EXHIBIT 4.3
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement is entered into and dated as of June
19, 2002 (this "AGREEMENT"), among Millennium Cell Inc., a Delaware corporation
(the "COMPANY"), Pine Ridge Financial, Inc. ("PINE RIDGE") and ZLP Master
Technology Fund, Ltd. ("ZLP"). Each of Pine Ridge and ZLP (including its
respective successors and assigns ) are sometimes individually referred to as a
"PURCHASER" and collectively, as the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to the Purchasers, and the Purchasers, severally and not jointly,
desire to purchase from the Company, certain securities of the Company pursuant
to the terms set forth herein.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall
have the meanings set forth in this Section 1.1:
"ADDITIONAL DEBENTURES" means $3,000,000 in aggregate principal
amount of secured convertible debentures due on the third year anniversary of
the issuance date thereof, issuable to Pine Ridge, subject to the terms hereof,
on the Additional Settlement Date, in the form of Exhibit A hereto.
"ADDITIONAL SETTLEMENT DATE" means the second Business Day
immediately following the date Shareholder Approval is obtained, provided, that
such date may not occur later than the sixth month anniversary of the Closing
Date.
"AFFILIATE" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 144.
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday or a day on which banking institutions in
the State of New York or the State of New Jersey are authorized or required by
law or other governmental action to close.
"CLOSING" means the closing of the purchase and sale of the Shares
and First Warrants pursuant to Section 2.1.
"CLOSING DATE" means the date of the Closing.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, $.001 par
value per share, and any securities into which such common stock may hereafter
be reclassified.
"COMMON STOCK EQUIVALENTS" means any securities of the Company or
the Subsidiaries which would entitle the holder thereof to acquire Common Stock,
including without limitation, any debt, preferred stock or other instrument that
is at any time convertible into or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.
"COMPANY COUNSEL" means Xxxxxxx, Del Deo, Dolan, Griffinger
& Xxxxxxxxx, P.C.
"DEBENTURES" means, collectively, the Initial Debentures and the
Additional Debentures.
"EFFECTIVE DATE" means the date that the initial Registration
Statement required by the Registration Rights Agreement is first declared
effective by the Commission.
"ELIGIBLE MARKET" means any of the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National Market or the Nasdaq Small Cap
Market.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FIRST WARRANT" means the Common Stock purchase warrant, in the form
of Exhibit C, issuable to a Purchaser at the Closing to purchase the aggregate
number of Underlying Shares indicated below such Purchaser's name on its
signature page to this Agreement.
"INITIAL DEBENTURES" means $9,000,000 in aggregate principal amount
of secured convertible debentures due on the third year anniversary of the
issuance date thereof, issuable to Pine Ridge, subject to the terms hereof, on
the Initial Settlement Date, in the form of Exhibit A hereto.
"INITIAL SETTLEMENT DATE" means the second Business Day immediately
following the Effective Date.
"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened in writing.
-2-
"PURCHASER COUNSEL" means Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP.
"PURCHASER PERCENTAGE" means, with respect to a Purchaser, the
percentage equal to the product of (x) a fraction, the numerator of which shall
be the aggregate purchase price paid by such Purchaser for Shares under this
Agreement and the denominator of which shall be the aggregate purchase price
paid by all Purchasers for Shares under this Agreement and (y) 100.
"REGISTRATION STATEMENT" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchasers of the Shares and Underlying Shares.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Purchasers, in the form of Exhibit B hereto.
"REQUIRED MINIMUM" means, as of any date, the maximum aggregate
number of shares of Common Stock then issued or potentially issuable in the
future pursuant to the Transaction Documents, including any Underlying Shares
issuable upon exercise of conversion in full of all Warrants and Debentures and
assuming that: (a) the Debentures are held until the third anniversary of the
Closing Date and all interest on the Debentures is accreted to the principal
amount of the Debentures, (b) the maximum number of Underlying Shares is issued
pursuant to the Warrants and (c) the Conversion Price (as defined in the
Debentures) will be adjusted to 50% of the Initial Conversion Price (as defined
in the Debentures) pursuant to the terms of the Debentures.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECOND WARRANT" means the Common Stock purchase warrant, in the
form of Exhibit D, issuable to Pine Ridge on the Initial Settlement Date,
pursuant to Section 2.3(a), to purchase the aggregate number of Underlying
Shares indicated below Pine Ridge's name on its signature page to this
Agreement.
"SECURITIES" means the Shares, the Debentures, the Warrants and the
Underlying Shares issued or issuable (as applicable) to the applicable Purchaser
pursuant to the Transaction Documents.
"SHAREHOLDER APPROVAL" means the approval of the shareholders of the
Company owning no less than 50% of the issued and outstanding Common Stock in
favor of issuance of Shares and Underlying Shares upon conversion of the
Debentures and exercise of the Warrants in excess of 20% of the number of shares
of Common Stock outstanding on the Closing Date, pursuant to the rules of
Nasdaq.
