Exhibit 10.1
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PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
by and among
NexMed, Inc., as Issuer and Seller
and
SDS Merchant Fund, L.P. and the other parties named herein, as Purchasers
with respect to Seller's
Series B 8% Cumulative Convertible Preferred Stock
and Warrants to Purchase Common Stock
April 21, 2003
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Table of Exhibits and Schedules
Exhibit A Form of Certificate of Designation of the Series B 8%
Cumulative Convertible Preferred Stock
Exhibit B Form of Warrant
Exhibit C Form of Investor Rights Agreement
Exhibit D Form of Opinion of Seller's Counsel
Exhibit E Form of Opinion of Nevada Counsel
Exhibit F Form of Escrow Agreement
Schedule 1 Purchasers and Shares of Preferred Stock and Warrants
Purchased
Schedule 3.10 Litigation
Schedule 3.11 Absence of Certain Changes
Schedule 3.15 Intellectual Property
Schedule 3.17 Preemptive Rights
Schedule 3.19 Subsidiaries and Investments
Schedule 3.20 Capitalization
Schedule 3.21 Options, Warrants, Rights
Schedule 3.22 Employees, Employment Agreements and Employee Benefit Plans
Schedule 3.27 Brokers
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the "Agreement") dated
as of April 21, 2003, by and among NexMed, Inc., a Nevada corporation (the
"Seller"), and SDS Merchant Fund, L.P. and each of the other persons listed on
Schedule 1 hereto (each is individually referred to as a "Purchaser" and
collectively, the "Purchasers").
W I T N E S S E T H:
WHEREAS, each of the Purchasers is willing to purchase from the Seller,
and the Seller desires to sell to the Purchasers, up to an aggregate of 800
shares of its Series B 8% Cumulative Convertible Preferred Stock, $10,000
liquidation preference per share, par value $0.001 per share (the "Preferred
Stock"), and Common Stock Purchase Warrants (the "Warrants") entitling the
holders thereof to purchase shares of the Seller's common stock, $0.001 par
value (the "Common Stock") as more fully set forth herein.
NOW THEREFORE, in consideration of the mutual promises and
representations, warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I - PURCHASE AND SALE
1.1 Purchase and Sale.
(a) On the terms and subject to the conditions set forth in this
Agreement, at the Closing (as defined in Section 2.2), the Seller will sell and
each of the Purchasers will purchase the Preferred Stock in the amounts set
forth on Schedule 1 hereto. In addition, the Seller will sell and each Purchaser
will purchase at the Closing the number of Warrants set forth on Schedule 1
hereto.
(b) The shares of Common Stock issuable upon conversion of the
Preferred Stock or upon payment of dividends on the Preferred Stock are referred
to herein as the "Conversion Shares," and the shares of Common Stock issuable
upon exercise of the Warrants are referred to herein as the "Warrant Shares."
1.2 Terms of the Preferred Stock and Warrants. The terms and provisions
of the Preferred Stock are set forth in the form of Certificate of Designation
of Series B 8% Cumulative Convertible Preferred Stock, attached hereto as
Exhibit A (the "Certificate of Designation"). The terms and provisions of the
Warrants are more fully set forth in the form of Common Stock Purchase Warrant,
attached hereto as Exhibit B.
1.3 Transfers; Legends.
(a) Except as required by federal securities laws and the securities
law of any state or other jurisdiction within the United States, the Preferred
Stock, Conversion Shares, Warrants and Warrant Shares (collectively, the
"Securities") may be transferred, in whole or in part, by any of the Purchasers
at any time. In the case of Preferred Stock, such transfer may be effected by
delivering written transfer instructions to the Seller, and the Seller shall
reflect such transfer on its books and records and reissue certificates
evidencing the Preferred Stock upon surrender of
certificates evidencing the Preferred Stock being transferred. Any such transfer
shall be made by a Purchaser in accordance with applicable law. In connection
with any transfer of Securities other than pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or to the Seller, the Seller may require the transferor thereof to furnish to
the Seller an opinion of counsel selected by the transferor, such counsel and
the form and substance of which opinion shall be reasonably satisfactory to the
Seller and Seller's counsel, to the effect that such transfer does not require
registration under the Securities Act; provided, that in the case of a transfer
pursuant to Rule 144 under the Securities Act, no opinion shall be required if
the transferor provides the Company with a customary seller's representation
letter, and if such sale is not pursuant to subsection (k) of Rule 144, a
customary broker's representation letter and Form 144. Notwithstanding the
foregoing, the Seller hereby consents to and agrees to register on the books of
the Seller and with any transfer agent for the securities of the Seller, without
any such legal opinion, any transfer of Securities by a Purchaser to an
Affiliate of such Purchaser, provided that the transferee certifies to the
Seller that it is an "accredited investor" as defined in Rule 501(a) under the
Securities Act and that it is acquiring the Securities solely for investment
purposes (subject to the qualifications hereof) and not with a view to, or for,
resale, distribution or fractionalization thereof in whole or in part in
violation of the Securities Act. Any transferee shall agree to be bound by the
terms of the Investor Rights Agreement and this Agreement. The Seller shall
reissue certificates evidencing the Securities upon surrender of certificates
evidencing the Securities being transferred in accordance with this Section
1.3(a). An "Affiliate" means any Person (as such term is defined below) 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. A "Person" means any individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision of any thereof) or other entity of any kind.
(b) The certificates representing the Securities shall bear the
following legends:
"THE SHARES REPRESENTED BY, OR ACQUIRABLE UPON CONVERSION OR EXERCISE OF
SECURITIES EVIDENCED BY, THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT UNLESS, IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, SUCH REGISTRATION IS
NOT REQUIRED."
"THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS
AGREEMENT DATED AS OF APRIL 21, 2003, AS AMENDED FROM TIME TO TIME, AMONG THE
COMPANY AND CERTAIN HOLDERS OF ITS OUTSTANDING SECURITIES. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS
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CERTIFICATE TO THE SECRETARY OF THE COMPANY."
ARTICLE II - PURCHASE PRICE AND CLOSING
2.1 Purchase Price. The aggregate purchase price (the "Purchase Price")
to be paid by the Purchasers to the Seller to acquire the Preferred Stock and
the applicable Warrants shall be the total amounts set forth on Schedule 1
hereto.
2.2 The Closing. The closing of the transactions contemplated under
this Agreement (the "Closing") will take place as promptly as practicable, but
no later than five (5) business days following satisfaction or waiver of the
conditions set forth in Article 6.1(a) and (b) and 6.2(a) (other than those
conditions which by their terms are not to be satisfied or waived until the
Closing), at the offices of Xxxxxx & Xxxx LLP, 000 Xxxxxxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxxxxx 00000. The date on which the Closing occurs is the "Closing Date."
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchasers as follows:
3.1 Corporate Existence and Power; Subsidiaries. The Seller and its
Subsidiaries are corporations duly incorporated, validly existing and in good
standing under the laws of the state in which they are incorporated, and have
all corporate powers required to carry on their business as now conducted. The
Seller and its Subsidiaries are duly qualified to do business as a foreign
corporation and are in good standing in each jurisdiction where the character of
the property owned or leased by them or the nature of their activities makes
such qualification necessary, except for those jurisdictions where the failure
to be so qualified would not have a Material Adverse Effect on the Seller or any
of its Subsidiaries. For purposes of this Agreement, the term "Material Adverse
Effect" means, with respect to any person or entity, a material adverse effect
on its and its Subsidiaries' condition (financial or otherwise), business,
properties, assets, liabilities (including contingent liabilities), results of
operations or current prospects, taken as a whole. True and complete copies of
the Seller's Articles of Incorporation, as amended, and Bylaws, as amended, as
currently in effect and as will be in effect on the Closing Date (collectively,
the "Articles and Bylaws"), have previously been provided to the Purchasers. For
purposes of this Agreement, the term "Subsidiary" or "Subsidiaries" means, with
respect to any entity, any corporation or other organization of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are
directly or indirectly owned by such entity or of which such entity is a partner
or is, directly or indirectly, the beneficial owner of 50% or more of any class
of equity securities or equivalent profit participation interests. The Seller
has no Subsidiaries other than the following, each of which, unless otherwise
indicated, is wholly-owned by the Seller:
(a) NexMed Holdings, Inc., a Delaware corporation,
(b) NexMed (U.S.A.), Inc., a Delaware corporation,
(1) New Brunswick Medical Inc. a Delaware corporation and a
wholly-owned subsidiary of NexMed (U.S.A.), Inc.,
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(c) NexMed International Limited, organized under British Virgin
Islands law,
(1) NexMed (Americas) Limited, organized under Nova Scotia
law and a wholly-owned subsidiary of NexMed
International Limited, and
(2) NexMed International (Hong Kong) Ltd. organized under
Hong Kong law and a wholly-owned subsidiary of NexMed
International Limited, a wholly-owned subsidiary of
NexMed International Limited.
3.2 Corporate Authorization. The execution, delivery and performance by
the Seller of this Agreement, and the Warrants, the Escrow Agreement (as defined
below), the Certificate of Designation, the Investor Rights Agreement, and each
of the other documents executed pursuant to and in connection with this
Agreement (collectively, the "Related Documents"), and the consummation of the
transactions contemplated hereby and thereby (including, but not limited to, the
sale and delivery of the Preferred Stock and the Warrants, and the subsequent
issuance of the Conversion Shares upon conversion of the Preferred Stock and the
Warrant Shares upon exercise of the Warrants) have been duly authorized, and no
additional corporate or stockholder action is required for the approval of this
Agreement. The Conversion Shares and the Warrant Shares have been duly reserved
for issuance by the Seller. This Agreement and the Related Documents have been
or, to the extent contemplated hereby or by the Related Documents, will be duly
executed and delivered and constitute the legal, valid and binding agreement of
the Seller, enforceable against the Seller in accordance with their terms,
except as may be limited by bankruptcy, reorganization, insolvency, moratorium
and similar laws of general application relating to or affecting the enforcement
of rights of creditors, and except as enforceability of its obligations
hereunder are subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
3.3 Charter, Bylaws and Corporate Records. The minute books of the
Seller and its Subsidiaries contain complete and accurate records of all
meetings and other corporate actions of the board of directors, committees of
the board of directors, incorporators and stockholders of the Seller and its
Subsidiaries from September 15, 1995 to the date hereof. All material corporate
decisions and actions have been validly made or taken. All corporate books,
including without limitation the share transfer register, comply with applicable
laws and regulations and have been regularly updated. Such books fully and
correctly reflect all the decisions of the stockholders.
