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EXHIBIT 4.2
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PREFERRED STOCK PURCHASE AGREEMENT
By and Among
NEOTHERAPEUTICS, INC.,
▇▇▇▇▇▇▇▇ INVESTMENTS L.P.
and
MONTROSE INVESTMENTS L.P.
Dated as of January 29, 1999
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PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
January 29, 1999, by and among NeoTherapeutics, Inc., a Delaware corporation
(the "Company"), ▇▇▇▇▇▇▇▇ Investments L.P., a Delaware limited partnership
("▇▇▇▇▇▇▇▇"), and Montrose Investments L.P., a Cayman Islands exempt limited
partnership ("Montrose"). ▇▇▇▇▇▇▇▇ and Montrose are each sometimes referred to
herein as a "Purchaser" and are collectively sometimes referred to herein as the
"Purchasers."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers, severally and not jointly, desire to purchase from the Company
shares of the Company's 5% Series A Preferred Stock with Conversion Features,
par value $.001 per share (the "Series A Preferred"), and shares of the
Company's 5% Series B Preferred Stock with Conversion Features, par value $.001
per share (the "Series B Preferred" and, together with the Series A Preferred,
the "Preferred Stock").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company and the Purchasers agree as follows:
ARTICLE 1
PURCHASE AND SALE OF PREFERRED STOCK
1.1 Purchase and Sale. (a) Subject to the terms and conditions set
forth herein, the Company shall issue and sell to the Purchasers, and the
Purchasers, severally and not jointly, shall purchase from the Company 400
shares of the Series A Preferred (the "Series A Shares") and 200 shares of the
Series B Preferred (the "Series B Shares" and, together with the Series A
Shares, the "Shares").
(b) The Series A Preferred shall have the respective rights,
preferences and privileges set forth in Exhibit A attached hereto (the "Series A
Terms"), which shall be incorporated into a Certificate of Designation to be
approved by the Purchasers and filed prior to the Series A Closing Date (as
defined below) by the Company with the Secretary of State of Delaware (the
"Series A Designation"). The Series B Preferred shall have respective rights,
preferences and privileges identical to the Series A Terms, mutatis mutandis,
and shall rank pari passu with the Series A Preferred with regard to dividends,
liquidation, voting rights and any other preferential rights designated therein,
except that the Conversion Price (as defined below) for conversion of the Series
B Shares shall be determined as of the Original Issue Date (as defined below)
for the Series B Shares.
The Series B Preferred shall be authorized pursuant to a Certificate of
Designation prepared by the Company and, subject to the approval of the
Purchasers, filed prior to the Series B Closing Date (as defined below), by the
Company with the Secretary of State of Delaware (the "Series B Designation" and,
together with the Series A Designation, the "Certificates of Designation").
For purposes of this Agreement, "Business Day", "Conversion Price,"
"Original Issue Date," "Trading Day" and "Per Share Market Value" shall have the
meanings set forth in Exhibit A. Each of the Series A Closing and Series B
Closing are sometimes individually referred to herein as a "Closing."
1.2 Purchase Price. The purchase price per Share shall be $10,000.
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1.3 The Closings.
(a) The Series A Closing. (i) The closing of the purchase and
sale of the Series A Shares (the "Series A Closing") shall take place at the
offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇"), immediately following
the execution hereof or such later date as the parties shall agree. The date of
the Series A Closing is hereinafter referred to as the "Series A Closing Date."
(ii) At the Series A Closing, the parties shall deliver or
shall cause to be delivered the following: (a) the Company shall deliver
to the Purchasers (1) a stock certificate representing 140 Series A
Shares, registered in the name of ▇▇▇▇▇▇▇▇, (2) a stock certificate
representing 260 Series A Shares registered in the name of Montrose, (3)
common stock purchase warrant in the form of Exhibit B entitling
▇▇▇▇▇▇▇▇ to purchase an aggregate of 26,250 shares of the Company's
common stock, $.001 par value per share (the "Common Stock"), at an
exercise price equal to 125% of the average Per Share Market Values for
the ten (10) Trading Days immediately preceding the Series A Closing
Date (the "Exercise Price"), registered in the name of ▇▇▇▇▇▇▇▇ (the
"▇▇▇▇▇▇▇▇ Warrant"), (4) common stock purchase warrant in the form of
Exhibit B entitling Montrose to purchase an aggregate of 48,750 shares
of Common Stock at the Exercise Price, registered in the name of
Montrose (the "Montrose Warrant" and, together with the ▇▇▇▇▇▇▇▇
Warrant, the "Warrants"), (5) the legal opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇, outside counsel to the Company, substantially in the
form of Exhibit D, dated the Series A Closing Date, and (6) all other
documents, instruments and writings required to have been delivered at
or prior to the Series A Closing Date by the Company pursuant to this
Agreement, including an executed Registration Rights Agreement, dated
the date hereof, among the Company and the Purchasers, in the form of
Exhibit C (the "Registration Rights Agreement"), and the Irrevocable
Transfer Agent Instructions, in the form of Exhibit E, delivered to and
acknowledged by the Company's transfer agent (the "Transfer Agent
Instructions") and dated the Series A Closing Date; (b) ▇▇▇▇▇▇▇▇ shall
deliver to the Company (1) $1,400,000 in United States dollars in
immediately available funds by wire transfer to an account designated in
writing by the Company for such purpose prior to the Series A Closing
Date, and (2) all documents, instruments and writings required to have
been delivered at or prior to the Series A Closing by ▇▇▇▇▇▇▇▇ pursuant
to this Agreement, including an executed Registration Rights Agreement
(c) Montrose shall deliver to the Company (1) $2,600,000 in United
States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose prior to
the Series A Closing Date, and (2) all documents, instruments and
writings required to have been delivered at or prior to the Series A
Closing by Montrose pursuant to this Agreement, including an executed
Registration Rights Agreement.
