EXHIBIT 99.1
COMMON STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 4, 2001
BY AND BETWEEN
PACIFICARE HEALTH SYSTEMS, INC.
AND
ACQUA WELLINGTON NORTH AMERICAN EQUITIES FUND, LTD.
Table of Contents
Page
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ARTICLE I Definitions.............................................................................................1
Section 1.1 Definitions............................................................................1
ARTICLE II Purchase and Sale of Common Stock......................................................................6
Section 2.1 Purchase and Sale of Stock.............................................................6
Section 2.2 The Shares.............................................................................6
Section 2.3 Purchase Price and Closing.............................................................6
Section 2.4 Opinion of Counsel, Secretary's Certificate and Closing Certificate....................6
ARTICLE III Representations and Warranties........................................................................6
Section 3.1 Representations and Warranties of the Company..........................................6
Section 3.2 Representations and Warranties of the Purchaser.......................................13
ARTICLE IV Covenants.............................................................................................15
Section 4.1 Securities Compliance.................................................................15
Section 4.2 Registration and Listing..............................................................15
Section 4.3 Registration Procedures...............................................................15
Section 4.4 Piggyback Registration................................................................16
Section 4.5 Stop Orders...........................................................................18
Section 4.6 Transfer of Shares After Registration; Suspension.....................................18
Section 4.7 Selling Restriction...................................................................20
Section 4.8 Non-Public Information................................................................20
Section 4.9 Information Available.................................................................21
Section 4.10 Disclosure of Draw Down Notice........................................................21
Section 4.11 Compliance with Laws..................................................................21
Section 4.12 Keeping of Records and Books of Account...............................................22
Section 4.13 Limitations on Holdings and Issuances.................................................22
Section 4.14 Other Agreements and Other Financings.................................................22
Section 4.15 Comfort Letters and SAS No. 71 Letters................................................22
Section 4.16 Transfer Agent Instructions. ........................................................23
ARTICLE V Conditions to Draw Downs...............................................................................23
Section 5.1 Conditions Precedent to the Company's Obligation to Sell the Shares...................23
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to Accept a Draw Down and
Purchase the Shares...................................................................24
ARTICLE VI Draw Down Terms.......................................................................................26
Section 6.1 Draw Down Terms.......................................................................26
Section 6.2 Aggregate Limit.......................................................................28
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Table of Contents
(continued)
Page
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ARTICLE VII Termination..........................................................................................28
Section 7.1 Term; Termination by Mutual Consent...................................................28
Section 7.2 Effect of Termination.................................................................28
ARTICLE VIII Indemnification.....................................................................................29
Section 8.1 General Indemnity.....................................................................29
Section 8.2 Indemnification Procedures............................................................30
ARTICLE IX Miscellaneous.........................................................................................31
Section 9.1 Fees and Expenses.....................................................................31
Section 9.2 Specific Enforcement, Consent to Jurisdiction.........................................32
Section 9.3 Entire Agreement; Amendment...........................................................32
Section 9.4 Notices...............................................................................32
Section 9.5 Waivers...............................................................................33
Section 9.6 Headings..............................................................................33
Section 9.7 Successors and Assigns................................................................34
Section 9.8 Governing Law.........................................................................34
Section 9.9 Survival..............................................................................34
Section 9.10 Counterparts..........................................................................34
Section 9.11 Publicity.............................................................................34
Section 9.12 Severability..........................................................................34
Section 9.13 Further Assurances....................................................................35
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement"), is dated as of
December 4, 2001 by and between PacifiCare Health Systems, Inc., a Delaware
corporation (the "Company") and Acqua Wellington North American Equities Fund,
Ltd., an international business company incorporated under the laws of the
Commonwealth of The Bahamas (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
(a) "Aggregate Limit" shall have the meaning assigned to such
term in Section 2.1 hereof.
(b) "Alternate Market" shall mean the Nasdaq Small Cap Market,
the American Stock Exchange, the New York Stock Exchange or the OTC Bulletin
Board, whichever is at the time the principal trading exchange or market for the
Common Stock.
(c) "Articles" shall have the meaning assigned to such term in
Section 3.1(c) hereof.
(d) "Broker-Dealer" shall have the meaning assigned to such
term in Section 8.1(a) hereof.
(e) "Bylaws" shall have the meaning assigned to such term in
Section 3.1(c) hereof.
(f) "Closing" shall have the meaning assigned to such term in
Section 2.3 hereof.
(g) "Closing Date" shall have the meaning assigned to such
term in Section 2.3 hereof.
(h) "Comfort Letter" shall mean a letter from a "Big Five"
independent public accounting firm, in form and substance satisfactory to the
Purchaser, addressed to the Purchaser and dated as of the effective date of the
Registration Statement or the filing date of any Current Report on Form 8-K
incorporated by reference into the Registration Statement, if such report
contains substantial financial information, (i) confirming that they are
independent auditors with the meaning of the Securities Act and are in
compliance with the applicable requirements relating to the qualifications of
accountants under Rule 2-01 of Regulation S-X of the Commission and (ii)
stating, as of the effective date of the Registration Statement or filing date,
as applicable, the conclusions and findings of such firm with respect to the
audited and unaudited
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financial statements and footnotes thereto included in the Registration
Statement or incorporated by reference therein, and the financial information
included in the Registration Statement or incorporated by reference therein that
can be verified by comparison to the audited or unaudited financial statements
of the Company, or, if applicable, the financial information contained in any
Current Report on Form 8-K filed after the effective date of the Registration
Statement and incorporated by reference into the Registration Statement.
(i) "Commission" shall mean the Securities and Exchange
Commission or any successor entity.
(j) "Commission Documents" shall mean all reports, schedules,
forms, statements and other documents filed by the Company with the Commission
pursuant to the reporting requirements of the Exchange Act, including material
filed pursuant to Section 13(a) or 15(d) of the Exchange Act, on or after
January 1, 2001 and which shall be filed by the Company in the future during the
Investment Period, including, without limitation the Annual Report on Form 10-K
filed by the Company for the year ended December 31, 2000, the Quarterly Reports
on Form 10-Q filed by the Company for the quarterly periods ended March 31,
2001, June 30, 2001, and September 30, 2001, and all Current Reports on Form 8-K
filed by the Company after December 31, 2000 and shall include all information
contained in such filings and all filings incorporated by reference therein.
(k) "Common Stock" means the Company's common stock, $.01 par
value per share.
(l) "DTC" shall have the meaning assigned to such term in
Section 6.1(k).
(m) "DWAC" shall have the meaning assigned to such term in
Section 6.1(k).
(n) "Draw Down" means the transactions contemplated under
Section 6.1 of this Agreement.
(o) "Draw Down Amount" means the actual amount of proceeds
received by the Company by a Draw Down under this Agreement.
(p) "Draw Down Amount Requested" shall mean the amount of a
Draw Down requested by the Company in its Draw Down Notice as provided in
Section 6.1(i) hereof.
(q) "Draw Down Discount Price" shall have the meaning assigned
to such term in Section 6.1(b) hereof.
(r) "Draw Down Exercise Date" shall have the meaning assigned
to such term in Section 6.1(a) hereof.
(s) "Draw Down Notice" shall mean a notice sent by the Company
to exercise a Draw Down as provided in Section 6.1(i) hereof.
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(t) "Draw Down Pricing Period" shall mean a period of eighteen
(18) consecutive Trading Days commencing on the first Trading Day designated as
the start date of such draw down pricing period in the Draw Down Notice.
(u) "Environmental Laws" shall have the meaning assigned to
such term in Section 3.1(r) hereof.
(v) "ERISA Affiliate" shall have the meaning assigned to such
term in Section 3.1(y) hereof.
(w) "Event Period" shall have the meaning assigned to such
term in Section 7.2 hereof.
(x) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder.
(y) "GAAP" shall mean generally accepted accounting principles
in the United States of America as applied by the Company.
(z) "Governmental Authority" means any government, any
governmental entity, department, commission, board, agency or instrumentality,
and any court, tribunal, or judicial or arbitral body, whether federal, state,
local or foreign.
(aa) "Governmental Order" means any order, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Authority.
(bb) "Indebtedness" shall have the meaning assigned to such
term in Section 3.1(k) hereof.
(cc) "Investment Period" shall have the meaning assigned to
such term in Section 7.1 hereof.
(dd) "knowledge," as used with respect to the Company, shall
mean the actual knowledge of the Company's senior executive officers, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇ without any independent investigation.
(ee) "Law" means any federal, state, local or foreign statute,
law, ordinance, regulation, rule, code, order or rule of common law, including,
without limitation, the federal anti kickback statute, the ▇▇▇▇▇ law, the
federal False Claims Act and state law prohibiting kickbacks or certain
referrals.
(ff) "Material Adverse Effect" shall mean any effect on the
business, operations, properties or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and affiliates, taken
as a whole and/or any condition, circumstance, or situation that would prohibit
or otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement in any material respect; provided,
however, the following shall not be taken into account in determining a
"Material Adverse
3
Effect" (1) any material adverse change in the political, financial or economic
conditions of the United States, (2) a general banking moratorium has been
declared by federal authorities (3) any adverse change, event, effect,
occurrence, state of fact or development that is directly attributable to
conditions affecting health maintenance organizations or health care insurers
generally unless such conditions adversely affect the Company in a materially
disproportionate manner, (4) any event, violation, inaccuracy, circumstance or
other matter resulting from or relating to the Company's compliance with the
terms of this Agreement or the taking by the Company of any action in compliance
with the terms of this Agreement and (5) failure by the Company to meet analyst
earnings estimates of the Company's earnings or the Company's earnings guidance
in any fiscal quarter.
(gg) "Material Agreements" shall have the meaning assigned to
such term in Section 3.1(s) hereof.
(hh) "Material Change in Ownership" shall be deemed to occur
under this Agreement when any person or group within the meaning of Section
13(d) or 14(d) of the Exchange Act or comparable successor provision (excluding
any employee benefit plan or related trust, sponsored or maintained by the
Company or any subsidiary of the Company or other entity controlled by the
Company) acquires beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) directly or indirectly of forty-five percent (45%) of the voting
power of the Company.
(ii) "Nasdaq" means the NASDAQ National Market or any
successor thereto.
(jj) "Other Financing" shall have the meaning assigned to such
term in Section 4.14(b) hereof.
(kk) "Other Financing Notice" shall have the meaning assigned
to such term in Section 4.14(b) hereof.
(ll) "Permitted Transaction" shall have the meaning assigned
to such term in Section 4.14(b) hereof.
(mm) "Placement Agent" shall mean Reedland Capital Partners,
an Institutional Division of Financial West Group, Member, NASD/SIPC/MSRB.
(nn) "Prospectus" as used in this Agreement means the
prospectus in the form included in the Registration Statement as supplemented by
any supplement to the Prospectus filed with the Commission pursuant to Rule
424(b) promulgated under Securities Act, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the
Securities Act, and such information is included in a prospectus filed with the
Commission pursuant to Rule 424(b) under the Securities Act, the term
"Prospectus" as used in this Agreement means the prospectus in the form included
in the Registration Statement, as amended, as supplemented by the addition of
the Rule 430A information contained in the Prospectus filed with the Commission
pursuant to Rule 424(b).