3.4 Governmental Authorization. Except as otherwise specifically
contemplated in this Agreement and the Related Documents, and except for: (i)
the filings referenced in Section 5.11; (ii) the filing of the Certificate of
Designation; (iii) the filing of a Form D with respect to the Preferred Stock
and Warrants under Regulation D under the Securities Act; (iv) the filing of the
Registration Statement with the Commission; (v) the application(s) to each
trading market for the listing of the Conversion Shares and the Warrant Shares
for trading thereon; and (vi) any filings required under state securities laws
that are permitted to be made after the date hereof, the execution, delivery and
performance by the Seller of this Agreement and the Related Documents,
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and the consummation of the transactions contemplated hereby and thereby
(including, but not limited to, the sale and delivery of the Preferred Stock and
Warrants and the subsequent issuance of the Conversion Shares and Warrant Shares
upon conversion of the Preferred Stock or otherwise or exercise of the Warrants,
as applicable) by the Seller require no action by or in respect of, or filing
with, any governmental body, agency, official or authority. Notwithstanding the
foregoing, the Seller makes no representation or warranty with respect to the
compliance of the transactions contemplated by this Agreement with Rule 4350(i)
of the National Association of Securities Dealers, Inc.
3.5 Non-Contravention. The execution, delivery and performance by the
Seller of this Agreement and the Related Documents, and the consummation by the
Seller of the transactions contemplated hereby and thereby (including the
issuance of the Conversion Shares and Warrant Shares) do not and will not (a)
contravene or conflict with the Articles (as amended by the Certificate of
Designation) and Bylaws of the Seller and its Subsidiaries or any material
agreement to which the Seller is a party or by which it is bound; (b) contravene
or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
the Seller or its Subsidiaries; (c) constitute a default (or would constitute a
default with notice or lapse of time or both) under or give rise to a right of
termination, cancellation or acceleration or loss of any benefit under any
material agreement, contract or other instrument binding upon the Seller or its
Subsidiaries or under any material license, franchise, permit or other similar
authorization held by the Seller or its Subsidiaries; or (d) result in the
creation or imposition of any Lien (as defined below) on any asset of the Seller
or its Subsidiaries. For purposes of this Agreement, the term "Lien" means, with
respect to any asset, any mortgage, lien, pledge, charge, security interest,
claim or encumbrance of any kind in respect of such asset.
3.6 SEC Documents. The Seller is obligated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") to file reports pursuant
to Sections 13 or 15(d) thereof (all such reports filed or required to be filed
by the Seller, including all exhibits thereto or incorporated therein by
reference, and all documents filed by the Seller under the Securities Act
hereinafter called the "SEC Documents"). The Seller has filed all reports or
other documents required to be filed under the Exchange Act. All SEC Documents
filed by the Seller as of or for any period beginning on or after January 1,
2001, (i) were prepared in all material respects in accordance with the
requirements of the Exchange Act and (ii) did not at the time they were filed
(or, if amended or superseded by a filing prior to the date hereof, then on the
date of such filing) contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Seller has previously delivered to the Purchaser a
correct and complete copy of each report which the Seller filed with the
Securities and Exchange Commission (the "SEC" or the "Commission") under the
Exchange Act for any period ending on or after December 31, 2002 (the "Recent
Reports"). None of the information about the Seller or any of its Subsidiaries
which has been disclosed to the Purchasers herein or in the course of
discussions and negotiations with respect hereto which is not disclosed in the
Recent Reports is or was required to be so disclosed, and no material non-public
information has been disclosed to the Purchasers.
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3.7 Financial Statements. Each of the Seller's audited consolidated
balance sheet and related consolidated statements of income, cash flows and
changes in stockholders' equity (including the related notes) as of and for the
years ended December 31, 2002 and December 31, 2001, as contained in the Recent
Reports (collectively, the "Seller's Financial Statements" or the "Financial
Statements") (x) present fairly in all material respects the financial position
of the Seller and its Subsidiaries on a consolidated basis as of the dates
thereof and the results of operations, cash flows and stockholders' equity as of
and for each of the periods then ended, and (y) were prepared in accordance with
generally accepted accounting principals ("GAAP") applied on a consistent basis
throughout the periods involved, in each case, except as otherwise indicated in
the notes thereto.
3.8 Compliance with Law. The Seller and its Subsidiaries are in
compliance and have conducted their business so as to comply with all laws,
rules and regulations, judgments, decrees or orders of any court, administrative
agency, commission, regulatory authority or other governmental authority or
instrumentality, domestic or foreign, applicable to their operations, the
violation of which would cause a Material Adverse Affect. There are no judgments
or orders, injunctions, decrees, stipulations or awards (whether rendered by a
court or administrative agency or by arbitration), including any such actions
relating to affirmative action claims or claims of discrimination, against the
Seller or its Subsidiaries or against any of their properties or businesses.
3.9 No Defaults. The Seller and its Subsidiaries are not, nor have they
received notice that they would be with the passage of time, giving of notice,
or both, (i) in violation of any provision of their Articles and Bylaws (ii) in
default or violation of any term, condition or provision of (A) any judgment,
decree, order, injunction or stipulation applicable to the Seller or its
Subsidiaries or (B) any material agreement, note, mortgage, indenture, contract,
lease or instrument, permit, concession, franchise or license to which the
Seller or its Subsidiaries are a party or by which the Seller or its
Subsidiaries or their properties or assets may be bound, and no circumstances
exist which would entitle any party to any material agreement, note, mortgage,
indenture, contract, lease or instrument to which such Seller or its
Subsidiaries are a party, to terminate such as a result of such Seller or its
Subsidiaries, having failed to meet any material provision thereof including,
but not limited to, meeting any applicable milestone under any material
agreement or contract.
3.10 Litigation. Except as disclosed in the Recent Reports or on
Schedule 3.10, there is no action, suit, proceeding, judgment, claim or
investigation pending or, to the best knowledge of the Seller, threatened
against the Seller and its Subsidiaries which could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Seller or its Subsidiaries or which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
hereby, and there is no basis for the assertion of any of the foregoing.
There are no claims or complaints existing or, to the knowledge of the
Seller or its Subsidiaries, threatened for product liability in respect of any
product of the Seller or its Subsidiaries, and the Seller and its Subsidiaries
are not aware of any basis for the assertion of any such claim.
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3.11 Absence of Certain Changes. Since December 31, 2002, the Seller
has conducted its business only in the ordinary course and there has not
occurred, except as set forth in the Recent Reports or any exhibit thereto or
incorporated by reference therein:
(a) Any event that could reasonably be expected to have a Material
Adverse Effect on the Seller or any of its Subsidiaries;
(b) Any amendments or changes in the Articles or Bylaws of the Seller
and its Subsidiaries, other than on account of the filing of the Certificate of
Designation;
(c) Any damage, destruction or loss, whether or not covered by
insurance, that would, individually or in the aggregate, have or would be
reasonably likely to have, a Material Adverse Effect on the Seller and its
Subsidiaries;
(d) Except as set forth on Schedule 3.11(d), any
(i) incurrence, assumption or guarantee by the Seller or its
Subsidiaries of any debt for borrowed money other than for equipment
leases;
(ii) issuance or sale of any securities convertible into or
exchangeable for securities of the Seller other than to directors,
employees and consultants pursuant to existing equity compensation or
stock purchase plans of the Seller;
(iii) issuance or sale of options or other rights to acquire from
the Seller or its Subsidiaries, directly or indirectly, securities of
the Seller or any securities convertible into or exchangeable for any
such securities, other than options issued to directors, employees and
consultants in the ordinary course of business in accordance with past
practice;
(iv) issuance or sale of any stock, bond or other corporate
security;
(v) discharge or satisfaction of any material Lien, other than
current liabilities incurred since December 31, 2001 in the ordinary
course of business;
(vi) declaration or making any payment or distribution to
stockholders or purchase or redemption of any share of its capital
stock or other security;
(vii) sale, assignment or transfer any of its intangible assets
except in the ordinary course of business, or cancellation of any debt
or claim except in the ordinary course of business;
(viii) waiver of any right of substantial value whether or not in
the ordinary course of business;
(ix) material change in officer compensation except in the
ordinary course of business and consistent with past practices; or
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(x) other commitment (contingent or otherwise) to do any of the
foregoing.
(e) Any creation, sufferance or assumption by the Seller or any of its
Subsidiaries of any Lien on any asset (other than Liens existing on the date
hereof or in connection with equipment leases and working capital lines of
credit set forth on Schedule 3.11(e)) or any making of any loan, advance or
capital contribution to or investment in any Person in an aggregate amount which
exceeds $25,000 outstanding at any time;
(f) Any entry into, amendment of, relinquishment, termination or
non-renewal by the Seller or its Subsidiaries of any material contract, license,
lease, transaction, commitment or other right or obligation, other than in the
ordinary course of business; or
(g) Any transfer or grant of a right with respect to the trademarks,
trade names, service marks, trade secrets, copyrights or other intellectual
property rights owned or licensed by the Seller or its Subsidiaries, except as
among the Seller and its Subsidiaries.
