EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
November ___, 2004, between LifePoint, Inc., a corporation organized under the
laws of the State of Delaware (the "Company"), and each of the purchasers
(individually, a "Purchaser" and collectively the "Purchasers") set forth on the
execution pages hereof (the "Execution Pages" and each an "Execution Page").
WHEREAS:
A. The Company and each Purchaser are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Rule 506 of Regulation D ("Regulation D"), as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Securities Act").
B. The Company desires to sell, and each Purchaser desires to
purchase, upon the terms and conditions stated in this Agreement, units (the
"Units"), each Unit consisting of (i) one share of the Company's Series E
Convertible Preferred Stock, par value $.001 per share (the "Preferred Stock"),
convertible into approximately 5,000 shares of the Company's common stock, par
value $.001 per share (the "Common Stock") (subject to adjustment for any stock
dividends, combinations or splits with respect to the Common Stock), and (ii) a
warrant, in the form attached hereto as EXHIBIT B (the "Warrants"), to acquire
approximately 5,000 shares of Common Stock (subject to adjustment for any stock
dividends, combinations or splits with respect to the Common Stock). The rights,
preferences and privileges of the Preferred Stock, including the terms upon
which such Preferred Stock are convertible into shares of Common Stock, are set
forth in the form of Certificate of Designations, Preferences and Rights
attached hereto as EXHIBIT A (the "Certificate of Designation"). The shares of
Common Stock issuable upon conversion of the Preferred Stock pursuant to the
Certificate of Designation are referred to herein as the "Conversion Shares" and
the shares of Common Stock issuable upon exercise of or otherwise pursuant to
the Warrants are referred to herein as the "Warrant Shares." The Preferred
Stock, the Warrants, the Conversion Shares and the Warrant Shares are
collectively referred to herein as the "Securities" and each of them may
individually be referred to herein as a "Security."
C. In connection with the Closing (as defined herein) pursuant
to this Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement, in the form attached hereto as EXHIBIT C (the
"Registration Rights Agreement"), pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
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D. The requisite holders of Series D Preferred Stock of the
Company have entered into that certain amendment agreement dated November __,
2004 in the form of Exhibit D hereto (the "Amendment Agreements").
E. This Agreement, the Certificate of Designation, the
Warrants, the Registration Rights Agreement, the Debt Documents and the
Amendment Agreements are collectively referred to herein as the "Transaction
Documents."
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF UNITS.
(a) PURCHASE OF UNITS. The issuance, sale and purchase of the Units
shall take place in two (2) separate closings (each a "CLOSING" and
collectively, the "CLOSINGS"), the first of which is hereinafter referred to as
the "FIRST CLOSING" and the second of which is hereinafter referred to as the
"SECOND CLOSING." The purchase price (the "PURCHASE PRICE") per Unit at each
such Closing shall be equal to One Thousand Dollars ($1,000). The Closings shall
occur at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
(i) On the date of the First Closing, subject to the
satisfaction (or waiver) of the conditions set forth in Sections 7 and 8 below,
the Company shall issue and sell to each Purchaser and each Purchaser shall
purchase from the Company the number of Units identified as "FIRST CLOSING
UNITS" on the signature page hereto executed by such Purchaser.
(ii) On the date of the Second Closing, if any, subject to the
satisfaction (or waiver) of the conditions set forth in Sections 7 and 8 below,
the Company shall issue and sell to each Purchaser and each Purchaser shall
purchase from the Company, the number of Units identified as "SECOND CLOSING
UNITS" on the signature page hereto executed by such Purchaser.
(b) FORM OF PAYMENT. At the Closing, each Purchaser shall pay the
aggregate Purchase Price for the Units being purchased by such Purchaser
hereunder by wire transfer to the Company, in accordance with the Company's
wiring instructions below, against delivery of the duly executed certificates
representing the Preferred Stock and Warrants being purchased by such Purchaser
hereunder. The Company shall deliver such certificates and Warrants upon receipt
of such aggregate Purchase Price. Each Purchaser who is paying the Purchase
Price for the Units by wire transfer shall wire the funds to:
Community Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
For the Account of:
LifePoint, Inc.
ABA #▇▇▇▇▇▇▇▇▇
Account No.: 08-000728
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(c) CLOSING DATE. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 7 and 8 below, the date and time of the
issuance and sale of the Securities pursuant to this Agreement shall be (i) in
the First Closing, 12:00 noon Eastern Time on November __, 2004, and (ii) in the
case of the Second Closing, 12:00 noon Eastern Time on the fifth trading day
following notification of satisfaction (or waiver) of the conditions to such
Closing set forth in Section 8(b) hereof or, in each case, such other time as
may be mutually agreed upon by the Company and the Purchasers (the "Closing
Date").
ADDITIONAL ISSUANCES. The Company shall have the right, at any time and from
time to time, before the date of filing the registration statement pursuant to
Section 2(a) of the Registration Rights Agreement to sell additional Units to
one or more additional purchasers as determined by the Company on the same terms
set forth in this Agreement, provided, however, that any such additional
purchaser must meet the reasonable satisfaction of the Majority Holders (as
defined below). Any additional purchaser so acquiring shall be considered a
"Purchaser" for purposes of this Agreement and securities so acquired by such
additional Purchaser shall be considered Preferred Stock, Warrants, Conversion
Shares, Warrant Shares and Securities, as applicable, for purposes of this
Agreement. Each Purchaser acknowledges that each such additional purchaser shall
become a party to and shall execute counterpart copies of the Registration
Rights Agreement, and in such event shall be entitled to the rights and have the
obligations conferred thereby. In the event that additional Purchasers become
parties to this Agreement, the Schedule of Exceptions may be revised by the
Company to reflect additional information and/or subsequent events, provided,
however, that nothing contained in a revised Schedule of Exceptions shall affect
the Company's liability to the Purchasers or the Purchasers' rights hereunder.
Each party hereto consents to such subsequent sales pursuant to this Section
1(d). Notwithstanding the foregoing, in no event shall the Company offer or sell
any Units or take any other action which would prevent the use of the exemption
from securities registration afforded by the provisions of Rule 506 of
Regulation D with respect to any of the Securities offered hereby or require
registration of any of such Securities under the Securities Act, nor shall the
exercise by the Company of its rights under this Section 1(d) be permitted in
any way to delay or jeopardize the ability of the Company to obtain the
Stockholder Approvals (as defined below).
2. PURCHASER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Purchaser
severally, but not jointly, represents, warrants and agrees to the Company as
follows:
(a) PURCHASE FOR OWN ACCOUNT, ETC. Such Purchaser is purchasing the
Units for such Purchaser's own account for investment only and not with a
present view towards the public sale or distribution thereof, except pursuant to
sales that are exempt from the registration requirements of the Securities Act
and/or sales registered under the Securities Act. Such Purchaser understands
that Purchaser must bear the economic risk of this investment indefinitely,
unless the Securities are registered pursuant to the Securities Act and any
applicable state securities or blue sky laws or an exemption from such
registration is available, and that the Company has no present intention of
registering the resale of any such Securities other than as contemplated by the
Registration Rights Agreement. Notwithstanding anything in this Section 2(a) to
the contrary, by making the representations herein, the Purchaser does not agree
to hold the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or pursuant to
a registration statement or an exemption from the registration requirements
under the Securities Act.
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(b) ACCREDITED INVESTOR STATUS. Such Purchaser is an "Accredited
Investor" as that term is defined in Rule 501(a) of Regulation D under the
Securities Act.
(c) RELIANCE ON EXEMPTIONS. Such Purchaser understands that the Units
are being offered and sold to such Purchaser in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and such Purchaser's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the availability of such exemptions and the
eligibility of such Purchaser to acquire the Securities.
(d) INFORMATION. Such Purchaser is knowledgeable, sophisticated and
experienced in making, and is qualified to make, decisions with respect to
investments in securities representing an investment decision like that involved
in the purchase of the Securities, and such Purchaser or its counsel, if any,
have been furnished all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been specifically requested by such Purchaser or its
counsel. Neither such inquiries nor any other investigation conducted by such
Purchaser or its counsel or any of its representatives shall modify, amend or
affect such Purchaser's right to rely on the Company's representations and
warranties contained in Section 3 below. Such Purchaser understands that such
Purchaser's investment in the Securities involves a high degree of risk.
(e) GOVERNMENTAL REVIEW. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
(f) TRANSFER OR RESALE. Such Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(a) the transfer is made pursuant to and as set forth in an effective
registration statement under the Securities Act covering the Securities; or (b)
such Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; or (c) sold under and in compliance with Rule 144 promulgated
under the Securities Act (or a successor rule) ("Rule 144"); or (d) sold or
transferred in accordance with applicable securities laws to an affiliate of
such Purchaser who agrees to sell or otherwise transfer the Securities only in
accordance with the provisions of this Section 2(f) and who is an Accredited
Investor; and (ii) neither the Company nor any other person is under any
obligation to register such Securities under the Securities Act or any state
securities laws (other than pursuant to the Registration Rights Agreement).
