SECURITIES PURCHASE AGREEMENT
Exhibit
10.1
This
Securities Purchase Agreement (this “Agreement”)
is
dated as of September 28, 2005, by and among NutraCea, a California corporation
(the “Company”),
and
the purchasers identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser”
and
collectively 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 each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described in this
Agreement.
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 each Purchaser agrees as
follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions.
In
addition to the terms defined elsewhere in this Agreement: (a) capitalized
terms
that are not otherwise defined herein have the meanings given to such terms
in
the Certificate of Determination (as defined herein), and (b) the following
terms have the meanings indicated in this Section 1.1:
“Action”
shall
have the meaning ascribed to such term in Section 3.1(l).
“Actual
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 or conversion
in full of all Warrants and shares of Preferred Stock, ignoring any conversion
or exercise limits set forth therein, and assuming that any previously
unconverted shares of Preferred Stock are held until the fourth anniversary
of
the date of determination and all dividends are paid in shares of Common Stock
until such fourth anniversary.
“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 under the Securities Act. With
respect to a Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as such Purchaser will
be deemed to be an Affiliate of such Purchaser.
“Certificate
of Determination”
means
the Certificate of Determination to be filed prior to the Closing by the Company
with the Secretary of State of California, in the form of Exhibit
A
attached
hereto.
“Closing”
means
the closing of the purchase and sale of the Securities pursuant to Section
2.1.
“Closing
Date”
means
the Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to
(i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities have been satisfied or
waived.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $.001 per share, and any securities
into which such common stock shall hereinafter have been reclassified
into.
“Company
Counsel”
means
Xxxxxxxxx Genshlea Chediak Law Corporation.
“Conversion
Price”
shall
have the meaning ascribed to such term in the Certificate of
Determination.
“Contingent
Obligation”
means,
as applied to any Person, any direct or indirect liability of that Person with
respect to any Indebtedness, lease, dividend, guaranty, letter of credit or
other obligation, contractual or otherwise (the “primary
obligation”)
of
another Person other than an Affiliate of such Person (the “primary
obligor”),
whether or not contingent, (a) to purchase, repurchase or otherwise acquire
such
primary obligations or any property constituting direct or indirect security
therefor, (b) to advance or provide funds (i) for the payment or discharge
of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition
of
the primary obligor, (c) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation,
or
(d) otherwise to assure or hold harmless the owner of any such primary
obligation against loss or failure or inability to perform in respect thereof.
The amount of any Contingent Obligation shall be deemed to be an amount equal
to
the stated or determinable amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof.
“Disclosure
Schedules”
shall
have the meaning ascribed to such term in Section 3.1 hereof.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“GAAP”
shall
have the meaning ascribed to such term in Section 3.1(i).
2
“Indebtedness”
means,
as to any Person, (a) all obligations of such Person for borrowed money
(including, without limitation, reimbursement and all other obligations with
respect to surety bonds, letters of credit and bankers’ acceptances, whether or
not matured), (b) all obligations of such Person to pay the deferred purchase
price of property or services, except trade accounts payable and accrued
commercial or trade liabilities arising in the ordinary course of business
(provided that to the extent that such accounts payable and liabilities are
overdue, the interest and penalties incurred as a result of such overdue amounts
shall be considered Indebtedness), (c) all interest rate and currency swaps,
caps, collars and similar agreements or hedging devices under which payments
are
obligated to be made by such Person, whether periodically or upon the happening
of a contingency, (d) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale
of
such property), (e) all obligations of such Person under leases which have
been
or should be, in accordance with GAAP, recorded as capital leases, (f) all
indebtedness secured by any Lien (other than Liens in favor of lessors under
leases other than leases included in clause (e)) on any property or asset owned
or held by that Person regardless of whether the indebtedness secured thereby
shall have been assumed by that Person or is non-recourse to the credit of
that
Person, and (g) any Contingent Obligation of such Person.
“Liens”
means
a
lien, charge, security interest, encumbrance, right of first refusal, preemptive
right or other restriction.
“Material
Adverse Effect”
means
any of (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 financial condition of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document. Changes in the market price of
the
common stock of the Company or The RiceX Company shall not, in and of itself,
constitute a Material Adverse Effect.
“Material
Permits”
shall
have the meaning ascribed to such term in Section 3.1(o).
“Merger
Transaction”
means
the proposed business combination of the Company and The RiceX Company, as
described in the Company’s definitive proxy statement filed with the
SEC.
“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.
“Preferred
Stock”
means
the up to 25,000 shares of the Company’s Series B Convertible Preferred Stock
issued hereunder having the rights, preferences and privileges set forth in
the
Certificate of Determination.
3
“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.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, dated the date hereof, among the Company
and
the Purchasers, in the form of Exhibit
B
attached
hereto.
“Registration
Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale of the Underlying Shares by each
Purchaser as provided for in the Registration Rights Agreement.