3.12 No Undisclosed Liabilities. Except as set forth in the Recent
Reports, and except for liabilities and obligations incurred in the ordinary
course of business since December 31, 2002, as of the date hereof, (i) the
Seller and its Subsidiaries do not have any material liabilities or obligations
(absolute, accrued, contingent or otherwise) which, and (ii) there has not been
any aspect of the prior or current conduct of the business of the Seller or its
Subsidiaries which may form the basis for any material claim by any third party
which if asserted could result in any such material liabilities or obligations
which, are not fully reflected, reserved against or disclosed in the balance
sheet of the Seller as at December 31, 2002.
3.13 Taxes. All tax returns and tax reports required to be filed with
respect to the income, operations, business or assets of the Seller and its
Subsidiaries have been timely filed (or appropriate extensions have been
obtained) with the appropriate governmental agencies in all jurisdictions in
which such returns and reports are required to be filed, and all of the
foregoing as filed are correct and complete and, in all material respects,
reflect accurately all liability for taxes of the Seller and its Subsidiaries
for the periods to which such returns relate, and all amounts shown as owing
thereon have been paid. All income, profits, franchise, sales, use, value added,
occupancy, property, excise, payroll, withholding, FICA, FUTA and other taxes
(including interest and penalties), if any, collectible or payable by the Seller
and its Subsidiaries or relating to or chargeable against any of its material
assets, revenues or income or relating to any employee, independent contractor,
creditor, stockholder or other third party through the Closing Date, were fully
collected and paid by such date if due by such date or provided for by adequate
reserves in the Financial Statements as of and for the periods ended December
31, 2002 (other than taxes accruing after such date) and all similar items due
through the Closing Date will have been fully paid by that date or provided for
by adequate reserves, whether or not any such taxes were reported or reflected
in any tax returns or filings. No taxation authority has sought to audit the
records of the Seller or any of its Subsidiaries for the purpose of verifying or
disputing any tax returns, reports or related information and disclosures
provided to such taxation authority, or for the Seller's or any of its
Subsidiaries' alleged failure to provide any such tax returns, reports or
related information and disclosure. No material claims or deficiencies have been
asserted against or inquiries raised with the Seller or any of its Subsidiaries
with respect to any taxes or
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other governmental charges or levies which have not been paid or otherwise
satisfied, including claims that, or inquiries whether, the Seller or any of its
Subsidiaries has not filed a tax return that it was required to file, and, to
the best of the Seller's knowledge, there exists no reasonable basis for the
making of any such claims or inquiries. Neither the Seller nor any of its
Subsidiaries has waived any restrictions on assessment or collection of taxes or
consented to the extension of any statute of limitations relating to taxation.
3.14 Interests of Officers, Directors and Other Affiliates. The
description of any interest held, directly or indirectly, by any officer,
director or other Affiliate of Seller (other than the interests of the Seller
and its Subsidiaries in such assets) in any property, real or personal, tangible
or intangible, used in or pertaining to Seller's business, including any
interest in the Intellectual Property (as defined in Section 3.15 hereof), as
set forth in the Recent Reports, is true and complete, and no officer, director
or other Affiliate of the Seller has any interest in any property, real or
personal, tangible or intangible, used in or pertaining to the Seller's
business, including the Seller's Intellectual Property, other than as set forth
in the Recent Reports.
3.15 Intellectual Property. Other than as set forth in the Recent
Reports:
(a) the Seller or a Subsidiary thereof has the right to use or is the
sole and exclusive owner of all right, title and interest in and to all foreign
and domestic patents, patent rights, trademarks, service marks, trade names,
brands and copyrights (whether or not registered and, if applicable, including
pending applications for registration) owned, used or controlled by the Seller
and its Subsidiaries (collectively, the "Rights") and in and to each material
invention, software, trade secret, technology, product, composition, formula,
method of process used by the Seller or its Subsidiaries (the Rights and such
other items, the "Intellectual Property"), and, to the Seller's knowledge, has
the right to use the same, free and clear of any claim or conflict with the
rights of others;
(b) no royalties or fees (license or otherwise) are payable by the
Seller or its Subsidiaries to any Person by reason of the ownership or use of
any of the Intellectual Property except as set forth on Schedule 3.15;
(c) there have been no claims made against the Seller or its
Subsidiaries asserting the invalidity, abuse, misuse, or unenforceability of any
of the Intellectual Property, and, to its knowledge, there are no reasonable
grounds for any such claims;
(d) neither the Seller nor its Subsidiaries have made any claim of any
violation or infringement by others of its rights in the Intellectual Property,
and to the best of the Seller's knowledge, no reasonable grounds for such claims
exist; and
(e) neither the Seller nor its Subsidiaries have received notice that
it is in conflict with or infringing upon the asserted rights of others in
connection with the Intellectual Property.
3.16 Restrictions on Business Activities. Other than as set forth in
the Recent Reports, there is no agreement, judgment, injunction, order or decree
binding upon the Seller or its Subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or
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materially impairing any business practice of the Seller or its Subsidiaries,
any acquisition of property by the Seller or its Subsidiaries or the conduct of
business by the Seller or its Subsidiaries as currently conducted or as
currently proposed to be conducted by the Seller.
3.17 Preemptive Rights. Except as set forth in Schedule 3.17, none of
the stockholders of the Seller possess any preemptive rights in respect of the
Preferred Stock or the Conversion Shares or Warrant Shares to be issued to the
Purchasers upon conversion of the Preferred Stock or exercise of the Warrants,
as applicable.
3.18 Insurance. The insurance policies providing insurance coverage to
the Seller or its Subsidiaries including for product liability are adequate for
the business conducted by the Seller and its Subsidiaries (currently limited to
the testing phase) and are sufficient for compliance by the Seller and its
Subsidiaries with all requirements of law and all material agreements to which
the Seller or its Subsidiaries are a party or by which any of their assets are
bound. All of such policies are in full force and effect and are valid and
enforceable in accordance with their terms, and the Seller and its Subsidiaries
have complied with all material terms and conditions of such policies, including
premium payments. None of the insurance carriers has indicated to the Seller or
its Subsidiaries an intention to cancel any such policy. 3.19 Subsidiaries and
Investments. Except as set forth in the Recent Reports or on Schedule 3.19, the
Seller has no Subsidiaries or Investments. For purposes of this Agreement, the
term "Investments" shall mean, with respect to any Person, all advances, loans
or extensions of credit to any other Person, all purchases or commitments to
purchase any stock, bonds, notes, debentures or other securities of any other
Person, and any other investment in any other Person, including partnerships or
joint ventures (whether by capital contribution or otherwise) or other similar
arrangement (whether written or oral) with any Person, including but not limited
to arrangements in which (i) the Person shares profits and losses, (ii) any such
other Person has the right to obligate or bind the Person to any third party, or
(iii) the Person may be wholly or partially liable for the debts or obligations
of such partnership, joint venture or other arrangement.
3.19 Subsidiaries and Investments. Except as set forth in the Recent
Reports or on Schedule 3.19, the Seller has no Subsidiaries or Investments. For
purposes of this Agreement, the term "Investments" shall mean, with respect to
any Person, all advances, loans or extensions of credit to any other Person,
all purchases or commitments to purchase any stock, bonds, notes, debentures or
other securities of any other Person, and any other investment in any other
Person, including partnerships or joint ventures (whether by capital
contribution or otherwise) or other similar arrangement (whether written or
oral) with any Person, including but not limited to arrangements in which (i)
the Person shares profits and losses, (ii) any such other Person has the right
to obligate or bind the Person to any third party, or (iii) the Person may be
wholly or partially liable for the debts or obligations or such partnership,
joint venture or other arrangement.
3.20 Capitalization. The authorized capital stock of the Seller
consists of 80,000,000 shares of common stock, $0.001 par value per share, of
which 29,484,234 shares are issued and outstanding as of the date hereof, and
10,000,000 shares of preferred stock, issuable in one or more classes or series,
with such relative rights and preferences as the Board of Directors may
determine, none of which has been authorized for issuance other than 1,000,000
shares of Series A Junior Participating Preferred Stock, $0.001 par value per
share, and other than the Preferred Stock contemplated hereby and none of which,
immediately prior to the Closing, is outstanding. All shares of the Seller's
issued and outstanding capital stock have been duly authorized, are validly
issued and outstanding, and are fully paid and nonassessable. No securities
issued by the Seller from the date of its incorporation to the date hereof were
issued in violation of any statutory or common law preemptive rights. There are
no dividends which have accrued or been declared but are unpaid on the capital
stock of the Seller. All taxes required to be paid by Seller in connection with
the issuance and any transfers of the Seller's capital stock have been paid.
Except as set forth on Schedule 3.20, all permits or authorizations required to
be obtained from or registrations required to be effected with any Person in
connection with any and all issuances
10
of securities of the Seller from the date of the Seller's incorporation to the
date hereof have been obtained or effected, and all securities of the Seller
have been issued and are held in accordance with the provisions of all
applicable securities or other laws.
3.21 Options, Warrants, Rights. Except as set forth on Schedule 3.21,
there are no outstanding (a) securities, notes or instruments convertible into
or exercisable for any of the capital stock or other equity interests of the
Seller or its Subsidiaries; (b) options, warrants, subscriptions or other rights
to acquire capital stock or other equity interests of the Seller or its
Subsidiaries; or (c) commitments, agreements or understandings of any kind,
including employee benefit arrangements, relating to the issuance or repurchase
by the Seller or its Subsidiaries of any capital stock or other equity interests
of the Seller or its Subsidiaries, any such securities or instruments
convertible or exercisable for securities or any such options, warrants or
rights. Other than the rights of the Purchasers under the Preferred Stock and
the Warrants, and except as set forth on Schedule 3.21, neither the Seller nor
the Subsidiaries have granted anti-dilution rights to any person or entity in
connection with any outstanding option, warrant, subscription or any other
instrument convertible or exercisable for the securities of the Seller or any of
its Subsidiaries. Other than the rights granted to the Purchasers under the
Investor Rights Agreement, there are no outstanding rights which permit the
holder thereof to cause the Seller or the Subsidiaries to file a registration
statement under the Securities Act or which permit the holder thereof to include
securities of the Seller or any of its Subsidiaries in a registration statement
filed by the Seller or any of its Subsidiaries under the Securities Act, and
there are no outstanding agreements or other commitments which otherwise relate
to the registration of any securities of the Seller or any of its Subsidiaries
for sale or distribution in any jurisdiction, except as set forth on Schedule
3.21.