Notwithstanding the foregoing or anything else contained herein to the contrary,
the Securities may be pledged as collateral in connection with a bona fide
margin account or other lending arrangement, provided such pledge is consistent
with applicable laws, rules and regulations, including those promulgated under
the Securities Act.
(g) LEGENDS. Such Purchaser understands that the certificates for the
Preferred Stock, Warrants and, until such time as the Conversion Shares and
Warrant Shares have been registered under the Securities Act (including
registration pursuant to Rule 416 thereunder) as contemplated by the
Registration Rights Agreement or otherwise may be sold by such Purchaser under
Rule 144(k), the certificates for the Conversion Shares and Warrant Shares shall
bear a restrictive legend in substantially the following form:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR IN
ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
THE COMPANY AGREES THAT IT SHALL, IMMEDIATELY FOLLOWING THE
REGISTRATION STATEMENT (AS DEFINED IN THE REGISTRATION RIGHTS
AGREEMENT) BEING DECLARED EFFECTIVE, DELIVER TO ITS TRANSFER
AGENT AN OPINION LETTER OF COUNSEL, OPINING THAT AT ANY TIME
THE REGISTRATION STATEMENT IS EFFECTIVE, THE TRANSFER AGENT
SHALL ISSUE, IN CONNECTION WITH THE ISSUANCE OF THE CONVERSION
SHARES AND WARRANT SHARES, CERTIFICATES REPRESENTING SUCH
CONVERSION SHARES AND WARRANT SHARES WITHOUT THIS RESTRICTIVE
LEGEND OR THE RESTRICTIVE LEGEND ABOVE, PROVIDED SUCH
CONVERSION SHARES AND WARRANT SHARES ARE TO BE SOLD IN
ACCORDANCE WITH THE PROSPECTUS CONTAINED IN THE REGISTRATION
STATEMENT. UPON RECEIPT OF SUCH OPINION, THE COMPANY SHALL
CAUSE THE TRANSFER AGENT TO CONFIRM, FOR THE BENEFIT OF THE
HOLDERS, THAT NO FURTHER OPINION OF COUNSEL IS REQUIRED AT THE
TIME OF TRANSFER IN ORDER TO ISSUE SUCH SHARES WITHOUT SUCH
RESTRICTIVE LEGEND.
The Company agrees that it shall, immediately following the Registration
Statement (as defined in the Registration Rights Agreement) being declared
effective, deliver to its transfer agent an opinion letter of counsel, opining
that at any time the Registration Statement is effective, the transfer agent
shall issue, in connection with the issuance of the Registrable Securities (as
defined in the Registration Rights Agreement), certificates representing such
Registrable Securities without the restrictive legend above, provided such
Conversion Shares and Warrant Shares are to be sold pursuant to the prospectus
contained in the Registration Statement. Upon receipt of such opinion, the
Company shall cause the transfer agent to confirm, for the benefit of the
holders, that no further opinion of counsel is required at the time of transfer
in order to issue such shares without such restrictive legend. Notwithstanding
the foregoing, following the First Closing, the Company may forward a letter to
its transfer agent requesting the removal of the restrictive legend in the
manner set forth in this paragraph, which request shall be acceptable to the
Purchasers provided that the transfer agent sends a letter to the Company on or
before the date of the Second Closing confirming that it will remove such legend
in accordance with this paragraph.
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The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if (unless otherwise required by state securities laws) (a) the sale of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder) as contemplated by the Registration Rights
Agreement; (b) such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Security may
be made without registration under the Securities Act; or (c) such holder
provides the Company with reasonable assurances that such Security can be sold
under Rule 144(k). In the event the above legend is removed from any Security
and thereafter the effectiveness of a registration statement covering such
Security is suspended or the Company determines that a supplement or amendment
thereto is required by applicable securities laws, then the Company may
immediately place a stop-transfer order against the certificates with respect to
the sale of any Security pursuant to such registration statement, and upon
reasonable advance written notice to such Purchaser the Company may require that
the above legend be placed on any such Security that cannot then be sold
pursuant to an effective registration statement or under Rule 144 and such
Purchaser shall cooperate in the replacement of such legend. Such legend shall
thereafter be removed when such Security may again be sold pursuant to an
effective registration statement or under Rule 144.
(h) AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of such Purchaser and are valid and binding agreements of such
Purchaser enforceable against such Purchaser in accordance with their terms.
(i) RESIDENCY. Such Purchaser is a resident of the jurisdiction set
forth under such Purchaser's name on the Execution Page hereto executed by such
Purchaser. The Purchaser acknowledges that the Company has represented that no
action has been or will be taken in any jurisdiction outside the United States
by the Company that would permit an offering of the Securities, or possession or
distribution of offering materials in connection with the issue of the
Securities, in any jurisdiction outside the United States where action for that
purpose is required except where such failure will prohibit the sale of the
Securities hereunder. If the Purchaser is located or domiciled outside the
United States it agrees to comply with all applicable laws and regulations in
each foreign jurisdiction in which it purchases, offers, sells or delivers
Securities or has in its possession or distributes any offering material, in all
cases at its own expense.
(j) PROSPECTUS DELIVERY REQUIREMENTS. Each Purchaser covenants and
agrees to comply with the prospectus delivery requirements under the Securities
Act with respect to all sales of Common Stock made pursuant to a registration
statement.
(k) NO COMPANY ADVICE. Each Purchaser understands that nothing in this
Agreement or any other materials presented to the Purchaser in connection with
the purchase and sale of the Securities constitutes legal, tax or investment
advice, including, without limitation, any filing obligations that such
Purchaser may have under applicable securities laws. Each Purchaser has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of
Securities.
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Except as set forth in Section 2(j) and (k) above, the Purchasers'
representations and warranties made in this Section 2 are made solely for the
purpose of permitting the Company to make a determination that the offer and
sale of the Preferred Stock and Warrants pursuant to this Agreement complies
with applicable U.S. federal and state securities laws and not for any other
purpose. The Company may not rely on such representations and warranties for any
other purpose.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth on a
Schedule of Exceptions executed and delivered by the Company to the Purchasers
at the Closing (the "Schedule of Exceptions"), the Company represents and
warrants to each Purchaser as follows:
(a) ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Company is a
corporation duly organized and existing in good standing under the laws of the
jurisdiction in which it is incorporated, and has the requisite corporate power
to own its properties and to carry on its business as now being conducted. The
Company has no, and at no point ever had any, direct or indirect subsidiaries
(as defined by Rule 405 under the Securities Act) and the Company does not
intend to form, purchase or otherwise create such a subsidiary in the
foreseeable future. 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
the business conducted by it makes such qualification necessary and where the
failure so to qualify has had or could reasonably be expected to have a Material
Adverse Effect. "Material Adverse Effect" means any material adverse effect on
(i) the Securities, (ii) the ability of the Company to perform its obligations
hereunder or under the other Transaction Documents or (iii) the business,
operations, properties, prospects, financial condition or results of operations
of the Company.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and the other Transaction Documents, to issue and sell the Units
in accordance with the terms hereof, to issue the Conversion Shares upon
conversion of the Preferred Stock in accordance with the terms of the
Certificate of Designation and to issue the Warrant Shares upon exercise of the
Warrants in accordance with the terms of such Warrants, except as described in
Section 3(c) below; (ii) the execution, delivery and performance of this
Agreement and the other Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Preferred Stock and Warrants
and the issuance and reservation for issuance of the Conversion Shares and
Warrant Shares) have been duly authorized by the Company's Board of Directors
and no further consent or authorization of the Company, its Board of Directors,
or any committee of the Board of Directors is required subject to the consents
and obligations set forth in Section 3(c) below, and (iii) this Agreement
constitutes, and, upon execution and delivery by the Company of the other
Transaction Documents, such agreements will constitute, valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms.
(c) RELIANCE ON EXEMPTIONS. Assuming the accuracy of the Purchaser's
representations, warranties and agreements as set forth in Section 2, the offer
and sale of the Units and Securities to the Purchasers as contemplated hereby is
exempt from the registration requirements of the Securities Act.
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(d) STOCKHOLDER AUTHORIZATION. Neither the execution, delivery or
performance by the Company of this Agreement and the other Transaction Documents
nor the consummation by it of the transactions contemplated hereby or thereby
(including, without limitation, the issuance of the Preferred Stock or Warrants
or the issuance or reservation for issuance of the Conversion Shares or Warrant
Shares) requires any consent or authorization of the Company's stockholders,
except that the issuance of the Conversion Shares and the Warrant Shares and any
other shares of Common Stock issuable in connection with the Preferred Stock and
the Warrants requires the approval of the Company's stockholders pursuant to
Rule 713 promulgated by the American Stock Exchange ("AMEX") (the foregoing
required stockholder approval is referred to as the "Stockholder Approvals").
Holders of the Company's Series D Convertible Preferred Stock (the "Series D
Holders") consented to the issuance of the Securities pursuant to an Amendment
Agreement dated November __, 2004, which the Company has made available to each
Purchaser, true and correct copies of which is attached hereto as EXHIBIT D, and
such Amendment Agreement constitutes a binding and enforceable agreement against
the Series D Holders.