-3-
"SHARES" means the shares of Common Stock issuable to each Purchaser
on the Closing Date pursuant to the terms hereof.
"SHARES INVESTMENT AMOUNT" means, with respect to each Purchaser,
the purchase price for the Shares issuable to such Purchaser, as indicated below
such Purchaser's name on its signature page to this Agreement.
"SUBSIDIARY" means any subsidiary of the Company that is required to
be listed in Schedule 3.1(a).
"THIRD WARRANT" means the Common Stock purchase warrant, in the form
of Exhibit D, issuable to Pine Ridge on the Additional Settlement Date, pursuant
to Section 2.4(a), to purchase the aggregate number of Underlying Shares
indicated below Pine Ridge's name on its signature page to this Agreement.
"TRADING DAY" means: (i) a day on which the Common Stock is traded
on a Trading Market, or (ii) if the Common Stock is not listed on a Trading
Market, a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is
not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted
in the over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.
"TRANSACTION DOCUMENTS" means this Agreement, the Registration
Rights Agreement, the Warrants, the Debentures, the Transfer Agent Instructions
and any other documents or agreements executed or delivered in connection with
the transactions contemplated hereunder.
"TRANSFER AGENT INSTRUCTIONS" means the Company's transfer agent
instructions in the form of Exhibit E.
"UNDERLYING SHARES" means the shares of Common Stock issuable upon:
(i) conversion of the Debentures and (ii) exercise of the Warrants.
"WARRANTS" means collectively, the First Warrants, the Second
Warrants and the Third Warrant issuable to the applicable Purchasers in
accordance with this Agreement.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to the Purchasers,
and the Purchasers shall, severally and not jointly, purchase from the Company,
the Shares and the First Warrants for an aggregate purchase price of $3,000,000.
The Closing shall take place at the offices of Purchaser Counsel
-4-
concurrently with the execution and delivery of this Agreement by the parties or
at such other location or time as the parties may agree.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be
delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a stock certificate, registered in the name of such
Purchaser, evidencing a number of Shares equal to the quotient obtained by
dividing: (i) such Purchaser's Shares Investment Amount by (ii) $2.79;
(iii) a First Warrant, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to acquire on
the terms set forth therein, the number of Underlying Shares indicated below
such Purchaser's name on its signature page to this Agreement;
(iv) the legal opinion of Company Counsel, in agreed form,
addressed to the Purchasers;
(v) the Registration Rights Agreement duly executed by the
Company; and
(vi) the Transfer Agent Instructions duly executed by the
Company and acknowledged by the Company's transfer agent.
(b) At the Closing, each Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser's Shares Investment Amount, in United
States dollars, by wire transfer to an account designated in writing by the
Company for such purpose; and
(iii) the Registration Rights Agreement duly executed by such
Purchaser.
2.3 Initial Settlement Date; Initial Debentures and Second Warrants.
(a) If each of the conditions set forth in Section 2.3(b) have
been either satisfied by the Company or waived by Pine Ridge, then on the
Initial Settlement Date, the Company shall issue to Pine Ridge, the Initial
Debentures and the Second Warrant for an aggregate purchase price of $9,000,000.
On the Initial Settlement Date, the Company will deliver to Pine Ridge: (1) the
Initial Debentures, registered in the name of Pine Ridge, in the aggregate
principal amount of $9,000,000 and (2) the Second Warrant, registered in the
name of Pine Ridge, pursuant to which Pine Ridge shall have
-5-
the right to acquire the aggregate number of Underlying Shares indicated below
its name on its signature page to this Agreement. Pine Ridge will, against
delivery of its Initial Debentures and Second Warrant, deliver to the Company,
$9,000,000, in United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for such purpose.
(b) Conditions Precedent to the Purchase of Initial Debentures.
Notwithstanding anything to the contrary contained in this Agreement, the
obligation of Pine Ridge to purchase the Initial Debentures on the Initial
Settlement Date is subject to the satisfaction by the Company or waiver by Pine
Ridge of each of the following conditions:
(i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company contained in this
Agreement shall be true and correct as of the date when made and as of the
Initial Settlement Date, as though made on and as of the Initial Settlement Date
(other than representations and warranties which relate to a specific date
(which shall not include representations and warranties relating to the "date
hereof") which representations and warranties shall be true as of such specific
date).
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company between the Closing Date and the
Initial Settlement Date.
(iii) Registration Statement. The Registration Statement shall
have been declared effective under the Securities Act by the Commission and
shall have remained effective (and the prospectus therein shall have remained
available for use by the Purchasers to resell Underlying Shares (including,
without limitation, Underlying Shares issuable upon conversion of the Initial
Debentures and exercise of the Second Warrants) thereunder at all times, not
subject to any actual or threatened stop order or subject to any actual or
threatened suspension at any time prior to the Initial Settlement Date.