3.22 Employees, Employment Agreements and Employee Benefit Plans.
Except as set forth in the Recent Reports or on Schedule 3.22, there are no
employment, consulting, severance or indemnification arrangements, agreements,
or understandings between the Seller and any officer, director, consultant or
employee of the Seller or its Subsidiaries (the "Employment Agreements"). No
Employment Agreement provides for the acceleration or change in the award,
grant, vesting or determination of options, warrants, rights, severance
payments, or other contingent obligations of any nature whatsoever of the Seller
or its Subsidiaries in favor of any such parties in connection with the
transactions contemplated by this Agreement. Except as disclosed in the Recent
Reports or on Schedule 3.22, the terms of employment or engagement of all
directors, officers, employees, agents, consultants and professional advisors of
the Seller and its Subsidiaries are such that their employment or engagement may
be terminated upon not more than two weeks' notice given at any time without
liability for payment of compensation or damages and the Seller and its
Subsidiaries have not entered into any agreement or arrangement for the
management of their business or any part thereof other than with their directors
or employees.
3.23 Absence of Certain Business Practices. Neither the Seller, nor any
Affiliate of the Seller, nor to the knowledge of the Seller, any agent or
employee of the Seller, any other Person acting on behalf of or associated with
the Seller, or any individual related to any of the foregoing Persons, acting
alone or together, has: (a) received, directly or indirectly, any rebates,
payments, commissions, promotional allowances or any other economic benefits,
regardless of their nature
11
or type, from any customer, supplier, trading company, shipping company,
governmental employee or other Person with whom the Seller has done business
directly or indirectly; or (b) directly or indirectly, given or agreed to give
any gift or similar benefit to any customer, supplier, trading company, shipping
company, governmental employee or other Person who is or may be in a position to
help or hinder the business of the Seller (or assist the Seller in connection
with any actual or proposed transaction) which (i) may subject the Seller to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, may have had an adverse effect on the
Seller or (iii) if not continued in the future, may adversely affect the assets,
business, operations or prospects of the Seller or subject the Seller to suit or
penalty in any private or governmental litigation or proceeding.
3.24 Products and Services. To the knowledge of the Seller and except
as disclosed in the Recent Reports, there exists no set of facts (i) which could
furnish a basis for the withdrawal, suspension or cancellation of any
registration, license, permit or other governmental approval or consent of any
governmental or regulatory agency with respect to any product or service
developed or provided by the Seller or its Subsidiaries, (ii) which could
furnish a basis for the withdrawal, suspension or cancellation by order of any
state, federal or foreign court of law of any product or service, or (iii) which
could have a Material Adverse Effect on the continued operation of any facility
of the Seller or its Subsidiaries or which could otherwise cause the Seller or
its Subsidiaries to withdraw, suspend or cancel any such product or service from
the market or to change the marketing classification of any such product or
service. Each product or service provided by Seller or its Subsidiaries has been
provided in accordance in all material respects with the specifications under
which such product or service normally is and has been provided and the
provisions of all applicable laws or regulations.
3.25 Environmental Matters. None of the premises or any properties
owned, occupied or leased by the Seller or its Subsidiaries (the "Premises") has
been used by the Seller or the Subsidiaries or, to the Seller's knowledge, by
any other Person, to manufacture, treat, store, or dispose of any substance that
has been designated to be a "hazardous substance" under applicable Environmental
Laws (hereinafter defined) ("Hazardous Substances") in violation of any
applicable Environmental Laws. To its knowledge, the Seller has not disposed of,
discharged, emitted or released any Hazardous Substances which would require,
under applicable Environmental Laws, remediation, investigation or similar
response activity. No Hazardous Substances are present as a result of the
actions of the Seller or, to the Seller's knowledge, any other Person, in, on or
under the Premises which would give rise to any liability or clean-up
obligations of the Seller under applicable Environmental Laws. The Seller and,
to the Seller's knowledge, any other Person for whose conduct it may be
responsible pursuant to an agreement or by operation of law, are in compliance
with all laws, regulations and other federal, state or local governmental
requirements, and all applicable judgments, orders, writs, notices, decrees,
permits, licenses, approvals, consents or injunctions in effect on the date of
this Agreement relating to the generation, management, handling, transportation,
treatment, disposal, storage, delivery, discharge, release or emission of any
Hazardous Substance (the "Environmental Laws"). Neither the Seller nor, to the
Seller's knowledge, any other Person for whose conduct it may be responsible
pursuant to an agreement or by operation of law has received any written
complaint, notice, order, or citation of any actual, threatened or alleged
noncompliance with any of the Environmental Laws, and there is no proceeding,
suit or
12
investigation pending or, to the Seller's knowledge, threatened against the
Seller or, to the Seller's knowledge, any such Person with respect to any
violation or alleged violation of the Environmental Laws, and, to the knowledge
of the Seller, there is no basis for the institution of any such proceeding,
suit or investigation.
3.26 Licenses; Compliance With FDA and Other Regulatory Requirements.
(a) General. Except as disclosed in the Recent Reports, the Seller
holds all material authorizations, consents, approvals, franchises, licenses and
permits required under applicable law or regulation for the operation of the
business of the Seller and its Subsidiaries as presently operated (the
"Governmental Authorizations"). All the Governmental Authorizations have been
duly issued or obtained and are in full force and effect, and the Seller and its
Subsidiaries are in material compliance with the terms of all the Governmental
Authorizations. The Seller and its Subsidiaries have not engaged in any activity
that, to their knowledge, would cause revocation or suspension of any such
Governmental Authorizations. The Seller has no knowledge of any facts which
could reasonably be expected to cause the Seller to believe that the
Governmental Authorizations will not be renewed by the appropriate governmental
authorities in the ordinary course. Neither the execution, delivery nor
performance of this Agreement shall adversely affect the status of any of the
Governmental Authorizations.
(b) FDA. Without limiting the generality of the representations and
warranties made in paragraph (a) above, the Seller represents and warrants that
(i) the Seller and each of its Subsidiaries is in material compliance with all
applicable provisions of the United States Federal Food, Drug, and Cosmetic Act
(the "FDC Act"), (ii) its products and those of each of its Subsidiaries that
are in the Seller's control are not adulterated or misbranded and are in lawful
distribution, (iii) the United States Food and Drug Administration (the "FDA")
has not initiated legal action with respect to the manufacturing of the Seller's
products, such as seizures or FDA-required recalls, and Seller uses best efforts
to comply with applicable FDA good manufacturing practice regulations, (iv) all
adverse events that were known to and required to be reported by Seller to the
FDA have been reported to the FDA in a timely manner, (v) neither the Seller nor
any of its Subsidiaries is, to their knowledge, employing or utilizing the
services of any individual who has been debarred under the FDC Act, (vi) all
stability studies required to be performed for products distributed by the
Seller or any of its Subsidiaries have been completed or are ongoing in material
compliance with the applicable FDA requirements, and (vii) the Seller and its
Subsidiaries is in compliance in all material respects with all applicable
provisions of the Controlled Substances Act.
3.27 Brokers. Except as set forth on Schedule 3.27, no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement,
based upon any arrangement made by or on behalf of the Seller, which would make
any Purchaser liable for any fees or commissions.
3.28 Securities Laws. Neither the Seller nor its Subsidiaries nor any
agent acting on behalf of the Seller or its Subsidiaries has taken or will take
any action which might cause this Agreement or the Preferred Stock or Warrants
to violate the Securities Act or the Exchange Act or any rules or regulations
promulgated thereunder, as in effect on the Closing Date. Assuming
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that all of the representations and warranties of the Purchasers set forth in
Article IV are true, all offers and sales of capital stock, securities and notes
of the Seller were conducted and completed in compliance with the Securities
Act. All shares of capital stock and other securities issued by the Seller and
its Subsidiaries prior to the date hereof have been issued in transactions that
were either registered offerings or were exempt from the registration
requirements under the Securities Act and all applicable state securities or
"blue sky" laws and in compliance with all applicable corporate laws.
3.29 Disclosure. No representation or warranty made by the Seller in
this Agreement, nor in any document, written information, financial statement,
certificate, schedule or exhibit prepared and furnished by the Seller or the
representatives of the Seller pursuant hereto or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact, or omits to state a material fact necessary to make the
statements or facts contained herein or therein not misleading in light of the
circumstances under which they were furnished.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, for itself only, hereby severally and not jointly,
represents and warrants to the Seller as follows:
4.1 Existence and Power. The Purchaser is duly organized, validly
existing and in good standing under the laws of the jurisdiction of such
Purchaser's organization. The Purchaser has all powers required to carry on such
Purchaser's business as now conducted.