(e) CAPITALIZATION. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Preferred Stock and Warrants)
exercisable or exchangeable for, or convertible into, any shares of capital
stock and the number of shares to be reserved for issuance upon conversion of
the Preferred Stock and exercise of the Warrants is set forth on Schedule 3(d).
All of such outstanding shares of capital stock have been, or upon issuance in
accordance with the terms of any such warrants, options or preferred stock, will
be, validly issued, fully paid and non-assessable. No shares of capital stock of
the Company (including the Preferred Stock, the Conversion Shares and the
Warrant Shares) are subject to preemptive rights or any other similar rights of
the stockholders of the Company or any liens or encumbrances. Except for the
Securities and as set forth on Schedule 3(d), as of the date of this Agreement,
(i) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exercisable or exchangeable for, any shares of
capital stock of the Company, or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company, nor are
any such issuances or arrangements contemplated, (ii) there are no agreements or
arrangements under which the Company is obligated to register the sale of any of
its securities under the Securities Act (except the Registration Rights
Agreements) and (iii) there are no outstanding securities or instruments of the
Company which contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which the Company is
or may become bound to redeem any security of the Company. Schedule 3(d) sets
forth all of the Company issued securities or instruments containing
antidilution or similar provisions that will be triggered by, and all of the
resulting adjustments that will be made to such securities and instruments as a
result of, the issuance of the Securities in accordance with the terms of this
Agreement, the Certificate of Designation or the Warrants. The Company has
furnished to the Purchasers true and correct copies of the Company's Amended and
Restated Certificate of Incorporation as in effect on the date hereof
("Certificate of Incorporation"), the Company's Bylaws as in effect on the date
hereof (the "Bylaws"), and all other instruments and agreements governing
securities convertible into or exercisable or exchangeable for capital stock of
the Company. The Certificate of Designation, in the form attached hereto, will
be duly filed prior to Closing with the Secretary of State of the State of
Delaware and, upon the issuance of the Preferred Stock in accordance with the
terms hereof, each Purchaser shall be entitled to the rights set forth therein.
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(f) ISSUANCE OF SHARES. The Units are duly authorized and, upon
issuance, delivery and payment therefor in accordance with the terms of this
Agreement and the other Transaction Documents, will be validly issued, fully
paid and non-assessable, and free from all taxes, liens, claims and encumbrances
(other than restrictions on transfer contained in this Agreement and in the
Registration Rights Agreements) and will not be subject to preemptive rights,
rights of first refusal or other similar rights of stockholders of the Company
or any other person and will not impose personal liability on the holders
thereof. Subject to receipt of the Stockholder Approvals, the Conversion Shares
will be duly authorized and reserved for issuance, and, upon conversion of the
Preferred Stock in accordance with the terms thereof, will be validly issued,
fully paid and non-assessable, and free from all taxes, liens, claims and
encumbrances (other than restrictions on transfer contained in this Agreement
and in the Registration Rights Agreements) and will not be subject to preemptive
rights, rights of first refusal or other similar rights of stockholders of the
Company and the issuance of the Conversion Shares in accordance with the terms
of this Agreement and the Certificate of Designation will not impose personal
liability upon the holder thereof. The Warrant Shares shall be duly authorized
and reserved for issuance, and, upon exercise of the Warrants in accordance with
the terms thereof, subject to receipt of the Stockholder Approvals, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances (other than restrictions on transfer contained in this
Agreement and in the Registration Rights Agreements) and will not be subject to
preemptive rights, rights of first refusal or other similar rights of
stockholders of the Company and the issuance of the Warrant Shares in accordance
with the terms of this Agreement and the Warrant will not impose personal
liability upon the holder thereof.
(g) NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Warrants and the Registration Rights Agreement by the Company,
the performance by the Company of its obligations under the Certificate of
Designation, and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
reservation for issuance, as applicable, of the Preferred Stock, Warrants,
Conversion Shares and Warrant Shares) will not, subject to receipt of the
Stockholders Approvals, (i) result in a violation of the Certificate of
Incorporation or Bylaws or (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment (including, without
limitation, the triggering of any anti-dilution provisions), acceleration or
cancellation of, any agreement, indenture or instrument to which the Company is
a party, or result in a violation of any law, rule, regulation, order, judgment
or decree (including United States federal and state securities laws and
regulations and rules or regulations of any self-regulatory organizations to
which either the Company or its securities are subject) applicable to the
Company or by which any property or asset of the Company is bound or affected
(except, with respect to clause (ii), for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations that have
not had and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect). The Company is not in violation of its
Certificate of Incorporation, Bylaws or other organizational documents. The
Company is not in default (and no event has occurred which, with notice or lapse
of time or both, would put the Company in default) under, nor has there occurred
any event giving others (with notice or lapse of time or both) any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company is a party, except for such
violations, defaults or events that have not and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
The business of the Company is not being conducted, and shall not be conducted
so long as a Purchaser owns any of the Preferred Stock, in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations the sanctions for which either singly or in the aggregate have not
had and could not reasonably be expected to have a Material Adverse Effect. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under its Certificate of Incorporation,
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bylaws, other agreements or instruments, or the laws of the state of its
incorporation which is or could become applicable to the Purchasers as a result
of the transactions contemplated by this Agreement, including without
limitation, the Company's issuance of the Securities and any and all Purchaser's
ownership of the Securities or the Purchaser's ownership of the Common Stock.
Except as specifically contemplated by this Agreement (including without
limitation receipt of the Stockholder Approvals and the filing and approval of
the AMEX listing application for the Conversion Shares and the Warrant Shares)
and the Registration Rights Agreement, the Company is not required to obtain any
consent, approval, authorization or order of, or make any filing or registration
with, any court or governmental agency or any regulatory or self regulatory
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement, the Warrants or the Registration Rights Agreement or to
perform its obligations under the Certificate of Designation, in each case in
accordance with the terms hereof or thereof. Except as set forth on Schedule
3(f) of the Schedule of Exceptions, the Company is not in violation of the
listing requirements of AMEX, has received no notice regarding the potential
delisting of the Common Stock by AMEX, and does not reasonably anticipate that
the Common Stock will be delisted by AMEX in the foreseeable future.
(h) SEC DOCUMENTS, FINANCIAL STATEMENTS. All reports, schedules, forms,
statements and other documents required to be filed by the Company with the SEC
pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein, being hereinafter
referred to herein as the "SEC Documents") have been timely filed by the Company
(within applicable extension periods) since December 31, 1997. The SEC Documents
are available on the SEC's web site at ▇▇▇.▇▇▇.▇▇▇. With respect to SEC
Documents filed on or after December 31, 1997, as of their respective dates,
such SEC Documents complied in all material respects with the requirements of
the Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Documents is, or has
been, required to be amended or updated under applicable law (except for such
statements as have been amended or updated in subsequent filings made prior to
the date hereof). As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC applicable with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"), consistently applied during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
immaterial year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the Select SEC Documents filed prior to
the date hereof or as set forth in Schedule 3(g) of the Schedule of Exceptions,
the Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to the date
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of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
GAAP to be reflected in such financial statements, which liabilities and
obligations referred to in clauses (i) and (ii), individually or in the
aggregate, are not material to the financial condition or operating results of
the Company. For purposes of this Agreement, "Select SEC Documents" means the
Company's (A) Proxy Statement for its fiscal year 2003 Annual Meeting, (B)
Annual Report on Form 10-K for the fiscal year ended March 31, 2004, (C)
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2004, and
(D) Current Reports on Form 8-K filed since March 31, 2004.
(i) DIVIDENDS. After giving effect to the sale and purchase of
Securities at the Closing pursuant to this Agreement, the Company shall be
legally permitted to pay a dividend on the Preferred Stock in accordance with
the Delaware General Corporation Law, and there are no agreements or instruments
restricting such payments.
(j) ABSENCE OF CERTAIN CHANGES. Except as set forth on the Schedule of
Exceptions, since March 31, 2004, there has been no material adverse change and
no material adverse development in the business, properties, operations,
prospects, financial condition or results of operations of the Company, except
as disclosed in the SEC Documents filed prior to the date hereof. The Company
has not taken any steps, and with the receipt of funds pursuant to this
Agreement does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy or receivership law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings with respect to the Company.
(k) TRANSACTIONS WITH AFFILIATES. Except as set forth on the Schedule
of Exceptions, other than the grant of stock options pursuant to option plans
disclosed in such SEC Documents, none of the officers, directors, or employees
of the Company is presently a party to any transaction with the Company (other
than for ordinary course services solely in their capacity as employees,
officers or directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or any corporation, partnership, trust or
other entity in which any such officer, director, or employee has an ownership
interest of five percent or more or is an officer, director, trustee or partner.
(l) ABSENCE OF LITIGATION. Except as publicly disclosed in the Select
SEC Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body, including, without limitation, the SEC or AMEX, pending
or, to the knowledge of the Company, threatened against or affecting the Company
or any of its respective directors or officers in their capacities as such.
There are no facts which, if known by a potential claimant or governmental
authority, could give rise to a claim or proceeding which, if asserted or
conducted with results unfavorable to the Company, could reasonably be expected
to have a Material Adverse Effect.