“Required
Approvals”
shall
have the meaning ascribed to such term in Section 3.1(e).
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
“SEC
Reports”
shall
have the meaning ascribed to such term in Section 3.1(i).
“Secured
Debt”
shall
have the meaning ascribed to such term in Section 4.9.
“Securities”
means
the Preferred Stock, the Warrants and the Underlying Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Stated
Value”
means
$1,000 per share of Preferred Stock.
“Subscription
Amount”
shall
mean, as to each Purchaser, the amount to be paid for the Preferred Stock
purchased hereunder as specified below such Purchaser's name on the signature
page of this Agreement and next to the heading “Subscription Amount”, in United
States Dollars and in immediately available funds.
“Subsidiary”
means
any subsidiary of the Company as set forth on Schedule
3.1(a).
“Trading
Day”
means
a
day on which the Common Stock is traded on a Trading Market.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Over-The-Counter Bulletin Board, the
Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock Exchange
or the Nasdaq National Market.
4
“Transaction
Documents”
means
this Agreement, the Certificate of Determination, the Warrants, the Registration
Rights Agreement and any other documents or agreements executed in connection
with the transactions contemplated hereunder.
“Underlying
Shares”
means
the shares of Common Stock issuable upon conversion of the Preferred Stock,
upon
exercise of the Warrants and issued and issuable in lieu of the cash payment
of
dividends on the Preferred Stock.
“Warrants”
means
collectively the Common Stock purchase warrants, in the form of Exhibit C
delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
hereof, which Warrants shall be exercisable immediately and have a term of
exercise equal to five years.
“Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE
II
PURCHASE
AND SALE
2.1 Closing.
On the
Closing Date, upon the terms and subject to the conditions set forth herein,
concurrent with the execution and delivery of this Agreement by the parties
hereto, the Company agrees to sell, and each Purchaser agrees to purchase in
the
aggregate, severally and not jointly, up to $25,000,000 of shares of Preferred
Stock with an aggregated Stated Value equal to such Purchaser’s Subscription
Amount and Warrants as determined pursuant to Section 2.2(a)(viii). The
aggregate number of shares of Preferred Stock sold hereunder shall be up to
25,000. Each
Purchaser shall deliver to the Company via wire transfer or a certified check
immediately available funds equal to their Subscription Amount and the Company
shall deliver to each Purchaser their respective shares of Preferred Stock
and
Warrants as determined pursuant to Section 2.2(a) and the other items set forth
in Section 2.2 issuable at the Closing. Upon satisfaction of the conditions
set
forth in Section 2.2, the Closing shall occur at the offices of Company Counsel,
or such other location as the parties shall mutually agree.
2.2
|
Deliveries.
|
a)
|
On
the Closing Date, the Company shall deliver or cause to be delivered
to
each Purchaser the following:
|
(i)
|
a
certificate evidencing a number of shares of Preferred Stock equal
to such
Purchaser’s Subscription Amount divided by the Stated Value, registered in
the name of such Purchaser;
|
(ii)
|
the
Registration Rights Agreement duly executed by the Company;
|
(iii)
|
a
legal opinion of Company Counsel, in the form of Exhibit
D
attached hereto;
|
5
(vi)
|
a
certificate evidencing the incorporation and good standing of the
Company
and each Subsidiary in such entity’s state or other jurisdiction of
incorporation or organization issued by the Secretary of State (or
other
applicable authority) of such state or jurisdiction of incorporation
or
organization as of a date within ten (10) days of the Closing Date;
|
(vii)
|
a
secretary’s certificate, dated as of the Closing Date, certifying as to
(A) the Resolutions, (B) the Articles of the Corporation, certified
as of
a date within ten (10) days of the Closing Date, and (C) the Bylaws,
each
as in effect as of the Closing Date, (D) the organizational documents
of
each subsidiary, certified as of a date within ten (10) days of the
Closing Date by the applicable governmental authority of the applicable
jurisdiction, and (E) the by laws, limited partnership agreement
or
limited liability company agreement of each Subsidiary, as the case
may
be; such Purchaser such other documents relating to the transactions
contemplated by this Agreement as such Purchaser or its counsel may
reasonably request; and
|
(viii)
|
a
Warrant registered in the name of such Purchaser to purchase up to
a
number of shares of Common Stock equal to 50% of such Purchaser’s
Subscription Amount divided by $0.50, with a per share exercise price
equal to $0.70,
subject to adjustment therein.
|
(ix)
|
such
other documents relating to the transactions contemplated by this
Agreement as such Purchaser or its counsel may reasonably
request.
|
b)
|
On
or prior to the Closing Date, each Purchaser shall deliver or cause
to be
delivered to the Company (or Company Counsel acting on behalf of
the
Company) the following:
|
(i)
|
such
Purchaser’s Subscription Amount by wire transfer to the account as
specified in writing by the Company;
and
|
(ii)
|
the
Registration Rights Agreement duly executed by such
Purchaser.