(oo) "Registration Statement" shall mean the registration
statement on Form S-3 to be filed with the Securities and Exchange Commission
pursuant to Section 4.3
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hereof for the registration of the Shares, as such Registration Statement may be
amended from time to time.
(pp) "Rights Agreement" shall mean that certain Rights
Agreement dated as of November 19, 1999 between the Company and ChaseMellon
Shareholder Services, L.L.C.
(qq) "SAS No. 71 Letter" shall mean the SAS No. 71 letter
provided by a "Big Five" independent public accounting firm with respect to the
Company's quarterly financial statements delivered to the Company.
(rr) "Securities Act" shall mean the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder.
(ss) "Settlement Date" shall have the meaning assigned to such
term in Section 6.1(d) hereof.
(tt) "Shares" shall mean the shares of Common Stock of the
Company issuable to the Purchaser upon exercise of any Draw Down.
(uu) "Suspension" shall have the meaning assigned to such term
in Section 4.6(c) hereof.
(vv) "Suspension Notice" shall have the meaning assigned to
such term in Section 4.6(c) hereof.
(ww) "Threshold Price" is the lowest price at which the
Company may set in the Draw Down Notice to sell Shares during each Draw Down
Pricing Period (not taking into account the Draw Down Discount Price during such
Draw Down Pricing Period); provided, however, that at no time shall the
Threshold Price be set below eleven dollars ($11.00) (as adjusted for stock
splits, reverse stock splits, recapitalizations and the like) per share.
(xx) "Trading Day" shall mean a trading day on the Nasdaq.
(yy) "Truncate Notice" shall have the meaning assigned to such
term in Section 6.1(l) hereof.
(zz) "Truncated Draw Down Allocation Amount" shall mean the
portion of the Draw Down Amount Requested that is allocated to the purchase of
Shares in accordance with Section 6.1 hereof for each Trading Day in a reduced
Draw Down Pricing Period (as provided in Section 6.1(l) hereof) that the VWAP
equals or exceeds the Threshold Price in accordance with clauses (h) and (l) of
Section 6.1 hereof.
(aaa) "Truncated Pricing Period" shall have the meaning
assigned to such term in Section 6.1(l) hereof.
(bbb) "VWAP" shall mean the daily volume weighted average
price (based on a Trading Day from 9:30 a.m. to 4:00 p.m. (New York time)) of
the Company on Nasdaq or an Alternate Market as reported by Bloomberg Financial
LP using the AQR function.
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ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company shall issue and sell to the Purchaser
and the Purchaser shall purchase from the Company during the Investment Period
up to a maximum of $150,000,000 of Common Stock (the "Aggregate Limit") through
up to fifteen (15) monthly Draw Downs during the Investment Period as provided
in Section 6.1 hereof. The aggregate dollar amount of all Draw Down Amounts
pursuant to the terms and conditions of this Agreement shall not exceed the
Aggregate Limit. In no event shall the total number of shares of Common Stock
purchased under this Agreement exceed 6,872,792.
Section 2.2 The Shares. The Company has authorized and has reserved and
covenants to continue to reserve, subject to Section 4.11(a) hereof, free of
preemptive rights and other similar contractual rights of stockholders, a
sufficient number of its authorized but unissued shares of its Common Stock to
cover the Shares to be issued in connection with all Draw Downs.
Section 2.3 Purchase Price and Closing. In consideration of and in
express reliance upon the representations, warranties, covenants, terms and
conditions of this Agreement, the Company agrees to issue and sell to the
Purchaser, and the Purchaser agrees to purchase, that number of the Shares to be
issued in connection with each Draw Down in accordance with the terms and
conditions of this Agreement. The closing under this Agreement shall take place
at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Closing") at 10:00 a.m. (San Francisco time)
on (i) December 4, 2001, or (ii) such other time and place or on such date as
the Purchaser and the Company may agree upon (the "Closing Date"). Each party
shall deliver all documents, instruments and writings required to be delivered
by such party pursuant to this Agreement at or prior to the Closing.
Section 2.4 Opinion of Counsel, Secretary's Certificate and Closing
Certificate. At the Closing, the Purchaser shall have received (i) opinions of
counsels to the Company, dated the date of Closing, covering customary matters,
(ii) a Secretary's Certificate from the Company, dated the date of Closing,
covering customary matters, and (iii) a Closing Certificate, dated the Closing
Date, covering customary matters.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the nature of
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the business conducted or property owned by it makes such qualification
necessary except for any jurisdiction in which the failure to be so qualified
will not have a Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue and sell the Shares in accordance with the terms hereof. The execution,
delivery and performance of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the Company.
This Agreement constitutes, or shall constitute when executed and delivered, a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as rights to indemnity may be limited under
applicable Law and except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
(c) Capitalization. The authorized capital stock of the
Company and the shares thereof issued and outstanding as of the date hereof are
set forth on Schedule 3.1(c) attached hereto. All of the outstanding shares of
Common Stock have been duly and validly authorized, and are fully paid and
nonassessable. Except as set forth on Schedule 3.1(c) attached hereto, as of the
date hereof, no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth on Schedule 3.1(c) attached hereto, as
of the date hereof, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except as set forth on
Schedule 3.1(c) attached hereto, as of the date hereof, the Company is not a
party to, and it has no knowledge of, any agreement restricting the voting or
transfer of any shares of the capital stock of the Company. Except as set forth
on Schedule 3.1(c) attached hereto, as of the date hereof, the Company is not a
party to any agreement granting registration rights to any person with respect
to any of its securities. The Company has furnished or made available to the
Purchaser true and correct copies of the Company's Certificate of Incorporation
as in effect on the date hereof (the "Articles"), and the Company's Bylaws as in
effect on the date hereof (the "Bylaws").
(d) Issuance of Shares. The Shares to be issued under this
Agreement have been duly authorized by all necessary corporate action and, when
paid for and issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding, fully paid and nonassessable, and the Purchaser
shall be entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated herein do not (i) violate any provision of the
Company's Articles or Bylaws, (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a
7
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party, (iii) create or impose a lien, charge or
encumbrance on any property of the Company under any agreement or any commitment
to which the Company is a party or by which the Company is bound or by which any
of its respective properties or assets are bound, or (iv) result in a violation
of any Law (including federal and state securities laws and regulations)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries are bound or affected, except,
in all cases (other than violations of federal of state securities laws and
regulations), for such conflicts, defaults, terminations, amendments,
acceleration, cancellations, liens, charges, encumbrances and violations as
would not, individually or in the aggregate, have a Material Adverse Effect;
provided, however, that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the
representations, warranties and agreements of the Purchaser herein). The Company
is not required under any Law to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement, or issue and sell the Shares to the Purchaser in accordance with the
terms hereof (other than any filings which may be required to be made by the
Company under federal or state securities laws and the filing of the
Registration Statement as contemplated by Section 4.3 of this Agreement and the
Registration Statement's being declared effective by the Commission); provided,
however, that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the representations,
warranties and agreements of the Purchaser herein.
(f) Commission Documents, Financial Statements. The Common
Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and
as of the date hereof the Company has timely filed all Commission Documents. The
Company has delivered or made available to the Purchaser true and complete
copies of the Commission Documents filed with the Commission since December 31,
2000 and prior to the date hereof. The Company has not provided to the Purchaser
any information which, according to applicable Law, should have been disclosed
publicly by the Company but which has not been so disclosed, other than with
respect to the transactions contemplated by this Agreement. As of their
respective dates, the Commission Documents complied in all material respects
with the requirements of the Exchange Act and as of their respective dates, such
Commission Documents did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except insofar as any such misstatements or
omissions were corrected through subsequent disclosures in Commission Documents
or disclosed publicly. The financial statements of the Company included in the
Commission Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission. Such financial statements have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial position of the Company and its subsidiaries as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
8
(g) Subsidiaries. Schedule 3.1(g) attached hereto sets forth
each subsidiary of the Company as of the date hereof, showing the jurisdiction
of its incorporation or organization and showing the percentage of the Company's
ownership of the outstanding stock or other interests of such subsidiary. Each
subsidiary is duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each subsidiary is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary except for any jurisdiction in which the
failure to be so qualified will not have a Material Adverse Effect. For the
purposes of this Agreement, "subsidiary" shall mean any corporation or other
entity of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by the Company and/or any of its other
subsidiaries.
(h) No Material Adverse Effect or Material Change in
Ownership. Since September 30, 2001, the Company has not experienced or suffered
any Material Adverse Effect or Material Change in Ownership.
(i) No Undisclosed Liabilities. Except as disclosed in the
Commission Documents or on Schedule 3.1(i) attached hereto, neither the Company
nor any of its subsidiaries has any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued,
contingent or otherwise) that would be required to be disclosed on a balance
sheet of the Company (including the notes thereto) in conformity with GAAP that
are not disclosed in the Commission Documents, other than those incurred in the
ordinary course of the Company's or its subsidiaries' respective businesses
since September 30, 2001, and which, individually or in the aggregate, do not or
would not reasonably be expected to have a Material Adverse Effect.
(j) Indebtedness. The Commission Documents as of September 30,
2001, set forth all outstanding secured and unsecured Indebtedness of the
Company or any subsidiary, or for which the Company or any subsidiary has
commitments as of September 30, 2001. For the purposes of this Agreement,
"Indebtedness" shall mean (a) any liabilities for borrowed money or amounts owed
in excess of $10,000,000 (other than trade accounts payable incurred in the
ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $1,000,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
nor any subsidiary is in default with respect to any Indebtedness.
(k) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto or thereto. Except as set forth in the Commission
Documents or on Schedule 3.1(k) attached hereto, there is no action, suit,
claim, investigation or proceeding pending or, to the knowledge of the Company,
threatened, against or
9
involving the Company, any subsidiary or any of their respective properties or
assets and which, if determined adversely to the Company or its subsidiary,
would reasonably be expected to have a Material Adverse Effect.
(l) Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in all material respects
in accordance with all applicable Laws, except as set forth in the Commission
Documents or on Schedule 3.1(l) attached hereto, and except as, individually or
in the aggregate, do not or would not reasonably be expected to have a Material
Adverse Effect. The Company and each of its subsidiaries have all franchises,
permits, licenses, consents and other governmental or regulatory authorizations
and approvals necessary for the conduct of its business as now being conducted
by it, except where the failure to possess such franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals,
individually or in the aggregate, do not or would not reasonably be expected to
have a Material Adverse Effect.
(m) Certain Fees. Except for the placement fee paid by the
Company to the Placement Agent, no brokers, finders or financial advisory fees
or commissions will be payable by the Company or any subsidiary with respect to
the transactions contemplated by this Agreement.
(n) Disclosure. Neither this Agreement or the Schedules
hereto, taken as a whole, contain any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements made
herein or therein, in the light of the circumstances under which they were made
herein or therein, not misleading.