(m) INTELLECTUAL PROPERTY. The Company owns or is duly licensed (and,
in such event, has the unfettered right to grant sublicenses) to use all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, permits,
inventions, discoveries, processes, scientific, technical, engineering and
marketing data, object and source codes, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures) and other similar rights and proprietary knowledge
(collectively, "Intangibles") necessary for the conduct of its business as now
being conducted and as presently contemplated to be conducted in the future. The
11
Company does not infringe and is not in conflict with any right of any other
person with respect to any Intangibles which could reasonably expect to have a
Material Adverse Affect. Except as set forth on Schedule 3(l) of the Schedule of
Exceptions, the Company has not received written notice of any pending conflict
with or infringement upon such third party Intangibles. Set forth on Schedule
3(l) of the Schedule of Exceptions, is a list of each patent, registered
copyright, copyright application, registered trademark, trademark application,
license or permit for which the termination of the Company's ownership of, or
right to use, could reasonably be expected to have a Material Adverse Effect.
The Company has not entered into any consent agreement, indemnification
agreement, forbearance to ▇▇▇ or settlement agreement with respect to the
validity of the Company's ownership or right to use its Intangibles and there is
no reasonable basis for any such claim to be successful. The Intangibles are
valid and enforceable and no registration relating thereto has lapsed, expired
or been abandoned or canceled or is the subject of cancellation or other
adversarial proceedings, and all applications therefor are pending and in good
standing. The Company has complied, in all material respects, with its
contractual obligations relating to the protection of the Intangibles used
pursuant to licenses. No person is infringing on or violating the Intangibles
owned or used by the Company.
(n) FOREIGN CORRUPT PRACTICES. Neither the Company nor any director,
officer or, to the Company's knowledge, any employee, any agent or other person
acting on behalf of the Company has, in the course of his actions for, or on
behalf of, the Company, used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977; or
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
(o) DISCLOSURE. All information relating to or concerning the Company
set forth in this Agreement or provided to any Purchaser pursuant to Section
2(d) hereof or otherwise in connection with the transactions contemplated hereby
is true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or exists with respect to the
Company or its business, properties, prospects, operations or financial
conditions, which has not been publicly disclosed but, under applicable law,
rule or regulation, would be required to be disclosed by the Company in a
registration statement filed on the date hereof by the Company under the
Securities Act with respect to a primary issuance of the Company's securities.
(p) ACKNOWLEDGMENT REGARDING PURCHASERS' PURCHASE OF THE UNITS. The
Company acknowledges and agrees that none of the Purchasers are acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement, the other Transaction Documents, or the transactions
contemplated hereby and thereby, the relationship between the Company and the
Purchasers is "arms-length" and any statement made by any Purchaser or any of
its representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Purchaser's
purchase of Securities and has not been relied upon by the Company, its officers
or directors in any way, and that, except as set forth on the Schedule of
Exceptions, no Purchaser is (i) an officer or director of the Company, (ii) an
"affiliate" of the Company (as defined in Rule 144) or (iii) a "beneficial
owner" of more than 5% of the Common Stock (as defined for purposes of Rule
13d-3 of the Exchange Act). The Company further acknowledges that the Company's
decision to enter into this Agreement has been based solely on an independent
evaluation by the Company and its representatives.
12
(q) FORM S-3 ELIGIBILITY. The Company is currently eligible to register
the resale of its Common Stock on a registration statement filed on Form S-3
under the Securities Act. Subject to receipt of the Stockholder Approvals, there
exist no facts or circumstances that would prohibit or delay the preparation and
filing of a registration statement on Form S-3 with respect to the Registrable
Securities (as defined in the Registration Rights Agreement). The Company has no
basis to believe that its past or present independent public auditors will
withhold their consent to the inclusion, or incorporation by reference, of their
audit opinion concerning the Company's financial statements which are included
in the Registration Statement required to be filed pursuant to the Registration
Rights Agreement.
(r) NO GENERAL SOLICITATION. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
(s) NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act or cause this offering
of Securities to be integrated with any prior offering of securities of the
Company for purposes of the Securities Act.
(t) NO BROKERS. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions or finder's fees or for
similar payments by any Purchaser relating to this Agreement or the transactions
contemplated hereby. Other than (i) ThinkEquity Partners, or (ii) as
contemplated in Section 4(e) of this Agreement or in any of the other
Transaction Documents, no other person or entity is entitled to payment by the
Company of fees, commissions and reimbursement of expenses in connection with
the transactions contemplated hereby.
(u) ACKNOWLEDGMENT REGARDING SECURITIES. The Company's executive
officers have studied and fully understand the nature of the Securities being
sold hereunder. The Company acknowledges that its obligation to issue Conversion
Shares upon conversion of the Preferred Stock in accordance with the Certificate
of Designation is, other than as set forth in the Certificate of Designation,
and subject to receipt of the Stockholder Approvals, absolute and unconditional,
regardless of the dilution that such issuance may have on the ownership
interests of other stockholders and the availability of remedies provided for in
the Transaction Documents relating to a failure or refusal to issue Conversion
Shares. Taking the foregoing into account, the Company's Board of Directors has
determined in its good faith business judgment that the issuance of the
Preferred Stock and Warrants hereunder and the consummation of the other
transactions contemplated hereby are in the best interests of the Company and
its stockholders. The Company fully intends to honor its obligations hereunder
to issue Conversion Shares upon conversion of the Preferred Stock regardless of
the dilution that such issuance may have on the ownership interests of other
stockholders and the availability of remedies provided for in the Transaction
Documents relating to their failure or refusal to issue Conversion Shares.
13
(v) TITLE. The Company has good and marketable title in fee simple to
all real property and good and merchantable title to all personal property owned
by it that is material to the business of the Company, in each case free and
clear of all liens, encumbrances and defects except such as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company. Any real property
and facilities held under lease by the Company are held by it under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not materially interfere with the use made and proposed to be made of such
property and buildings by the Company.
(w) TAX STATUS. Except as set forth in the Select SEC Documents, the
Company has made or filed all foreign, U.S. federal, state, provincial and local
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim. The Company has not executed a waiver with respect to any statute of
limitations relating to the assessment or collection of any foreign, federal,
state, provincial or local tax. None of the Company's tax returns is presently
being audited by any taxing authority.
(x) KEY EMPLOYEES. Each of the Company's directors, officers and any
Key Employee (as defined below) is currently serving the Company in the capacity
disclosed in the Select SEC Documents. No Key Employee is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company to any liability with respect to any of the foregoing matters. No Key
Employee has, to the knowledge of the Company, any intention to terminate or
limit his employment with, or services to, the Company, nor is any such Key
Employee subject to any constraints which would cause such employee to be unable
to devote his full time and attention to such employment or services. "Key
Employee" means the persons listed on Schedule 3(w) of the Schedule of
Exceptions and any individual who assumes or performs any of the duties of a Key
Employee.
(y) EMPLOYEE RELATIONS. (i) The Company is not involved in any material
union labor dispute nor, to the knowledge of the Company, is any such dispute
threatened. The Company believes that its relations with its employees are good.
No executive officer (as defined in Rule 501(f) of the Securities Act) has
notified the Company that such officer intends to leave the Company or otherwise
terminate such officer's employment with the Company; and (ii) the Company is in
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
(z) INSURANCE. The Company has in force fire, casualty, product
liability and other insurance policies, with extended coverage, sufficient in
amount to allow it to replace any of its material properties or assets which
might be damaged or destroyed or sufficient to cover liabilities to which the
Company may reasonably become subject, and such types and amounts of other
insurance with respect to its business and properties, on both a per occurrence
and an aggregate basis, as are customarily carried by persons engaged in the
same or similar business as the Company. No default or event has occurred that
could give rise to a default under any such policy.
14
(aa) ENVIRONMENTAL MATTERS. There is no environmental litigation or
other environmental proceeding pending or, to the Company's knowledge,
threatened by any governmental regulatory authority or others with respect to
the current or any former business of the Company or any partnership or joint
venture currently or at any time affiliated with the Company. No state of facts
exists as to environmental matters or Hazardous Substances (as defined below)
that involves the reasonable likelihood of a material capital expenditure by the
Company or that may otherwise have a Material Adverse Effect. No Hazardous
Substances have been treated, stored or disposed of, or otherwise deposited, in
or on the properties owned or leased by the Company or by any partnership or
joint venture currently or at any time affiliated with the Company in violation
of any applicable environmental laws. The environmental compliance programs of
the Company comply in all respects with all environmental laws, whether federal,
state, provincial or local, currently in effect. As used herein, "Hazardous
Substances" means any substance, waste, contaminant, pollutant or material that
has been determined by any governmental authority to be capable of posing a risk
of injury to health, safety, property or the environment.
(bb) REGULATORY PERMITS. The Company possesses all certificates,
authorizations and permits issued by the appropriate federal, state, provincial
or foreign regulatory authorities which are material to conduct its business,
and the Company has not received any written notice of any proceeding relating
to the revocation or modification of any such certificate, authorization or
permit.
4. COVENANTS.
(a) BEST EFFORTS. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 7 and Section 8 of this
Agreement.
