the posting of a bond or other security under ERISA or the Code or
(iii) incurred any liability under Title IV of ERISA other than a liability to
the PBGC for premiums under Section 4007 of ERISA.
19
(ii) The benefit plans not covered under clause (a) above
(including profit sharing, deferred compensation, stock option, employee stock
purchase, bonus, retirement, health or insurance plans, collectively the
"BENEFIT PLANS") relating to the employees of the Company are duly registered
where required by, and are in good standing in all material respects under, all
applicable laws. All required employer and employee contributions and premiums
under the Benefit Plans to the date hereof have been made, the respective fund
or funds established under the Benefit Plans are funded in accordance with
applicable laws, and no past service funding liabilities exist thereunder.
(iii) No Benefit Plans have any unfunded liabilities, either
on a "going concern" or "winding up" basis and determined in accordance with all
applicable laws and actuarial practices and using actuarial assumptions and
methods that are reasonable in the circumstances. No event has occurred and no
condition exists with respect to any Benefit Plans that has resulted or could
reasonably be expected to result in any pension plan having its registration
revoked or wound up (in whole or in part) or refused for the purposes of any
applicable laws or being placed under the administration of any relevant pension
benefits regulatory authority or being required to pay any taxes or penalties
(in any material amounts) under any applicable laws.
(bb) Taxes. All United States federal, state, county, municipality
local or foreign income tax returns and all other material tax returns
(including foreign tax returns) which are required to be filed by or on behalf
of the Company and each Subsidiary have been filed and all material taxes due
pursuant to such returns or pursuant to any assessment received by the Company
and each Subsidiary have been paid except those being disputed in good faith and
for which adequate reserves have been established. The charges, accruals and
reserves on the books of the Company and each Subsidiary in respect of taxes or
other governmental charges have been established in accordance with GAAP.
(cc) Absence of Any Undisclosed Liabilities or Capital Calls. Except
for litigation described in the SEC Reports, there are no liabilities of the
Company or any Subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability, other than (i) those liabilities provided for in
the Company's financial statements and (ii) other undisclosed liabilities which,
individually or in the aggregate, could not have, or reasonably be expected to
result in, a Material Adverse Effect.
(dd) Secured Indebtedness. As of the Closing Date, other than as set
forth in Schedule 3.1(dd), the Company has no Debt that is secured by any Lien.
(ee) Seniority. As of the date of this Agreement, except as set
forth on Schedule 3.1(ee), no indebtedness of the Company is senior to the Notes
in right of payment, whether with respect to interest or upon liquidation or
dissolution, or otherwise.
20
(ff) No Integrated Offering. Assuming the accuracy of the
Purchasers' representations and warranties set forth in Section 3.2, 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 cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the Securities Act or any applicable shareholder
approval provisions, including, without limitation, under the rules and
regulations of any Trading Market on which any of the securities of the Company
are listed or designated.
(gg) Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(hh) Disclosure. The Company confirms that neither it nor any Person
acting on its behalf has provided any Investor or its respective agents or
counsel with any information that the Company believes constitutes material,
non-public information except insofar as the existence and terms of the proposed
transactions hereunder may constitute such information. The Company understands
and confirms that the Investors will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. All disclosure
provided to the Investors regarding the Company, its business and the
transactions contemplated hereby, furnished by or on behalf of the Company
(including the Company's representations and warranties set forth in this
Agreement) are true and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
3.2 Representations and Warranties of the Investors. Each Investor hereby,
for itself and for no other Investor, represents and warrants to the Company as
follows:
(a) Organization; Authority. Such Investor is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations thereunder. The execution, delivery and performance by such
Investor of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or, if such Investor is not a corporation,
such partnership, limited liability company or other applicable like action, on
the part of such Investor. Each of this Agreement, the Registration Rights
Agreement and the Security Agreement has been duly executed by such Investor,
and when delivered by such Investor in accordance with terms hereof, will
21
constitute the valid and legally binding obligation of such Investor,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(b) Investment Intent. Such Investor is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Investor's right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws. Subject to the immediately preceding
sentence, nothing contained herein shall be deemed a representation or warranty
by such Investor to hold the Securities for any period of time. Such Investor is
acquiring the Securities hereunder in the ordinary course of its business. Such
Investor does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.
(c) Investor Status. At the time such Investor was offered the
Securities, it was, and at the date hereof it is, an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Such Investor is not a
registered broker-dealer under Section 15 of the Exchange Act.