(iv) No Injunction. Since the Closing Date, no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits the consummation of any of the
transactions contemplated by the Transaction Documents.
(v) Adverse Changes. Since the Closing Date, no event or
series of events which reasonably would be expected to have or result in a
material adverse effect on the results of operations, assets or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole.
(vi) Initial Letter of Credit. The Company shall have
obtained a letter of credit issued by First Union National Bank in the form of
Exhibit F hereto, in an amount equal to $9,000,000 (the "INITIAL LETTER OF
CREDIT").
-6-
(vii) Compliance Certificate. The Company shall have delivered
to Pine Ridge, an officer's certificate stating that the conditions specified in
clauses (i)-(vi) above have been satisfied.
2.4 Additional Settlement Date; Additional Debentures and Third
Warrants.
(a) If each of the conditions set forth in Section 2.4(b) have
been either satisfied by the Company or waived by Pine Ridge, then on the
Additional Settlement Date, the Company shall issue to Pine Ridge, the
Additional Debentures and the Third Warrant for an aggregate purchase price of
$3,000,000. On the Additional Settlement Date, the Company will deliver to Pine
Ridge: (1) the Additional Debentures, registered in the name of Pine Ridge, in
the aggregate principal amount of $3,000,000 and (2) the Third Warrant,
registered in the name of Pine Ridge, pursuant to which Pine Ridge shall have
the right to acquire the aggregate number of Underlying Shares indicated below
its name on its signature page to this Agreement. Pine Ridge will, against
delivery of its Additional Debentures and Third Warrant, deliver to the Company,
$3,000,000 less the applicable amount pursuant to Section 5.1, in United States
dollars in immediately available funds by wire transfer to an account designated
in writing by the Company for such purpose.
(b) Conditions Precedent to the Purchase of Additional Debentures.
Notwithstanding anything to the contrary contained in this Agreement, the
obligation of Pine Ridge to purchase the Additional Debentures on the Additional
Settlement Date is subject to the satisfaction by the Company or waiver by Pine
Ridge of each of the following conditions:
(i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company contained in this
Agreement shall be true and correct as of the date when made and as of the
Additional Settlement Date, as though made on and as of the Additional
Settlement Date (other than representations and warranties which relate to a
specific date (which shall not include representations and warranties relating
to the "date hereof") which representations and warranties shall be true as of
such specific date).
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company between the Closing Date and the
Additional Settlement Date.
(iii) Registration Statement. The Registration Statement shall
have been declared effective under the Securities Act by the Commission and
shall have remained effective (and the prospectus therein shall have remained
available for use by the Purchasers to resell Underlying Shares (including,
without limitation, Underlying Shares issuable upon conversion of the Additional
Debentures and exercise of the Third Warrants) thereunder at all times, not
subject to any actual or threatened stop order or subject to any actual or
threatened suspension at any time prior to the Additional Settlement Date.
-7-
(iv) No Injunction. Since the Closing Date, no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits the consummation of any of the
transactions contemplated by the Transaction Documents.
(v) Adverse Changes. Since the Closing Date, no event or
series of events which reasonably would be expected to have or result in a
material adverse effect on the results of operations, assets or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole.
(vi) Additional Letter of Credit. The Company shall have
obtained a letter of credit issued by First Union National Bank in the form of
Exhibit F hereto, in an amount equal to $3,000,000 (the "ADDITIONAL LETTER OF
CREDIT").
(vii) Shareholder Approval The Company shall have obtained the
Shareholder Approval by the sixth month anniversary of the Closing Date.
(viii) Compliance Certificate. The Company shall have
delivered to Pine Ridge, an officer's certificate stating that the conditions
specified in clauses (i)-(vii) above have been satisfied.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchasers:
(a) Subsidiaries. The Company has no direct or indirect
subsidiaries other than those listed in Schedule 3.1(a). Except as disclosed in
Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital
stock of each Subsidiary free and clear of any lien, charge, security interest,
encumbrance, right of first refusal or other restriction (collectively,
"LIENS"), and all the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights. If the Company has no subsidiaries, then
references in the Transaction Documents to the Subsidiaries will be disregarded.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
-8-
case may be, could not, individually or in the aggregate have or reasonably be
expected to result in: (i) a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii) a material adverse effect on
the results of operations, assets, business or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a
material adverse effect on the Company's ability to perform fully on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a "MATERIAL ADVERSE EFFECT"). Except as could not have or could not reasonably
be expected to result in a Material Adverse Effect, neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents.