(b) FORM D; BLUE SKY LAWS. The Company shall file with the SEC a Form D
with respect to the Securities as required under Regulation D and provide a copy
thereof to each Purchaser promptly after such filing. The Company shall take
such action as the Company shall reasonably determine is necessary to qualify
the Securities for sale to each Purchaser pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the United States or
obtain an exemption therefrom and within five (5) days thereafter, shall provide
the Purchasers with evidence of any such action so taken. Within two (2) trading
days after the Closing Date, the Company shall file a Form 8-K with the SEC
concerning this Agreement and the transactions contemplated hereby, which Form
8-K shall attach this Agreement and its Exhibits as exhibits to such Form ▇-▇
(▇▇▇ "▇-▇ ▇▇▇▇▇▇"). From and after the 8-K Filing, the Company hereby
acknowledges that no Purchaser shall be in possession of any material nonpublic
information received from the Company or any of its respective officers,
directors, employees or agents, that is not disclosed in the 8-K Filing. The
Company shall not, and shall cause each of its respective officers, directors,
employees and agents not to, provide any Purchaser with any material nonpublic
information regarding the Company from and after the 8-K Filing without the
express written consent of such Purchaser, provided, however, that a Purchaser
which exercises its rights under Section 4(n) shall be deemed to have given such
express written consent. In the event of a breach of the foregoing covenant by
the Company or any of its respective officers, directors, employees and agents,
in addition to any other remedy provided herein or in the other Transaction
Documents, a Purchaser shall have the right to request in writing that the
Company promptly make a public disclosure, in the form of a press release,
public advertisement or otherwise, of such material nonpublic information. If
15
the Company refuses to promptly make such a disclosure, the Company and the
requesting Purchaser shall meet (in person or telephonically) within two (2)
business days to resolve the issue. Unless the parties agree that disclosure is
not required, the Company shall either: (i) commence a Disclosure Delay Period
(as defined in the Registration Rights Agreement), or (ii) if the Company's
Board of Directors does not believe in good faith that the conditions to
commencing a Disclosure Delay Period set forth in the Registration Rights
Agreement have been satisfied, make a prompt public disclosure of the nonpublic
information at issue. Subject to the foregoing, neither the Company nor any
Purchaser shall issue any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Purchaser, to make
any press release or other public disclosure with respect to such transactions
(i) in substantial conformity with the 8-K Filing and contemporaneously
therewith and (ii) as is required by applicable law and regulations (provided
that in the case of clause (i) each Purchaser shall be consulted by the Company
in connection with any such press release or other public disclosure prior to
its release if such press release or other public disclosure contains the name
of such Purchaser).
(c) REPORTING STATUS. So long as any Purchaser beneficially owns any of
the Securities, the Company shall timely file (within applicable extension
periods) all reports required to be filed with the SEC pursuant to the Exchange
Act, and the Company shall not terminate its status as an issuer required to
file reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination. In addition, the Company
shall take all actions necessary to meet the "registrant eligibility"
requirements set forth in the general instructions to Form S-3 or any successor
form thereto, to continue to be eligible to register the resale of its Common
Stock on a registration statement on Form S-3 under the Securities Act.
(d) USE OF PROCEEDS. The Company shall use the proceeds from the sale
of the Units for general corporate purposes and working capital and shall
otherwise be subject to the limitations set forth on Schedule 4(d) hereof, which
Schedule 4(d) shall be deemed an essential part of this Agreement.
(e) FINANCIAL INFORMATION. Until a Purchaser transfers, assigns or
sells all of its Securities, the Company shall notify such Purchaser of the
release of, and, if not available on the SEC ▇▇▇▇▇ System, shall deliver to such
Purchaser, via electronic transmission or otherwise, copies of the following
reports: (i) within ten (10) days of filing with the SEC, its Annual Report on
Form 10-K, its Quarterly Reports on Form 10-Q, its proxy statements and any
Current Reports on Form 8-K; and (ii) within one (1) day after release all
financial press releases issued by the Company.
(f) RESERVATION OF SHARES. Subject to receipt of the Stockholder
Approvals, the Company shall at all times have authorized and reserved for the
purpose of issuance a sufficient number of shares of Common Stock to provide for
the full conversion of the outstanding Preferred Stock and issuance of the
Conversion Shares in connection therewith, the payment of dividends on the
Preferred Stock in the form of shares of Common Stock, and the full exercise of
the Warrants and the issuance of the Warrant Shares in connection therewith, in
each case to the extent required by the Certificate of Designation and the
Warrants (collectively, the "Issuance Obligations"). In the event such number of
shares becomes insufficient to satisfy the Issuance Obligations, the Company
shall take all necessary action to authorize and reserve such additional shares
of Common Stock necessary to satisfy the Issuance Obligations.
16
(g) LISTING. Promptly following receipt of the Stockholder Approvals,
the Company shall file an Application for Listing of Additional Shares with
respect to the Conversion Shares and the Warrant Shares with AMEX. From the time
that such listing form has been approved and thereafter, the Company shall
maintain, so long as any Purchaser (or any of their affiliates) own any
Securities, the listing of all Conversion Shares and Warrant Shares from time to
time issuable upon conversion of the Preferred Stock and exercise of the
Warrants on each national securities exchange or automated quotation system on
which shares of Common Stock are currently listed. The Company will use its best
efforts to continue the listing and trading of its Common Stock on AMEX, the New
York Stock Exchange (the "NYSE"), the Nasdaq National Market (the "NNM") or the
Nasdaq SmallCap Market (the "NSCM") and will comply in all material respects
with the reporting, filing and other obligations under the bylaws or rules of
AMEX and such exchanges and national automated stock quotation systems, as
applicable. The Company shall promptly provide to each holder of Preferred Stock
and/or Warrants copies of any notices it receives regarding the continued
eligibility of the Common Stock for trading on AMEX or, if applicable, any
securities exchange or automated quotation system on which securities of the
same class or series issued by the Company are then listed or quoted, if any.
(h) CORPORATE EXISTENCE. So long as a Purchaser beneficially owns any
Securities, the Company shall maintain its corporate existence, and in the event
of a merger, consolidation or sale of all or substantially all of the Company's
assets, the Company shall ensure that the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the other
Transaction Documents and the agreements and instruments entered into in
connection herewith and therewith regardless of whether or not the Company would
have had a sufficient number of shares of Common Stock authorized and available
for issuance in order to effect the conversion of all Preferred Stock and
exercise in full of all Warrants outstanding as of the date of such transaction,
and (ii) except in the event of a merger, consolidation of the Company into any
other Company, or the sale or conveyance of all or substantially all of the
assets of the Company where the consideration consists solely of cash, the
surviving or successor entity is a publicly traded corporation whose common
stock is listed for trading on the AMEX, the NYSE, the NNM, or the NSCM.
(i) NO INTEGRATED OFFERINGS. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause this offering of the Securities to be integrated with
any other offering of securities by the Company for purposes of the Securities
Act or any stockholder approval provision applicable to the Company or its
securities.
(j) LEGAL COMPLIANCE. The Company shall conduct its business in
compliance with all laws, ordinances or regulations of governmental entities
applicable to such businesses, except where the failure to do so would not have
a Material Adverse Effect.
(k) REDEMPTIONS AND DIVIDENDS. So long as any Purchaser beneficially
owns any Preferred Stock, the Company shall not, without first obtaining the
written approval of the holders of the Majority Holders, repurchase, redeem, or
declare or pay any cash dividend or premium or distribution on, or otherwise
repay or prepay on account of, any shares of capital stock or other outstanding
indebtedness of the Company except as provided pursuant to Schedule 4(d) hereof;
provided, however, that the foregoing shall not prohibit the Company from
repurchasing, redeeming or declaring or paying cash dividends or distributions
on Preferred Stock provided that any such repurchases, redemptions, dividends
and distributions are made solely in accordance with the terms of such Preferred
Stock as in effect on the date hereof.
17
(l) OTHER REGISTRATION RIGHTS. (i) The Company shall not grant any
rights to register any of the securities of the Company, through demand rights,
piggyback rights, or otherwise, to any person (a "Third Party"), provided,
however, that the holders of the Preferred Stock and the parties set forth on
Schedule 4(m) to the Schedule of Exceptions shall not be deemed to be Third
Parties. If any Third Party has any such registration rights in effect on the
date hereof, the Company shall, prior to the Closing, have all such Third
Parties irrevocably waive such registration rights in form and substance
reasonably satisfactory to the Purchasers, provided that, at a minimum, such
waiver will prohibit (a) any such Third Party from including any securities in a
Registration Statement (as defined in the Registration Rights Agreement), and
(b) any such Third Party from exercising any right to register the Company's
securities during the Registration Period.
(ii) Except as on Schedule 4(m) to the Schedule of Exceptions,
the Company shall not allow any shareholders of the Company, other than the
holders of the Preferred Stock, to have any registration rights with respect to
securities of the Company. Except as set forth in Schedule 4(m) to the Schedule
of Exceptions, if any shareholders of the Company have any such rights, the
Company shall, prior to the First Closing Date hereof, have all such
shareholders irrevocably waive such registration rights.