(d) General Solicitation. Such Investor is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
(e) Access to Information. Such Investor acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(f) Certain Trading Activities. Such Investor has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Investor, engaged in any transactions in the securities
of the Company (including, without limitations, any Short Sales involving the
Company's securities) since the earlier to occur of (1) the time that such
Investor was first contacted by the Company or placement agent engaged by the
22
Company regarding an investment in the Company pursuant to the Transaction
Documents and (2) the 20th day prior to the time that the transactions
contemplated by this Agreement are publicly disclosed by the Company. Such
Investor covenants that neither it nor any Person acting on its behalf or
pursuant to any understanding with it will engage in any transactions in the
securities of the Company (including Short Sales) prior to the time that the
transactions contemplated by this Agreement are publicly disclosed. Such
Investor acknowledges that it may not use shares registered pursuant to the
Registration Statement to cover short sales of Common Stock made prior to the
date on which the Registration Statement has been declared effective by the
Commission. Notwithstanding the foregoing, in the case of an Investor that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Investor's assets and the portfolio managers have no
actual knowledge of the investment decisions made by the portfolio managers
managing other portions of such Investor's assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement.
(g) Independent Investment Decision. Such Investor has independently
evaluated the merits of its decision to purchase Securities pursuant to this
Agreement, and such Investor confirms that it has not relied on the advice of
any other Investor's business and/or legal counsel in making such decision.
The Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 (a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of the Securities
other than pursuant to an effective registration statement, to the Company, to
an Affiliate of an Investor or in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act.
(b) Certificates evidencing the Securities will contain the
following legend, until such time as they are not required under Section 4.1(c):
[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
CONVERSION OR EXERCISE OF THESE SECURITIES HAVE BEEN
REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED] WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
23
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. [THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
CONVERSION OR EXERCISE OF THESE SECURITIES] [THESE SECURITIES]
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that an Investor may from time
to time pledge, and/or grant a security interest in some or all of the
Securities pursuant to a bona fide margin agreement in connection with a bona
fide margin account and, if required under the terms of such agreement or
account, such Investor may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject to
approval or consent of the Company and no legal opinion of legal counsel to the
pledgee, secured party or pledgor shall be required in connection with the
pledge, but such legal opinion may be required in connection with a subsequent
transfer following default by the Investor transferee of the pledge. No notice
shall be required of such pledge. At the appropriate Investor's expense, the
Company will execute and deliver such reasonable documentation as a pledgee or
secured party of Securities may reasonably request in connection with a pledge
or transfer of the Securities including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of selling stockholders thereunder.
(c) Certificates evidencing Underlying Shares and Warrant Shares
shall not contain any legend (including the legend set forth in Section 4.1(b)):
(i) while a registration statement (including the Registration Statement)
covering such Underlying Shares or Warrant Shares is then effective, or (ii)
following a sale or transfer of such Securities pursuant to Rule 144 (assuming
the transferor is not an Affiliate of the Company), or (iii) while such
Securities are eligible for sale under Rule 144(k). The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this Section. The
Company agrees that it shall, at its sole cost and expense, within three Trading
Days following such time as restrictive legends would not then be required under
this Section 4.1(c), issue and deliver to such Investor certificates that are
free of restrictive legends representing Underlying Shares or Warrant Shares in
replacement of Underlying Shares or Warrant Shares previously issued with
restrictive legends.
4.2 Furnishing of Information. As long as any Investor owns the
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
24
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Investor owns Securities, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to
the Investors and make publicly available in accordance with Rule 144(c) such
information as is required for the Investors to sell the Underlying Shares and
Warrant Shares under Rule 144. The Company further covenants that it will take
such further action as any holder of Securities may reasonably request, all to
the extent required from time to time to enable such Person to sell the
Underlying Shares and Warrant Shares without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144.
4.3 Listing of Securities. The Company agrees, (i) if the Company applies
to have the Common Stock traded on any other Trading Market, it will include in
such application the Underlying Shares and Warrant Shares, and will take such
other action as is necessary or desirable to cause the Underlying Shares and
Warrant Shares to be listed on such other Trading Market as promptly as
possible, and (ii) it will take all action reasonably necessary to continue the
listing and trading of its Common Stock on a Trading Market and will comply in
all material respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the Trading Market.