4.2 Authorization. The execution, delivery and performance by the
Purchaser of this Agreement, the Related Documents to which such Purchaser is a
party, and the consummation by the Purchaser of the transactions contemplated
hereby and thereby have been duly authorized, and no additional action is
required for the approval of this Agreement or the Related Documents. This
Agreement and the Related Documents to which the Purchaser is a party have been
or, to the extent contemplated hereby, will be duly executed and delivered and
constitute valid and binding agreements of the Purchaser, enforceable against
such Purchaser in accordance with their terms, except as may be limited by
bankruptcy, reorganization, insolvency, moratorium and similar laws of general
application relating to or affecting the enforcement of rights of creditors and
except that enforceability of their obligations thereunder are subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.3 Investment. The Purchaser is acquiring the securities described
herein for its own account and not with a view to, or for sale in connection
with, any distribution thereof, nor with the intention of distributing or
reselling the same, provided, however, that by making the representation herein,
the Purchaser does not agree to hold any of the securities for any minimum or
other specific term and reserves the right to dispose of the securities at any
time in accordance with or pursuant to a registration statement or an exemption
under the Securities Act. The Purchaser is aware that none of the securities has
been registered under the Securities Act or under applicable state securities or
blue sky laws. The Purchaser is an "Accredited Investor" as
14
such term is defined in Rule 501 of Regulation D, as promulgated under the
Securities Act.
4.4 Reliance on Exemptions. The Purchaser understands that the
Preferred Stock and Warrants are being offered and sold to such Purchaser in
reliance upon specific exemptions from the registration requirements of United
States federal and state securities laws and that the Seller is relying upon the
truth and accuracy of, and such Purchaser's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of such Purchaser to acquire the securities.
4.5 Experience of the Purchaser. The 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. The 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.
4.6 General Solicitation. The 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.
4.7 Independence. The Purchaser is neither an Affiliate of any other
Purchaser nor is a member of any "group" in which any other Purchaser is a
member, except that: SDS Merchant Fund, L.P. and BayStar Capital II, LP are
Affiliates of each other. For purposes hereof, "group" has the meaning set forth
in Section 13(d) of the Exchange Act and applicable regulations of the
Securities and Exchange Commission.
ARTICLE V - COVENANTS OF THE SELLER AND PURCHASERS
5.1 Insurance. The Seller and its Subsidiaries shall, from time to time
upon the written request of the Purchasers, promptly furnish or cause to be
furnished to the Seller evidence, in form and substance reasonably satisfactory
to the Purchasers, of the maintenance of all insurance maintained by it for loss
or damage by fire and other hazards, damage or injury to persons and property,
including from product liability, and under workmen's compensation laws.
5.2 Reporting Obligations. So long as any of the Preferred Stock is
outstanding, and so long as any Warrant has not been exercised and has not
expired by its terms, the Seller shall furnish to the Purchasers, or any other
persons who hold any of the Preferred Stock or Warrants (provided that such
subsequent holders give notice to the Seller that they hold Preferred Stock or
Warrants and furnish their addresses) promptly upon their becoming available one
copy of (A) each report, notice or proxy statement sent by the Seller to its
stockholders generally, and of each regular or periodic report (pursuant to the
Exchange Act) and (B) any registration statement, prospectus or written
communication pursuant to the Securities Act relating to the issuance or
registration of Conversion Shares and the Warrant Shares and filed by the Seller
with the Commission or any securities market or exchange on which shares of
Common Stock are listed;
15
provided, however, that the Company shall have no obligation to deliver periodic
reports (pursuant to the Exchange Act) under this Section 5.2 to the extent such
reports are publicly available.
The Purchasers are hereby authorized to deliver a copy of any financial
statement or any other information relating to the business, operations or
financial condition of the Seller which may have been furnished to the
Purchasers hereunder, to any regulatory body or agency having jurisdiction over
the Purchasers or to any Person which shall, or shall have right or obligation
to succeed to all or any part of the Purchasers' interest in the Seller or this
Agreement.
5.3 Investigation. The representations, warranties, covenants and
agreements set forth in this Agreement shall not be affected or diminished in
any way by any investigation (or failure to investigate) at any time by or on
behalf of the party for whose benefit such representations, warranties,
covenants and agreements were made. Without limiting the generality of the
foregoing, the inability or failure of the Purchasers to discover any breach,
default or misrepresentation by the Seller under this Agreement or the Related
Documents (including under any certificate furnished pursuant to this
Agreement), notwithstanding the exercise by the Purchasers or other holders of
the Preferred Stock of their rights hereunder to conduct an investigation shall
not in any way diminish any liability hereunder.
5.4 Further Assurances. The Seller shall, at its cost and expense, upon
written request of the Purchasers, duly execute and deliver, or cause to be duly
executed and delivered, to the Purchasers such further instruments and do and
cause to be done such further acts as may be necessary, advisable or proper, in
the absolute discretion of the Purchasers, to carry out more effectually the
provisions and purposes of this Agreement. The parties shall use their best
efforts to timely satisfy each of the conditions described in Article VI of this
Agreement.
5.5 Use of Proceeds. The Seller covenants and agrees that the proceeds
of the Purchase Price shall be used by the Seller for working capital and
general corporate purposes; under no circumstances shall any portion of the
proceeds be applied to:
(i) accelerated repayment of debt existing on the date hereof;
(ii) the payment of dividends or other distributions on any
capital stock of the Seller other than the Preferred Stock;
(iii) increased executive compensation or loans to officers,
employees, stockholders or directors, unless approved by a
disinterested majority of the Board of Directors;
(iv) the purchase of debt or equity securities of any person,
including the Seller and its Subsidiaries, except in connection with
investment of excess cash in high quality (A1/P1 or better) money
market instruments having maturities of one year or less; or
(v) any expenditure not directly related to the business of the
Seller.
5.6 Corporate Existence. So long as a Purchaser owns Preferred Stock,
Warrants,
16
Conversion Shares, or Warrant Shares, the Seller shall preserve and maintain and
cause its Subsidiaries to preserve and maintain their corporate existence and
good standing in the jurisdiction of their incorporation and the rights,
privileges and franchises of the Seller and its Subsidiaries (except, in each
case, in the event of a merger or consolidation in which the Seller or its
Subsidiaries, as applicable, is not the surviving entity) in each case where
failure to so preserve or maintain could have a Material Adverse Effect on the
financial condition, business or operations of the Seller and its Subsidiaries
taken as a whole.
5.7 Licenses. The Seller shall, and shall cause its Subsidiaries to,
maintain at all times all material licenses or permits necessary to the conduct
of its business and as required by any governmental agency or instrumentality
thereof, including without limitation all FDA clearances and approvals.
5.8 Short Selling. Each Purchaser hereby irrevocably agrees that it
will not make any net short sale of the Seller's Common Stock for a period
beginning on the date of this Agreement and ending on the second anniversary of
the Closing Date at a price below the Conversion Value as provided in the
Certificate of Designation. For purposes of this Section 5.8, a "net short sale"
by any Purchaser shall mean a sale of Common Stock by such Purchaser that is
marked as a short sale and that is made at a time when there is no equivalent
offsetting long position in Common Stock held by such Purchaser, where an
"equivalent offsetting long position" includes all shares of Common Stock held
by such Purchaser and all underlying shares of Common Stock which are issuable
upon conversion, exercise or exchange of convertible securities, warrants,
options or other rights to subscribe for or to purchase or exchange for shares
of Common Stock.
5.9 Taxes and Claims. The Seller and its Subsidiaries shall duly pay
and discharge (a) all material taxes, assessments and governmental charges upon
or against the Seller or its properties or assets prior to the date on which
penalties attach thereto, unless and to the extent that such taxes are being
diligently contested in good faith and by appropriate proceedings, and
appropriate reserves therefor have been established, and (b) all material lawful
claims, whether for labor, materials, supplies, services or anything else which
might or could, if unpaid, become a lien or charge upon the properties or assets
of the Seller or its Subsidiaries unless and to the extent only that the same
are being diligently contested in good faith and by appropriate proceedings and
appropriate reserves therefor have been established.
5.10 Perform Covenants. The Seller shall (a) make full and timely
payment of any and all payments on the Preferred Stock, and all other
obligations of the Seller to the Purchasers in connection therewith, whether now
existing or hereafter arising, and (b) duly comply with all the terms and
covenants contained herein and in each of the instruments and documents given to
the Purchasers in connection with or pursuant to this Agreement, all at the
times and places and in the manner set forth herein or therein.
5.11 Additional Covenants.
(a) Except for transactions approved by a majority of the disinterested
directors of the Board of Directors, neither the Seller nor any of its
Subsidiaries shall enter into any transaction with any director, officer,
employee or holder of more than 5% of the outstanding capital stock
17
of any class or series of capital stock of the Seller or any of its
Subsidiaries, member of the family of any such person, or any corporation,
partnership, trust or other entity in which any such person, or member of the
family of any such person, is a director, officer, trustee, partner or holder of
more than 5% of the outstanding capital stock thereof, with the exception of
transactions which are consummated upon terms that are no less favorable than
would be available if such transaction had been effected at arms-length, in the
reasonable judgment of the Board of Directors.
(b) The Seller shall timely prepare and file with the Securities and
Exchange Commission the form of notice of the sale of securities pursuant to the
requirements of Regulation D regarding the sale of the Preferred Stock and
Warrants under this Agreement.
(c) The Seller shall timely prepare and file such applications,
consents to service of process (but not including a general consent to service
of process) and similar documents and take such other steps and perform such
further acts as shall be required by the state securities law requirements of
each jurisdiction where a Purchaser resides as indicated on Schedule 1 with
respect to the sale of the Preferred Stock and Warrants under this Agreement.
5.12 Securities Laws Disclosure; Publicity. The Seller may (i) on or
promptly after the Closing Date, issue a press release acceptable to SDS
Merchant Fund, L.P. disclosing the transactions contemplated hereby, and (ii)
after the Closing Date, file with the Commission a Report on Form 8-K disclosing
the transactions contemplated hereby. Except as provided in the preceding
sentence, neither the Company nor the Purchasers shall make any press release or
other publicity about the terms of this Agreement or the transactions
contemplated hereby without the prior approval of the other unless otherwise
required by law or the rules of the Commission or Nasdaq.