(m) INFORMATION. The Company will furnish upon request to each
Purchaser, so long as it holds any Preferred Stock, (i) within 10 days of the
filing with the SEC of its annual reports on Form 10-K, a certificate of the
President, a Vice President or a senior financial officer of the Company stating
that, based upon such examination or investigation and review of this Agreement
as in the opinion of the signer is necessary to enable the signer to express an
informed opinion with respect thereto, the Company is not or has not during such
period been in default in the performance or observance of any of the terms,
covenants or conditions hereof, or, if the Company shall be or shall have been
in default, specifying all such defaults, and the nature and period of existence
thereof, and what action the Company or such Subsidiary has taken, is taking or
proposes to take with respect thereto; and (ii) the information the Company must
deliver to any holder or to any prospective transferee of Securities in order to
permit the sale or other transfer of such Securities pursuant to Rule 144A of
the SEC or any similar rule then in effect. The Company will keep at its
principal executive office a true copy of this Agreement (as at the time in
effect), and cause the same to be available for inspection at such office during
normal business hours and upon reasonable notice by any holder of Securities or
any prospective transferee of Securities designated by a holder thereof.
(n) INSPECTION OF PROPERTIES AND BOOKS. So long as any Purchaser shall
beneficially own any Securities, such Purchaser and its representatives and
agents (collectively, the "Inspectors") shall have the right, at such
Purchaser's expense during normal business hours and upon reasonable notice, to
visit and inspect any of the properties of the Company, to examine the books of
account and records of the Company, to make or be provided with copies and
extracts therefrom, to discuss the affairs, finances and accounts of the Company
with, and to be advised as to the same by, its officers, employees and
independent public accountants (and by this provision the Company authorizes
such accountants to discuss such affairs, finances and accounts, whether or not
a representative of the Company is present) all at such reasonable times and
intervals and to such reasonable extent as such Purchaser may desire; provided,
however, that each Inspector shall hold in confidence and shall not make any
disclosure (except to such Purchaser) of any such information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement filed pursuant to the Registration Rights Agreement, (b) the release
of such information is ordered pursuant to a subpoena or other order from a
18
court or government body of competent jurisdiction, or (c) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. Each Purchaser agrees that it shall,
upon learning that disclosure of such information is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the information deemed confidential.
(o) PLEDGE OF SECURITIES. The Company acknowledges and agrees that the
Units may be pledged by a Purchaser in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the Units
and the Securities. The pledge of Units and the Securities shall not be deemed
to be a transfer, sale or assignment of the Units hereunder, and no Purchaser
effecting a pledge of Units and the Securities shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document. The Company hereby
agrees to execute and deliver such documentation as a pledgee of the Units may
reasonably request in connection with a pledge of the Units and the Securities
to such pledgee by a Purchaser.
(p) VARIABLE SECURITIES. The Company shall not, in any manner, issue or
sell any rights, warrants or options to subscribe for or purchase Common Stock,
or any other securities directly or indirectly convertible into or exchangeable
or exercisable for Common Stock, at an effective conversion, exchange or
exercise price that varies or may vary with the market price of the Common
Stock, including by way of one or more reset(s) to any fixed price.
(q) STOCKHOLDER APPROVALS; ISSUANCE LIMITATIONS.
(i) Within five (5) business days of the First Closing, the
Company shall file with the SEC a Proxy Statement or Consent (the "Proxy
Statement"), to be submitted to stockholders of the Company in connection with
the Stockholder Approvals, and the Company shall use its best efforts to obtain
the Stockholder Approvals as promptly as practicable following the First
Closing. If the Stockholder Approvals have not been obtained within 75 days
following the First Closing (the "Repurchase Event"), the Company shall
immediately notify the holders of such failure and, within five days after the
occurrence of the Repurchase Event, purchase from each holder of Preferred
Stock, at a per share price equal to the Face Amount (as defined in the
Certificate of Designations) plus accrued Dividends through the repurchase date,
(the "Per Share Repurchase Price"), all shares of Preferred Stock (together with
Warrants to purchase that number of Warrant Shares issuable with such number of
shares) held by each Purchaser.
(ii) If at any time following receipt of the stockholder
approval referred to in Section 4(q)(i) above, the Company is prohibited by Rule
713 of the AMEX Company Guide or any successor or similar rule, or the rules of
any other securities exchange or automated quotation system on which the Common
Stock is then listed or traded (a "Triggering Event"), from issuing all of the
shares of Common Stock issuable upon complete conversion of the Preferred Stock
and complete exercise of the Warrants (without giving effect to the limitations
on conversion and exercise contained in Article IV.D of the Certificate of
Designation and Section 7(g) of the Warrants), the Company shall immediately
notify the holders of such Triggering Event and, within a period of five (5)
19
days after the occurrence of such Triggering Event, purchase from each holder of
the Preferred Stock, at a per share purchase price equal to the greater of
(a)(x) the quotient of the Face Amount plus accrued Dividends (y) divided by the
Conversion Price and (z) multiplied by the Market Price, and (b)(x) the Face
Amount together with accrued Dividends through the repurchase date (y)
multiplied by 1.25 (the "Per Share Price"), such whole number of Preferred Stock
such that the Common Stock issuable upon complete conversion of the Preferred
Stock and complete exercise of the Warrants (without giving effect to the
limitations on conversion and exercise contained in Article IV.D in the
Certificate of Designations and Section 7(g) of the Warrants) is no longer
prohibited by Rule 713 of the AMEX Company Guide (or any successor or similar
rule) or the rules of any other securities exchange or automated quotation
system on which the Common Stock is then listed or traded. The terms "Face
Amount," "Dividends," "Conversion Price" and "Market Price" shall have the
meanings ascribed to them in the Certificate of Designations.
(r) WAIVERS AND CONSENTS. Prior to the effectiveness of any
Registration Statement filed in accordance with Section 2(a) of the Registration
Rights Agreement, the Company shall have obtained proper waivers from any
security holders having registration rights, if any, consistent with the
provisions of Section 4(m) of this Agreement.
(s) CONFIDENTIAL AGREEMENT. Except for any disclosure required by
applicable law or rules of the SEC or AMEX, the Company and each Purchaser will,
and will direct its respective representatives to, hold in confidence all
information concerning this Agreement and the placement of shares hereunder
until the earlier of such time as (i) the Company has made a public announcement
concerning the Agreement and the placement of shares hereunder or (ii) this
Agreement is terminated.
5. PARTICIPATION RIGHT
(a) PARTICIPATION RIGHT. Subject to the terms and conditions specified
in this Section 5, until the third anniversary of the Issuance Date, the holders
of shares of Preferred Stock shall have a right to participate with respect to
the issuance or possible issuance of any equity or equity-linked securities or
debt which is convertible into equity or in which there is an equity component,
including, but not limited to, any additional issuance of Preferred Stock, (as
the case may be, "Additional Shares"), on the same terms and conditions as
offered by the Company to the other purchasers of such Additional Shares. Each
time the Company proposes to offer any Additional Shares, the Company shall make
an offering of such Additional Shares to each holder of shares of Preferred
Stock in accordance with the following provisions:
(i) The Company shall deliver a notice (the "Issuance Notice")
to the holders of shares of Preferred Stock stating (a) its bona fide intention
to offer such Additional Shares, (b) the number of such Additional Shares to be
offered, (c) the price and terms, if any, upon which it proposes to offer such
Additional Shares, and (d) the anticipated closing date of the sale of such
Additional Shares.
(ii) By written notification received by the Company, within
20 business days after giving of the Issuance Notice, any holder of shares of
Preferred Stock may elect to purchase or obtain, at the price and on the terms
specified in the Issuance Notice (provided that if the price is to be paid in
whole or in part in consideration other than cash, the holders of Preferred
Stock exercising their rights hereunder shall have the option to pay such
consideration in cash equal to the fair market value of such non-cash
consideration (valued in accordance with the method set forth in Article
XI.D(ii)(f) of the Certificate of Designation, up to that number of such
Additional Shares which equals such holder's Pro Rata Amount (as defined below).