(b) The Series B Closing. (i) Subject to the terms and conditions
set forth in this Agreement, the Company shall have the right to deliver a
written notice to the Purchasers (a "Subsequent Financing Notice") requiring the
Purchasers to purchase, severally and not jointly (subject to adjustment as
provided herein), at the Company's option, up to an aggregate of 200 Series B
Shares for an aggregate purchase price of $2,000,000. A Subsequent Financing
Notice may be delivered no earlier than 180 days following the Series A Closing
Date and no later than 230 days following the Series A Closing Date (the
expiration of such 230 day period or such earlier date as the
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Company notifies the Purchasers in writing of its election to irrevocably waive
its rights hereunder to sell the Series B Shares to the Purchasers, the "Series
B Closing Expiration Date"). The closing of the purchase and sale of the Series
B Shares (the "Series B Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ on the tenth (10th) Trading Day after the Subsequent Financing Notice
is deemed delivered hereunder or on such other date as otherwise agreed to by
the parties; provided, however, that in no case shall the Series B Closing take
place unless and until all of the conditions listed in Section 4.1 have been
satisfied by the Company or waived by the Purchasers (it being understood that
each Purchaser may elect to waive or enforce such conditions in its sole
discretion). The date of the Series B Closing is hereinafter referred to as the
"Series B Closing Date."
(ii) At the Series B Closing, the parties shall deliver or
shall cause to be delivered the following: (a) the Company shall deliver
to each Purchaser acquiring Series B Stock (1) a stock certificate
representing Series B Shares, registered in the name of such Purchaser,
in an amount equal to the pro rata portion of the number of Series B
Shares to be acquired by such Purchaser (determined by reference to the
pro rata portion of the amount of Series A Shares acquired by such
Purchaser hereunder at the Series A Closing); (2) the legal opinion
referenced in Section 4.1(xi), and (3) all other documents, instruments
and writings required to have been delivered at or prior to the Series B
Closing Date by the Company pursuant to this Agreement, including the
Transfer Agent Instructions referenced in Section 4.1 (xvii); (b) each
Purchaser acquiring Series B Shares shall deliver to the Company (1) the
product of $10,000 and the number of Series B Shares to be issued and
sold to it at the Series B Closing, in United States dollars in
immediately available funds by wire transfer to an account designated in
writing by the Company for such purpose prior to the Series B Closing
Date and (b) all documents, instruments and writings required to have
been delivered at or prior to the Series B Closing Date by such
Purchaser pursuant to this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) Organization and Qualification. The Company is a corporation,
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in Schedule
2.1(a) (collectively the "Subsidiaries"). Each of the Subsidiaries is an entity,
duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of the Securities (as defined
below) or any of this Agreement, the Certificates of Designation, the Warrants
or the Registration Rights Agreement (collectively, the
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"Transaction Documents"), (y) have or result in a material adverse effect on the
results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (z) adversely impair
the Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (x), (y) or (z), a "Material Adverse
Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents, and otherwise to carry out
its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company. Each of the Transaction Documents has been duly executed by the Company
and, when delivered (or filed, as the case may be) in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. Neither the
Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate of incorporation, by-laws or other charter documents.