5.13 Like Treatment of Purchasers and Holders. Neither the Seller nor
any of its affiliates shall, directly or indirectly, pay or cause to be paid any
consideration (immediate or contingent), whether by way of interest, fee,
payment for redemption, conversion or exercise of the Securities, or otherwise,
to any Purchaser or holder of Securities, for or as an inducement to, or in
connection with the solicitation of, any consent, waiver or amendment to any
terms or provisions of this Agreement or the Related Documents, unless such
consideration is required to be paid to all Purchasers or holders of Securities
bound by such consent, waiver or amendment. The Seller shall not, directly or
indirectly, redeem any Securities unless such offer of redemption is made pro
rata to all Purchasers or holders of Securities, as the case may be, on
identical terms.
ARTICLE VI - CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Purchasers to Effect the Closing. The
obligations of a Purchaser to effect the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing, of each of the following conditions, any of which may be waived,
in writing, by a Purchaser:
(a) The Seller shall deliver or cause to be delivered to each of the
Purchasers the following:
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1. (i) One or more certificates evidencing the aggregate number
of shares of the Preferred Stock, duly authorized, issued, fully paid
and non-assessable, as is indicated on Schedule 1 to be purchased at
the Closing by such Purchaser, registered in the name of such
Purchaser, in such denominations as is indicated on Schedule 1 for such
Purchaser;
(ii) One or more certificates evidencing the Warrants,
registered in the name of such Purchaser, in such denominations as is
indicated on Schedule 1 for such Purchaser, pursuant to which such
Purchaser shall be initially entitled to purchase that number of shares
of Common Stock as is indicated on Schedule 1.
2. The Investor Rights Agreement, in the form attached hereto as
Exhibit C (the "Investor Rights Agreement"), duly executed by the
Seller.
3. A legal opinion of Xxxxxx Xxxxxx Xxxxx Xxxxxxxx ("Seller's
Counsel"), counsel to the Seller, in the form attached hereto as
Exhibit D.
4. A legal opinion of Xxxxxxx Brignone ("Nevada Counsel"), Nevada
counsel to the Seller, in the form attached hereto as Exhibit E.
5. A certificate of the Secretary of the Seller (the "Secretary's
Certificate"), in form and substance satisfactory to the Purchasers,
certifying as follows:
(i) that the Certificate of Designation authorizing the
Preferred Stock has been duly filed in the office of the Secretary
of State of the State of Nevada, and that attached to the
Secretary's Certificate is true and complete copy of the Articles
of Incorporation of the Seller, as amended, and the Certificate of
Designation;
(ii) that a true copy of the Bylaws of the Seller, as amended
to the Closing Date, is attached to the Secretary's Certificate;
(iii) that attached thereto are true and complete copies of
the resolutions of the Board of Directors of the Seller
authorizing the execution, delivery and performance of this
Agreement and the Related Documents, instruments and certificates
required to be executed by it in connection herewith and approving
the consummation of the transactions in the manner contemplated
hereby including, but not limited to, the authorization and
issuance of the Preferred Stock;
(iv) the names and true signatures of the officers of the
Seller signing this Agreement and all other documents to be
delivered in connection with this Agreement;
(v) such other matters as required by this Agreement; and
(vi) such other matters as the Purchasers may reasonably
request.
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6. A wire transfer representing the Purchasers' reasonable legal
fees and other expenses as described in Section 8.2 hereof; such fee
may, at the election of the Purchasers, be paid out of the funds due
from the Purchasers at the Closing.
7. Proof of due filing with the Secretary of State of the State of
Nevada of the Certificate of Designation authorizing the Preferred
Stock.
8. Seller shall have applied to each U.S. securities exchange,
interdealer quotation system and other trading market where its Common
Stock is currently listed or qualified for trading or quotation for the
listing or qualification of the Conversion Shares and the Warrant
Shares for trading or quotation thereon in the time and manner required
thereby.
9. Such other documents as the Purchasers shall reasonably
request.
(b) The Seller shall have entered into an Escrow Agreement with Xxxxxx
& Xxxx LLP (the "Escrow Agent") in the form attached hereto as Exhibit F (the
"Escrow Agreement") pursuant to which the Escrow Agent shall hold certain funds
described therein to secure the Seller's potential redemption payment
obligations pursuant to Section 14 of the Certificate of Designation.
6.2 Conditions to Obligations of the Seller to Effect the Closing. The
obligations of the Seller to effect the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, by the Seller:
(a) Each of the Purchasers shall deliver or cause to be delivered to
the Seller (i) payment of the portion of the Purchase Price set forth opposite
each Purchaser's name on Schedule 1, in cash by either (x) wire transfer of
immediately available funds to an account designated in writing by Seller prior
to the date hereof, or (y) certified or cashier's check; (ii) an executed copy
of this Agreement; (iii) an executed copy of the Investor Rights Agreement; and
(iv) such other documents as the Seller shall reasonably request.
ARTICLE VII - INDEMNIFICATION, TERMINATION AND DAMAGES
7.1 Survival of Representations. Except as otherwise provided herein,
the representations and warranties of the Seller and the Purchasers contained in
or made pursuant to this Agreement shall survive the execution and delivery of
this Agreement and the Closing Date and shall continue in full force and effect
for a period of three (3) years from the Closing Date; provided, however, that
the Seller's warranties and representations under Sections 3.13 (Taxes), 3.19
(Subsidiaries and Investments), 3.20 (Capitalization), and 3.21 (Options,
Warrants, Rights), shall survive the Closing Date and continue in full force and
effect until the expiration of all applicable statutes of limitation; and
further provided that the Seller's warranties and representations under Section
3.25 (Environmental Matters) shall survive the Closing Date and continue in full
force and effect for a period of six (6) years from the Closing Date. The
Seller's and the Purchasers' warranties and representations shall in no way be
affected by any
20
investigation of the subject matter thereof made by or on behalf of the Seller
or the Purchasers.
7.2 Indemnification.
(a) The Seller agrees to indemnify and hold harmless the Purchasers,
their Affiliates, each of their officers, directors, employees and agents and
their respective successors and assigns, from and against any losses, damages,
or expenses which are caused by or arise out of (i) any breach or default in the
performance by the Seller of any covenant or agreement made by the Seller in
this Agreement or in any of the Related Documents; (ii) any breach of warranty
or representation made by the Seller in this Agreement or in any of the Related
Documents (iii) any and all third party actions, suits, proceedings, claims,
demands, judgments, costs and expenses (including reasonable legal fees and
expenses) incident to any of the foregoing.
(b) The Purchasers, severally and not jointly, agree to indemnify and
hold harmless the Seller, its Affiliates, each of their officers, directors,
employees and agents and their respective successors and assigns, from and
against any losses, damages, or expenses which are caused by or arise out of (A)
any breach or default in the performance by the Purchasers of any covenant or
agreement made by the Purchasers in this Agreement or in any of the Related
Documents; (B) any breach of warranty or representation made by the Purchasers
in this Agreement or in any of the Related Documents; and (C) any and all third
party actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal fees and expenses) incident to any of the
foregoing; provided, however, that a Purchaser's liability under this Section
7.2(b) shall not exceed the Purchase Price paid by such Purchaser hereunder.
7.3 Indemnity Procedure. A party or parties hereto agreeing to be
responsible for or to indemnify against any matter pursuant to this Agreement is
referred to herein as the "Indemnifying Party" and the other party or parties
claiming indemnity is referred to as the "Indemnified Party". An Indemnified
Party under this Agreement shall, with respect to claims asserted against such
party by any third party, give written notice to the Indemnifying Party of any
liability which might give rise to a claim for indemnity under this Agreement
within sixty (60) business days of the receipt of any written claim from any
such third party, but not later than twenty (20) days prior to the date any
answer or responsive pleading is due, and with respect to other matters for
which the Indemnified Party may seek indemnification, give prompt written notice
to the Indemnifying Party of any liability which might give rise to a claim for
indemnity; provided, however, that any failure to give such notice will not
waive any rights of the Indemnified Party except to the extent the rights of the
Indemnifying Party are materially prejudiced.
The Indemnifying Party shall have the right, at its election, to take
over the defense or settlement of such claim by giving written notice to the
Indemnified Party at least fifteen (15) days prior to the time when an answer or
other responsive pleading or notice with respect thereto is required. If the
Indemnifying Party makes such election, it may conduct the defense of such claim
through counsel of its choosing (subject to the Indemnified Party's approval of
such counsel, which approval shall not be unreasonably withheld), shall be
solely responsible for the expenses of such defense and shall be bound by the
results of its defense or settlement of the claim. The Indemnifying Party shall
not settle any such claim without prior notice to and
21
consultation with the Indemnified Party, and no such settlement involving any
equitable relief or which might have an adverse effect on the Indemnified Party
may be agreed to without the written consent of the Indemnified Party (which
consent shall not be unreasonably withheld). So long as the Indemnifying Party
is diligently contesting any such claim in good faith, the Indemnified Party may
pay or settle such claim only at its own expense and the Indemnifying Party will
not be responsible for the fees of separate legal counsel to the Indemnified
Party, unless the named parties to any proceeding include both parties or
representation of both parties by the same counsel would be inappropriate due to
conflicts of interest or otherwise. If the Indemnifying Party does not make such
election, or having made such election does not, in the reasonable opinion of
the Indemnified Party proceed diligently to defend such claim, then the
Indemnified Party may (after written notice to the Indemnifying Party), at the
expense of the Indemnifying Party, elect to take over the defense of and proceed
to handle such claim in its discretion and the Indemnifying Party shall be bound
by any defense or settlement that the Indemnified Party may make in good faith
with respect to such claim. In connection therewith, the Indemnifying Party will
fully cooperate with the Indemnified Party should the Indemnified Party elect to
take over the defense of any such claim. The parties agree to cooperate in
defending such third party claims and the Indemnified Party shall provide such
cooperation and such access to its books, records and properties as the
Indemnifying Party shall reasonably request with respect to any matter for which
indemnification is sought hereunder; and the parties hereto agree to cooperate
with each other in order to ensure the proper and adequate defense thereof.