|
2.3
|
Closing
Conditions.
|
a)
|
The
obligations of the Company hereunder in connection with the Closing
are
subject to the following conditions being
met:
|
(i)
|
the
accuracy in all material respects when made and on the Closing Date
of the
representations and warranties of the Purchasers contained
herein;
|
6
(ii)
|
the
aggregate value of Preferred Shares to be sold hereunder shall be
no less
than $6,000,000;
|
(iii)
|
the
Purchasers shall have performed in all material respects with all
obligations, covenants and agreements of the Purchasers required
to be
performed by them at or prior to the Closing Date;
and
|
(iv)
|
the
delivery by the Purchasers of the items set forth in Section 2.2(b)
of
this Agreement.
|
b)
|
The
respective obligations of the Purchasers hereunder in connection
with the
Closing are subject to the following conditions being
met:
|
(i)
|
the
accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained
herein;
|
(ii)
|
the
Company shall have performed in all material respects with all
obligations, covenants and agreements of the Company required to
be
performed by it at or prior to the Closing Date;
|
(iii)
|
the
delivery by the Company of the items set forth in Section 2.2(a)
of this
Agreement;
|
(iv)
|
the
shareholders of the Company and the stockholders of The RiceX Company
shall have approved the Merger Transaction and the Merger Transaction
shall have been simultaneously
consummated;
|
(v)
|
from
the date hereof to the Closing Date, trading in the Common Stock
shall not
have been suspended by the Commission or the Trading Market (except
for
any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the Closing);
and
|
(vi)
|
the
aggregate value of Preferred Shares to be sold hereunder shall be
no less
than $6,000,000.
|
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company.
Except
as set forth in the disclosure schedules separately delivered to the Purchasers
concurrently herewith (the “Disclosure
Schedules”),
the
Company hereby makes the representations and warranties set forth below to
each
Purchaser.
7
(a) Subsidiaries.
All of
the direct and indirect subsidiaries of the Company are set forth on
Schedule
3.1(a).
Except
as set forth on Schedule
3.1(a),
the
Company owns, directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any 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 to
subscribe for or purchase securities. 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. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. 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 case may be, could not
have or reasonably be expected to result in a Material Adverse Effect, and
no
Proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification.
(c) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company in connection therewith other than in
connection with the Required Approvals. Each Transaction Document has been
(or
upon delivery will have been) duly executed by the Company and, when delivered
in accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with
its
terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
(d) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the other transactions contemplated
thereby do not and will not: (i) conflict with or violate any provision of
the
Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any material Lien
upon
any of the properties or assets of
8
the
Company or any Subsidiary, 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) subject to
the
Required Approvals, conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which
any
property or asset of the Company or a Subsidiary is bound or affected; except
in
the case of each of clauses (ii) and (iii), such as could not have or reasonably
be expected to result in a Material Adverse Effect.
(e) Filings,
Consents and Approvals.
The
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court
or
other federal, state, local or other governmental authority in connection with
the execution, delivery and performance by the Company of the Transaction
Documents, other than (i) filings required pursuant to Section 4.6, (ii) filing
required by the Exchange Act, (iii) the filing with the Commission of the
Registration Statement, (iv) the notice and/or application(s) to each applicable
Trading Market for the issuance and sale of the Preferred Stock and Warrants
and
the listing of the Underlying Shares for trading thereon in the time and manner
required thereby, (v) the filing of Form D with the Commission and such filings
as are required to be made under applicable state securities laws and (vi)
the
approvals set forth on Schedule
3.1(e)
(collectively, the “Required
Approvals”).
(f) Issuance
of the Securities.
The
Securities are duly authorized and, when issued and paid for in accordance
with
the applicable Transaction Documents, will be duly and validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the Company
other
than restrictions on transfer provided for in the Transaction Documents. The
Underlying Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable, free and clear
of all Liens imposed by the Company. The Company has reserved from its duly
authorized capital stock a number of shares of Common Stock for issuance of
the
Underlying Shares at least equal to the Actual Minimum on the date hereof.
The
Company has not, and to the knowledge of the Company, no Affiliate of the
Company has sold, offered for sale or solicited offers to buy or otherwise
negotiated in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the
sale
of the Securities to the Purchasers, or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market.
(g) Capitalization.
The
capitalization of the Company is as described in the SEC Reports and the
company’s definitive proxy statement filed with the SEC on August 30, 2005
(“Proxy
Statement”).
Except as specified in the SEC Reports and the Proxy
9
Statement,
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 which shall not have been waived
prior
to Closing. Except as disclosed in the Company’s reports filed with the
Commission, issued pursuant to the Company’s stock incentive plan or as a result
of the purchase and sale of the Securities, 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. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities, except as set forth on Schedule
3.1(g).
No
further approval or authorization of any stockholder, the Board of Directors
of
the Company or others is required for the issuance and sale of the shares of
Preferred Stock.