4.4 Participation Right. If, at any time prior to the one year anniversary
of the Closing Date, the Company proposes to issue any Common Stock or Common
Stock Equivalents (collectively, the "OFFERED SECURITIES") in a subsequent
transaction ("SUBSEQUENT PLACEMENT"), the Company shall first offer the Offered
Securities to the Investors in accordance with the following provisions:
(a) The Company shall deliver to each Investor a written notice (the
"OFFER") of any proposed or intended issuance or sale or exchange of the Offered
Securities in a Subsequent Placement, which Offer shall (w) identify and
describe the Offered Securities, (x) include the transaction documents for such
Subsequent Placement, including the price and other terms upon which the Offered
Securities are to be issued, sold or exchanged, and the number or amount of the
Offered Securities to be issued, sold or exchanged and (z) offer to issue and
sell to or exchange with each Investor all or a portion of the Offered
Securities, based on such Investor's pro rata portion (based upon such
Investor's percentage ownership of the total number of issued and outstanding
Shares) of the Offered Securities for the price and upon the terms and
conditions set forth in the Offer (the "BASIC Amount").
(b) To accept an Offer, in whole or in part, an Investor must
deliver a written notice to the Company prior to the end of the third (3)
Trading Day from the delivery of the Offer, setting forth the portion of the
Investor's Basic Amount that such Investor elects to purchase (the "NOTICE OF
ACCEPTANCE").
(c) The Company shall have seven (7) Trading Days from the
expiration of the period set forth in Section 4.4(b) above to issue, sell or
exchange all or any part of, and publicly announce the transaction with respect
to, such Offered Securities as to which a Notice of Acceptance has not been
given by the Investors (the "REFUSED SECURITIES"), but only to the offerees
25
described in the Offer and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to the
acquiring Person or Persons than those set forth in the Offer. If by the end of
the seven (7) Trading Days referenced in this subsection the Company has not
made a public announcement with respect to the transaction involving such
Offered Securities, such transaction shall be deemed terminated and knowledge of
such transaction shall no longer be deemed material, non-public information.
(d) Upon the closing of the issuance, sale or exchange of all or
less than all of the Refused Securities, each Investor shall acquire from the
Company, and the Company shall issue to each Investor, the number or amount of
Offered Securities specified in such Investor's Notice of Acceptance upon the
terms and conditions specified in the Offer.
(e) The rights contained in this Section shall not apply to the
issuance and sale by the Company, from time to time hereafter, of (i) shares of
Common Stock or Common Stock Equivalents to consultants, employees, officers, or
directors of the Company, as compensation for their services to the Company or
any of its direct or indirect Subsidiaries pursuant to arrangements approved by
the Board of Directors of the Company and consistent with past practice, (ii)
the issuance of the Securities pursuant to the Transaction Documents, (iii)
shares of Common Stock issued and sold in a firm commitment underwritten public
offering (which shall not include an equity line of credit, shelf takedown, or
similar financing arrangement) resulting in net proceeds to the Company of in
excess of $15,000,000, (iv) up to 250,000 shares of Common Stock or Common Stock
Equivalents issuable in connection with an equipment financing by Vencore
Solutions LLC, (v) up to an aggregate of 500,000 shares of Common Stock
(including any shares of Common Stock issuable in respect of Common Stock
Equivalents) issued or issuable as part of a credit facility provided by ▇▇▇▇
Technologies BV, approved by the Company's Board of Directors, (vi) issuance of
shares of Common Stock to Logisticorp, Inc., and Southwest Resource
Preservation, Inc., or their successors and assigns, based upon the issuance and
conversion of outstanding convertible debentures, with the issuance of said
Common Stock not to exceed 700,000 shares, (vii) shares of Common Stock issued
as consideration for the acquisition of another company or business in which the
shareholders of the Company do not have an ownership interest, which acquisition
has been approved by the Board of Directors of the Company, (viii) shares of
Common Stock issued in connection with Anti-Dilution Entitlements or New
Entitlements, or (ix) shares of Common Stock or Common Stock Equivalents issued
in connection with Strategic Transactions.
4.5 Acknowledgment of Dilution. The Company acknowledges that the issuance
of Underlying Shares upon conversion of Notes and Warrant Shares upon exercise
of Warrants will result in dilution of the outstanding shares of Common Stock,
which dilution may be substantial. The Company further acknowledges that its
obligation to honor conversions under the Notes is unconditional and absolute
and not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim that the Company may
have against any Investor.
26
4.6 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Investors, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market in a manner that would require stockholder
approval of the sale of the Securities to the Investors.