(o) Operation of Business. The Company or one or more of its
subsidiaries owns or controls all patents, trademarks, service marks, trade
names, copyrights, licenses and authorizations as set forth in the Commission
Documents or on Schedule 3.1(o) attached hereto, and all rights with respect to
the foregoing, which are reasonably necessary for the conduct of its business as
now conducted without any conflict with the rights of others, except to the
extent set forth in the Commission Documents and except to the extent that any
such conflict would not reasonably be expected to have a Material Adverse
Effect.
(p) Environmental Compliance. Except as disclosed in the
Commission Documents or on Schedule 3.1(p) attached hereto, the Company and each
of its subsidiaries have obtained all material approvals, authorization,
certificates, consents, licenses, Governmental Orders and permits or other
similar authorizations of all governmental authorities, or from any other
person, that are required under any Environmental Laws, except for any
approvals, authorization, certificates, consents, licenses, Governmental Orders
and permits or other similar authorizations the failure of which to obtain does
not or would not reasonably be expected to have a Material Adverse Effect.
"Environmental Laws" shall mean all applicable Laws relating to the protection
of the environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
10
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
or its subsidiaries that violate or could reasonably be expected to violate any
Environmental Law after the Closing or that could reasonably be expected to give
rise to any environmental liability, or otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
(q) Material Agreements. Except as set forth in the Commission
Documents or on Schedule 3.1(q) attached hereto, neither the Company nor any
subsidiary of the Company is a party to any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, a copy of
which would be required to be filed with the Commission as an exhibit to a
registration statement on Form S-1 if the Company were registering securities
under the Securities Act or an annual report on Form 10-K (collectively,
"Material Agreements"). The Company and each of its subsidiaries (i) has
performed all the obligations required to be performed by them to date under the
Material Agreements, except where such non-performance would not reasonably be
expected to have a Material Adverse Effect, (ii) to its knowledge have received
no notice of default by the Company thereunder and (iii) are not in default
under any Material Agreement now in effect.
(r) Transactions with Affiliates. Except as set forth in the
Commission Documents or on Schedule 3.1(r) attached hereto, there are no loans,
leases, agreements, contracts, royalty agreements, management contracts or
arrangements or other continuing transactions exceeding $60,000 between (a) the
Company or any subsidiary, on the one hand, and (b) on the other hand, any
executive officer or director of the Company, or any person who would be covered
by Item 404(a) of Regulation S-K or any corporation or other entity controlled
by such executive officer, director or person.
(s) Securities Act. The Company has complied in all material
respects with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Shares hereunder, subject to the timely
filing with the Commission of a Form D under Regulation D of the Securities Act.
(i) Each Prospectus included as part of the
Registration Statement to be filed pursuant to Section 4.3 or as part of any
amendment or supplement thereto, or to be filed pursuant to Rule 424 under the
Securities Act, will comply when so filed as to form in all material respects
with the provisions of the Securities Act.
(ii) The Company meets the requirements for the use
of Form S-3 under the Securities Act. The Registration Statement in the form in
which it will become effective, and also in such form as the Registration
Statement may be further amended or supplemented from time to time, and the
Prospectus and any supplement or amendment thereto when filed with the
Commission under Rule 424(b) under the Securities Act, will comply as to
11
form in all material respects with the provisions of the Securities Act and will
not at any such times contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein in the light of the circumstances under which they were and
are made, not misleading, except that this representation and warranty does not
apply to statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information relating to
the Purchaser furnished to the Company in writing by or on behalf of the
Purchaser expressly for use therein.
(iii) Other than the Commission Documents, the
Company has not distributed and, prior to the completion of the distribution of
the Shares, will not distribute any offering material in connection with the
offering and sale of the Shares. The Company has not in the past nor will it
hereafter take any action independent of the Placement Agent to sell, offer for
sale or solicit offers to buy any securities of the Company which would bring
the offer, issuance or sale of the Shares, as contemplated by this Agreement,
within the provisions of Section 5 of the Securities Act of 1933, as amended
(the "Securities Act"), unless such offer, issuance or sale was or shall be
within the exemptions of Section 4 of the Securities Act.
(t) No Manipulation of Stock. The Company has not taken and
will not, in violation of applicable Law, take, any action designed to or that
would reasonably be expected to cause or result in unlawful manipulation of the
price of the Common Stock to facilitate the sale or resale of the Shares.
(u) Public Utility Holding Company Act and Investment Company
Act Status. The Company is not a "holding company" or a "public utility company"
as such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(v) ERISA. Neither the Company nor any ERISA Affiliate (as
defined below) has ever sponsored, maintained, contributed to or been obligated
to contribute to a Plan (as defined below) subject to Title IV of ERISA or
Section 412 of the Code. The Company and each ERISA Affiliate, with respect to
each Plan is, and each such Plan is, in compliance in all material respects with
ERISA, the Code, and any other applicable legal requirements. Neither the
Company nor any ERISA Affiliate nor, to the Company's knowledge, any fiduciary
of any Plan which covers or has covered employees or former employees of the
Company or any ERISA Affiliate has engaged in any transaction in violation of
ERISA Sections 404 or 406 or any "prohibited transaction," as defined in
Code Section 4975(c)(1), or has otherwise violated in any material respect any
of the provisions of ERISA. As used in this Section 3.1(y) the term "ERISA
Affiliate" shall mean any other person that, together with the Company, would be
treated as a single employer under Code Section 414(b) or (c), and solely for
the purposes of potential liability under ERISA Section 302(c)(ii) and Code
Section 412(c)(ii) and the lien created under ERISA Section 302(f) and Code
Section 412(n), under Code Section 414(m) or (o). As used in this Section 3.1(v)
the term "Plan" shall mean an "employee pension benefit plan" as defined in
Section 3(3) of ERISA that is, or at any time was, sponsored, maintained, or
contributed to by the Company or any ERISA Affiliate or to which the Company or
any ERISA Affiliate has ever been obligated to contribute.
12
(w) Acknowledgment Regarding Purchaser's Purchase of Shares.
The Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Purchaser's purchase of the
Shares.
Section 3.2 Representations and Warranties of the Purchaser.The
Purchaser hereby makes the following representations and warranties to the
Company:
(a) Organization and Standing of the Purchaser. The Purchaser
is an international business company duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of The Bahamas.
(b) Authorization and Power. The Purchaser has the requisite
corporate power and authority to enter into and perform this Agreement and to
purchase the Shares in accordance with the terms hereof. The execution, delivery
and performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or stockholders is required. This Agreement has been duly
executed and delivered by the Purchaser. This Agreement constitutes, or shall
constitute when executed and delivered, a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of
this Agreement and the consummation by the Purchaser of the transactions
contemplated hereby or relating hereto do not and will not (i) result in a
violation of such Purchaser's charter documents or bylaws or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Purchaser is a party, (iii) create or impose a lien,
charge or encumbrance on any property of the Purchaser under any agreement or
any commitment to which the Purchaser is party or by which the Purchaser is
bound or by which any of its respective properties or assets are bound, or (iv)
result in a violation of any Law, or any Governmental Order applicable to the
Purchaser or its properties, except for such conflicts, defaults and violations
as would not, individually or in the aggregate, prohibit or otherwise interfere
with the ability of the Purchaser to enter into and perform its obligations
under this Agreement in any material respect. The Purchaser is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or to purchase
the Shares in accordance with the terms hereof; provided, however, that for
purposes of the representation made in this sentence, the Purchaser is assuming
13
and relying upon the accuracy of the representations, warranties and agreements
of the Company herein.
(d) Accredited Investor. The Purchaser represents and warrants
to the Company that: (i) the Purchaser is an "accredited investor" as defined in
Regulation D under the Securities Act, and the Purchaser is also knowledgeable,
sophisticated and experienced in making, and is qualified to make decisions with
respect to, investments in shares presenting an investment decision like that
involved in the purchase of the Shares, including investments in securities
issued by the Company and investments in comparable companies, and has
requested, received, reviewed and considered all information it deemed relevant
in making an informed decision to purchase the Shares; (ii) the Purchaser is
acquiring the Shares for its own account for investment only and with no present
intention of distributing any of such Shares and has no arrangement or
understanding with any other persons regarding the distribution of such Shares;
(iii) Purchaser will not, directly or indirectly, offer, sell, pledge, transfer
or otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares, except in compliance with the
Securities Act, applicable state securities laws and the respective rules and
regulations promulgated thereunder; and (iv) the Purchaser has, in connection
with its decision to purchase the Shares, relied only upon the Commission
Documents and Company press releases provided to the Purchaser by the Company in
contemplation of this offering and the representations and warranties of the
Company contained herein. The Purchaser understands that its acquisition of the
Shares has not been registered under the Securities Act or registered or
qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein. Purchaser will
satisfy the prospectus delivery obligations in connection with any sale or
disposition of the Shares.
(e) Information. The Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Shares which have been requested by the Purchaser. The Purchaser and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. The Purchaser has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision with respect to
its acquisition of the Shares. The Purchaser understands that it (and not the
Company) shall be responsible for its own tax liabilities that may arise as a
result of this investment or the transactions contemplated by this Agreement.
(f) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Purchaser,
threatened against the Purchaser which questions the validity of this Agreement
or the transactions contemplated hereby or any action taken or to be taken
pursuant hereto or thereto.
(g) No Manipulation of Stock. The Purchaser has not taken and
will not, in violation of applicable Law, take, any action designed to or that
would reasonably be expected to cause or result in unlawful manipulation of the
price of the Common Stock to facilitate the sale or resale of the Shares.
14
ARTICLE IV
COVENANTS
The Company covenants with the Purchaser, and the Purchaser covenants
with the Company, as follows, which covenants of one party are for the benefit
of the other party, during the Investment Period.
Section 4.1 Securities Compliance. The Company shall notify the
Commission and Nasdaq, if applicable, in accordance with their rules and
regulations, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required by applicable Law,
for the legal and valid issuance of the Shares to the Purchaser.
Section 4.2 Registration and Listing. The Company will take all action
necessary to cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Securities Act) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company will take all action necessary to continue the
listing or trading of its Common Stock and the listing of the Shares purchased
by Purchaser hereunder on Nasdaq or any Alternate Market, if applicable, and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Nasdaq or any Alternate Market.