The "Pro Rata Amount" for any given holder of shares of Preferred Stock shall
20
equal that portion of the Additional Shares that the Company proposes to offer
which equals the proportion that the number of shares of Common Stock that such
holder owns or has the right to acquire (without giving effect to the
limitations contained in Article IV.D of the Certificate of Designation) bears
to the total number of shares of Common Stock then outstanding (assuming in each
case the full conversion, exercise or exchange of all Convertible Securities and
Purchase Rights then outstanding); provided, however, that in the event that any
such holder exercises its right to pay the consideration for the Additional
Shares purchasable hereunder with shares of Preferred Stock increased (but not
decreased) to the extent necessary to equal (x) such number of shares of Common
Stock (if the Additional Shares being issued are Common Stock) or (y) that
number of Additional Shares as are convertible into or exercisable or
exchangeable for such number of shares of Common Stock (if the Additional Shares
being issued are Convertible Securities or Purchase Rights), as is obtained by
dividing (a) the Redemption Amount attributable to such holder's shares of
Preferred Stock being redeemed by (b)(i) the price per share at which such
Common Stock is being issued (if the Additional Shares being issued are Common
Stock) or (ii) the conversion, exercise or exchange price at which such
Additional Shares are convertible into or exercisable or exchangeable for shares
of Common Stock (if the Additional Shares being issued are Convertible
Securities or Purchase Rights), and in such event the Company shall be obligated
to sell such number of Additional Shares to each such holder, even if the
aggregate Pro Rata Amount for all such holders exceeds the aggregate amount of
Additional Shares that the Company had initially proposed to offer. The Company
shall promptly, in writing, inform each holder of shares of Preferred Stock
which elects to purchase all of the Additional Shares available to it
("Fully-Exercising Holder") of any other holder's failure to do likewise. During
the five-day period commencing after such information is given, each
Fully-Exercising Holder shall be entitled to obtain that portion of the
Additional Shares for which the holders of shares of Preferred Stock were
entitled to subscribe but which were not so subscribed for by such holders which
is equal to the proportion that the number of shares of Preferred Stock held by
such Fully-Exercising Holder bears to the total number of shares of Preferred
Stock held by all Fully-Exercising Holders who wish to purchase any of the
unsubscribed shares.
(iii) If all Additional Shares which the holders of shares of
Preferred Stock are entitled to obtain pursuant to subparagraph (ii) of this
Section 5 are not elected to be obtained as provided in such subparagraph, the
Company may, during the 75-day period following the expiration of the period
provided in such subparagraph, offer the remaining unsubscribed portion of such
Additional Shares to any person or persons at a price not less than, and upon
terms no more favorable to the offeree than, those specified in the Issuance
Notice. If the Company does not consummate the sale of such Additional Shares
within such period, the right provided hereunder shall be deemed to be revived
and such Additional Shares shall not be offered or sold unless first reoffered
to the holders of shares of Preferred Stock in accordance herewith.
(iv) The participation right set forth in this Section 5 may
not be assigned or transferred, except that such right is assignable by each
holder of shares of Preferred Stock to any wholly-owned subsidiary or parent of,
or to any corporation or entity that is, within the meaning of the Securities
Act of 1933, as amended, controlling, controlled by or under common control
with, any such holder.
(v) The purchase right granted by this Section 5 shall not
apply to: (i) the grant or exercise of any stock, options or warrants which may
hereafter be granted or exercised under any equity incentive plan of the Company
now existing or to be implemented in the future which is approved in good faith
by the Board of Directors of the Company or a committee of non-employee
directors established for such purpose; (ii) the conversion of the Series E
Preferred Stock or the exercise of the Warrants; (iii) the issuance of
securities in connection with a bona fide business acquisition; (iv) the
issuance of stock, warrants or other securities or rights to persons or entities
21
in connection with commercial lease lines or bank financing provided that such
issuances are primarily for purposes other than equity financing; or (v) the
issuance of securities in connection with strategic transactions involving the
Company and other entities, including joint ventures, manufacturing, marketing
or distribution arrangements (but excluding any sale of substantially all of the
Company's assets or any merger or consolidation of the Corporation into or with
another entity in which the holders of the capital stock of the Company
immediately prior to such merger or consolidation do not hold at least fifty
percent (50%) in voting power of the surviving corporation); or (vi) the
Company's recapitalization plan as described in Section 5(v) of the Schedule of
Exceptions.
(b) CONSIDERATION FOR PREFERRED SHARES. In the event that any holder of
shares of Preferred Stock exercises its participation right under this Section 5
and also exercises its redemption right pursuant to Article VIII.A(ix) of the
Certificate of Designation, such holder shall be entitled to use the shares of
Preferred Stock that are being so redeemed as the consideration for the purchase
of its allocated portion of Additional Shares pursuant to this Section 5, with
the shares of Preferred Stock being valued at the Redemption Amount for such
purpose.
6. TRANSFER AGENT INSTRUCTIONS.
(a) If the Company's transfer agent is participating in the Depository
Trust Company ("DTC") Fast Automated Securities Transfer program, and so long as
the certificates therefor do not bear a legend and the holder of the Preferred
Stock or Warrants (any and each a "Holder") thereof is not then required to
return such certificate for the placement of a legend thereon, the Company shall
cause its transfer agent to electronically transmit all Conversion Shares and
Warrant Shares to the Holder by crediting the account of the Holder or its
nominee with DTC through its Deposit Withdrawal Agent Commission System ("DTC
Transfer"). If the aforementioned conditions to a DTC Transfer are not
satisfied, the Company shall deliver to the Holder physical certificates
representing the Conversion Shares and Warrant Shares, as applicable. Further,
the Holder may instruct the Company to deliver to the Holder physical
certificates representing the Conversion Shares and Warrant Shares in lieu of
delivering such shares by way of DTC Transfer.
(b) The Company warrants that no instruction other than such
instructions referred to in this Section 6, the Registration Rights Agreement
and stop transfer instructions to give effect to Section 2(f) or 2(g) hereof,
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way each Purchaser's obligations and
agreement set forth in Section 2(g) hereof to resell the Securities pursuant to
an effective registration statement or under an exemption from the registration
requirements of applicable securities law.
(c) If any Purchaser provides the Company and the transfer agent with
an opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that the Securities have been sold or transferred pursuant to an
exemption from registration, or any Purchaser provides the Company with an
opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions and
reasonably acceptable to the Company, to the effect that such Securities may be
sold under Rule 144(k), the Company shall permit the transfer and, in the case
of the Conversion Shares and Warrant Shares, promptly instruct its transfer
agent to issue one or more certificates in such name and in such denominations
as specified by such Purchaser. The Company shall assume the reasonable costs
associated with any such opinion.
22
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Units to each
Purchaser hereunder at each of the First Closing and the Second Closing
(collectively the "Closings") is subject to the satisfaction, at or before the
Closings, of each of the following conditions thereto, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion.
(a) Each Purchaser shall have executed such Purchaser's Execution Page
to this Agreement and the other Transaction Documents and delivered executed
copies of the same to the Company via facsimile, to be followed with originals
sent via overnight courier.
(b) Each Purchaser shall have delivered such Purchaser's Purchase Price
for the Units being purchased at the Closings in accordance with Section 1(b)
above.
(c) The representations and warranties of each Purchaser shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date), and such Purchaser shall have performed, satisfied and complied
in all material respects with the covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by such Purchaser
at or prior to the Closing Date.
(d) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
8. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of each Purchaser (which shall be several but not joint)
hereunder to purchase the Units to be purchased by it at each of the First
Closing and the Second Closing is subject to the satisfaction, at or before each
of the Closing Date for the First Closing and the Second Closing, respectively,
of each of the following conditions, provided that such conditions are for such
Purchaser's sole benefit and may be waived by such Purchaser at any time in such
Purchaser's sole discretion:
(a) As to the First Closing:
(i) The Company shall have executed this Agreement and the
other Transaction Documents and delivered executed copies of the same to such
Purchaser via facsimile, to be followed with originals sent via overnight
courier.
(ii) The Certificate of Designation shall have been filed and
accepted for filing with the Secretary of State of the State of Delaware and a
copy thereof certified by the Secretary of State of Delaware shall have been
delivered to such Purchaser.
23
(iii) The Company shall have delivered to such Purchaser duly
executed certificates and Warrants (each in such denominations as such Purchaser
shall request) representing the Preferred Stock and Warrants being so purchased
by such Purchaser at the Closing in accordance with Section 1(b) above.
(iv) Trading in the Common Stock shall not have been suspended
by the SEC or AMEX.
(v) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date), and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing Date. The Company shall have delivered for the benefit of
the Purchasers, a certificate, executed by the Chief Executive Officer of the
Company after reasonable investigation, dated as of the Closing Date to the
foregoing effect and as to such other matters as may reasonably be requested by
such Purchaser prior to the Closing.
(vi) No statute, rule, regulation, executive order, decree,
ruling, injunction, action or proceeding shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which questions the validity of, challenges or
prohibits the consummation of, any of the transactions contemplated by this
Agreement.
(vii) Each Purchaser shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Purchaser and in substantially the form of
EXHIBIT D attached hereto.
(viii) There shall have been no material adverse changes and
no material adverse developments in the business, properties, operations,
prospects, financial condition or results of operations of the Company, taken as
a whole, since the date hereof, and no information, of which the Purchasers are
not currently aware, shall come to the attention of the Purchasers that might
have a Material Adverse Effect.
(ix) Each Purchaser shall have received a copy of resolutions,
duly adopted by the Board of Directors of the Company, which shall be in full
force and effect at the time of the Closing, authorizing the consummation by the
Company of the transactions contemplated hereby and by the other Transaction
Documents, certified as such by the Secretary or Assistant Secretary of the
Company and such other documents reasonably requested by such Purchaser.
(b) As to the Second Closing:
(i) The Company shall have executed this Agreement and the
other Transaction Documents and delivered executed copies of the same to such
Purchaser via facsimile, to be followed with originals sent via overnight
courier.