(h) Indebtedness.
Except
as set forth in the SEC Reports or on Schedule
3.1(h),
the
Company has not incurred or guaranteed, suffered to exist or is otherwise liable
for any Indebtedness.
(i) 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 twelve months preceding the date hereof (or such shorter period as
the
Company was required by law to file such material) (the foregoing materials,
including the exhibits thereto, being collectively referred to herein as the
“SEC
Reports”)
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. As
of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have
been
prepared in accordance with United States 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 except that unaudited financial statements may not contain all
footnotes required by GAAP, and
10
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.
(j) No
Undisclosed Events, Liabilities or Developments.
Except
for the issuance of the Preferred Shares and Underlying Shares contemplated
by
this Agreement or as set forth on Schedule
3(j),
no
event, liability or development has occurred or exists with respect to the
Company or its Subsidiaries or their respective business, properties, operations
or financial condition, that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made that
has not been publicly disclosed one (1) Trading Day prior to the date that
this
representation is made.
(k) 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 plan or restricted stock plan or as otherwise described on Schedule
3(k).
The
Company does not have pending before the Commission any request for confidential
treatment of information.
(l) Litigation.
Except
as set forth in SEC Reports, there is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened in writing against or affecting the Company, any Subsidiary
or any of their respective properties before or by any court, arbitrator,
governmental or administrative agency 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, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor, to the Company’s
knowledge, any director or officer thereof (in his or her capacity as such),
is
or has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of the Company, there
is not pending, any investigation by the Commission involving the Company or
any
current or former director or officer of the Company (in his or her capacity
as
such). The Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
11
(m) Labor
Relations.
No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company which could reasonably
be
expected to result in a Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates to such employee’s
relationship with the Company, and neither the Company nor any of its
Subsidiaries is a party to a collective bargaining agreement, and the Company
and its Subsidiaries believe that their relationships with their employees
are
good. No executive officer, to the knowledge of the Company, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does
not
subject the Company or any of its Subsidiaries to any liability with respect
to
any of the foregoing matters. The Company and its Subsidiaries are in compliance
with all U.S. federal, state, local and foreign laws and regulations relating
to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(n) Compliance.
Except
as set forth in the SEC Reports, 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 material indenture, loan or credit agreement or any other
material agreement or instrument to which it is a party or by which it or any
of
its material 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 applicable to its business and all
such laws that affect the environment, except in each case as could not have
a
Material Adverse Effect.
(o) Regulatory
Permits.
The
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in
the
SEC Reports, except where the failure to possess such permits could not have
or
reasonably be expected to result in a Material Adverse Effect (“Material
Permits”),
and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(p) Title
to Assets.
Except
as set forth on Schedule
3.1(p),
the
Company and the Subsidiaries have good and marketable title in fee simple to
all
real property owned by them that is material to the business of the Company
and
the Subsidiaries and good and marketable title in all personal property owned
by
them that is material to the
12
business
of the Company and the Subsidiaries, in each case free and clear of all Liens,
except for Liens as do not materially affect the value of such property and
do
not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties. Any real property and facilities held under lease by
the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in
compliance.
(q) Intellectual
Property Rights.
Other
than as set forth in the SEC Reports, the Company and the Subsidiaries have,
or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventory, copyrights,
licenses and other similar intellectual property rights that are necessary
for
use in connection with their respective businesses and which the failure to
so
have could have a Material Adverse Effect (collectively, the “Intellectual
Property Rights”).
Except as set forth in the SEC Reports, neither the Company nor any Subsidiary
has received a written notice that the Intellectual Property Rights used by
the
Company or any Subsidiary violates or infringes upon the rights of any Person.
Except as set forth in the SEC Reports, to the knowledge of the Company, all
such Intellectual Property Rights are enforceable and there is no existing
material infringement by another Person of any of the Intellectual Property
Rights. The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(r) Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged. To the best of Company’s knowledge, such insurance contracts and
policies are accurate and complete. Neither the Company nor any Subsidiary
has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.
(s) Transactions
With Affiliates and Employees.
Except
as set forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner, in each case in excess of $60,000
other than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii)
for
other employee benefits, including stock option agreements under any stock
option plan of the Company and restricted stock agreements under any restricted
stock plan of the Company.
13
(t) Xxxxxxxx-Xxxxx;
Internal Accounting Controls.
Except
as set forth in the SEC Reports, the Company is in material compliance with
all
provisions of the Xxxxxxxx-Xxxxx Act of 2002 which are applicable to it as
of
the Closing Date. The
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient in the judgment of the Company’s management 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
GAAP and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared
with
the existing assets at reasonable intervals and appropriate action is taken
with
respect to any differences.
(u) Certain
Fees.
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, except as set forth on Schedule
3.1(s).