Section 4.3 Registration Procedures. The Company shall:
(a) prepare and file with the Commission as expeditiously as
possible, but in no event later than ten (10) days after the Closing Date, the
Registration Statement for a number of shares of Common Stock having a proposed
maximum offering price of $150,000,000 to enable the resale of the Shares by the
Purchaser from time to time through the automated quotation system of the Nasdaq
Stock Market or in privately-negotiated transactions;
(b) use its reasonable efforts to cause the Registration
Statement to become effective as expeditiously as possible, but in no event
later than ninety (90) days after the Registration Statement is filed by the
Company;
(c) use its reasonable efforts to promptly prepare and file
with the Commission such amendments and supplements to the Registration
Statement and the Prospectus used in connection therewith as may be necessary to
keep the Registration Statement current and effective until the earlier of (i)
two (2) years after the expiration of the Investment Period, (ii) the date on
which the Purchaser may sell all Shares then held by the Purchaser without
restriction by the volume limitations of Rule 144(e) of the Securities Act, or
(iii) such time as all Shares which the Company may sell to the Purchaser
pursuant to this Agreement have been sold by the Purchaser pursuant to a
registration statement and the Purchaser is no longer required to deliver a
prospectus with respect to such Shares;
15
(d) furnish to the Purchaser with respect to the Shares
registered under the Registration Statement such number of copies of the
Registration Statement and Prospectuses in conformity with the requirements of
the Securities Act and such other documents as the Purchaser may reasonably
request, in order to facilitate the public sale or other disposition of all or
any of the Shares by the Purchaser, provided, however, that the obligation of
the Company to deliver copies of Prospectuses to the Purchaser shall be subject
to the receipt by the Company of reasonable assurances from the Purchaser that
the Purchaser will comply with the applicable provisions of the Securities Act
and of such other securities or blue sky laws as may be applicable in connection
with any use of such Prospectuses;
(e) file documents required of the Company for normal blue sky
clearance in states specified in writing by the Purchaser, provided, however,
that the Company shall not be required to qualify as a foreign corporation or as
dealer in securities or to do business or consent to service of process or
subject itself to taxation in any jurisdiction in which it is not now so
qualified or has not so consented;
(f) with a view to making available to the Purchaser the
benefits of Rule 144 (or its successor rule) and any other rule or regulation of
the Commission that may at any time permit the Purchaser to sell Shares to the
public without registration, the Company covenants and agrees to: (i) make and
keep public information available, as those terms are understood and defined in
Rule 144, until the date on which the Company is not required to keep the
Registration Statement current and effective with respect to the Purchaser's
Shares, as specified in paragraph (c) above; (ii) file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and under the Exchange Act, and furnish to the Purchaser upon
request, as long as the Purchaser owns any Shares, (A) a written statement by
the Company that it has complied with the reporting requirements of the
Securities Act and the Exchange Act, (B) a copy of the Company's most recent
Annual Report on Form 10-K or Quarterly Report on Form 10-Q and (C) such other
information as may be reasonably requested in order to avail the Purchaser of
any rule or regulation of the Commission that permits the selling of any such
Shares without registration; and
(g) bear all expenses (other than underwriting discounts and
commissions, if any) in connection with the procedures in paragraph (a) through
(f) of this Section 4.3 and the registration of the Shares pursuant to the
Registration Statement.
Section 4.4 Piggyback Registration.
(a) The Company shall use its reasonable efforts to notify the
Purchaser in writing at least twenty (20) days before filing any registration
statement under the Securities Act for purposes of effecting an underwritten
public offering by the Company solely of Common Stock (excluding registration
statements relating to any employee benefit plan or a corporate merger,
acquisition or reorganization, or any Form S-3 or similar shelf registration
statements relating to the non-underwritten offer and sale of securities for the
account of persons or entities other than the Company) and will afford the
Purchaser an opportunity to include in such registration statement all or any
part of the Shares then held by the Purchaser. If the Purchaser desires to
include in any such registration statement all or any part of the Shares held by
the Purchaser, the Purchaser shall, within ten (10) days after receipt of the
above-described notice
16
from the Company, so notify the Company in writing, and in such notice shall
inform the Company of the number of Shares the Purchaser wishes to include in
such registration statement. If the Purchaser decides not to include all of its
Shares in any such registration statement filed by the Company, the Purchaser
shall nevertheless continue to have the right to include any Shares in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to underwritten public offerings solely of its Common
Stock, all upon the terms and conditions set forth in this Section 4.4. The
Purchaser's rights to include any Shares in any offering under this Section are
subject in all events to the ability of the managing underwriter for such
offering to exclude some or all of the Shares requested to be registered on the
basis of a good faith determination that inclusion of such securities might
adversely affect the success of the offering or otherwise adversely affect the
Company. Any such exclusion shall be pro rata among all holders of Common Stock
having contractual registration rights who have requested to sell Common Stock
in such registration according to the total amount of shares such holders have
requested to have included therein and are entitled to have included therein or
in such other proportions as may be mutually agreed to by such holders, but in
no event shall any shares being sold by a stockholder exercising a demand
registration right be excluded from such offering.
(b) If a registration statement under which the Company gives
notice under this Section is for an underwritten offering, then the Company
shall so advise the Purchaser. In such event, the right of any of the
Purchaser's Shares to be included in a registration pursuant to this Section
shall be conditioned upon the Purchaser's participation in such underwriting and
the inclusion of the Purchaser's Shares in the underwriting to the extent
provided herein. If the Purchaser desires to distribute its Shares through such
underwriting, it shall enter into an underwriting agreement in customary form
with the managing underwriter or underwriters selected for such underwriting and
shall furnish such information and documents as the Company or the managing
underwriter or underwriters may reasonably request. Notwithstanding any other
provision of this Agreement, if the managing underwriter(s) determine(s) in good
faith that marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude Shares from the
registration and the underwriting in the manner described in Section 4.4(a)
above. If the Purchaser disapproves of the term of any such underwriting, the
Purchaser may elect to withdraw therefrom by written notice to the Company and
the managing underwriter(s), delivered at least ten (10) business days prior to
the effective date of the registration statement. Any Shares excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration and such withdrawn registration shall count against the number of
registrations to which the Purchaser is entitled pursuant to Section 4.4(d).
(c) The Purchaser shall be responsible for its pro rata share
of registration fees and underwriters' and brokers' discounts and commissions
relating to any Shares included in such registration and for the fees and
expenses of counsel to the Purchaser. Other registration expenses (such as legal
and accounting fees of counsel to the Company, printing fees, road show
expenses, and the like) shall be borne by the Company.
(d) The piggyback registration rights granted to the Purchaser
under this Section 4.4: (i) shall apply to the first three registrations filed
by the Company after the Closing, (ii) shall in no event be available to the
Purchaser after such time as the Registration Statement is declared effective,
except that such rights shall be available during a Suspension, and (iii) shall
17
terminate at such time as the Company is no longer obligated to keep the
Registration Statement current and effective with respect to Purchaser's Shares,
as specified in Section 4.3(c).
Section 4.5 Stop Orders. The Company will advise the Purchaser promptly
and, if requested by the Purchaser, will confirm such advice in writing: (i) of
the Company's receipt of notice of any request by the Commission for amendment
of or a supplement to the Registration Statement, any Prospectus or for
additional information; (ii) of the Company's receipt of notice of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) of the Company becoming aware of the happening of any
event, which makes any statement of a material fact made in the Registration
Statement or the Prospectus (as then amended or supplemented) untrue or which
requires the making of any additions to or changes in the Registration Statement
or the Prospectus (as then amended or supplemented) in order to state a material
fact required by the Securities Act to be stated therein or necessary in order
to make the statements therein not misleading, or of the necessity to amend or
supplement the Registration Statement (as then amended or supplemented) to
comply with the Securities Act. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, or notify
the Company of the suspension of qualification of the Shares for offering or
sale in any jurisdiction, the Company will make commercially reasonable efforts
to obtain the withdrawal of such order or suspension at the earliest possible
time.
Section 4.6 Transfer of Shares After Registration; Suspension.
(a) Purchaser agrees that it will not sell, offer to sell,
solicit offers to buy, dispose of, loan, pledge or grant any right with respect
to the Shares or its right to purchase the Shares that would constitute a sale
within the meaning of the Securities Act except as contemplated in the
Registration Statement referred to in Section 4.3 and as described below, and
that it will promptly notify the Company of any changes in the information set
forth in the Registration Statement regarding the Purchaser or its plan of
distribution.
(b) Except in the event that paragraph (c) below applies, the
Company shall: (i) prepare and file from time to time with the Commission a
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or a supplement or amendment to any document incorporated
therein by reference or file any other required document so that such
Registration Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and so that, as thereafter delivered
to purchasers of the Shares being sold thereunder, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; (ii)
provide the Purchaser copies of any documents filed pursuant to Section
4.6(b)(i); and (iii) inform the Purchaser that the Company has complied with its
obligations in Section 4.6(b)(i) (or that, if the Company has filed a
post-effective amendment to the Registration Statement which has not yet been
declared effective, the Company will notify the Purchaser to that effect, will
use its reasonable efforts to secure the effectiveness of such post-effective
amendment as promptly as possible and will
18
promptly notify the Purchaser pursuant to Section 4.6(b)(i) hereof when the
amendment has become effective).
(c) Subject to paragraph (d) below, in the event: (i) of any
request by the Commission or any other federal or state governmental authority
during the period of effectiveness of the Registration Statement for amendments
or supplements to a Registration Statement or related Prospectus or for
additional information; (ii) of the issuance by the Commission or any other
federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose; (iii) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Shares for sale in any jurisdiction or the initiation of any
proceeding for such purpose; or (iv) of any event or circumstance which
necessitates the making of any changes in the Registration Statement or
Prospectus, or any document incorporated or deemed to be incorporated therein by
reference, so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; then the Company shall immediately deliver a certificate in writing
to the Purchaser (the "Suspension Notice") to the effect of the foregoing and,
upon receipt of such Suspension Notice, the Purchaser will refrain from selling
any Shares pursuant to the Registration Statement (a "Suspension") until the
Purchaser's receipt of copies of a supplemented or amended Prospectus prepared
and filed by the Company, or until it is advised in writing by the Company that
the current Prospectus may be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in any such Prospectus. In the event of any Suspension, the Company will use its
reasonable efforts to cause the use of the Prospectus so suspended to be resumed
as soon as reasonably practicable but no later than twenty (20) ) business days
after delivery of a Suspension Notice to the Purchaser. In addition to and
without limiting any other remedies (including, without limitation, at law or at
equity) available to the Purchaser, the Purchaser shall be entitled to specific
performance in the event that the Company fails to comply with the provisions of
this Section 4.6(c). In the event that the Company delivers a Suspension Notice
and has not yet delivered a Truncate Notice, such Suspension Notice shall also
be deemed be a Truncate Notice pursuant to Section 6.1(l) hereof.
(d) Notwithstanding the foregoing paragraphs of this Section
4.6, the Purchaser shall not be prohibited from selling Shares under the
Registration Statement as a result of Suspensions on more than two occasions,
each of not more than twenty (20) days, in any twelve month period, unless, in
the good faith judgment of the Company's Board of Directors, upon advice of
counsel, the sale of Shares under the Registration Statement in reliance on this
paragraph 4.6(d) would be reasonably likely to cause a violation of the
Securities Act or the Exchange Act and result in potential liability to the
Company.
(e) Provided that a Suspension is not then in effect the
Purchaser may sell Shares under the Registration Statement, provided that it
arranges for delivery of a current Prospectus to the transferee of such Shares.
Upon receipt of a request therefore, the Company
19
has agreed to provide a reasonable number of current Prospectuses to the
Purchaser and to supply a reasonable number of copies to any other parties
requiring such Prospectuses.