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each
Transaction Document has been (or upon delivery will be) duly executed by the
Company and, when delivered in accordance with the terms hereof, will constitute
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not: (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) subject to obtaining the Required Approvals (as defined below), conflict
with, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or
a Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected (except to the extent that stockholder approval may be
required pursuant to the rules of the NASDAQ for the issuance for a number of
Underlying Shares together with the Shares (at a price below the closing price
of the Common Stock on the Trading Day immediately preceding the Closing Date)
greater than 19.99% of the number of shares of Common Stock outstanding
immediately prior to the Closing Date (the "19.99% Rule"); except in the case of
each of clauses (ii) and (iii), such as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
-9-
(e) Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filing with the Commission of the
Registration Statement, (ii) the filings required by Section 4.8, (iii) the
application with the Trading Market for the listing of the Shares and Underlying
Shares for trading thereon in the time and manner required thereby, (iv) to the
extent that the stockholder approval required pursuant to the 19.99% Rule and
(v) as required by blue sky filings (collectively, the "REQUIRED APPROVALS").
(f) Issuance of the Securities. The Securities have been duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens. The Company has reserved from its duly authorized
capital stock a number of shares of Common Stock to be issued to the applicable
Purchasers upon conversion or exercise of the Debentures or Warrants and such
number of reserved shares of Common Stock shall be at least equal to the
Required Minimum calculated as of the date hereof.
(g) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock of the Company is set forth in
Schedule 3.1(g). No securities of the Company are entitled to preemptive or
similar rights, and no Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities and except as disclosed in Schedule 3.1(g), there are
no outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities.
(h) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing materials being collectively referred
to herein as the "SEC REPORTS" and, together with the Schedules to this
Agreement, the "DISCLOSURE MATERIALS") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has delivered to the Purchasers a
copy of all SEC Reports filed within the 10 days preceding the date hereof. As
of their respective dates, the SEC Reports complied in
-10-
all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(i) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports: (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than: (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
The Company does not have pending before the Commission any request for
confidential treatment of information.
(j) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "ACTION") which: (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect. Except as disclosed in Schedule 3.1(j), neither the
Company nor any Subsidiary, nor any officer thereof, is or has been, nor any
director thereof is or has been for the last three years, the subject of any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been, and,
to the knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director that was a director of the Company at any time during the last three
years or
-11-
officer of the Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.
(k) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.
(l) Patents and Trademarks. The Company and the Subsidiaries have,
or have rights to use, patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could have, or reasonably be expected to result in, a Material Adverse
Effect (collectively, the "INTELLECTUAL PROPERTY RIGHTS"). Neither the Company
nor any Subsidiary has received a written notice that the Intellectual Property
Rights used by the Company or any Subsidiary violates or infringes upon the
rights of any Person which if determined adversely to the Company would,
individually or in the aggregate have a Material Adverse Effect. To the
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights.
(m) Transactions With Affiliates and Employees. Except as set
forth in SEC Reports and except as set forth on the attached Schedule 3.1(m),
none of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
(n) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
-12-
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(o) Solvency. Based on the financial condition of the Company as
of the Closing Date, (i) the Company's fair saleable value of its assets exceeds
the amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be payable on or
in respect of its debt).
(p) Certain Fees. Except for fees or commissions payable by the
Company to Banc of America Securities LLC, no brokerage or finder's fees or
commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by this Agreement. The
Purchasers shall have no obligation with respect to any fees or with respect to
any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.
(q) Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2(b)-(e), no registration
under the Securities Act is required for the offer, issuance and sale of the
Securities by the Company to the Purchasers as contemplated hereby.
(r) Form S-3 Eligibility. The Company is eligible to register the
resale of shares of Common Stock for resale by the Purchasers under Form S-3
promulgated under the Securities Act.
(s) Listing and Maintenance Requirements. The Company has not, in
the two years preceding the date hereof, received notice (written or oral) from
any Eligible Market on which the Common Stock is or has been listed or quoted to
the effect that the Company is not in compliance with the listing or maintenance
requirements of such Eligible Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market and no approval of the shareholders of the Company is required
for the Company to issue and deliver to
-13-
the Purchasers the maximum number of Securities contemplated by this Agreement
assuming exercise of the Warrants and conversion of the Debentures on the date
hereof.
(t) Registration Rights. Except as described in Schedule 3.1(t),
the Company has not granted or agreed to grant to any Person any rights
(including "piggy back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority that
have not been satisfied.
(u) Investment Company. The Company is not, and is not an
Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(v) Application of Takeover Protections. 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 the Company's Certificate of Incorporation (or similar
charter documents) or the laws of its state of incorporation that is or could
become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company's issuance of
the Securities and the Purchasers' ownership of the Securities.