The
Purchasers shall have no personal obligation with respect to any fees or with
respect to any claims (other than such fees or commissions owed by a Purchaser
pursuant to agreements entered into by such Purchaser, which fees or commissions
shall be the sole responsibility of such Purchaser) 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 due to an
arrangement or agreement made by the Company.
(v) Private
Placement.
Assuming the accuracy of the Purchasers representations and warranties set
forth
in Section 3.2, no registration under the Securities Act is required for the
offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does
not
contravene the rules and regulations of the Trading Market.
(w) Investment
Company.
The
Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the shares of Preferred Stock, will not be or be an Affiliate of,
an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended. The Company shall conduct its business in a manner so that it will
not become subject to the Investment Company Act.
(x) Listing
and Maintenance Requirements.
The
Company’s Common Stock is registered pursuant to Section 15(d) of the Exchange
Act, and the Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
that
the Commission is contemplating terminating such registration. The Company
has
not, in the 12 months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been
14
listed
or
quoted to the effect that the Company is not in compliance with the listing
or
maintenance requirements of such Trading 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.
(y) 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 Articles 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.
(z) 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 the Company believes constitutes material, nonpublic information except
insofar as the existence and terms of the proposed transactions hereunder may
constitute such information. The Company understands and confirms that the
Purchasers will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All written materials provided to
the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure Schedules to this Agreement, furnished by
or on
behalf of the Company with respect to the representations and warranties made
herein are true and correct with respect to such representations and warranties
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. 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 Section 3.2
hereof.
(aa) Tax
Status.
Except
for matters that would not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect, the Company and each
Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon,
and the Company has no knowledge of a tax deficiency which has been asserted
or
threatened in writing against the Company or any Subsidiary.
(bb) Foreign
Corrupt Practices.
Neither
the Company, nor to the knowledge of the Company, any agent or other person
acting on behalf of the Company, has (i) directly or indirectly, used any
corrupt funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or
to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or made
by
any person acting on
15
its
behalf of which the Company is aware) which is in violation of law, or (iv)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended
(cc) No
Disagreements with Accountants and Lawyers.
There
are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the accountants and lawyers formerly or
presently employed by the Company and the Company is current with respect to
any
fees owed to its accountants and lawyers.
(dd) Acknowledgment
Regarding Purchasers’ Purchase of Securities.
The
Company acknowledges and agrees that each of the Purchasers is acting solely
in
the capacity of an arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary
of
the Company (or in any similar capacity) with respect to this Agreement and
the
transactions contemplated hereby and any advice given by any Purchaser or any
of
their respective representatives or agents in connection with this Agreement
and
the transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Securities. The Company further represents to each Purchaser
that the Company’s decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
3.2 Representations
and Warranties of the Purchasers.
Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
as of the date hereof and as of the Closing Date 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 full right,
corporate or partnership power and authority to enter into and to consummate
the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations thereunder. The execution, delivery and performance by
such
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of such
Purchaser. Each Transaction Document to which it is a party 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, except
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
16
(b) Purchaser
Representation.
Such
Purchaser understands that the Securities are “restricted securities” and have
not been registered under the Securities Act or any applicable state securities
law and is acquiring the Securities as principal for its own account and not
with a view to or for distributing or reselling such Securities or any part
thereof, has no present intention of distributing any of such Securities and
has
no arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not limiting
such Purchaser’s right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities 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.
(c) Purchaser
Status.
At the
time such Purchaser was offered the Securities, it was, and at the date hereof
it is, and on each date on which it exercises any Warrants, it will be either:
(i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional
buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser is
not required to be registered as a 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, 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 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 as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
(f) Short
Sales.
Each
Purchaser represents that from January 1, 2005 through 9:00 a.m. ET on the
Trading Day immediately following the date of execution of this Agreement,
neither it nor any Person over which the Purchaser has direct control, have
made
any purchases or sales of, or granted any option for the purchase of or entered
into any hedging or similar transaction with the same economic effect as a
net
short sale, of the Common Stock.
The
Company acknowledges and agrees that each Purchaser does not make or has not
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.
|
17
(a) The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected
by
the transferor and reasonably acceptable to the Company, 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,
of a
legend on any of the Securities in the following form:
NEITHER
THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
OR CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
(c) Certificates
evidencing the Underlying Shares shall not contain any legend (including the
legend set forth in Section 4.1(b) hereof): (i) following a sale or transfer
of
such Underlying Shares pursuant to, and in compliance with, an effective
registration statement, or (ii) following any sale of such Underlying Shares
pursuant to Rule 144 (assuming the transferor is not an Affiliate of the
Company), or (iii) if such Underlying Shares are eligible for sale under Rule
144(k). If all or any shares of Preferred Stock or any portion of a Warrant
is
converted or exercised (as applicable) into the Underlying Shares and such
Underlying Shares may be sold under Rule 144(k), then such Underlying Shares
shall be issued free of all legends. The Company agrees that at such time as
such legend is no longer required under this Section 4.1(c), it will, no later
than five Trading Days following the receipt by the Company of, or the receipt
by the Company of notice that the Transfer Agent has received, a certificate
representing Underlying Shares, as applicable, issued with a restrictive legend,
deliver or cause to be delivered to such Purchaser a certificate representing
such shares that is free from all such restrictive and 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.