24
(ii) The Company shall have delivered to such Purchaser duly
executed certificates and Warrants (each in such denominations as such Purchaser
shall request) representing the Preferred Stock and Warrants being so purchased
by such Purchaser at the Closing in accordance with Section 1(b) above.
(iii) Trading in the Common Stock shall not have been
suspended by the SEC or AMEX.
(iv) The representations and warranties of the Company shall
be true and correct as of the date when made and as of the Second Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date, which representations and warranties shall be true
and correct as of such date), and the Company shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Second Closing Date. The Company shall
have delivered for the benefit of the Purchasers, a certificate, executed by the
Chief Executive Officer of the Company after reasonable investigation, dated as
of the Second Closing Date to the foregoing effect and as to such other matters
as may reasonably be requested by such Purchaser prior to the Second Closing.
(v) No statute, rule, regulation, executive order, decree,
ruling, injunction, action or proceeding shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which questions the validity of, challenges or
prohibits the consummation of, any of the transactions contemplated by this
Agreement.
(vi) Each Purchaser shall have received an opinion of the
Company's counsel, dated as of the Second Closing Date, in form, scope and
substance reasonably satisfactory to the Purchaser and in substantially the form
of EXHIBIT D attached hereto.
(vii) There shall have been no material adverse changes and no
material adverse developments in the business, properties, operations,
prospects, financial condition or results of operations of the Company, taken as
a whole, since the date hereof, and no information, of which the Purchasers are
not currently aware, shall come to the attention of the Purchasers that might
have a Material Adverse Effect.
(viii) The resolutions, duly adopted by the Board of Directors
of the Company, and delivered at the First Closing, shall be in full force and
effect at the time of the Second Closing, authorizing the consummation by the
Company of the transactions contemplated hereby and by the other Transaction
Documents, and such other documents reasonably requested by such Purchaser.
(ix) The Stockholder Approvals shall have been obtained.
9. GOVERNING LAW; MISCELLANEOUS.
(a) GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company and
each of the Purchasers irrevocably consent to the jurisdiction of the United
States federal courts and the state courts located in the State of Delaware in
any suit or proceeding based on or arising under this Agreement and irrevocably
agree that all claims in respect of such suit or proceeding may be determined in
25
such courts. The Company and each of the Purchasers irrevocably waive the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company and each of the Purchasers further agrees that service of process
mailed by first class mail shall be deemed in every respect effective service of
process in any such suit or proceeding. Nothing herein shall affect the right of
the Company or any Purchaser to serve process in any other manner permitted by
law. The Company and each of the Purchasers agrees that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.
(b) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof, provided that the failure to so deliver any manually executed
Execution Page shall not affect the validity or enforceability of this
Agreement.
(c) CONSTRUCTION. Whenever the context requires, the gender of any word
used in this Agreement includes the masculine, feminine or neuter, and the
number of any word includes the singular or plural. Unless the context otherwise
requires, all references to articles and sections refer to articles and sections
of this Agreement, and all references to schedules are to schedules attached
hereto, each of which is made a part hereof for all purposes. The descriptive
headings of the several articles and sections of this Agreement are inserted for
purposes of reference only, and shall not affect the meaning or construction of
any of the provisions hereof.
(d) SEVERABILITY. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other
Transaction Documents (including any schedules and exhibits hereto and thereto)
contain the entire understanding of the Purchasers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived other than by an instrument in writing signed by
the party to be charged with enforcement and no provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and each
Purchaser.
(f) NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally, by responsible overnight carrier or
by confirmed facsimile, and shall be effective five (5) days after being placed
in the mail, if mailed, or upon receipt or refusal of receipt, if delivered
personally or by responsible overnight carrier or confirmed facsimile, in each
case addressed to a party. The addresses for such communications shall be:
26
If to the Company:
LifePoint, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Executive Officer
with a copy simultaneously transmitted by like means to (which transmittal shall
not constitute notice hereunder):
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to any Purchaser, to such address set forth under such Purchaser's name on
the Execution Page hereto executed by such Purchaser.
Each party shall provide notice to the other parties of any change in address.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Except as
provided herein, the Company shall not assign this Agreement or any rights or
obligations hereunder. Any Purchaser may assign or transfer the Securities
pursuant to the terms of the Certificate of Designation, the Warrants and this
Agreement or assign such Purchaser's rights hereunder or thereunder to any other
person or entity. In addition, and notwithstanding anything to the contrary
contained in this Agreement, the Registration Rights Agreement or the Warrants,
the Securities may be pledged and all rights of any Purchaser under this
Agreement or any other agreement or document related to the transactions
contemplated hereby may be assigned, without further consent of the Company, to
a bona fide pledgee in connection with such Purchaser's margin or brokerage
account, provided such pledge is consistent with applicable laws, rules and
regulations, including those promulgated under the Securities Act.
(h) THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i) SURVIVAL. The representations and warranties of the Company and the
agreements and covenants of the parties set forth in Sections 2, 3, 4, 5, 6, 7,
8 and 9 (including, but not limited to, the participation rights of the
Purchasers set forth in Section 5) hereof shall survive the Closings
notwithstanding any due diligence investigation conducted by or on behalf of any
Purchaser. Moreover, none of the representations and warranties made by the
Company herein shall act as a waiver of any rights or remedies any Purchaser may
have under applicable U.S. federal or state securities laws.
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(j) PUBLICITY. Except as otherwise set forth in the Registration Rights
Agreement, the Company and each Purchaser whose name shall appear therein shall
have the right to approve before issuance any press releases, SEC or AMEX
filings, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of the Purchasers, to make any press release or SEC
or AMEX filings with respect to such transactions as is required by applicable
law and regulations (although the Purchasers shall be consulted by the Company
in connection with any such press release which contains such Purchaser's name
and filing prior to its release and shall be provided with a copy thereof).
(k) FURTHER ASSURANCES. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) PAYMENT SET ASIDE. To the extent that the Company makes a payment
or payments to any Purchaser hereunder or pursuant to any of the other
Transaction Documents or any Purchaser enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
(m) JOINT PARTICIPATION IN DRAFTING. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement and the other
Transaction Documents. As such, the language used herein and therein shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party to
this Agreement.
(n) EQUITABLE RELIEF. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to each Purchaser by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations hereunder (including, but not limited to, its obligations pursuant
to Section 5 hereof) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement (including,
but not limited to, its obligations pursuant to Section 5 hereof), that each
Purchaser shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer
of the Securities, without the necessity of showing economic loss and without
any bond or other security being required.
(o) INDEMNIFICATION BY COMPANY. In consideration of each Purchaser's
execution and delivery of this Agreement and the other Transaction Documents and
purchase of the Securities hereunder, and in addition to all of the Company's
other obligations under this Agreement and the other Transaction Documents, from
and after the Closing, the Company shall defend, protect, indemnify and hold
harmless each Purchaser and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or
28
indirect investors and any of the foregoing persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement, collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (i)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, any other Transaction Document or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement, any other Transaction Document or any other certificate, instrument
or document contemplated hereby or thereby or (iii) any cause of action, suit or
claim brought or made against such Indemnitee by a third party (including for
these purposes a derivative action brought on behalf of the Company) and arising
out of or resulting from (A) the execution, delivery, performance or enforcement
of this Agreement, any other Transaction Document or any other certificate,
instrument or document contemplated hereby or thereby, (B) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance and sale of the Securities, (C) any disclosure made by
such Purchaser pursuant to Section 4(b) or 4(n) hereof, or (D) the status of
such Purchaser or holder of the Securities as an investor in the Company. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 9(o)
shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.
(p) KNOWLEDGE. As used in this Agreement, the term "knowledge" with
respect to the Company shall mean and include actual knowledge of the Company's
directors and executive officers and that knowledge which a reasonably prudent
business person, acting in his/her capacity as either a director or an executive
officer, as applicable, could have obtained in the management of his or her
business affairs after making due inquiry and exercising due diligence which a
prudent business person should have made or exercised, as applicable, with
respect thereto.
(q) ADDITIONAL ACKNOWLEDGEMENT. Each Purchaser acknowledges that it has
independently evaluated the merits of the transactions contemplated by this
Agreement and the other Transaction Documents, that it has independently
determined to enter into the transactions contemplated hereby and thereby, that
it is not relying on any advice from or evaluation by any other Purchaser, and
that it is not acting in concert with any other Purchaser in making its purchase
of securities hereunder. The Purchasers and, to its knowledge, the Company agree
that the Purchasers have not taken any actions that would deem such Purchasers
to be members of a "group" for purposes of Section 13(d) of the Exchange Act and
the Purchasers have not agreed to act together for the purpose of acquiring,
holding, voting or disposing of equity securities of the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company
have caused this Agreement to be duly executed as of the date first above
written.
LIFEPOINT, INC.
By: ________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
PURCHASERS:
FUND NAME
By: ________________________________
Name: ___________________________
Title: __________________________
ADDRESS: ___________________________
____________________________________
____________________________________
Attn: ______________________________
Telephone: _________________________
Facsimile: _________________________
E-mail: ____________________________
First Closing Units: ________________________
Second Closing Units: _______________________
Purchase Price ($1,000 per Unit): $ _________
30