With regard to claims of third parties for which indemnification is
payable hereunder, such indemnification shall be paid by the Indemnifying Party
upon the earlier to occur of: (i) the entry of a judgment against the
Indemnified Party and the expiration of any applicable appeal period, or if
earlier, five (5) days prior to the date that the judgment creditor has the
right to execute the judgment; (ii) the entry of an unappealable judgment or
final appellate decision against the Indemnified Party; or (iii) a settlement of
the claim. Notwithstanding the foregoing, the reasonable expenses of counsel to
the Indemnified Party shall be reimbursed on a current basis by the Indemnifying
Party. With regard to other claims for which indemnification is payable
hereunder, such indemnification shall be paid promptly by the Indemnifying Party
upon demand by the Indemnified Party.
7.4 Liquidated Damages. The Seller and the Purchasers agree that the
Purchasers will suffer damages if a Breach Event (as defined below) occurs or is
ongoing. The Seller and the Purchasers further agree that it may not be feasible
to ascertain the extent of such damages with precision. If a Breach Event (as
defined below) occurs, then the Purchasers may elect, as liquidated damages, and
in addition to any other remedies legally available to such Purchasers, to
require that the Seller shall pay to the Purchasers liquidated damages at a rate
of 20% per annum of the aggregate Liquidation Amount of such Purchasers'
outstanding Preferred Stock payable monthly in cash at the end of each month in
which the Breach Event is outstanding. Notwithstanding the foregoing, the amount
of liquidated damages payable by the Seller pursuant to this Section 7.4 in
respect of any Breach Event shall be limited to a total of $500,000 and such
limitation amount shall be allocated to the Purchasers on a pro rata basis.
"Breach Event" means either:
22
(i) Any breach of any material warranty or representation of
the Seller as of the date made in this Agreement or any agreement
delivered herewith which breach, if capable of being cured, has not
been cured within ten (10) days after notice of such breach has been
given by the holders of a majority of Preferred Stock to the Seller
(the "Breach Cure Period"); or
(ii) Any breach by the Seller of any material covenant or
other provision of this Agreement or any agreement delivered herewith
which is within the control of the Seller, and which breach, if capable
of being cured, has not been cured within the Breach Cure Period.
The Seller and the Purchasers have expressly negotiated this Section
7.4, and have agreed that in light of the circumstances existing at the time of
execution of this Agreement, the liquidated damages expressed herein represent a
reasonable estimate of the harm likely to be suffered by the Purchasers upon the
occurrence of a Breach Event.
ARTICLE VIII - MISCELLANEOUS
8.1 Further Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to better evidence and reflect the transactions described herein
and contemplated hereby and to carry into effect the intents and purposes of
this Agreement, and further agrees to take promptly, or cause to be taken, all
actions, and to do promptly, or cause to be done, all things necessary, proper
or advisable under applicable law to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals, to effect all necessary registrations and filings, and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement.
8.2 Fees and Expenses. The Seller shall be responsible for the payment
of the Purchasers' reasonable legal fees and other third-party expenses relating
to the preparation and negotiation of this Agreement and the Related Documents
and the consummation of the transactions contemplated herein and therein, up to
a maximum of $60,000 (which amount may be increased with the approval of the
Seller).
8.3 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 5:00 p.m. (New York City time) on a business
day, (b) the next business 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 business day or later than 5:00 p.m. (New
York City time) on any business day, or (c) the business day following the date
of mailing, if sent by U.S. nationally recognized overnight courier service such
as Federal Express. The address for such notices and communications shall be as
follows:
23
If to the Purchasers at each Purchaser's address set forth under its
name on Schedule 1 attached hereto, or with respect to the Seller, addressed to:
NexMed, Inc.
000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile No.: 000-000-0000
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Seller shall be sent to Xxxxxx Xxxxxx
Xxxxx Xxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000, Attn: Xxxxxx Xxxx, Esq.,
Facsimile No. (000) 000-0000. Copies of notices to any Purchaser shall be sent
to the addresses, if any, listed on Schedule 1 attached hereto.
Unless otherwise stated above, such communications shall be effective
when they are received by the addressee thereof in conformity with this Section.
Any party may change its address for such communications by giving notice
thereof to the other parties in conformity with this Section.
8.4 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
enforced in accordance with the laws of the State of New York without reference
to the conflicts of laws principles thereof.
8.5 Jurisdiction and Venue. This Agreement shall be subject to the
exclusive jurisdiction of the Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx Xxxxxxxx of New
York and if such court does not have proper jurisdiction, the State Courts of
New York County, New York. The parties to this Agreement agree that any breach
of any term or condition of this Agreement shall be deemed to be a breach
occurring in the State of New York by virtue of a failure to perform an act
required to be performed in the State of New York and irrevocably and expressly
agree to submit to the jurisdiction of the Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx
Xxxxxxxx of New York and if such court does not have proper jurisdiction, the
State Courts of New York County, New York for the purpose of resolving any
disputes among the parties relating to this Agreement or the transactions
contemplated hereby. The parties irrevocably waive, to the fullest extent
permitted by law, any objection which they may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement, or any judgment entered by any court in respect hereof brought
in New York County, New York, and further irrevocably waive any claim that any
suit, action or proceeding brought in Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx Xxxxxxxx
of New York and if such court does not have proper jurisdiction, the State
Courts of New York County, New York has been brought in an inconvenient forum.
Each of the parties hereto consents to process being served in any such suit,
action or proceeding, by mailing a copy thereof to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 8.5 shall affect or limit any right to serve process in any other
manner permitted by law.
24
8.6 Successors and Assigns. This Agreement is personal to each of the
parties and may not be assigned without the written consent of the other
parties; provided, however, that any of the Purchasers shall be permitted to
assign this Agreement to any Person to whom it assigns or transfers securities
issued or issuable pursuant to this Agreement. Any assignee must be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act.
8.7 Severability. If any provision of this Agreement, or the
application thereof, shall for any reason or to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall continue in full force and effect and in
no way be affected, impaired or invalidated.
8.8 Entire Agreement. This Agreement and the other agreements and
instruments referenced herein constitute the entire understanding and agreement
of the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings.
8.9 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party shall be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law, or in equity
on such party, and the exercise of any one remedy shall not preclude the
exercise of any other.
8.10 Amendment and Waivers. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the Seller and the holders of 75% of
the Preferred Stock then outstanding, and such waiver or amendment, as the case
may be, shall be binding upon all Purchasers. The waiver by a party of any
breach hereof or default in the performance hereof shall not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
This Agreement may not be amended or supplemented by any party hereto except
pursuant to a written amendment executed by the Seller and the holders of 75% of
the Preferred Stock then outstanding. No amendment shall be effected to impact a
holder of Preferred Stock in a disproportionately adverse fashion without the
consent of such individual holder of Preferred Stock.
8.11 No Waiver. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
8.12 Construction of Agreement; Knowledge. For purposes of this
Agreement, the term "knowledge," when used in reference to a corporation means
the knowledge of the directors and executive officers of such corporation
(including, if applicable, any person designated as a chief scientific, medical
or technical officer) assuming such persons shall have made inquiry that is
customary and appropriate under the circumstances to which reference is made,
and when used in reference to an individual means the knowledge of such
individual assuming the individual shall have made inquiry that is customary and
appropriate under the circumstances to which reference is made.
8.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of
25
which together shall constitute one and the same instrument. This Agreement
shall become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
signatories. 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.
8.14 No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.
8.15 Waiver of Trial by Jury. THE PARTIES HERETO IRREVOCABLY WAIVE
TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
[Signature Page Follows]
26
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SELLER:
NEXMED, INC.
By: /s/ Xxxxxx X. Xxx
-----------------
Name: Xxxxxx X. Xxx
Title: Vice President
PURCHASERS:
SDS MERCHANT FUND, LP
By: SDS CAPITAL PARTNERS, LLC
By: /s/ Xxxxx X. Xxxxx
------------------
Name: Xxxxx X. Xxxxx
Title: General Counsel
NORTH SOUND LEGACY INSTITUTIONAL FUND LLC
By: NORTH SOUND CAPITAL LLC
By: /s/ Xxxxxx Xxxxxx
-----------------
Name: Xxxxxx Xxxxxx
Title: Chief Financial Officer
27
NORTH SOUND LEGACY INTERNATIONAL LTD.
By: NORTH SOUND CAPITAL LLC
By: /s/ Xxxxxx Xxxxxx
-----------------
Name: Xxxxxx Xxxxxx
Title: Chief Financial Officer
BAYSTAR CAPITAL II, LP
By: BAYSTAR CAPITAL MANAGEMENT, LLC
By: /s/ Xxxxxx X. Xxxxx
-------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Member
THE TAIL WIND FUND LTD.
By: TAIL WIND ADVISORY AND MANAGEMENT LTD.,
as investment manager
By: /s/ Xxxxx X. Xxxxx
------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
SOLOMON STRATEGIC HOLDINGS, INC.
By: /s/ Xxxxxx X. XxxXxxxxx
-----------------------
Name: Xxxxxx X. XxxXxxxxx
Title: Director
28
MIDSUMMER INVESTMENT, LTD.
By: MIDSUMMER CAPITAL, LLC,
as investment advisor
By: /s/ Xxxxx Xxxxxxx
-----------------
Name: Xxxxx Xxxxxxx
Title: Managing Director
THE XXXXXXX AND XXXX XXXXXXXXX REVOCABLE TRUST
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Trustee
XXXXXXX DUCK, JR., XXX ROLLOVER ACCOUNT
NUMBER 2976-7384
By: /s/ Xxxxxxx Duck, Jr.