18
4.2 Acknowledgment
of Dilution.
The
Company acknowledges that the issuance of the Securities may result in dilution
of the outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions. The Company further acknowledges that its
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 the Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.
4.3 Furnishing
of Information.
For a
period ending upon the earlier to occur of (i) the date in which no Purchaser
owns the Securities and (ii) two (2) years following the Closing Date, 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. The Company further
covenants that it will take such further action as any holder of Securities
may
reasonably request, all to the extent required from time to time to enable
such
Person to sell such Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144.
4.4 Integration.
The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the
sale
of the Securities to the Purchasers or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market.
4.5 Conversion
and Exercise Procedures.
The
form of Notice of Exercise included in the Warrants and the Notice of Conversion
included in the Certificate of Determination set forth the totality of the
procedures required of the Purchasers in order to exercise the Warrants or
convert the Preferred Stock. No additional legal opinion or other information
or
instructions shall be required of the Purchasers to convert their Preferred
Stock or exercise their Warrants. The Company shall honor exercises of the
Warrants and conversions of the Preferred Stock and shall deliver Underlying
Shares in accordance with the terms, conditions and time periods set forth
in
the Transaction Documents.
4.6 Securities
Laws Disclosure;
Publicity.
The
Company shall, by 9:00 a.m. Eastern time on the fourth Trading Day following
the
date hereof, file a Current Report on Form 8-K, reasonably acceptable to counsel
to the Purchasers disclosing the material terms of the transactions contemplated
hereby, and shall attach this Agreement, the Registration Rights Agreement
and
the Certificate of Determination thereto. The Company shall not publicly
disclose the name of any Purchaser other than the Placement Agent, if
applicable, when issuing any press releases, without the prior written consent
of such Purchaser, except to the extent such disclosure is required by law
or
Trading Market regulations. If the Company fails to file the Form 8-K as
required in this Section, in addition to any other remedy provided herein or
in
the Transaction Documents, a Purchaser shall have the right to make, public
disclosure in the form
19
of
a
press release, public advertisement or otherwise, of such material nonpublic
information without the prior approval by the Company, its Subsidiaries, or
any
of its or their respective officers, directors, employees or agents, provided
that such Purchaser gives the Company at least two (2) Business Days’ notice of
its intention to make such public disclosure and provides such intended
disclosure to the Company. No Purchaser shall have any liability to the Company,
its Subsidiaries, or any of its or their respective officers, directors,
employees, shareholders or agents for any such disclosure so long as the
nonpublic information disclosed by such Purchaser is accurate and not
misleading.
4.7 Form
D; Blue Sky Filings.
The
Company agrees to timely file a Form D with respect to the Securities as
required under Regulation D and to provide a copy thereof to each Purchaser
promptly after such filing. The Company shall, on or before the Closing Date,
take such action as the Company shall reasonably determine is necessary in
order
to obtain an exemption for, or to qualify the Securities for, sale to the
Purchasers at the Closing and issuance to the Purchasers on the Delivery Date
pursuant to this Agreement under applicable securities or “Blue Sky” laws of the
states of the United States, and shall provide evidence of any such action
to
counsel for AG on or prior to the Closing Dates. The Company shall make all
filings and reports relating to the offer and sale of the Securities required
under applicable securities or “Blue Sky” laws of the states of the United
States following the Closing Dates.
4.8 Non-Public
Information.
The
Company covenants and agrees that it and its employees, officers and directors
will not, and it will not authorize any other Person acting on its behalf to
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.
4.9 Use
of
Proceeds.
Except
for payment of (i) principal and accrued but unpaid interest with respect to
the
Company’s December 22, 2004 secured debt financing (the “Secured
Debt”),
(ii)
attorney’s fees and (iii) fees incurred in connection with the Merger
Transaction and the transactions contemplated by this Agreement, the Company
shall use the net proceeds from the sale of the Securities hereunder for working
capital purposes.
4.10
Indemnification
of Purchasers.