Section 4.7 Selling Restriction. Purchaser has the right to sell shares
of the Stock during the Investment Period, subject to compliance with this
Section 4.7. The Purchaser covenants that prior to and during the term of the
Investment Period, neither the Purchaser nor any affiliates of the Purchaser nor
any entity managed by the Purchaser or its affiliates will sell shares of the
Company's Common Stock other than shares of Common Stock that the Purchaser (or
the respective affiliate or managed entity) owns in a long position at the time
of the sale, or if the Purchaser has sold all shares of Common Stock that
Purchaser (or the respective affiliate or managed entity) owns in a long
position, then Purchaser shall have the right to sell any shares that the
Purchaser is deemed to own in a long position. For purposes of this Section, the
Purchaser (or the respective affiliate or managed entity) shall be deemed to own
in a long position only those Shares that the Purchaser is obligated to purchase
under a pending Draw Down Notice, determined as of the proposed sale date for
such Shares based upon the number of Shares that Purchaser would be obligated to
purchase pursuant to Section 6.1 of this Agreement for each Trading Day in the
applicable Draw Down Pricing Period that has occurred prior to, but exclusive of
the proposed sale date. Except for the sale of Shares deemed to be owned in a
long position, Purchaser shall not enter into a short position with respect to
the Common Stock in any account owned by Purchaser, any affiliate of Purchaser
or any entity managed by the Purchaser or its affiliate. On a daily Trading Day
basis, the Purchaser agrees to restrict the volume of sales of Shares by the
Purchaser, its affiliates and any entity managed by the Purchaser to no more
than twenty five percent (25%) of the total trading volume of the Common Stock,
as reported on Bloomberg Financial LP using HP function, for such Trading Day.
The Purchaser further covenants that prior to and during the term of the
Investment Period, the Purchaser, all of its affiliates and every entity managed
by the Purchaser or its affiliates shall not enter into any block transactions
in Common Stock (including block transactions involving options) to purchase or
acquire rights to dispose of, and securities convertible into, or exchangeable
for, or warrants to purchase, shares of Common Stock). The Purchaser further
covenants that prior to and during the term of the Investment Period, the
Purchaser, all of its affiliates and every entity managed by the Purchaser or
its affiliates shall not engage in any derivative transaction in respect of the
Common Stock, including without limitation, any grant of any option or warrants
to purchase or to dispose of for value any shares of Common Stock, or any
securities convertible into, or exchangeable for any shares of Common Stock , or
any swap, futures contract or other derivative agreement that transfers, in
whole or in part, the economic risk of ownership of Common Stock or the trading
in any options, futures contracts or other derivative instruments in respect of
the Common Stock or any securities convertible into or exchangeable for any
shares of Common Stock, in each case whether settled in securities or in cash.
Section 4.8 Non-Public Information. Neither the Company nor any of its
directors, officers or agents shall disclose any material non-public information
about the Company to the Purchaser, except that the Company may disclose the
fact there is material non-public information that is causing the Company to
give a Suspension Notice without disclosing the information itself.
20
Section 4.9 Information Available. So long as the Registration
Statement is effective covering the resale of Shares owned by the Purchaser, the
Company will furnish to the Purchaser:
(a) as soon as practicable after it is available, one copy of
(i) its Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with generally accepted accounting
principles by a national firm of certified public accountants) and (ii) if not
included in substance in the Annual Report to Stockholders, its Annual Report on
Form 10-K (the foregoing, in each case, excluding exhibits);
(b) upon the reasonable request of the Purchaser, all exhibits
excluded by the parenthetical to subparagraph (a)(ii) of this Section 4.9 as
filed with the Commission and all other information that is made available to
stockholders;
(c) upon the reasonable request of the Purchaser, an adequate
number of copies of the Prospectuses to supply to any other party requiring such
Prospectuses; and the Company, upon the reasonable request of the Purchaser,
will meet with the Purchaser or a representative thereof at the Company's
headquarters to discuss all information relevant for disclosure in the
Registration Statement covering the Shares and will otherwise cooperate with the
Purchaser conducting an investigation for the purpose of reducing or eliminating
the Purchaser's exposure to liability under the Securities Act, including the
reasonable production of information at the Company's headquarters; provided,
that the Company shall not be required to disclose any confidential information
to or meet at its headquarters with the Purchaser until and unless the Purchaser
shall have entered into a confidentiality agreement in form and substance
reasonably satisfactory to the Company with the Company with respect thereto.
Section 4.10 Disclosure of Draw Down Notice.The Company shall not
disclose any Draw Down Notice or any information contained in any Draw Down
Notice (other than to its legal advisors) unless such disclosure is required by
applicable Law; provided that the Company shall notify the Purchaser if such
disclosure during the Draw Down Pricing Period is required by Law.
Section 4.11 Compliance with Laws.
(a) The Company will not be obligated to issue and the
Purchaser will not be obligated to purchase any shares of the Company's Common
Stock which would result in the issuance under this Agreement of more than
nineteen and nine-tenths percent (19.9%) of the issued and outstanding shares of
the Company's Common Stock as of the date of this Agreement, unless such
issuance has been permitted by Nasdaq or any Alternate Market without obtaining
approval of the Company's stockholders.
(b) The Company and the Purchaser shall each comply with all
applicable Laws and Governmental Orders in connection with this Agreement and
the transactions contemplated hereby. Without limiting the foregoing, the
Company and Purchaser shall comply with the requirements of the Securities Act
and the Exchange Act including without limitation Rule 10b-5 and Regulation M,
to the extent applicable, under the Exchange Act.
21
Section 4.12 Keeping of Records and Books of Account. The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 4.13 Limitations on Holdings and Issuances. At no time during
the term of this Agreement shall the Purchaser directly or indirectly
beneficially own (as defined in the Rights Agreement) more than fourteen and
nine-tenths percent (14.9%) of the issued and outstanding shares of Common
Stock. The Company will not be obligated to issue and the Purchaser will not be
obligated to purchase any shares of the Common Stock which would result in the
issuance under this Agreement to Purchaser at any time of more than fourteen and
nine-tenths percent (14.9%) of the issued and outstanding shares of the Common
Stock.
Section 4.14 Other Agreements and Other Financings.
(a) The Company shall not enter into any agreement in which
the terms of such agreement would restrict or impair the right to perform of the
Company or any subsidiary under this Agreement or the Articles.
(b) If the Company enters into any definitive agreement with a
third party, the principal purpose of which is to secure an Other Financing (as
defined below) during any Draw Down Pricing Period, the Company shall notify the
Purchaser in writing (the "Other Financing Notice") and the Purchaser shall
purchase Shares of the Draw Down Amount Requested by the Company for such Draw
Down Pricing Period at the lesser of (i) the Purchaser's price as provided in
this Agreement and (ii) the third party's price, net of such third party's
discount, if any, and fees (to the extent paid by the Company). As used herein,
"Other Financing" shall mean any issuance of securities for the purpose of
raising capital; provided, however, without limiting the foregoing, Other
Financing shall not include the Company (i) entering into a loan, credit or
lease facility with a bank, financing institution or other creditor (including
any equity component thereof), (ii) establishing an employee equity incentive
plan or agreement, employee stock purchase plan or a director equity plan, (iii)
issuing shares of Common Stock in connection with the Company's current option
and other equity incentive plans (as the same may be amended from time to time),
stock purchase plans, 401(k) plans, deferred compensation plans, rights plans,
currently outstanding warrants or options, or increasing the number of shares
available under any such plans (the primary purpose of which is not to raise
equity), (iv) issuing non-convertible debt securities; and (v) issuing shares of
Common Stock and/or preferred stock in connection with the formation and
maintenance of strategic partnerships, alliances or joint ventures, or the
acquisition of products, licenses, other assets or entities (each a "Permitted
Transaction").
Section 4.15 Comfort Letters and SAS No. 71 Letters.
(a) The Company shall provide Purchaser with a Comfort Letter
in respect of the Registration Statement.
22
(b) If the Company files a Form 8-K containing substantial
financial information incorporated by reference into the Registration Statement,
the Company shall provide Purchaser with a Comfort Letter with respect to such
Form 8-K within 20 days after the filing of the Form 8-K.
(c) Within 45 days of the end of each of the Company's fiscal
quarters, the Company shall, with the consent of its public accounting firm,
deliver to Purchaser the SAS No. 71 Letter which the parties agree shall not
contain a reliance paragraph.
Section 4.16 Transfer Agent Instructions. Prior to the date of
effectiveness of the Registration Statement, the Company shall send to the
transfer agent a letter in the form attached hereto as Exhibit C instructing the
transfer agent to automatically remove stop order instructions with respect to
Shares sold by the Purchaser upon receipt from the Purchaser of a Certificate of
Subsequent Sale in the form set forth on Exhibit C unless the Company notifies
the transfer agent in writing prior to any transfer to stop transfer because the
transfer would violate applicable Law.
ARTICLE V
CONDITIONS TO DRAW DOWNS
Section 5.1 Conditions Precedent to the Company's Obligation to Sell
the Shares. The obligation of the Company to issue and sell Shares to the
Purchaser pursuant to a Draw Down Notice is subject to the satisfaction or
waiver, at or before the Closing and with respect to each Draw Down, at or
before each Draw Down Exercise Date and Settlement Date, as applicable, of each
of the conditions set forth below. These conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchaser's Representations and
Warranties. Except for representations and warranties that are expressly made as
of a particular date, the representations and warranties of the Purchaser in
this Agreement shall be true and correct in all material respects as of the date
when made and as of each Draw Down Exercise Date and each Settlement Date as
though made at that time.
(b) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to the Closing, each Draw Down
Exercise Date and each Settlement Date, as applicable.
(c) No Injunction. No statute, regulation, Governmental Order,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(d) No Proceedings or Litigation. No action, suit or
proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been
threatened in writing, against the Company or any subsidiary, or any of the
officers, directors or affiliates of the Company or any subsidiary seeking
23
to restrain, prevent or change the transactions contemplated by this Agreement,
or seeking damages in connection with such transactions.
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down and Purchase the Shares. The obligation hereunder of the
Purchaser to accept a Draw Down grant and to acquire and pay for the Shares is
subject to the satisfaction or waiver, as of each Draw Down Exercise Date and
each Settlement Date, of each of the conditions set forth below. The conditions
are for the Purchaser's sole benefit and may be waived by the Purchaser at any
time in its sole discretion. If Purchaser waives one or more conditions
precedent to issuance of any Draw Down Notice, then the Purchaser shall be
precluded from asserting the same facts as a basis for the failure of the
Company to satisfy a condition precedent to the settlement of such Draw Down or
a subsequent Draw Down Notice.
(a) Accuracy of the Company's Representations and Warranties.
Except for representations and warranties that are expressly made as of a
particular date, each of the representations and warranties of the Company shall
be true and correct in all material respects as of the date when made and as of
each Draw Down Exercise Date and each Settlement Date, as though made at that
time, including, without limitation, under Section 3.1(h) hereof, subject to the
update of the Disclosure Schedules delivered concurrent with the Draw Down
Exercise Notice and subject to any further update of the Disclosure Schedules
delivered one Trading Day prior to the Settlement Date.