(w) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their agents
or counsel with any information that constitutes or might constitute material,
non-public information. The Company understands and confirms that the Purchasers
will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on behalf of the Company are
true and correct and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(x) Seniority. As of the date of this Agreement, no indebtedness
of the Company is senior to the Debentures in right of payment, whether with
respect to interest or upon liquidation or dissolution, or otherwise.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents to which it is a party and otherwise
to carry out its obligations thereunder. The purchase by such Purchaser of the
Securities issued or issuable to it pursuant to the terms hereof has been duly
authorized by all necessary corporate
-14-
action on the part of such Purchaser. Each of this Agreement and the
Registration Rights Agreement has been duly executed by such Purchaser, and,
when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities
issued or issuable to it as principal for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Securities or any part thereof, without prejudice, however, to such Purchaser's
right, subject to the provisions of this Agreement, at all times to sell or
otherwise dispose of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act or under an exemption from such
registration and in compliance with applicable federal and state securities
laws. Nothing contained herein shall be deemed a representation or warranty by
such Purchaser to hold the Securities issued or issuable to it for any period of
time. Such Purchaser is acquiring the Securities issued or issuable to it
hereunder in the ordinary course of its business. Such Purchaser does not have
any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities issued or issuable to it.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities issued or issuable to it, it was, and at the date hereof it is, and
as of each date of exercise of Warrants, it will be, an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Such Purchaser has not been
formed solely for the purpose of acquiring the Securities issued or issuable to
it. Such Purchaser is not a registered broker-dealer under Section 15 of the
Exchange Act.
(d) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities issued or
issuable to it, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities issued or issuable to it and, at the present time, is able to afford
a complete loss of such investment.
(e) General Solicitation. Such Purchaser is not purchasing the
Securities issued or issuable to it as a result of any advertisement, article,
notice or other communication regarding the Securities issued or issuable to it
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.
(f) Access to Information. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities issued or issuable to it and the merits and risks of
investing in the Securities issued or issuable to it; (ii) access to information
about the
-15-
Company and the Subsidiaries and their respective financial condition, results
of operations, business, properties, management and prospects sufficient to
enable it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Purchaser or its representatives
or counsel shall modify, amend or affect such Purchaser's right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents.
The Company acknowledges and agrees that no Purchaser makes or has made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of the Securities
other than pursuant to an effective registration statement, to the Company, to
an Affiliate of a Purchaser who is an "accredited investor" as defined in Rule
501(a) under the Securities Act or in connection with a pledge as contemplated
in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer, any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of a Purchaser under this Agreement and the Registration
Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of the following legend on the certificates evidencing
the Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE/EXERCISABLE] HAVE [NOT] BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS AS EVIDENCED BY A
-16-
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THESE SECURITIES [AND THE SECURITIES ISSUABLE UPON
CONVERSION/EXERCISE OF THESE SECURITIES] MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement or grant a security
interest in some or all of the Securities issued or issuable to it and, if
required under the terms of such arrangement, such Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties. Such a pledge
or transfer would not be subject to approval of the Company and no legal opinion
of the pledgee, secured party or pledgor shall be required in connection
therewith, provided, that the Company's transfer agent may require a legal
opinion to issue a certificate in the name of such pledgee or secured party if
such pledgee or secured party requires registration of the applicable Securities
in its name. Further, no notice shall be required of such pledge. At the
appropriate Purchaser's expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities
including the preparation and filing of any required prospectus supplement under
Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders
thereunder.
(c) Certificates evidencing the Shares or Underlying Shares shall
not contain any legend (including the legend set forth in Section 4.1(b)): (i)
while a registration statement (including the Registration Statement) covering
the resale of such Shares or Underlying Shares is effective under the Securities
Act, or (ii) following any sale of such Shares or Underlying Shares pursuant to
Rule 144, or (iii) if such Shares or Underlying Shares are eligible for sale
under Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The Company shall cause
its counsel to issue the legal opinion included in the Transfer Agent
Instructions to the Company's transfer agent on the Effective Date. If all or
any portion of a Warrant or Debenture is exercised or converted at a time when
there is a effective registration statement to cover the resale of the
Underlying Shares, such Underlying Shares shall be issued free of all legends.
The Company agrees that following the Effective Date or at such time as such
legend is no longer required for Shares or Underlying Shares under this Section
4.1(c), it will, no later than three Trading Days following the delivery by a
Purchaser to the Company or the Company's transfer agent of a certificate
representing Shares or Underlying Shares issued with a restrictive legend,
deliver or cause to be delivered to such Purchaser a certificate representing
such Shares or Underlying Shares that is free from all restrictive or other
legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.
4.2 Unconditional Performance. The Company acknowledges that the
issuance of the Securities will result in dilution of the outstanding shares of
Common Stock. The Company
-17-
further acknowledges that its obligations under the Transaction Documents,
including without limitation its obligation to issue the Underlying Shares
pursuant to the Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction, regardless of
the effect of any such dilution or any claim that the Company may have against
any Purchaser and shall only be subject to a non-appealable order of the
Commission.