Subject
to the provisions of this Section 4.10, the Company will indemnify and hold
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 that any such Purchaser Party may suffer or incur as a result
of
or relating to any material breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents. If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of
its
own choosing. Any Purchaser Party shall have the right to employ separate
counsel in any such action and
20
participate
in the defense thereof, but the fees and expenses of such counsel shall be
at
the expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense
and
to employ counsel or (iii) the named parties to any such Proceeding (including
any impleaded parties) include both such Purchaser Party and the Company, and
such Purchaser Party shall reasonably believe that a material conflict of
interest is likely to exist if the same counsel were to represent such Purchaser
Party and the Company (in which case, if such Purchaser Party notifies the
Company in writing that it elects to employ separate counsel at the expense
of
the Company, the reasonable fees and expenses of one separate counsel shall
be
at the expense of the Company). The Company shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. The Company will not be liable
to
any Purchaser Party under this Agreement (i) for any settlement by a Purchaser
Party effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is primarily attributable to any
Purchaser Party’s breach of any of the representations, warranties, covenants or
agreements made by the Purchasers in this Agreement or in the other Transaction
Documents. The Company shall not, without the prior written consent of the
Purchaser Party (which consent shall not be unreasonably withheld or delayed),
effect any settlement of any pending proceeding in respect of which any
Purchaser Party is a party, unless such settlement includes an unconditional
release of such Purchaser Party from all liability on claims that are the
subject matter of such proceeding.
4.11
Reservation
and Listing of Securities.
(a) The
Company shall maintain a reserve from its duly authorized shares of Common
Stock
for issuance pursuant to the Transaction Documents in such amount as may be
required to fulfill its obligations in full under the Transaction Documents.
(b) The
Company shall, if applicable: (i) in the time and manner required by the Trading
Market, prepare and file with such Trading Market an additional shares listing
application (if required by such Trading Market) covering a number of shares
of
Common Stock at least equal to the Actual Minimum on the date of such
application, (ii) take all steps necessary to cause such shares of Common Stock
to be approved for listing on the Trading Market as soon as possible thereafter,
and (iii) maintain the listing of such Common Stock on any date at least equal
to the Actual Minimum on such date on such Trading Market or another Trading
Market.
4.12
Equal
Treatment of Purchasers.
No
consideration shall be offered or paid to any person to amend or consent to
a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration is also offered to all of the parties to the
Transaction Documents. For clarification purposes, this provision constitutes
a
separate right granted to each Purchaser by the Company and negotiated
separately by each Purchaser, and is intended to treat for the Company the
Purchasers as a class and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.
21
4.13
Limitation
on Additional Indebtedness.
As long
as at least 5,000 shares of Preferred Stock remain outstanding, without the
prior written consent of the holders of a majority of the shares of Preferred
Stock then outstanding, the Company shall not, and shall not permit any of
its
Subsidiaries to, directly or indirectly, incur, assume or suffer to exist
(including through acquisitions) any new Indebtedness other than Indebtedness
(i) up to an aggregate of $1,000,000 in addition to all Indebtedness pursuant
to
(ii), (iii) and (iv) below, (ii) that is secured solely by the accounts
receivable of the Corporation and that does not exceed the aggregate amount
of
all outstanding accounts receivable of the Corporation, (iii) incurred to
finance or refinance the construction or improvement of existing or new
manufacturing and production plant, facilities or equipment for the
Corporation’s products provided that such Indebtedness is secured solely by the
property and assets so financed, constructed or improved, (iv) incurred as
a
result of Persons exercising dissenters’ rights in the Merger Transaction and
(v) in connection with the renewal, extension, or replacement (on substantially
similar terms) of any Indebtedness outstanding as of the Closing
Date.
4.14
Release
of Secured Debt.
The
Company shall cause the security interests securing the Secured Debt to be
released within three (3) days after the Closing Date.
4.15
Most
Favored Nations.
From
the date hereof until the first anniversary of the Closing Date, the Company
shall not offer to enter into or enter into any contract, agreement or
understanding for a equity or convertible debt financing of any type (including,
but not limited to, common stock issuances, preferred stock issuances,
convertible debt offerings, rights offerings or debt financing with warrant
coverage), or consummate any transaction contemplated by any such contract,
agreement or understanding with any Person that contains terms and provisions
(including fees, dividend or interest provisions or rates, ranking, redemption,
conversion price, warrant coverage, expense reimbursement or otherwise) that
are
more favorable individually or in the aggregate than the terms and provisions
contained in this Agreement or any of the other Transaction Documents, without
first entering into amendments to the Transaction Documents with the Purchasers
to provide for the same more favorable terms and provisions.
4.16
Repurchase
of Securities.
In
the event that any Purchaser shall deliver written notice to the Company of
its
election to seek redemption pursuant to this Section 4.16 at any time, the
Company agrees that it will, within 20 days of receipt of such written notice,
repurchase all the securities of the Company then held by such Purchaser for
an
aggregate repurchase price of $1.00 in cash.
ARTICLE
V
MISCELLANEOUS
5.1 Termination.
This
Agreement may be terminated by any Purchaser prior to the Closing, by written
notice to the other parties, if (a) the Closing has not been consummated on
or
before October 15, 2005 or (b) at the election of any Purchaser, with respect
to
such Purchaser, if there has been a material breach of any representation,
warranty, covenant or agreement on the part of the Company contained in this
Agreement, which breach has not been cured within ten (10) business days notice
to the Company of such breach; provided that no such termination will affect
the
right of any party to xxx for any breach by the other party (or
parties).