4.7 Reservation of Shares. The Company shall maintain a reserve from its
duly authorized shares of Common Stock to comply with its conversion obligations
under the Notes. If on any date the Company would be, if notice of conversion
were to be delivered on such date, precluded from issuing the number of (i)
Underlying Shares, as the case may be, issuable upon conversion in full of the
Notes or (ii) Warrant Shares, as the case may be, issuable upon exercise in full
of the Warrants, due to the unavailability of a sufficient number of authorized
but unissued or reserved shares of Common Stock, then the Board of Directors of
the Company shall promptly prepare and mail to the stockholders of the Company
proxy materials or other applicable materials requesting authorization to amend
the Company's certificate of incorporation or other organizational document to
increase the number of shares of Common Stock which the Company is authorized to
issue so as to provide enough shares for issuance of the Underlying Shares and
Warrant Shares. In connection therewith, the Board of Directors shall (a) adopt
proper resolutions authorizing such increase, (b) recommend to and otherwise use
its best efforts to promptly and duly obtain stockholder approval to carry out
such resolutions (and hold a special meeting of the stockholders as soon as
practicable, but in any event not later than the 60th day after delivery of the
proxy or other applicable materials relating to such meeting) and (c) within
five Business Days of obtaining such stockholder authorization, file an
appropriate amendment to the Company's certificate of incorporation or other
organizational document to evidence such increase.
4.8 Conversion Procedures. The form of Conversion Notice included in and
as defined in the Notes sets forth the totality of the procedures required by
the Investors in order to convert the Notes. The Company shall honor conversions
of the Notes and shall deliver Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Transaction Documents.
4.9 Subsequent Registrations. Other than pursuant to the Registration
Statement, prior to the Effective Date, the Company may not file any
registration statement with the Commission with respect to any securities of the
Company other than registration statements on Form S-8 promulgated by the
Commission.
4.10 Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York City
time) on the Trading Day following the execution of this Agreement, and by 9:00
a.m. (New York City time) on the Trading Day following the Closing Date, the
Company shall issue press releases in forms approved by the Investors disclosing
the transactions contemplated hereby. On the Trading Day following the execution
of this Agreement the Company will file a Current Report on Form 8-K disclosing
the material terms of the Transaction Documents (and attach as exhibits thereto
the Transaction Documents), and on the Trading Day following the Closing Date
the Company will file an additional Current Report on Form 8-K to disclose the
Closing. In addition, the Company will make such other filings and notices in
27
the manner and time required by the Commission and the Trading Market on which
the Common Stock is listed. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Investor, or include the name of any Investor
in any filing with the Commission (other than the Registration Statement and any
exhibits to filings made in respect of this transaction in accordance with
periodic filing requirements under the Exchange Act) or any regulatory agency or
Trading Market, without the prior written consent of such Investor, except to
the extent such disclosure is required by law or Trading Market regulations.
4.11 Limitation on Issuance of Future Priced Securities. During the six
months following the Closing Date, the Company shall not issue any "Future
Priced Securities" as such term is described by NASD IM-4350-1.
4.12 Indemnification of Investors. In addition to the indemnity provided
in the Registration Rights Agreement, the Company will indemnify and hold the
Investors and their directors, officers, stockholders, partners, employees and
agents (each, an "INVESTOR PARTY") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation (collectively, "LOSSES") that any
such Investor Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.
4.13 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Investor or its
agents or counsel with any information that the Company believes constitutes
material non-public information.
4.14 Use of Proceeds. The Company will use the net proceeds from the sale
of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables and accrued expenses in the ordinary course of the Company's business
and consistent with prior practices), or to redeem any Common Stock or Common
Stock Equivalents, provided that ▇▇▇▇ Technologies BV will fund $2 million of
the purchase price of the Notes by converting $2 million of its existing
extension of credit to the Company into Notes.
4.15 Existence; Conduct of Business. The Company will, and will cause each
of the Subsidiaries to, do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its legal existence and the rights,
licenses, permits, privileges and franchises material to the conduct of its
business, provided, that the foregoing shall not prohibit (a) any sale, lease,
transfer or other disposition permitted by this Agreement, or (b) any merger of
(i) any domestic Subsidiary with any other domestic Subsidiary, (ii) any
domestic Subsidiary with and into the Company, or (iii) any foreign Subsidiary
with any other foreign Subsidiary.
28
ARTICLE V.