---------------------
Name: Xxxxxxx Duck, Jr.
Title: Owner
XXXXXXXXXXX X. XXXX REVOCABLE TRUST
By: /s/ Xxxxx Xxxx
--------------
Name: Xxxxx Xxxx
Title: Trustee
SYSOREX INTERNATIONAL INC.
By: /s/ A. Salam Qureish
--------------------
Name: A Salam Qureish
Title: President
29
CLARION CAPITAL CORPORATION
By: /s/ Xxxxxx X. Xxxxx
-------------------
Name: Xxxxxx X. Xxxxx
Title: Chairman
CLARION PARTNERS, LP
By: /s/ Xxxxxx X. Xxxxx
-------------------
Name: Xxxxxx X. Xxxxx
Title: General Partner
CLARION OFFSHORE FUND, LTD.
By: /s/ Xxxxxx X. Xxxxx
-------------------
Name: Xxxxxx X. Xxxxx
Title: Investment Manager
PROVIDENT MASTER FUND, LTD.
By: /s/ Xxxxx X. Xxxxxxx
--------------------
Name: Xxxxx X. Xxxxxxx
Title: Director
CHULA PARTNERS, LP
By: /s/ Xxxxxx Xxxxxx
-----------------
Name: Xxxxxx Xxxxxx
Title:
30
/s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Xxxxxx X. Xxxxxxxxx
/s/ Xxxxx Xxxx
--------------
Xxxxx Xxxx
31
Schedule 1
to Preferred Stock and Warrant Purchase Agreement
Purchasers and Shares of Preferred Stock and Warrants
---------------------------------------------------------------------------------------------------------------------------------
Name, Address and Shares of Preferred Common Stock
Fax Number of Purchaser Copies of Notices to Stock Purchased Underlying Warrants Purchase Price
---------------------------------------------------------------------------------------------------------------------------------
SDS Merchant Fund, LP
Address: Xxxxxx & Xxxx LLP
000 Xxxxxxxx Xxxxxx
c/o SDS Capital Partners, LLC Xxxxxxxx, XX 00000 150 824,780 $1,500,000
00 Xxxxxx Xxxxxx, 0xx Xxxxx Telephone: (000) 000-0000
Xxx Xxxxxxxxx, XX 00000 Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxxx Attn: Xxxxxxx Xxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
---------------------------------------------------------------------------------------------------------------------------------
North Sound Legacy Institutional
Fund LLC
Address: Xxxxxx & Xxxx LLP
000 Xxxxxxxx Xxxxxx
c/o North Sound Capital LLC Xxxxxxxx, XX 00000 141.61 778,642 $1,416,100
00 Xxxxxx Xxxxxx, Xxxxx 000 Telephone: (000) 000-0000
Xxx Xxxxxxxxx, XX 00000 Facsimile: (000) 000-0000
Attn: Xxxxxx Xxxxxx Attn: Xxxxxxx Xxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
---------------------------------------------------------------------------------------------------------------------------------
1
---------------------------------------------------------------------------------------------------------------------------------
Name, Address and Shares of Preferred Common Stock
Fax Number of Purchaser Copies of Notices to Stock Purchased Underlying Warrants Purchase Price
---------------------------------------------------------------------------------------------------------------------------------
North Sound Legacy International
Ltd.
Address: Xxxxxx & Xxxx LLP
000 Xxxxxxxx Xxxxxx
c/o North Sound Capital LLC Xxxxxxxx, XX 00000 138.39 760,947 $1,383,900
00 Xxxxxx Xxxxxx, Xxxxx 000 Telephone: (000) 000-0000
Xxx Xxxxxxxxx, XX 00000 Facsimile: (000) 000-0000
Attn: Xxxxxx Xxxxxx Attn: Xxxxxxx Xxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
---------------------------------------------------------------------------------------------------------------------------------
BayStar Capital II, LP
Address: Xxxxxx & Xxxx LLP
000 Xxxxxxxx Xxxxxx
c/o BayStar Capital Management, LLC Xxxxxxxx, XX 00000 100 549,853 $1,000,000
00 Xxxxxx Xxxxxx, Xxxxx 000 Telephone: (000) 000-0000
Xxx Xxxxxxxxx, XX 00000 Facsimile: (000) 000-0000
Attn: Xxxxx Xxxxx Attn: Xxxxxxx Xxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
---------------------------------------------------------------------------------------------------------------------------------
The Tail Wind Fund Ltd.
Address: Xxxxx X. Xxxxxxx, P.C.
000 Xxxx 00xx Xxxxxx, 00xx Floor
c/o Tail Wind Advisory and Xxx Xxxx, XX 00000 60 329,912 $600,000
Management Ltd. Telephone: 000-000-0000
Attn: Xxxxx Xxxxx Facsimile: 000-000-0000
1st Floor, No. 0 Xxxxxx Xxxxxx
Xxxxxx, XX0X 0XX XX
Tel: 00-000-000-0000
Fax: 00-000-000-0000
---------------------------------------------------------------------------------------------------------------------------------
2
---------------------------------------------------------------------------------------------------------------------------------
Name, Address and Shares of Preferred Common Stock
Fax Number of Purchaser Copies of Notices to Stock Purchased Underlying Warrants Purchase Price
---------------------------------------------------------------------------------------------------------------------------------
Solomon Strategic Holdings, Inc.
Address:
Solomon Strategic Holdings, Inc. Xxxxx X. Xxxxxxx, P.C.
c/o Xxxxxx X. XxxXxxxxx (Director) 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx Xxx Xxxx, XX 00000 10 54,985 $100,000
The Red Gap Telephone: 000-000-0000
Castletown Facsimile: 000-000-0000
IM9 1HB
British Virgin Isles
Tel: 000 (00) 0000 000000
Fax: 000 (00) 0000 000000
---------------------------------------------------------------------------------------------------------------------------------
Midsummer Investment, Ltd.
Address: Xxx Xxxxxxx, Esq.
Xxxxxxx Xxxxxxxxx LLP
c/o Midsummer Capital, LLC 000 Xxxxxxxxx Xxxxxx, Xxxxx 0000 50 274,927 $500,000
000 Xxxxxxx Xxxxxx, 00xx Xxxxx Xxx Xxxx, XX 00000
Xxx Xxxx, Xxx Xxxx 00000 Tel: (000) 000-0000
Tel: 000-000-0000 Fax: (000) 000-0000
Fax: 000-000-0000
Attn: Xxxxx Xxxxxxx
---------------------------------------------------------------------------------------------------------------------------------
The Xxxxxxx and Xxxx Xxxxxxxxx
Revocable Trust
Address:
0000 000xx Xxxxxx 20 109,971 $200,000
Xxxxxxxxx, XX 00000
Attn: Xxx Xxxxxxxxx, TTEE
Tel: (000) 000-0000
Fax: (000) 000-0000
---------------------------------------------------------------------------------------------------------------------------------
3
---------------------------------------------------------------------------------------------------------------------------------
Name, Address and Shares of Preferred Common Stock
Fax Number of Purchaser Copies of Notices to Stock Purchased Underlying Warrants Purchase Price
---------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxx
Address:
10 54,985 $100,000
000 Xxxx 00xx Xxxxxx, # 00X
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxxx
---------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx Duck, Jr , XXX Rollover
Account Number 2976-7384
Address:
10 54,985 $100,000
c/o Xxxxxxx Xxxxx & Co., Inc.
0 Xxxxxxxx Xxx
Xxxxxxxxx, Xx 00000
Attn: Xxxxxxx Duck, Jr.
Cell: 000-000-0000
---------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxxxxx X. Xxxx Revocable Trust
Address:
000 Xxxxxx Xxxxxx 15 82,478 $150,000
Xxxxxxxx, XX 00000
Attn: Xxxxx Xxxx, TTEE
Tel: (000) 000-0000
Fax: (000) 000-0000
---------------------------------------------------------------------------------------------------------------------------------
4
---------------------------------------------------------------------------------------------------------------------------------
Name, Address and Shares of Preferred Common Stock
Fax Number of Purchaser Copies of Notices to Stock Purchased Underlying Warrants Purchase Price
---------------------------------------------------------------------------------------------------------------------------------
Sysorex International Inc.
Address:
000 Xxxx Xxxxxxxxxxx Xxxx 10 54,985 $100,000
Xxxxxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
---------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxx
Address: 10 54,985 $100,000
00 Xxxxxxxx Xx.
Xxxxx Xxxxx, XX 00000
---------------------------------------------------------------------------------------------------------------------------------
Clarion Capital Corporation
Address:
0000 Xxxx Xxxxx Xxxxxx, # 0000 20 109,971 $200,000
Xxxxxxxxx, XX 00000
Attn: Xxx Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
---------------------------------------------------------------------------------------------------------------------------------
Clarion Partners, LP
Address:
0000 Xxxx Xxxxx Xxxxxx, # 0000 16 87,977 $160,000
Xxxxxxxxx, XX 00000
Attn: Xxx Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
---------------------------------------------------------------------------------------------------------------------------------
5
---------------------------------------------------------------------------------------------------------------------------------
Name, Address and Shares of Preferred Common Stock
Fax Number of Purchaser Copies of Notices to Stock Purchased Underlying Warrants Purchase Price
---------------------------------------------------------------------------------------------------------------------------------
Clarion Offshore Fund, Ltd.
Address:
0000 Xxxx Xxxxx Xxxxxx, # 0000 4 21,994 $40,000
Xxxxxxxxx, XX 00000
Attn: Xxx Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
---------------------------------------------------------------------------------------------------------------------------------
Provident Master Fund, Ltd.
Address:
000 Xxxxx Xxxx Xxxx, #000 20 109,971 $200,000
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
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Chula Partners, LP
Address:
000 Xxxxx Xxxxxx Xxxxxx, 00 82,478 $150,000
Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
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Totals: 800 4,398,826 $8,000,000
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