(b) Registration Statement. The Company shall have a dollar
amount of Shares registered under the Registration Statement which are in an
amount equal to or in excess of the maximum dollar amount worth of Shares
issuable pursuant to such Draw Down Notice. The Registration Statement shall
have been declared effective by the Commission, there shall be no stop order
suspending the effectiveness thereof, and no Suspension as described in Section
4.6(c) shall be in effect.
(c) No Suspension. Trading in the Common Stock shall not have
been suspended by the Commission or the Nasdaq (except for any suspension of
trading of limited duration agreed to by the Purchaser, which suspension shall
be terminated prior to each Draw Down Exercise Date and Settlement Date), and,
at any time after the date of this Agreement (in the event there have been no
prior Settlement Dates) or the Settlement Date related to the immediately
preceding Draw Down, or at any time from the Draw Down Exercise Date through the
Settlement Date, trading in securities generally as reported on Nasdaq shall not
have been suspended, nor shall a banking moratorium have been declared either by
the United States or New York State authorities, nor shall there have occurred
any material outbreak or escalation of hostilities (other than the ongoing
hostilities in Afghanistan existing as of the date of this Agreement) or other
national or international calamity or crisis of such magnitude in its effect on,
or any material adverse change in, any financial market which, in each case, in
the reasonable judgment of the Purchaser, makes it impracticable or inadvisable
to issue the Shares.
(d) No Injunction. No statute, rule, regulation, Governmental
Order, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction and
remain in effect which prohibits the consummation of any of the transactions
contemplated by this Agreement.
24
(e) No Proceedings or Litigation. No action, suit or
proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been
threatened in writing , which, in either case, is ongoing, against the Company
or any subsidiary, or any of the officers, directors or affiliates of the
Company or any subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(f) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to each Draw Down Exercise Date and
each Settlement Date, and shall have delivered the Compliance Certificate
substantially in the form attached hereto as Exhibit A.
(g) Settlement of Prior Draw Downs. All prior Draw Downs shall
have settled.
(h) Aggregate Limit. The Draw Down Amount Requested in the
Draw Down Notice issued by the Company, when aggregated with the all prior Draw
Down Amounts, shall not exceed the Aggregate Limit.
(i) Prospectus Supplement. A supplement to the Prospectus, in
form and substance to be agreed upon by the parties, setting forth information
regarding the Draw Down including, without limitation, the Draw Down Amount, the
number of shares sold to the Purchaser in connection with the Draw Down, if not
previously disclosed in a Commission Document, and any additional information
required by the Commission's rules and regulations, shall have been filed with
the Commission and sufficient copies thereof delivered to the Purchaser on the
first Trading Day immediately following the end of the Draw Down Pricing Period.
(j) No Material Adverse Effect or Material Change in Control.
Since the last Draw Down Notice, there shall have been no Company Material
Adverse Effect or Material Change in Control.
(k) No Other Financing. Since the last Draw Down Notice, there
shall have been no Other Financing which provides for (i) the issuance of Common
Stock or securities convertible, exercisable or exchangeable into Common Stock
at a discount to the then current market price of the Common Stock, including,
without limitation, an equity line of credit transaction, (ii) a mechanism for
the reset of the purchase price of the Common Stock to below the then current
market price of the Common Stock, or (iii) the issuance of Common Stock with
warrants, which have an exercise price such that together with the price of the
Common Stock would result in the issuance of shares of Common Stock at a per
share price below the then current market price of the Common Stock.
(l) Comfort Letter. The Comfort Letter(s) in respect of the
Registration Statement or any Form 8-K containing substantial financial
information incorporated by reference into the Registration Statement shall have
been delivered prior to the date of delivery of such Draw Down Notice,
satisfactory in form and substance in the Purchaser, and shall not
25
have been rescinded, and a SAS No. 71 Letter covering the Company's most
recently completed fiscal quarter in respect of which the Company has its
results of operations shall have been delivered prior to the date of delivery of
such Draw Down Notice and shall not have been rescinded.
ARTICLE VI
DRAW DOWN TERMS
Section 6.1 Draw Down Terms. Subject to the satisfaction of the
conditions set forth in this Agreement, and subject to Section 6.2 below, the
parties agree as follows:
(a) Beginning on the effective date of the Registration
Statement, the Company may, in its sole discretion, issue a Draw Down Notice (as
defined in Section 6.1(i) hereof) for a specified Draw Down Amount Requested (i)
of up to $30,000,000 if the Threshold Price for the Draw Down Amount as set
forth in such Draw Down Notice is equal to or greater than $15.00 and less than
$17.00, (ii) increased by up to $3,000,000 incrementally for every $2.00
increase in the Threshold Price above $15.00 and up to and including $35.00, or
(iii) decreased by up to $3,000,000 incrementally for every $2.00 decrease in
the Threshold Price below $15.00 and down to and including $11.00. The date the
Company issues any Draw Down Notice in accordance with this Section 6.1 shall be
a "Draw Down Exercise Date" for purposes of this Agreement.
(b) Subject to Section 6.1(h) below, the number of Shares to
be issued by the Company to the Purchaser in connection with each Draw Down
shall be equal to the sum of the quotients (for each Trading Day of the Draw
Down Pricing Period for which the VWAP equals or exceeds the Threshold Price) of
(x) a fraction of the Draw Down Amount, the numerator of which is one (1) and
the denominator of which equals the number of Trading Days during the Draw Down
Pricing Period, divided by (y) the specified percentage of the VWAP set forth in
Section 6.1(j) hereof (the "Draw Down Discount Price") of the Common Stock. All
fractional shares shall be rounded down to the nearest whole share.
(c) Only one Draw Down shall be allowed in each Draw Down
Pricing Period.
(d) Each Draw Down shall be settled on the second Trading Day
after the end of each Draw Down Pricing Period (the "Settlement Date").
(e) There shall be a minimum of five (5) Trading Days between
the end of a Draw Down Pricing Period and the commencement of the next Draw Down
Pricing Period.
(f) There shall be a maximum of fifteen (15) monthly Draw
Downs during the Investment Period.
(g) Each Draw Down will automatically expire immediately after
the last Trading Day of each Draw Down Pricing Period.
26
(h) If the VWAP on a given Trading Day in the Draw Down
Pricing Period is less than the Threshold Price, then the total amount of the
Draw Down Amount Requested will be reduced by a fraction, the numerator of which
is one (1) and the denominator of which equals the number of Trading Days in the
Draw Down Pricing Period and no Shares will be purchased or sold with respect to
such Trading Day, except as provided below. The aggregate amount by which the
Draw Down Amount Requested is reduced shall be referred to herein as the "Below
Threshold Amount." At no time shall the Threshold Price be set below eleven
dollars ($11.00) per share (as adjusted for stock splits, reverse stock splits,
recapitalizations and the like). If trading in the Common Stock is suspended for
any reason for three (3) hours or more in any Trading Day, the price of the
Common Stock will be deemed to be below the Threshold Price for that Trading
Day.
(i) As a condition to the exercise of any Draw Down, the
Company must provide a notice to the Purchaser of the Company's exercise of any
Draw Down via facsimile transmission before the first Trading Day of the Draw
Down Pricing Period covered by such notice (the "Draw Down Notice"),
substantially in the form attached hereto as Exhibit B. The Draw Down Notice
shall specify the Draw Down Amount Requested, set the Threshold Price for such
Draw Down and designate the first Trading Day of the Draw Down Pricing Period.
If the Company wishes the date of the Draw Down Notice to be the first Trading
Day of the Draw Down Pricing Period, such notice must be delivered to the
Purchaser and such receipt confirmed, before 9:30 a.m. (New York time) on such
Trading Day.
(j) With respect to any Draw Down, if the Threshold Price for
the Draw Down Amount as set forth in the Draw Down Notice is equal to or greater
than $15.00 and less than $17.00, the Draw Down Discount Price shall be 95.8% of
the VWAP. For any Threshold Price for the Draw Down Amount as set forth in the
Draw Down Notice at or above $17.00 and up to and including $35.00, the Draw
Down Discount Price shall increase by 0.10% incrementally for every $2.00
increase in the Threshold Price above $15.00, up to a maximum Draw Down Discount
Price of 96.8% of the VWAP. For any Threshold Price for the Draw Down Amount as
set forth in the Draw Down Notice below $15.00 and down to and including $11.00,
the Draw Down Discount Price shall decrease by 0.25% incrementally for every
$2.00 decrease in the Threshold Price below $15.00, down to a minimum Draw Down
Discount Price of 95.3% of the VWAP.
(k) On each Settlement Date, the Company shall instruct the
Transfer Agent to deliver Shares purchased by the Purchaser to The Depositary
Trust Company ("DTC") on the Purchaser's behalf via the Deposit Withdrawal Agent
Commission system ("DWAC"), and upon receipt of the Shares, the Purchaser shall
cause payment therefore to be made to the account designated by the Company by
wire transfer of immediately available funds, provided that the Shares are
received by the Purchaser no later than 1:00 p.m., New York time, or of next day
available funds if the Shares are received thereafter. In certain circumstances
and as set forth in Section 9.1(b), a failure by the Company to deliver such
Shares may result in the payment of liquidated damages by the Company to the
Purchaser. The Purchaser acknowledges that although the Shares acquired from the
Company pursuant to a DWAC transfer do not bear a restrictive legend, they
constitute "restricted securities" within the meaning of the Securities Act and
the Purchaser agrees it will transfer the Shares through the facilities of The
Depository Trust
27
Company only pursuant to the Registration Statement or Rule 144 and in
compliance with the prospectus delivery requirements under the Securities Act.
(l) If during any Draw Down Pricing Period the Company
reasonably believes an event may occur which would result in or may require the
suspension of the effectiveness of the Registration Statement prior to the
applicable Settlement Date, including, without limitation, entering into an
extraordinary transaction in which the Company is not the surviving entity, the
Company shall notify the Purchaser before 9:30 a.m. (New York time) on any
Trading Day (a "Truncate Notice") and truncate the number of Trading Days in
such Draw Down Pricing Period (a "Truncated Pricing Period"). If the Company
delivers the Truncate Notice (i) before 9:30 a.m. (New York time) on a Trading
Day, the last Trading Day of such Truncated Pricing Period shall be the Trading
Day preceding the receipt of the Truncate Notice between, or (ii) between 9:30
a.m. and 4:00 p.m. (New York time) on a Trading Day, then the last Trading Day
of such Truncated Pricing Period shall be the Trading Day on which the Truncate
Notice was received by the Purchaser.
Subject to the satisfaction of the conditions set forth in Section 5.2,
the Purchaser will purchase the Truncated Draw Down Allocation Amount for each
of the Trading Days in a Truncated Pricing Period, for an aggregate purchase
price determined in accordance with Section 6.1(b) and Section 6.1(h).