NEGATIVE COVENANTS
The Company hereby agrees that, from and after the date hereof until the
date that the Notes have either been repaid in their entirety and/or converted
entirely into Common Stock, the Company shall be bound according to the
restrictions set forth in each of the following negative covenants unless any
such restriction shall have been expressly waived in writing by the Required
Investors:
5.1 Restrictions on Certain Amendments. [Reserved].
5.2 Restricted Payment. The Company shall not, and shall not permit any
Subsidiary thereof, to make any Restricted Payment, other than Restricted
Payments made by one or more Subsidiaries to the Borrower.
5.3 Debt. The Company shall not, and shall not permit any Subsidiary
thereof, to create, incur, assume, become or be liable in any manner in respect
of, or suffer to exist, any Debt, except for Permitted Indebtedness.
5.4 Liens. The Company shall not, and shall not permit any Subsidiary
thereof, to create or suffer to exist any Lien upon any of its properties or
assets, except for Permitted Liens.
5.5 Amendment of Organizational Documents. The Company shall not permit
any amendment to its articles of incorporation so as to adversely affect the
rights or privileges granted under the Notes.
5.6 Sale and Leaseback. The Company shall not enter into any arrangement
whereby it sells or transfers any of its assets, and thereafter rents or leases
such assets, except as otherwise specifically permitted in the definition of
Permitted Indebtedness.
5.7 Business. The Company shall not change the nature of its business as
now conducted (as described in the SEC Reports), except for changes in
connection with additional diagnostic opportunities.
5.8 Transactions with Affiliates. Except in respect of any arrangements or
agreements between the Subsidiaries and the Company, ▇▇▇▇ Technologies BV or any
affiliates of ▇▇▇▇ Technologies BV which are approved by the Board of Directors
of the Company and which do not otherwise violate any terms of the Transaction
Documents, the Company shall not, directly or indirectly, pay any funds to or
for the account of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect any transaction in
connection with any joint enterprise or other joint arrangement with, any
29
Affiliate, except, on terms no less favorable than terms that could be obtained
by the Company from a Person that is not an Affiliate of the Company upon
negotiation at arms' length, as determined in good faith by the Board; provided
that no determination of the Board of Directors shall be required with respect
to any such transactions entered into in the ordinary course of business.
Notwithstanding the foregoing, consulting agreements shall not be restricted by
this Section, provided, that consulting agreements containing an equity
component shall be approved by the Board of Directors of the Company.
5.9 Limitation on Restrictions. Other than as permitted by the Transaction
Documents, the Company shall not, and shall not permit any Subsidiary, to enter
into, or suffer to exist, any agreement with any Person which prohibits or
limits its ability to (a) pay Debt owed to the Investors, except as expressly
permitted by the Security Agreement, (b) make loans or advances to the Company,
pay dividends or other distributions in respect of its equity interests to the
Company (except that Subsidiaries may pay dividends or other distributions) or
guarantee Debt of the Company or (c) ▇▇▇▇▇ ▇ ▇▇▇▇ in favor of the Agent and the
Secured Parties.
5.10 Investments in Foreign Subsidiaries. The Company shall not, and shall
not permit any domestic Subsidiary thereof, to (a) purchase, hold or acquire any
Debt of, permit to exist any loans or advances to, or make or permit to exist
any guarantees of any obligations of any foreign Subsidiary, other than in
respect of Permitted Foreign Subsidiary Debt or (b) or make or permit to exist
any investment or any other interest in, any foreign Subsidiary, in an aggregate
amount exceeding $5,000,000 at any time outstanding.
ARTICLE VI.
MISCELLANEOUS
6.1 Fees and Expenses. At the Closing, the Company shall pay to ▇▇▇▇▇ ▇▇▇▇
LLP $60,000.00 as partial reimbursement of SF Capital Partners Ltd. for its
legal fees in connection with the Transaction Documents (SF Capital Partners
Ltd. may deduct such amount from the Investment Amount deliverable to the
Company at Closing), it being understood that ▇▇▇▇▇ ▇▇▇▇ LLP has only rendered
legal advice to SF Capital Partners Ltd., and not to the Company or any other
Investor in connection with the transactions contemplated hereby, and that each
of the Company and the other Investors has relied for such matters on the advice
of its own respective counsel. Except as specified in the immediately preceding
sentence, 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 the Transaction Documents. The Company shall pay all stamp and
other taxes and duties levied in connection with the sale of the Notes.
6.2 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
30
6.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile (provided the sender
receives a machine-generated confirmation of successful transmission) at the
facsimile number specified in this Section prior to 5:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
If to the Company: Calypte Biomedical Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
With a copy to: Coudert Brothers LLP
▇▇▇ ▇. ▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. St.Clair, Esq.