22
5.2 Fees
and Expenses.
At the
Closing, the Company has agreed to reimburse Xxxxxx Xxxxxx (“AG”)
the
non-accountable sum of $25,000, for its actual, reasonable, out-of-pocket legal
fees and expenses. Accordingly, in lieu of the foregoing payments, the aggregate
amount that AG is to pay for the Securities at the Closing shall be reduced
by
$25,000 in lieu thereof. Except as expressly set forth in the Transaction
Documents to the contrary, 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 other than income taxes of the Purchasers that may
be
incurred in connection with the transactions contemplated hereby.
5.3 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.
5.4 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 set forth on the signature
pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading
Day,
(b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth
on
the signature pages attached hereto on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) the second Trading
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, (d) upon actual receipt by the party to whom such
notice is required to be given or (e) four (4) days after being placed in the
mail, if mailed. The address for such notices and communications shall be as
set
forth on the signature pages attached hereto.
5.5 Amendments;
Waivers.
No
provision of this Agreement may be waived, modified, supplemented or amended
except in a written instrument signed by the Company and the Purchasers holding
a majority of the shares of Preferred Stock issued hereby. 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.
5.6 Construction.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
23
5.7 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser; provided, however, that the Company may assign its
rights and delegate its duties hereunder to any surviving, acquiring or
successor corporation in connection with a merger or consolidation of the
Company with another corporation, or a sale, transfer or other disposition
of
all or substantially all of the Company’s assets to another corporation, or
other similar transaction, without the prior written consent of the Purchasers,
after notice duly given by the Company to the Purchasers. Any Purchaser may
assign any or all of its rights under this Agreement to any Person to whom
such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the “Purchasers”.
5.8 No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Section 4.9.
5.9 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents shall be governed by and construed and enforced
in
accordance with the internal laws of the State of New York, without regard
to
the principles of conflicts of law thereof. Each party agrees that all legal
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. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect
to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof 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. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions
of
the Transaction Documents, then the prevailing party in such action or
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 action or proceeding.
5.10
Survival.
The
representations, warranties, covenants and other agreements contained herein
shall survive the Closing and the delivery, exercise and/or conversion of the
Securities; provided that the survival period for the representations and
warranties shall be eighteen (18) months following the Closing
Date.
24
5.11
Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original
thereof.
5.12
Severability.
If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
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
Independent
Nature of Purchasers’ Obligations and Rights.
The
obligations of each Purchaser under any Transaction Document are several and
not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. 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 any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its
25
own
separate legal counsel in their review and negotiation of the Transaction
Documents. The Company has elected to provide all Purchasers with the same
terms
and Transaction Documents for the convenience of the Company and not because
it
was required or requested to do so by the Purchasers.
[SIGNATURE
PAGE FOLLOWS]
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.
Address
for Notice:
|
||||
By:
|
|
1261
Hawks’ Flight Court
|
||
Name:
Xxxxxxx Xxxxx
|
Xx
Xxxxxx Xxxxx, XX 00000
|
|||
Title:
President
|
Facsimile:
|
(000)
000-0000
|
||
Attention:
|
Chief
Executive Officer
|
With
a
copy to (which shall not constitute notice):
Xxxxxxxxx
Genshlea Chediak law corporation
000
Xxxxxxx Xxxx
Xxxxxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
Attn.:
Xxxxxxxxxxx Xxxxxxx, Esq.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASERS FOLLOWS]
27
[PURCHASER
SIGNATURE PAGES TO NUTRACEA SECURITIES PURCHASE AGREEMENT]
[ENTITY
INVESTOR]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of
Investing Entity: __________________________
Signature
of Authorized Signatory of Investing Entity:
__________________________
Name
of
Authorized Signatory: _________________________
Title
of
Authorized Signatory: __________________________
Email
Address of Authorized Signatory:________________________________
Tax
ID
number of Investing Entity:__________________________________
Physical
Address for Notice of Investing Entity:
Facsimile
Address for Notice of Investing Entity: _________________________
Address
for Delivery of Securities for Investing Entity (if not same as
above):
Subscription
Amount:
Shares
of
Preferred Stock:
[SIGNATURE
PAGES CONTINUE]
28
[PURCHASER
SIGNATURE PAGES TO NUTRACEA SECURITIES PURCHASE AGREEMENT]
[INDIVIDUAL
INVESTOR]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of
Investing Individual: __________________________
Signature
of Investing Individual:
__________________________
Email
Address of Investing Individual:________________________________
Tax
ID
number of Investing Individual:__________________________________
Physical
Address for Notice to Investing Individual:
Facsimile
Address for Notice to Investing Individual:
_________________________
Address
for Delivery of Securities for Investing Individual (if not same as
above):
Subscription
Amount:
Shares
of
Preferred Stock:
Warrant
Shares:
[SIGNATURE
PAGES CONTINUE]
29