4.3 Furnishing of Information. As long as any Purchaser owns the
Securities issued or issuable to it, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. Upon the request of any such Person, the Company
shall deliver to such Person a written certification of a duly authorized
officer as to whether it has complied with the preceding sentence. As long as
any Purchaser owns the Securities issued or issuable to it, if the Company is
not required to file reports pursuant to such laws, it will prepare and furnish
to the Purchasers and make publicly available in accordance with Rule 144(c)
such information as is required for the Purchasers to sell the Securities under
Rule 144.
4.4 Integration. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the applicable Securities to the
Purchasers, or that would be integrated with the offer or sale of the applicable
Securities for purposes of the rules and regulations of any Trading Market, if
such integration would result in a violation of any such rule or regulation.
4.5 Listing of Securities. The Company shall: (i) in the time and manner
required by each Trading Market, prepare and file with such Trading Market an
additional shares listing application covering the Shares and the Underlying
Shares, (ii) take all steps necessary to cause such shares to be approved for
listing on each Trading Market as soon as possible thereafter, (iii) provide to
the Purchasers evidence of such listing, and (iv) maintain the listing of such
shares on each such Trading Market or another eligible securities market.
4.6 Reservation of Shares. The Company shall maintain a reserve from its
duly authorized shares of Common Stock to comply with its conversion and
exercise obligations under the Debentures and Warrants pursuant to the
Transaction Documents. If on any date the Company would be, if notice of
exercise or conversion were to be delivered on such date, precluded from issuing
the number of Underlying Shares, as the case may be, issuable upon exercise in
full of all of the Warrants and issuable upon conversion in full of the
Debentures due to the unavailability of a sufficient number of authorized but
unissued or reserved shares of Common Stock, then the Board of Directors of the
Company shall promptly prepare and mail to the stockholders of the Company proxy
materials requesting authorization to amend the Company's certificate of
incorporation to increase the number of shares of Common Stock which the Company
is authorized to issue so as to provide enough shares for issuance of the
Underlying Shares. In connection therewith, the Board of Directors shall (a)
adopt proper resolutions authorizing such increase, (b) recommend to and
otherwise use its best efforts to promptly and duly obtain stockholder approval
to carry out such resolutions (and hold a special meeting of the stockholders as
soon as practicable, but in any event not later than the 60th day
-18-
after delivery of the proxy materials relating to such meeting) and (c) within
five Business Days of obtaining such stockholder authorization, file an
appropriate amendment to the Company's certificate of incorporation to evidence
such increase.
4.7 Subsequent Placements and Registration Statements.
(a) From the date hereof through and including the Effective Date,
the Company will not: (i) directly or indirectly, offer, sell or grant any
option to purchase (or announce any offer, sale, grant or any option to
purchase) any of its Common Stock Common Stock Equivalents, or (ii) file a
registration statement (other than on a Form S-8 and pursuant to the
Registration Rights Agreement) with the Commission with respect to any
securities of the Company.
(b) The Company will not, directly or indirectly, offer, sell or
issue any Common Stock or Common Stock Equivalents, in a transaction intended to
be exempt from the registration requirements of the Securities Act (a
"SUBSEQUENT PRIVATE PLACEMENT") from the Closing Date until the earlier to occur
of (x) eighteen months from the Closing Date, or (y) with respect to each
individual Purchaser, the date on which such Purchaser no longer holds 20% or
more of the Securities (including Underlying Shares), issued or issuable to such
Purchaser pursuant to the Transaction Documents, unless (i) the Company delivers
to each of the Purchasers a written notice (the "SUBSEQUENT PRIVATE PLACEMENT
NOTICE") of its intention to effect such Subsequent Private Placement, which
Subsequent Private Placement Notice shall describe in reasonable detail the
proposed terms of such Subsequent Private Placement, the amount of proceeds
intended to be raised thereunder, the Person with whom such Subsequent Private
Placement is proposed to be effected, and attached to which shall be a term
sheet or similar document relating thereto and (ii) such Purchaser shall not
have notified the Company by 6:30 p.m. (New York City time) on the tenth Trading
Day after its receipt of the Subsequent Placement Notice of its willingness to
provide (or to cause its designee to provide), subject to completion of mutually
acceptable documentation, up to the greater of 20% of such financing or six
million dollars ($6,000,000) (the "SUBSEQUENT FINANCING AMOUNT") to the Company
on the same terms set forth in the Subsequent Private Placement Notice. If the
Purchasers shall fail to so notify the Company of their willingness to
participate in the Subsequent Financing Amount, the Company may effect the
remaining portion of such Subsequent Placement on the terms and to the Persons
set forth in the Subsequent Private Placement Notice. The Company shall provide
the Purchasers with a second Subsequent Private Placement Notice and the
Purchasers will again have the right of first refusal set forth above in this
paragraph (b), if the Subsequent Placement subject to the initial Subsequent
Private Placement Notice is not consummated for any reason on the terms set
forth in such Subsequent Placement Notice within 45 Trading Days after the date
of the initial Subsequent Placement Notice with the Person identified in the
Subsequent Placement Notice. If the Purchasers indicate a willingness to provide
financing in excess of the Subsequent Financing Amount, then each Purchaser will
be entitled to provide financing pursuant to such Subsequent Placement Notice up
to an amount equal to such Purchaser's Percentage, but the Company shall not be
required to accept financing from the Purchasers in an amount in excess of the
Subsequent Financing Amount.