(c) Capitalization. The number of authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 2.1(c). No
shares of Common Stock are entitled to preemptive or similar rights, nor is any
holder of the Common Stock entitled to preemptive or similar rights arising out
of any agreement or understanding with the Company by virtue of any of the
Transaction Documents. Except as disclosed in Schedule 2.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Shares and the Warrants, securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock. To
the knowledge of the Company, except as specifically disclosed in the SEC
Documents (as defined below) or Schedule 2.1(c), no Person or group of related
Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or
has the right to acquire by agreement with or by obligation binding upon the
Company in excess of 5% of the Common Stock. A "Person" means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
(d) Issuance of the Shares and the Warrants. The Shares and the
Warrants are duly authorized, and, when issued and paid for in accordance with
the terms hereof, shall have been validly issued, fully paid and nonassessable,
free and clear of all liens, encumbrances and rights of first refusal of any
kind (collectively, "Liens"). The Company has on the date hereof and will, at
each Closing Date and at all times while the Shares and the Warrants are
outstanding, maintain an adequate reserve of duly authorized shares of Common
Stock, reserved for issuance to the holders of the Shares and the Warrants to
enable it to perform its conversion, exercise and other obligations under this
Agreement, the Certificates of Designations and the Warrants. With respect to
the Securities to be issued at or in connection with each Closing hereunder,
such number of reserved
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and available shares of Common Stock is not less than the sum of (i) 200% of the
number of shares of Common Stock which would be issuable upon conversion in full
of the Shares to be issued at such Closing, assuming such conversion occurred on
the Original Issue Date for such Shares, the applicable Filing Date (as defined
in the Registration Rights Agreement) or the applicable Effectiveness Date,
whichever yields the lowest Conversion Price for such Shares, (ii) the number of
shares of Common Stock issuable upon exercise in full of the Warrants to be
issued at such Closing, and (iii) the number of shares Common Stock which would
be issuable upon payment of dividends on the Shares to be issued at such
Closing, assuming each Share is outstanding for three years and all dividends
are paid in shares of Common Stock (such number of shares of Common Stock, the
"Initial Minimum"). All such authorized shares of Common Stock shall be duly
reserved for issuance to the holders of the Shares and the Warrants. The shares
of Common Stock issuable upon conversion of the Shares, as payment of dividends
thereon, and upon exercise of the Warrants are collectively referred to herein
as the "Underlying Shares." The Shares, the Warrants and the Underlying Shares
are collectively referred to herein as, the "Securities." When issued in
accordance with the Certificates of Designation and the Warrants, the Underlying
Shares shall have been duly authorized, validly issued, fully paid and
nonassessable, free and clear of all Liens.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its certificate of incorporation, bylaws or other
charter documents (each as amended through the date hereof), or (ii) subject to
obtaining the Required Approvals (as defined below), 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 (with or without notice, lapse of time
or both) of, any agreement, credit facility, indenture or instrument (evidencing
a Company debt or otherwise) to which the Company or any Subsidiary is a party
or by which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or govern-mental
authority to which the Company is subject (including Federal and state
securities laws and regulations), or by which any property or asset of the
Company is bound or affected, except in the case of each of clauses (ii) and
(iii), as could not, individually or in the aggregate, have or result in a
Material Adverse Effect. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental authority,
except for violations which, individually or in the aggregate, could not have or
result in a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
Federal, state, local or other govern-mental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing of the Certificates of
Designation with the Secretary of State of Delaware, (ii) the filings required
pursuant to Section 3.10, (iii) the filing of one or more Underlying Securities
Registration Statement with the Securities and Exchange Commission (the
"Commission") meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Underlying Shares by the Purchasers,
(iv) the application(s) to the Nasdaq National Market ("NASDAQ") for the listing
of the Underlying Shares for trading on the NASDAQ (and with any other national
securities exchange or market on which the Common Stock is then listed), (v)
applicable Blue Sky filings and (vi) in all other cases where the failure to
obtain such
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consent, waiver, authorization or order, or to give such notice or make such
filing or registration could not have or result in, individually or in the
aggregate, a Material Adverse Effect (collectively, the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed in
the SEC Documents, there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (Federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, individually or in
the aggregate, have or result in a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived which, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is in violation of any statute, rule or
regulation of any governmental authority, except as could not individually or in
the aggregate, have or result in a Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"). Neither the Company
nor any Person acting on its behalf has taken any action which could subject the
offering, issuance or sale of the Securities to the registration requirements of
the Securities Act. Neither the Company nor any Person acting on the Company's
behalf has solicited any offer to buy or sell the Securities by means of any
form of general solicitation or advertising.
(j) SEC Documents; Financial Statements. The Company has filed
all reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the three years preceding the
date hereof (or such shorter period as the Company was required by law to file
such material) (the foregoing materials being collectively referred to herein as
the "SEC Documents" and, together with the Schedules to this Agreement the
"Disclosure Materials") on a timely basis or has received a valid extension of
such time of filing and has filed any such SEC Documents prior to the expiration
of any such extension. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or assets of
the Company are subject have been filed as exhibits to the SEC Documents as
required. The financial statements of the Company included in the SEC Documents
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect
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thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
Since September 30, 1998, except as specifically disclosed in the SEC Documents,
(a) there has been no event, occurrence or development that has had or could
have or result in a Material Adverse Effect, (b) the Company has not incurred
any liabilities (contingent or otherwise) other than (x) liabilities incurred in
the ordinary course of business consistent with past practice and (y)
liabilities not required to be reflected in the Company's financial statements
pursuant to GAAP or required to be disclosed in filings made with the
Commission, (c) the Company has not altered its method of accounting or the
identity of its auditors and (d) the Company has not declared or made any
payment or distribution of cash or other property to its stockholders or
officers or directors (other than in compliance with existing Company stock
option plans) with respect to its capital stock, or purchased, redeemed (or made
any agreements to purchase or redeem) any shares of its capital stock. The
Company last filed audited financial statements with the Commission on March 31,
1998, and has not received any comments from the Commission in respect thereof.