(m) The Settlement Date for any Truncated Pricing Period shall
be the second business day after the last Trading Day of the applicable
Truncated Pricing Period.
Section 6.2 Aggregate Limit. Notwithstanding anything to the contrary
herein, in no event may the Company issue a Draw Down Notice to the extent that
the sale of shares of Common Stock pursuant thereto and pursuant to all prior
Draw Down Notices issued hereunder would cause the Company to sell or the
Purchaser to purchase shares of Common Stock which in the aggregate are in a
dollar amount in excess of the Aggregate Limit.
ARTICLE VII
TERMINATION
Section 7.1 Term; Termination by Mutual Consent. The term of this
Agreement shall expire on the earlier of (i) eighteen (18) months from the date
the Registration Statement is declared effective by the Commission (the
"Investment Period"), (ii) the date that the entire dollar amount of Shares
registered under the Registration Statement have been issued and sold, (iii) the
date the Purchaser shall have purchased $150,000,000 of Common Stock, or (iv)
upon written mutual consent of the parties hereto.
Section 7.2 Effect of Termination. If this Agreement is terminated,
this Agreement shall become void and of no further force and effect, except as
provided in Section 9.1 and Section 9.9 hereof. Nothing in this Section 7.2
shall be deemed to release the Company or the Purchaser from any liability for
any breach under this Agreement, or to impair the rights of the Company and the
Purchaser to compel specific performance by the other party of its obligations
under this Agreement.
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ARTICLE VIII
INDEMNIFICATION
Section 8.1 General Indemnity.
(a) Indemnification by the Company. The Company will indemnify
and hold harmless the Purchaser, any broker-dealer named in the Registration
Statement, as amended, (the "Broker-Dealer") and each person, if any, who
controls the Purchaser or the Broker-Dealer within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act from and against any
losses, claims, damages, liabilities and expenses (including reasonable costs of
defense and investigation and all reasonable legal fees and expenses incurred in
connection with such defense or investigation) to which the Purchaser, the
Broker-Dealer and each such controlling person may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained, or incorporated by reference, in the Registration Statement
(including any Prospectus or Prospectus supplement which are a part of it), or
any amendment or supplement to it, or (ii) the omission or alleged omission to
state in the Registration Statement (including any Prospectus or Prospectus
supplement which are a part of it), or any amendment or supplement to it, or any
document incorporated by reference in the Registration Statement, a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except that the Company will not be liable to the extent any
loss, claim, damage, liability or expense arises out of, or is based upon, an
untrue statement, alleged untrue statement, omission or alleged omission that
was made in reliance upon, and in conformity with, written information furnished
by the Purchaser or Broker-Dealer to the Company for inclusion in the
Registration Statement, Prospectus, Prospectus supplement, any amendment or
supplement to the Registration Statement or any Prospectus or Prospectus
supplement, or any document incorporated by reference in the Registration
Statement.
The Company will reimburse the Purchaser, the Broker-Dealer and each
such controlling person promptly upon demand for any reasonable legal or other
costs or expenses reasonably incurred by the Purchaser, the Broker-Dealer or
such controlling person in investigating, defending against, or preparing to
defend against any such claim, action, suit or proceeding, except that the
Company will not be liable to the extent any loss, claim, damage, liability or
expense arises out of, or is based upon, an untrue statement, alleged untrue
statement, omission or alleged omission that was made in reliance upon, and in
conformity with, written information furnished by the Purchaser or Broker-Dealer
to the Company for inclusion in the Registration Statement, Prospectus,
Prospectus supplement, any amendment or supplement to the Registration Statement
or any Prospectus or Prospectus supplement, or any document incorporated by
reference in the Registration Statement.
(b) Indemnification by the Purchaser. The Purchaser will
indemnify and hold harmless the Company, each of its directors and officers, and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act from and against any
losses, claims, damages, liabilities and expenses (including reasonable costs of
defense and investigation and all reasonable legal fees and expenses incurred
29
in connection with such defense or investigation) to which the Purchaser any of
its directors or officers, and each such controlling person may become subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained, or incorporated by reference, in the Registration Statement
(including any Prospectus or Prospectus supplement which are a part of it), or
any amendment or supplement to it, or (ii) the omission or alleged omission to
state in the Registration Statement (including any Prospectus or Prospectus
supplement which are a part of it), or any amendment or supplement to it, or any
document incorporated by reference in the Registration Statement, a material
fact required to be stated therein or necessary to make the statements therein
not misleading, to the extent, but only to the extent, the untrue statement,
alleged untrue statement, omission or alleged omission was made in reliance
upon, and in conformity with, written information furnished by the Purchaser to
the Company for inclusion in the Registration Statement, Prospectus, Prospectus
supplement, any amendment or supplement to the Registration Statement or any
Prospectus or Prospectus supplement, or any document incorporated by reference
in the Registration Statement.
The Purchaser will reimburse the Company and each such director,
officer or controlling person promptly upon demand for any reasonable legal or
other costs or expenses reasonably incurred by the Company or the other person
in investigating, defending against, or preparing to defend against any loss,
claim, damage, liability or expense arising out of, or based upon, an untrue
statement, alleged untrue statement, omission or alleged omission that was made
in reliance upon, and in conformity with, written information furnished by the
Purchaser to the Company for inclusion in the Registration Statement,
Prospectus, Prospectus supplement, any amendment or supplement to the
Registration Statement or any Prospectus or Prospectus supplement, or any
document incorporated by reference in the Registration Statement.
Section 8.2 Indemnification Procedures. Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under Section 8.1, the person will notify the
indemnifying party in writing of the claim or commencement of the action, suit
or proceeding; provided, however, that failure to notify the indemnifying party
will not relieve the indemnifying party from liability under Section 8.1, except
to the extent it has been materially prejudiced by the failure to give notice.
The indemnifying party will be entitled to participate in the defense of any
claim, action, suit or proceeding as to which indemnification is being sought,
and, to the extent the indemnifying party elects by written notice to the
indemnified party, the indemnifying party shall be entitled to (but will not be
required to) assume the defense against the claim, action, suit or proceeding
with counsel satisfactory to the indemnified party. After an indemnifying party
notifies an indemnified party that the indemnifying party wishes to assume the
defense of a claim, action, suit or proceeding, the indemnifying party will not
be liable for any legal or other expenses incurred by the indemnified party in
connection with the defense against the claim, action, suit or proceeding except
that if, in the opinion of counsel to the indemnified party, one or more of the
indemnified parties should be separately represented in connection with a claim,
action, suit or proceeding, the indemnifying party will pay the reasonable fees
and expenses of one separate counsel for the indemnified parties. Each
indemnified party, as a condition to receiving indemnification as provided in
Section 8.1, will cooperate in all reasonable respects with the indemnifying
party in the defense of any action or claim as to which indemnification is
sought.
30
No indemnifying party will be liable for any settlement of any action effected
without its prior written consent. No indemnifying party will, without the prior
written consent of the indemnified party, effect any settlement of a pending or
threatened action with respect to which an indemnified party is, or is informed
that it may be, made a party and for which it would be entitled to
indemnification, unless the settlement includes an unconditional release of the
indemnified party from all liability and claims which are the subject matter of
the pending or threatened action.
If for any reason the indemnification provided for in this Agreement is
not available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in Section 8.1 as to which it is
entitled to indemnification thereunder, each indemnifying party will, in lieu of
indemnifying the indemnified party, contribute to the amount paid or payable by
the indemnified party as a result of such loss or liability, (i) in the
proportion which is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand, and by the indemnified party on the other,
from the sale of Shares which is the subject of the claim, action, suit or
proceeding which resulted in the loss or liability or (ii) if that allocation is
not permitted by applicable Law, in such proportion as is appropriate to reflect
not only the relative benefits of the sale of such Shares, but also the relative
fault of the indemnifying party and the indemnified party with respect to the
statements or omissions which are the subject of the claim, action, suit or
proceeding that resulted in the loss or liability, as well as any other relevant
equitable considerations.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Fees and Expenses.
(a) Each party shall bear its own fees and expenses related to
the transactions contemplated by this Agreement; provided, however, that the
Company shall promptly pay legal fees incurred by the Purchaser up to $75,000 in
connection with the preparation, negotiation, execution and delivery of this
Agreement, any amendments, modifications or waivers of this Agreement and the
review of the Registration Statement and the Prospectus, including any
amendments and supplements thereto. The Company shall pay all stamp or other
similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto.
(b) If the Company issues a Draw Down Notice and fails to
deliver the Shares on the applicable Settlement Date, and such failure continues
for ten (10) Trading Days, the Company shall pay the Purchaser in cash or
restricted shares of Common Stock, (valued at the same price per share as the
Shares to be purchased in connection with the applicable Draw Down), at the
option of the Purchaser, as liquidated damages for such failure and not as a
penalty, an amount equal to two percent (2%) of the Draw Down Amount required to
be paid by the Purchaser on such Settlement Date for the initial thirty (30)
days following such Settlement Date until the Shares have been delivered, and an
additional two percent (2%) for each additional thirty (30) day period
thereafter until the Shares have been delivered, which amount shall be prorated
for such periods less than thirty (30) days.
31
(c) On each Settlement Date, the Company shall pay the
Placement Agent a placement fee in the amount of eight-tenths percent (0.8%) of
the corresponding Draw Down Amount.
Section 9.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that either party shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement by the other party and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which either
party may be entitled by law or equity.
(b) Each of the Company and the Purchaser (i) hereby
irrevocably submits to the jurisdiction of the United States District Court and
other courts of the United States sitting in the State of New York for the
purposes of any suit, action or proceeding arising out of or relating to this
Agreement, and (ii) hereby waives, and agrees not to assert in any such suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Purchaser consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section shall affect or limit any right to serve
process in any other manner permitted by Law.
Section 9.3 Entire Agreement; Amendment. This Agreement represents the
entire agreement of the parties with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by either
party relative to subject matter hereof not expressly set forth herein. No
provision of this Agreement may be amended other than by a written instrument
signed by both parties hereto.
Section 9.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, or by facsimile (with facsimile
machine confirmation of delivery received) at the address or number designated
below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The address
for such communications shall be:
If to the Company:
PacifiCare Health Systems, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇
▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
General Counsel
With copies to: ▇▇▇▇▇▇ Godward LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
If to the Purchaser:
Acqua Wellington North American Equities Fund, Ltd.
c/o Fortis Fund Services (Bahamas) Ltd.
Montage Sterling Centre
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇-▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
With copies to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Either party hereto may from time to time change its address for
notices by giving at least ten (10) days advance written notice of such changed
address to the other party hereto.
Section 9.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter, except as set forth in the last
sentence of Section 5.2. No provision of this Agreement may be waived other than
in a written instrument signed by the party against whom enforcement of such
waiver is sought.
Section 9.6 Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
33
Section 9.7 Successors and Assigns. The Purchaser may not assign this
Agreement to any person without the prior consent of the Company, in the
Company's sole discretion. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. After Closing, the
assignment by a party to this Agreement of any rights hereunder shall not affect
the obligations of such party under this Agreement.