-19-
(c) The restrictions contained in Section 4.7(a) and (b) shall not
apply to any grant or issuance by the Company of any of the following:
(i) Any grant of an option or warrant for Common Stock or
issuance of any shares of Common Stock upon the exercise of any options or
warrants to employees, officers and directors of or consultants to the Company
pursuant to any stock option plan, employee stock purchase plan or similar plan
or incentive or consulting arrangement approved by the Company's board of
directors;
(ii) Any rights or agreements to purchase Common Stock
Equivalents outstanding on the date hereof and as specified in Schedule 3.1(g)
(but not as to any amendments or other modifications to the number of Common
Stock issuable thereunder, the terms set forth therein, or the exercise price
set forth therein);
(iii) Any Common Stock or Common Stock Equivalents issued for
consideration other than cash pursuant to a merger, consolidation, acquisition
or other similar business combination;
(iv) Any issuances of Common Stock or Common Stock
Equivalents to a Person which is or will be, itself or through its subsidiaries,
an operating company in a business related to or complementary with the business
of the Company and in which the Company receives reasonably material benefits in
addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities;
(v) Any Common Stock Equivalents that entitle the holders
thereof to acquire up to 500,000 shares of Common Stock issued pursuant to any
equipment leasing arrangement;
(vi) Any Common Stock or Common Stock Equivalents issued to
pay all or a portion of any investment banking, finders or similar fee or
commission, which entitles the holders thereof to acquire shares of Common Stock
at a price not less than the market price of the Common Stock on the date of
such issuance and which is not subject to any adjustments other than on account
of stock splits and reverse stock splits;
(vii) Any shares of Common Stock issued upon: (x) the exercise
of the Warrants or any similar warrant issued pursuant to this Agreement and (y)
the conversion of the Debentures;
(viii) a bona fide underwritten public offering of the Common
Stock resulting in gross proceeds in excess of $15 million to the Company (it
being understood that equity line transactions, including any on going warrant
financing, or any similar arrangements shall not constitute a bona fide
underwritten public offering of the Common Stock for the purposes hereof).
-20-
4.8 Securities Laws Disclosure; Publicity. The Company shall, within one
Business Day after each of the Closing Date, the Initial Settlement Date and the
Additional Settlement Date, issue a press release or file a Current Report on
Form 8-K reasonably acceptable to the Purchasers disclosing all material terms
of the transactions contemplated hereby. The Company and the Purchasers shall
consult with each other in issuing any press releases with respect to the
transactions contemplated hereby. Notwithstanding the foregoing, other than in
any registration statement filed pursuant to the Registration Rights Agreement
and filings related thereto, the Company shall not publicly disclose the name of
any Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except to the extent such disclosure is required by
law or Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure.
4.9 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.10 Use of Proceeds. The Company shall not use any of the net proceeds
from the sale of the Securities hereunder for the satisfaction of any portion of
the Company's debt (other than payment of trade payables in the ordinary course
of the Company's business and prior practices), to redeem any Company equity or
equity equivalent securities or to extend any loans to its Affiliates.
4.11 Indemnification of Purchasers. The Company hereby indemnifies and
holds the Purchasers and their directors, officers, shareholders, partners,
employees and agents (each, a "PURCHASER PARTY") harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation (collectively, "LOSSES")
that any such Purchaser Party may suffer or incur as a result of or relating to
any misrepresentation, breach or inaccuracy, or any allegation by a third party
that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents. The Company will reimburse such
Purchaser for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The Company and the
Purchaser Party may not, without the prior written consent of the other, agree
to any settlement of any claim or action with respect to which the Company is
required to indemnify the Purchaser Party pursuant to this Section 4.9.
4.12 Shareholders Rights Plan. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
any shareholders rights plan
-21-
or similar plan or arrangement in effect or hereafter adopted by the Company, or
that any Purchaser could be deemed to trigger the provisions of any such plan or
arrangement, by virtue of receiving Shares or Underlying Shares under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.