(k) Investment Company. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. Except for certain fees payable by the Company
to Brighton Capital Ltd., no fees or commissions will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, or bank with respect to the transactions contemplated by this
Agreement. The Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall indemnify and
hold harmless the Purchasers, their employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as such fees
and expenses are incurred.
(m) Form S-3 Eligibility. The Company is, and at each Closing
Date will be, eligible to register securities for resale with the Commission
under Form S-3 promulgated under the Securities Act.
(n) Exclusivity. The Company shall not issue and sell shares of
Preferred Stock to any Person other than the Purchasers other than with the
specific prior written consent of the Purchasers.
(o) Seniority. No class of equity securities of the Company is
senior to the Shares in right of payment, whether upon liquidation or
dissolution, or otherwise.
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(p) Listing and Maintenance Requirements Compliance. The Company
has not, in the two years preceding the date hereof, received notice (written or
oral) from the NASDAQ or any other stock exchange, market or trading facility on
which the Common Stock is or has been listed (or on which it has been quoted) to
the effect that the Company is not in compliance with the listing or maintenance
requirements of such exchange or market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such maintenance requirements.
(q) Patents and Trademarks. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and rights (collectively, the
"Intellectual Property Rights") which are necessary or material for use in
connection with its business, and which the failure to so have would have a
Material Adverse Effect. To the best knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
(r) Registration Rights; Rights of Participation. Except as set
forth on Schedule 6(b) to the Registration Rights Agreement, the Company has not
granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied. No
Person, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.
(s) Regulatory Permits. The Company and its Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate Federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents, except where the failure to
possess such permits could not, individually or in the aggregate, have or result
in a Material Adverse Effect ("Material Permits"), and neither the Company nor
any such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(t) Title. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property and personal property owned
by them which is material to the business of the Company and its Subsidiaries,
in each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its Subsidiaries. Any
real property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.
(u) Disclosure. The Company confirms that it has not provided the
Purchasers or their agents or counsel with any information that constitutes or
might constitute material non-public information. The Company understands and
confirms that the Purchasers shall be relying on the foregoing representations
in effecting transactions in securities of the Company. All disclosure provided
to the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished by or
on behalf of the Company are true and correct and do not contain any untrue
statement of a material fact or omit to state any
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material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby represents and warrants to the Company as follows:
(a) Organization; Authority. Such Purchaser is a limited
partnership validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite power and authority, to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The purchase by
such Purchaser of the Securities hereunder has been duly authorized by all
necessary action on the part of such Purchaser. Each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by such
Purchaser and constitutes the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities
for its own account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof or interest
therein, without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement and the Registration Rights Agreement, at all times
to sell or otherwise dispose of all or any part of such Securities pursuant to
an effective registration statement under the Securities Act and in compliance
with applicable state securities laws or under an exemption from such
registration.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof, it is, and at each Closing Date and
each exercise date under its respective Warrant, it will be, an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Such Purchaser has
not been formed solely for the purpose of acquiring the Securities.
(d) Experience of Purchaser. Such Purchaser either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the pre-sent time, is able to afford a complete loss of such investment.
(f) Access to Information. Such Purchaser acknowledges receipt of
the Disclosure Materials and further acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, proper-ties, management
and prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained
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in the Disclosure Materials. Neither such inquiries nor any other investigation
conducted by or on behalf of such Purchaser or its representatives or counsel
shall modify, amend or affect such Purchaser's right to rely on the truth,
accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents.
(g) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) Reliance. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that each of the Purchasers
makes no representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 2.2.
ARTICLE 3
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred securities under the
Securities Act. Notwithstanding the foregoing, the Company hereby consents to
and agrees to register on the books of the Company and with any transfer agent
for the securities of the Company any transfer of Securities by a Purchaser to
another Purchaser, to one or more funds under common management with a
Purchaser, and any transfer among any such commonly managed funds, provided that
the transferee provides the Company the representations and warranties set forth
in Section 2.2 hereof. Any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
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"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
Underlying Shares shall not contain the legend set forth above
nor any other legend if the conversion of Shares, the payment of dividends
thereon, and exercise of the Warrants or other issuances of Underlying Shares as
contemplated hereby, by the Certificates of Designation or the Warrants occurs
at any time while an Underlying Securities Registration Statement is effective
under the Securities Act or, in the event there is not an effective Underlying
Securities Registration Statement, at such time, if in the opinion of counsel to
the Company, such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission). The Company shall cause its counsel to issue the
legal opinion included in the Transfer Agent Instructions to the Company's
transfer agent on the day that the Underlying Securities Registration Statement
is declared effective by the Commission. The Company agrees that, in the event
any Underlying Shares are issued with a legend in accordance with this Section
3.1(b), it will, within three (3) Trading Days after request therefor by a
Purchaser and the surrender by such Purchaser of the certificate representing
the Underlying Shares, provide such Purchaser with a certificate or certificates
representing such Underlying Shares, free from such legend at such time as such
legend would not have been required under this Section 3.1(b) had such issuance
occurred on the date of such request. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company which
enlarge the restrictions of transfer set forth in this Section. Each Purchaser
will comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities (as defined
in the Registration Rights Agreement) pursuant to an Underlying Securities
Registration Statement.