If to an Investor: To the address set forth under such Investor's name
on the signature pages hereof;
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
6.4 Amendments; Waivers; No Additional Consideration. No provision of this
Agreement may be waived or amended except in a written instrument signed by the
Company and the Required Investors except as set forth below and except that the
conditions precedent set forth in Sections 2.1(b) and 2.2(b) may only be waived
by each Investor to be bound by such waiver. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. No consideration shall be
offered or paid to any Investor to amend or consent to a waiver or modification
of any provision of any Transaction Document unless the same consideration is
also offered to all Investors who then hold Notes. Without the written consent
or the affirmative vote of each Investor affected thereby, an amendment or
waiver under this Section 6.4 may not:
31
(a) change the maturity of the principal amount of, or the interest
payment date under, or the payment of liquidated damages, is due on, any Note or
Warrant;
(b) make any change that impairs the conversion or exercise rights
of any Securities;
(c) reduce the Event Equity Value under the Notes or amend or modify
in any manner adverse to the Holders of Securities the Company's obligation to
make such payments;
(d) amend the definition of Required Investors;
(e) change the currency of any amount owed or owing under the
Securities or any interest thereon from U.S. Dollars;
(f) impair the right of any Investor to institute suit for the
enforcement of any payment with respect to, or conversion or exercise of, any
Security; or
(g) modify the provisions of this Section 6.4 or Section 6.5.
It shall not be necessary for the consent of the Investors under this Section
6.4 to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent approves the substance thereof.
6.5 Termination. This Agreement may be terminated prior to the Closing:
(a) by written agreement of the Investors and the Company;
(b) by the Company or an Investor (as to itself but no other
Investor) upon written notice to the other, if the Closing shall not have taken
place by 5:30 p.m. (New York City time) on the Outside Date; provided, that the
right to terminate this Agreement under this Section 6.5(b) shall not be
available to any Person whose failure to comply with its obligations under this
Agreement has been the cause of or resulted in the failure of the Closing to
occur on or before such time.
(c) by an Investor (as to itself but no other Investor) if it
concludes in good faith that any of the conditions precedent contained in
Sections 2.1(d)(iv), (v) or (vi) shall have been breached or shall not be
capable of being satisfied by the Outside Date despite the assumed best efforts
of the Company.
In the event of a termination pursuant to this Section, the Company
shall promptly notify all non-terminating Investors and shall pay to the
terminating Investor(s) all of the fees and expenses incurred by such Investors
(including reasonable legal fees and expenses) in connection with this Agreement
and the transactions contemplated by this Agreement through the termination
date. Other than as to the foregoing fees and expenses, upon a termination in
accordance with this Section 6.5, the Company and the terminating Investor(s)
shall not have any further obligation or liability (including as arising from
such termination) to the other and no Investor will have any liability to any
other Investor under the Transaction Documents as a result therefrom.
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6.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. 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. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
6.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign any
or all of its rights under this Agreement to any Person to whom such Investor
assigns or transfers any Notes, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Investors."
6.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.12 (as to each
Investor Party).
6.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
33
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys' fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Proceeding.
6.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery of the Securities.
6.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
6.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
6.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Investor exercises a right, election, demand
or option under a Transaction Document and the Company does not timely perform
its related obligations within the periods therein provided, then such Investor
may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.
6.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
6.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investors and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
34
6.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Investor pursuant to any Transaction Document or an Investor
enforces or exercises its rights 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.
6.17 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
6.18 Limitation of Liability. Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that the liability of an Investor
arising directly or indirectly, under any Transaction Document of any and every
nature whatsoever shall be satisfied solely out of the assets of such Investor,
and that no trustee, officer, other investment vehicle or any other Affiliate of
such Investor or any investor, stockholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
CALYPTE BIOMEDICAL CORPORATION
By:
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: EVP and CFO
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR INVESTORS FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
NAME OF INVESTOR
By:
-------------------------------------------
Name:
Title:
Investment Amount: $
--------------------------
Tax ID No.:
----------------------------------
ADDRESS FOR NOTICE
c/o:
-----------------------------------------
Street:
--------------------------------------
City/State/Zip:
------------------------------
Attention:
-----------------------------------
Tel:
-------------------------------------
Fax:
-------------------------------------
DELIVERY INSTRUCTIONS
(if different from above)
c/o:
-----------------------------------------
Street:
---------------------------------------
City/State/Zip:
------------------------------
Attention:
-----------------------------------
Tel:
-------------------------------------
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