Section 9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
Section 9.9 Survival. The representations and warranties of the Company
and the Purchaser contained in Article III and the covenants contained in
Article IV shall survive the execution and delivery hereof and the Closing until
the termination of this Agreement, and the agreements and covenants set forth in
Article VIII of this Agreement shall survive the execution and delivery hereof
and the Closing hereunder.
Section 9.10 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
Section 9.11 Publicity. Prior to the Closing, neither the Company nor
the Purchaser shall issue any press release or otherwise make any public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement without the prior written
consent of the other party to such disclosure, except that if the Company is
required by Law to issue a press release or otherwise make a public statement or
announcement with respect to this Agreement prior to the Closing, the Company
may do so and shall reasonably consult with the Purchaser in advance on the form
and substance of such press release. After the Closing, the Company may issue a
press release or otherwise make a public statement or announcement with respect
to this Agreement or the transactions contemplated hereby or the existence of
this Agreement; provided, however, that prior to issuing any such press release,
making any such public statement or announcement, the Company shall reasonably
consult with the Purchaser on the form and substance of such press release or
other disclosure. Concurrent with or upon filing of a Prospectus supplement, the
Company may issue a press release disclosing solely the information contained in
such Prospectus supplement without consulting with the Purchaser.
Section 9.12 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of
34
such provision, had never been contained herein, so that such provisions would
be valid, legal and enforceable to the maximum extent possible.
Section 9.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
35
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
PACIFICARE HEALTH SYSTEMS, INC.
By:
------------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
ACQUA WELLINGTON NORTH AMERICAN
EQUITIES FUND, LTD.
By:
------------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
36
CERTIFICATE OF SECRETARY
OF PACIFICARE HEALTH SYSTEMS, INC.
Reference is made to the Common Stock Purchase Agreement, dated as of
December 4, 2001 (the "Agreement"), by and between PacifiCare Health Systems,
Inc. (the "Company") and Acqua Wellington North America Equities Fund, Ltd. (the
"Purchaser"). All capitalized terms used in this certificate which are not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement.
I, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, certify that I am the duly qualified and
elected Executive Vice President and Secretary of the Company, and that, as
such, I am authorized to execute this certificate on behalf of the Company, and
DO HEREBY FURTHER CERTIFY that:
1. Attached hereto as Exhibit A is a true and complete copy of
the Amended and Restated Certificate of Incorporation of the Company
and each amendment thereto on file with the Delaware Secretary of State
(the "Certificate of Incorporation"). The Certificate of Incorporation
has not been amended or otherwise modified since the date of the
Certificate of the Delaware Secretary of State attached thereto, and no
steps have been taken by the directors or stockholders of the Company
to effect or authorize any further amendment or other modification
thereto.
2. Attached hereto as Exhibit B is a true and complete copy of
the bylaws of the Company as are in full force and effect as of the
date hereof, and as were in full force and effect on the dates of the
resolutions referred to below. No steps have been taken by the
directors or stockholders of the Company to effect or authorize any
amendment, repeal or other modification to the bylaws of the Company.
3. Attached hereto as Exhibit C is a true and correct copy of
all resolutions of the board of directors of the Company, or any
committee thereof, pertaining to (a) the offering of the Common Stock
to be sold by the Company pursuant to the Agreement, (b) the execution
and delivery of the Agreement and any other documents, agreements,
instruments or certificates to be executed and delivered by the Company
pursuant to, or as contemplated by, the Agreement (collectively, the
"Transaction Documents"), and (c) all transactions in connection with
the foregoing. The resolutions have not been amended, modified or
rescinded and remain in full force and effect on the date hereof.
4. Attached hereto as Exhibit D are the authentic signatures
of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, each of whom is duly authorized to execute
and deliver and perform on behalf of the Company any Transaction
Document to which the Company is or is to be a party and the other
documents to be delivered under the Agreement. Further, on the date
hereof, such individuals have been duly elected to, are duly qualified
for and on the date hereof do hold, the offices set forth opposite
their respective names on such Exhibit D.
37
5. The Agreement as executed and delivered on behalf of the
Company has been approved by the Company.
IN WITNESS WHEREOF, I have executed this Certificate as of December
___, 2001.
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Executive Vice President and Secretary
I, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President and Chief Executive Officer of
PacifiCare Health Systems, Inc., do hereby certify that ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ is
the duly elected, qualified and acting Executive Vice President and Secretary of
PacifiCare Health Systems, Inc. and that the signature above is his genuine
signature.
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
CLOSING CERTIFICATE
Reference is made to the Common Stock Purchase Agreement, dated as of
December __, 2001 (the "Agreement"), by and between PacifiCare Health Systems,
Inc. (the "Company") and Acqua Wellington North America Equities Fund, Ltd. (the
"Purchaser"). All capitalized terms used in this certificate which are not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement.
I, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, certify that I am the duly qualified and elected
Executive Vice President and Chief Financial Officer of the Company, and that,
as such, I am authorized to execute this certificate on behalf of the Company,
and DO HEREBY FURTHER CERTIFY that:
1. Except as set forth on the attached Schedule, the
representations and warranties of the Company set forth in Section 3.1
of the Agreement are true and correct in all material respects on and
as of the date hereof as though expressly made on and as of the date
hereof, except for the representations and warranties that speak as of
a particular date.
2. The Company has performed in all material respects all
covenants and agreements to be performed by the Company on or prior to
the Closing Date and has complied in all material respects with all
obligations and conditions contained in the Agreement.
IN WITNESS WHEREOF, I have executed this Certificate as of December
___, 2001.
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Executive Vice President and
Chief Financial Officer
EXHIBIT A TO THE
COMMON STOCK PURCHASE AGREEMENT
COMPLIANCE CERTIFICATE
Reference is made to the Common Stock Purchase Agreement, dated as of
December __, 2001 (the "Agreement"), by and between PacifiCare Health Systems,
Inc. (the "Company") and Acqua Wellington North America Equities Fund, Ltd. (the
"Purchaser"). All capitalized terms used in this certificate which are not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement.
I, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, in connection with the issuance of shares of
Common Stock of the Company pursuant to the Draw Down Notice, dated ____________
___, 200_ delivered by the Company to the Purchaser pursuant to Article VI of
the Agreement, certify that I am the duly qualified and elected Executive Vice
President and Chief Financial Officer of the Company, and that, as such, I am
authorized to execute this certificate on behalf of the Company, and DO HEREBY
FURTHER CERTIFY that:
The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Draw Down Exercise
Date and the Settlement Date related to the Draw Down Notice and has complied in
all material respects with all obligations and conditions contained in Section
5.2 of the Agreement.
IN WITNESS WHEREOF, I have executed this Certificate as of ________
___, 200_.
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Executive Vice President and
Chief Financial Officer
EXHIBIT B TO THE
COMMON STOCK PURCHASE AGREEMENT
FORM OF DRAW DOWN NOTICE
Reference is made to the Common Stock Purchase Agreement dated as
of[INSERT DATE], (the "Purchase Agreement") between PacifiCare Health Systems,
Inc. (the "Company"), and Acqua Wellington North American Equities Fund, Ltd.
Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement.
In accordance with and pursuant to Section 6.1 of the Purchase
Agreement, the Company hereby issues this Draw Down Notice to exercise a Draw
Down request for the Draw Down Amount indicated below.
Draw Down Amount:
------------------------------------------------------
Draw Down Pricing Period start date:
-----------------------------------
Draw Down Pricing Period end date:
-------------------------------------
Settlement Date:
-------------------------------------------------------
Threshold Price:
-------------------------------------------------------
Minimum Threshold Price: $11.00
-----------------------------------------------
Dollar Amount and/or Number of Shares
of Common Stock Currently Unissued
under the Registration Statement:
--------------------------------------
Dollar Amount of Common Stock
Currently Available under the
Aggregate Limit:
-------------------------------------------------------
Dated:
-----------------------------
By:
---------------------------------
Name:
Title:
Address:
Facsimile No.:
Wire Instructions:
------------------
Contact Name:
-----------------------
EXHIBIT C
[FORM OF INSTRUCTION LETTER]
[Date]
Mellon Investor Services LLC.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Re: PacifiCare Health Systems, Inc.
Issuance of Common Stock to
Acqua Wellington North American Equities Fund, Ltd.
Dear Sir/Madam:
In connection with the issuance of ____________ shares of Common Stock (the
"Shares") of PacifiCare Health Systems, Inc. (the "Company") to Acqua Wellington
North American Equities Fund, Ltd. ("Purchaser") pursuant to that certain Common
Stock Purchase Agreement, dated as of December __, 2001, by and between the
Company and Purchaser, you are hereby instructed, as transfer agent, to deliver
the Shares to Acqua Wellington North American Equities Fund, Ltd. on
______________, 200_ via the Deposit Withdrawal Agent Commission System with no
restrictive legends.
WE FURTHER INSTRUCT YOU TO MAINTAIN AN INTERNAL STOP TRANSFER RESTRICTION IN
YOUR RECORDS FOR SUCH SHARES OF COMMON STOCK OF THE COMPANY HELD BY PURCHASER.
Such Shares shall not be transferred by Purchaser and shall remain subject to
such stop transfer restriction until such time as you have received a
Certificate of Subsequent Sale, in the form attached hereto as EXHIBIT A,
executed by Purchaser. Upon receipt of such Certificate of Subsequent Sale with
respect to any sale of the Shares, you are hereby instructed, as transfer agent,
to transfer such Shares. Notwithstanding your receipt of the executed
Certificate of Subsequent Sale with respect to any such sale of Shares by
Purchaser, in the event the Company notifies you in writing prior to settlement
of the Shares that such transfer would violate applicable law, the stop transfer
restriction with respect to such Shares shall remain in effect and you are
hereby instructed, in such event, to not transfer such Shares until such time as
you receive further instructions from the Company.
Please contact me with any questions, comments or concerns.
Very truly yours,
-----------------------------
EXHIBIT A TO FORM OF INSTRUCTION LETTER
CERTIFICATE OF SUBSEQUENT SALE
[Transfer Agent]
RE: Sale of Shares of Common Stock of PacifiCare Health Systems Inc. (the
"Company") pursuant to the Company's Prospectus dated _______________
(the "Prospectus")
Dear Sir/Madam:
The undersigned hereby certifies, in connection with the sale of shares
of Common Stock of the Company included in the Selling Stockholders section of
the Prospectus, that the undersigned has sold the Shares pursuant to the
Prospectus and in a manner described under the caption "Plan of Distribution" in
the Prospectus and that such sale complies with all applicable securities laws,
including, without limitation, the Prospectus delivery requirements of the
Securities Act of 1933, as amended.
Selling Stockholder (the beneficial owner): Acqua Wellington North American
Equities Fund, Ltd.
Record Holder (e.g., if held in name of nominee):
------------------------------
Number of Shares Sold:
---------------------------------------------------------
Date of Sale:
------------------------------------------------------------------
Very truly yours,
Dated: By:
-------------------------- ------------------------------------
Print Name:
----------------------------
Title:
---------------------------------