3.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Underlying Shares upon (i) conversion of the Shares and payment
of dividends thereon in accordance with the terms of the Certificates of
Designation and (ii) exercise of the Warrants in accordance with their terms
will result in dilution of the outstanding shares of Common Stock, which
dilution may be substantial under certain market conditions. The Company further
acknowledges that its obligation to issue Underlying Shares upon (x) conversion
of the Shares and payment of dividends thereon in accordance with the terms of
the Certificates of Designation, and (y) exercise of the Warrants in accordance
with their terms, is unconditional and absolute, subject to the limitations set
forth herein and in the Certificates of Designation or pursuant to the Warrants,
regardless of the effect of any such dilution.
3.3 Furnishing of Information. As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own Securities, if
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act such information as is
required for the Purchasers to sell the Securities under Rule 144 promulgated
under
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the Securities Act. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell Underlying Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in this Section. Upon the request of any such
Person, the Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such requirements.
3.4 Integration. The Company shall not, and shall use its best
efforts to ensure that, no Affiliate shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers.
3.5 Increase in Authorized Shares. Subject to the operation of
Section 5(a)(iii)(A)(2) of each of the Certificates of Designation, if on any
date the Company would be, if a notice of conversion or exercise (as the case
may be) were to be delivered on such date, precluded from (a) issuing 200% of
the number of Underlying Shares as would then be issuable upon a conversion in
full of the then outstanding Shares and as payment of any accrued and unpaid
dividends in respect thereof in shares of Common Stock, or (b) issuing the
number of Underlying Shares upon exercise in full of the then outstanding
Warrants (the "Current Required Minimum"), in either case, due to the
unavailability of a sufficient number of authorized but unissued or reserved
shares of Common Stock, then the Board of Directors of the Company shall
promptly (and in any case, within 60 Business Days from such date) prepare and
mail to the stockholders of the Company proxy materials requesting authorization
to amend the Company's Certificate of Incorporation to increase the number of
shares of Common Stock which the Company is authorized to issue to at least such
number of shares as reasonably requested by the Purchasers in order to provide
for such number of authorized and unissued shares of Common Stock to enable the
Company to comply with its issuance, conversion exercise and reservation of
shares obligations as set forth in this Agreement, the Certificates of
Designation and the Warrants (the sum of (x) the number of shares of Common
Stock then outstanding plus all shares of Common Stock issuable upon exercise of
all outstanding options, warrants, agreements and convertible instruments, and
(y) the Current Required Minimum, shall be a reasonable number). In connection
therewith, the Board of Directors shall (a) adopt proper resolutions authorizing
such increase, (b) recommend to and otherwise use its best efforts to promptly
and duly obtain stockholder approval to carry out such resolutions (and hold a
special meeting of the stockholders no later than the 60th day after delivery of
the proxy materials relating to such meeting) and (c) within five (5) Business
Days of obtaining such stockholder authorization, file an appropriate amendment
to the Company's Certificate of Incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company
shall (i) not later than the fifth (5th) Business Day following each Closing
Date prepare and file with the NASDAQ (and such other national securities
exchange or market or trading or quotation facility on which the Common Stock is
then listed) an additional shares listing application covering a number of
shares of Common Stock which is not less than the Initial Minimum for the
Securities to be issued on such Closing Date, (ii) take all steps necessary to
cause such shares of Common Stock to be approved for listing in the NASDAQ (as
well as on any such other national securities exchange or market or
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trading or quotation facility on which the Common Stock is then listed) as soon
as possible thereafter, and (iii) provide the Purchasers evidence of such
listing, and the Company shall maintain the listing of its Common Stock thereon.
If the number of Underlying Shares issuable upon conversion in full of the then
outstanding Shares, as payment of dividends thereon, and upon exercise of the
then unexercised portion of the Warrants exceeds 85% of the number of Underlying
Shares previously listed on account thereof with NASDAQ (and any such other
required exchanges), then the Company shall take the necessary actions to
immediately list a number of Underlying Shares as equals no less than the then
Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common
Stock for issuance upon conversion of the Shares and for payment of dividends
thereupon in shares of Common Stock and upon exercise in full of the Warrants in
accordance with this Agreement, the Certificates of Designation and the
Warrants, respectively, in such amount as may be required to fulfill its
obligations in full under the Transaction Documents, which reserve shall equal
no less than the then Current Required Minimum.