4.13 Letter of Credit. No later than the Initial Settlement Date, as
material inducement for the Purchasers to purchase the Initial Debentures, the
Company shall obtain the Initial Letter of Credit from First Union National
Bank. No later than the Additional Settlement Date, as material inducement for
the Purchasers to purchase the Additional Debentures, the Company shall obtain
the Additional Letter of Credit from First Union National Bank. The failure of
the Company to comply with any part of this covenant, may be deemed by Pine
Ridge to be a material violation of this Agreement.
4.14 Shareholder Approval. The Company shall use its best efforts to
obtain the Shareholder Approval no later than the sixth month anniversary of the
Closing Date. The failure of the Company to comply this covenant, may be deemed
by Pine Ridge to be a material violation of this Agreement.
ARTICLE V.
MISCELLANEOUS
5.1 Fees and Expenses. The Company has agreed to pay $40,000 at the
Closing to the Purchasers as reimbursement for their legal and other fees and
expenses incurred in connection with the investigation and negotiation of the
transaction and the preparation and negotiation of the Transaction Documents of
which $30,000 has been paid as of the date hereof. Accordingly, in lieu of the
foregoing payment, the Company, on the Closing Date, will direct that the
aggregate amount that the Purchasers are to pay for the Shares and First
Warrants at the Closing, will be reduced by $10,000. The Company has agreed to
pay $25,000 on the Additional Settlement Date to Pine Ridge as reimbursement for
its legal and other fees and expenses incurred in connection with the
investigation and negotiation of the transaction and the preparation and
negotiation of the Transaction Documents. Accordingly, in lieu of the foregoing
payment, the Company, on the Second Settlement Date, will direct that the
aggregate amount that Pine Ridge has to pay for the Additional Debentures and
Third Warrants on the Second Additional Closing Date, will be reduced by
$25,000. Other than as specified above, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the issuance of any Securities.
5.2 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company
-22-
will execute and deliver to the Purchasers such further documents as may be
reasonably requested in order to give practical effect to the intention of the
parties under the Transaction Documents.
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The addresses for such notices and communications are those set forth on the
signature pages hereof, or such other address as may be designated in writing
hereafter, in the same manner, by such Person.
5.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement and the Registration Rights Agreement to any
Person to whom such Purchaser assigns or transfers any Securities.
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.
5.8 Governing Law; Venue; Waiver of Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by and construed and enforced in accordance with the internal
laws of the State of New York,
-23-
without regard to the principles of conflicts of law thereof. Each party agrees
that all Proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Agreement and any other Transaction
Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
Proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such Proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its attorneys fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.
5.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the Settlement Date, as
applicable, and the delivery, conversion and exercise of the Securities, as
applicable.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.11 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.12 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents,
-24-
whenever any Purchaser exercises a right, election, demand or option under a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
5.13 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.15 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.16 Independent Nature of Purchasers' Obligations and Rights. The rights
and obligations of each Purchaser under any Transaction Document are several and
not joint with the rights and obligations of the other Purchaser and a Purchaser
shall not be responsible in any way for the performance of the obligations of
the other Purchaser under any Transaction Document. Nothing contained herein or
in any Transaction Document, and no action taken by any Purchaser pursuant
thereto shall constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Documents.
-25-
5.17 Each Purchaser shall be entitled to independently protect and
enforce its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for the other Purchaser to be joined as an additional party in any
proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
-26-
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
MILLENNIUM CELL INC.
By: /s/ Xxxxxx X. Xxxxxxxx, Xx.
-----------------------------------
Name: Xxxxxx X. Xxxxxxxx, Xx.
Title: Vice President - Finance and
International Business
Address for Notice:
0 Xxxxxxxxxx Xxx Xxxx
Xxxxxxxxx, XX 00000
Phone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With a copy to:
Xxxxxxx, Del Deo, Dolan, Griffinger
& Xxxxxxxxx, P.C
Xxx Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Phone (000) 000-0000
Fax (000) 000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASERS FOLLOW]
PINE RIDGE FINANCIAL, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Attorney-in-Fact
Shares Investment Amount: $2,500,000
Number of Shares to be acquired: 896,057
Maximum Number of Underlying Shares
issuable under First Warrant: 224,014
Maximum Number of Underlying Shares
issuable under Second Warrant: 624,029
Maximum Number of Underlying Shares
issuable under Third Warrant: 208,010
Address for Notice:
c/x Xxxxxxx Capital Corp.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn.: Avi Vigder and Eldad Gal
With a copy to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx
& Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 and (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
ZLP MASTER TECHNOLOGY FUND, LTD
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Director
Shares Investment Amount: $500,000
Number of Shares to be acquired: 179,211
Maximum Number of Underlying Shares
issuable under First Warrant: 44,803
Address for Notice:
c/o Xxxxxx Xxxxx Partners, LLC
00 Xxxxxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxx
Fax: 000-000-0000
With a copy to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 and (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