3.7 Conversion Procedures. The Transfer Agent Instructions,
Conversion Notice (as defined in Exhibit A) and Notice of Exercise under the
Warrants set forth the totality of the procedures with respect to the conversion
of the Shares and exercise of the Warrants, including the form of legal opinion,
if necessary, that shall be rendered to the Company's transfer agent and such
other information and instructions as may be reasonably necessary to enable the
Purchasers to convert their Shares and exercise their Warrants as contemplated
in the Certificates of Designation and the Warrants (as applicable).
3.8 Conversion and Exercise Obligations of the Company. The Company
shall honor conversions of the Shares and exercises of the Warrants and shall
deliver Underlying Shares in accordance with the respective terms, conditions
and time periods set forth in the respective Certificates of Designation and the
Warrants.
3.9 Right of First Refusal; Subsequent Registrations. (a) The Company
shall not, directly or indirectly, without the prior written consent of the
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities in a transaction intended to be exempt or not subject to registration
under the Securities Act (a "Subsequent Placement") for a period of 180 days
after the earlier to occur of the Series B Closing Date and the Series B Closing
Expiration Date, except (i) the granting of options or warrants to employees,
officers, directors, consultants and other service providers (but not Strategic
Partners (as defined below)), and the issuance of shares upon exercise of
options granted, under any stock option plan heretofore or hereinafter duly
adopted by the Company, (ii) shares of Common Stock issuable upon exercise of
any currently outstanding options and warrants and upon conversion of any
currently outstanding convertible securities of the Company, in each case
disclosed in Schedule 2.1(c), (iii) shares of Common Stock issuable upon
conversion of Preferred Stock and as payment of dividends thereon and upon
exercise of the Warrants in accordance with the Certificates of Designation or
the Warrants, respectively, (iv) shares of Common Stock issuable pursuant to the
Private Equity Line of Credit Agreement dated March 27, 1998 between the Company
and Kingsbridge Capital Limited, as described in the Company's Amendment No. 2
on Form SB-2, filed with the Commission on August 13, 1998 (but not pursuant to
any amendment or modification
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thereto), and (v) shares of Common Stock issuable in connection with a Strategic
Transaction (as defined below); unless (A) the Company delivers to the
Purchasers a written notice (the "Subsequent Placement Notice") of its intention
to effect such Subsequent Placement, which Subsequent Placement Notice shall
describe in reasonable detail the proposed terms of such Subsequent Placement,
the amount of proceeds intended to be raised thereunder, the Person with whom
such Subsequent Placement shall be effected, and attached to which shall be a
term sheet or similar document relating thereto and (B) the Purchasers shall not
have notified the Company by 5:00 p.m. (New York City time) on the fifth (5th)
Trading Day after their receipt of the Subsequent Placement Notice of their
willingness to provide (or to cause its sole designee to provide), subject to
completion of mutually acceptable documentation, financing to the Company on
conversion, reset and pricing terms (including original issue discount, if any)
and substantially on such other terms set forth in the Subsequent Placement
Notice. If the Purchasers shall fail to notify the Company of their intention to
enter into such negotiations within such time period, the Company may effect the
Subsequent Placement substantially upon the terms and to the Persons (or
Affiliates of such Persons) set forth in the Subsequent Placement Notice;
provided, that the Company shall provide the Purchasers with a second Subsequent
Placement Notice, and the Purchasers shall again have the right of first refusal
set forth above in this paragraph (a), if the Subsequent Placement subject to
the initial Subsequent Placement Notice shall not have been consummated for any
reason on conversion, reset and pricing terms (including original issue
discount, if any) and substantially on such other terms set forth in such
Subsequent Placement Notice within thirty (30) Trading Days after the date of
the initial Subsequent Placement Notice with the Person (or an Affiliate of such
Person) identified in the Subsequent Placement Notice. If the Purchasers shall
indicate a willingness to provide financing in excess of the amount set forth in
the Subsequent Placement Notice, then each Purchaser shall be entitled to
provide financing pursuant to such Subsequent Placement Notice up to an amount
equal to such Purchaser's pro rata portion of the aggregate number of Shares
purchased by such Purchaser under this Agreement, but the Company shall not be
required to accept financing from the Purchasers in an amount less than or in
excess of the amount set forth in the Subsequent Placement Notice. For purposes
of this Section 3.9, a "Strategic Transaction" shall mean a transaction or
relationship in which the Company issues shares of Common Stock to an entity
which is, itself or through its subsidiaries, an operating company in a business
related to the business of the Company and in which the Company receives
material benefits in addition to the investment of funds, but shall not include
a transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is investing
in securities (such entity, a "Strategic Partner").
(b) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company permitted pursuant to Schedule 6(b) of
the Registration's Rights Agreement to be registered, in an Underlying
Securities Registration in accordance with the Registration Rights Agreement,
and (z) Common Stock to be registered for resale in connection with financings
permitted pursuant to paragraph (a)(i) - (v) of Section 3.9(a), the Company
shall not, without the prior written consent of the Purchasers (i) issue or sell
any of its or any of its Affiliates' equity or equity-equivalent securities
pursuant to Regulation S promulgated under the Securities Act, or (ii) register
for resale any securities of the Company for a period of not less than 90
Trading Days after the date that the Underlying Securities Registration
Statement is declared effective by the Commission. Any days that a Purchaser is
unable to sell Underlying Securities under the
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Underlying Securities Registration Statement shall be added to such 90 Trading
Day period for the purposes of (i) and (ii) above.
3.10 Certain Securities Laws Disclosures; Publicity. The Company
shall: (i) on each Closing date, issue a press release acceptable to the
Purchasers disclosing the transactions contemplated hereby on the Closing Date,
(ii) file with the Commission a Report on Form 8-K disclosing the transactions
contemplated hereby within ten (10) Business Days after each Closing Date, and
(iii) timely file with the Commission a Form D promulgated under the Securities
Act as required under Regulation D promulgated under the Securities Act with
respect to each Closing and provide a copy thereof to the Purchasers promptly
after the filing thereof. The Company shall, no less than two (2) Business Days
prior to the filing of any disclosure required by clauses (ii) and (iii) above,
provide a copy thereof to the Purchasers.
3.11 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of Company debt or to redeem any Company equity or
equity-equivalent securities. Pending application of the proceeds of this
placement in the manner permitted hereby, the Company will invest such proceeds
in interest bearing accounts and/or short-term, investment grade interest
bearing securities.
3.12 Transfer of Intellectual Property Rights. Except in connection
with the sale of all or substantially all of the assets of the Company, the
Company shall not transfer, sell or otherwise dispose of any Intellectual
Property Rights or allow any of the Intellectual Property Rights to become
subject to any Liens, or fail to renew such Intellectual Property Rights (if
renewable and it would otherwise lapse if not renewed), without the prior
written consent of the Purchasers. Notwithstanding the foregoing, the Company
may license the right to promote and use its Intellectual Property Rights to
Strategic Partners in the ordinary course of its business without the prior
consent of the Purchasers.
3.13 Reimbursement. If any of the Purchasers, other than by reason of
its gross negligence or willful misconduct, become involved in any capacity in
any action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith, as such expenses are incurred. In addition, other than
with respect to any matter in which any of the Purchasers is a named party, the
Company will pay such Purchaser the charges, as reasonably determined by such
Purchaser, for the time of any officers or employees of such Purchaser devoted
to appearing and preparing to appear as witnesses, assisting in preparation for
hearings, trials or pretrial matters, or otherwise with respect to inquiries,
hearings, trials, and other proceedings relating to the subject matter of this
Agreement. The reimbursement obligations of the Company under this paragraph
shall be in addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any Affiliates of the
Purchasers who are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither
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the Purchasers nor any such Affiliates, partners, directors, agents, employees
or controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of the Transaction Documents except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of the Purchasers
or entity in connection with the transactions contemplated by this Agreement.
ARTICLE 4
CONDITIONS
4.1 Conditions Precedent to the Obligation of the Purchasers to
Purchase Series B Shares. The obligation of the Purchasers to acquire Series B
Shares is subject to the satisfaction or waiver by the Purchasers, at or before
the Series B Closing Date of each of the following conditions:
(i) Series A Closing. The Series A Closing shall have
occurred;
(ii) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company contained
herein shall be true and correct as of the date when made and as of the
Series B Closing Date as though made on and as of the Series B Closing
Date.
(iii) Performance by the Company. The Company shall have
performed, satisfied and complied with all covenants, agreements and
conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Series B
Closing Date;
(iv) Underlying Securities Registration Statement. The
Underlying Securities Registration Statement covering the Underlying
Shares issuable upon conversion of Series A Shares, payment of dividends
thereon in shares of Common Stock and exercise of the Warrants shall
have been declared effective under the Securities Act by the Commission
not less than 60 Trading Days prior to the Series B Closing Date and
shall have remained effective at all times, not subject to any actual or
threatened stop order or subject to any actual or threatened suspension
at any time prior to the Series B Closing Date;
(v) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by the Transaction Documents, including the
issuance or conversion of any of the Shares or exercise of the Warrants;
(vi) Adverse Changes. Since the Series A Closing Date, no
event or series of events which reasonably would be expected to have or
result in a Material Adverse Effect shall have occurred.
(vii) Management. In the reasonable judgment of the
Purchasers, there have been no substantial changes in the senior
management of the Company;
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(viii) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by the
Commission or on the NASDAQ (except for any suspension of trading of
limited duration solely to permit dissemination of material information
regarding the Company) at any time since the Series A Closing Date;
(ix) Listing of Common Stock. The Common Stock shall have
been at all times since the Series A Closing Date listed for trading on
the NASDAQ;
(x) Change of Control. No Change of Control in the
Company shall have occurred. "Change of Control" means the occurrence of
any of (i) an acquisition after the date hereof by an individual or
legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated
under the Exchange Act) of in excess of 33% of the voting securities of
the Company, (ii) a replacement of more than one-half of the members of
the Company's board of directors which is not approved by those
individuals who are members of the board of directors on the date hereof
in one or a series of related transactions, (iii) the merger of the
Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of
related transactions or (iv) the execution by the Company of an
agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii) or (iii);
(xi) Legal Opinion. The Company shall have delivered to
the Purchasers the opinion of the Company's outside counsel, in
substantially the form of Exhibit D, dated the Series B Closing Date;
(xii) Required Approvals. All Required Approvals shall
have been obtained;
(xiii) Shares of Common Stock. On the Series B Closing
Date, the Company shall have duly reserved the number of Underlying
Shares required by this Agreement to be reserved for issuance upon
conversion of Series B Shares and payment of dividends thereon;
(xiv) Delivery of Stock Certificate. The Company shall
have delivered to each of the Purchasers or its designee the stock
certificate(s) representing the Series B Shares registered in the name
of such Purchaser, in form satisfactory to such Purchaser;
(xv) Performance of Conversion/Exercise Obligations. The
Company shall have (a) delivered Underlying Shares upon conversion of
Series A Shares and otherwise performed its obligations in accordance
with the terms, conditions and timing requirements of the Series A
Certificate of Designation and (b) delivered Underlying Shares upon
exercise of the Warrants and otherwise performed its obligations in
accordance with the terms of the Warrants;
(xvi) Closing Threshold. For the 10 Trading Days
immediately preceding the Series B Closing Date, the average daily
trading volume of the Common Stock on the NASDAQ shall be at least
35,000 shares and the average of the Per Share Market Value for such 10
Trading Day period shall be greater than $8.00;
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(xvii) Transfer Agent Instructions. The Transfer Agent
Instructions, dated the Series B Closing Date, shall have been delivered
to and acknowledged in writing by the Company's transfer agent; and
(xviii) Shareholder Approval. No approval of the
shareholders of the Company shall be required under the rules of the
Nasdaq Stock Market in order to issue 200% of the number of Underlying
Shares issuable upon conversion in full of the Series B Shares (assuming
such conversion occurred on the Series B Closing Date) and as payment of
dividends.
ARTICLE 5
MISCELLANEOUS
5.1 Fees and Expenses. At the Series A Closing the Company shall pay
$20,000 to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in connection with the preparation and negotiation
of the Transaction Documents and $5,000 at the Series B Closing. Other than the
amount contemplated in the immediately prior sentence, and except as otherwise
set forth in the Registration Rights Agreement, each party shall pay the fees
and expenses of its advisers, counsel, accountants and other experts, if any,
and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
issuance of the Securities.
5.2 Entire Agreement; Amendments. The Transaction Documents, together
with the Exhibits and Schedules thereto, and the Transfer Agent Instructions
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 8:00 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 8:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: NeoTherapeutics Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.:(▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
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With copies to: Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attn: C. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq. And
▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to Montrose: Montrose Investments, Ltd.
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇
If to ▇▇▇▇▇▇▇▇: ▇▇▇▇▇▇▇▇ Investments L.P.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇
With copies to (for all
communications to
Montrose and ▇▇▇▇▇▇▇▇): ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq. And
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
5.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each of the Purchasers; or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Purchasers. Except as set forth
in Section 3.1(a), the Purchasers may not assign this Agreement
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or any of the rights or obligations hereunder without the consent of the
Company. This provision shall not limit the each Purchaser's right to transfer
securities or transfer or assign rights hereunder or under the Registration
Rights Agreement.
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.8 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
5.9 Survival. The representations, warranties, agreements and
covenants contained herein shall survive each Closing and the delivery and
conversion or exercise (as the case may be) of the Shares and the Warrants.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.11 Publicity. The Company and each of the Purchasers shall consult
with each other in issuing any press releases or otherwise making public
statements or filings and other communications with the Commission or any
regulatory agency or stock market or trading facility with respect to the
transactions contemplated hereby that are contemplated by Section 3.10 hereof or
the Registration Rights Agreement and neither party shall issue any such press
release or otherwise make any such public statement, filings or other
communications without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed, except that no prior consent
shall be required if such disclosure is required by law or applicable stock
market regulations, in which such case the disclosing party shall provide the
other party with prior notice of such public statement, filing or other
communication.
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5.12 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
5.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. Each of the Company and the Purchasers
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
5.14 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchaser hereunder, and neither Purchaser shall be
responsible in any way for the performance of the obligations of the other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
Transaction Documents, and it shall not be necessary for the other Purchaser to
be joined as an additional party in any proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Preferred Stock
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
NEOTHERAPEUTICS, INC.
By:_____________________________________
Name:
Title:
▇▇▇▇▇▇▇▇ INVESTMENTS L.P.
By:_____________________________________
Name:
Title:
MONTROSE INVESTMENTS L.P.
By:_____________________________________
Name:
Title:
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