Execution Version
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
February 14, 2005 among QMed, Inc., a Delaware corporation (the "Company"), and
the purchasers identified on the signature pages hereto (each, a "Purchaser" and
collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act"), the Company desires to issue and sell to each Purchaser,
and each Purchaser, severally and not jointly, desires to purchase from the
Company, certain securities of the Company as more fully described in this
Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser,
severally and not jointly, agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
"Additional Investment Rights" means, collectively, the
Additional Investment Rights issued and sold under this Agreement, in
the form of Exhibit A.
"Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person, as such terms are used in and
construed under Rule 144 of 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.
"Business Day" means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
"Change of Control" means the occurrence of any of the
following in one or a series of related transactions: (i) an
acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) under the Exchange Act) of
more than one-half of the voting rights or equity interests in the
Company; (ii) a replacement of more than one-half of the members of the
Company's board of directors that is not approved by those individuals
who are members of the board of directors on the date hereof (or other
directors previously approved by such individuals); (iii) a merger or
consolidation of the Company or any significant Subsidiary or a sale of
more than one-half of the assets of the Company in one or a series of
related transactions, unless following such transaction or series of
transactions, the holders of the Company's securities prior to the
first such transaction continue to hold at least two-thirds of the
voting rights and equity interests in the surviving entity or acquirer
of such assets; (iv) a recapitalization, reorganization or other
transaction involving the Company or any significant Subsidiary that
constitutes or results in a transfer of more than one-half of the
voting rights or equity interests in the Company; (v) consummation of a
"Rule 13e-3 transaction" as defined in Rule 13e-3 under the Exchange
Act with respect to the Company, or (vi) the execution by the Company
or its controlling shareholders of an agreement providing for or
reasonably likely to result in any of the foregoing events.
"Closing" means the closing of the purchase and sale of the
Shares and the Additional Investment Rights pursuant to Section 2.1.
"Closing Date" means the date of the Closing.
"Closing Price" means, for any date, the price determined by
the first of the following clauses that applies: (a) if the Common
Stock is then listed or quoted on an Eligible Market or any other
national securities exchange, the closing price per share of the Common
Stock for such date (or the nearest preceding date) on the primary
Eligible Market or exchange on which the Common Stock is then listed or
quoted; (b) if prices for the Common Stock are then quoted on the OTC
Bulletin Board, the closing bid price per share of the Common Stock for
such date (or the nearest preceding date) so quoted; (c) if prices for
the Common Stock are then reported in the "Pink Sheets" published by
the National Quotation Bureau Incorporated (or a similar organization
or agency succeeding to its functions of reporting prices), the most
recent closing bid price per share of the Common Stock so reported; or
(d) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith
by Purchasers holding a majority of the Securities.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par
value $0.001 per share.
"Common Stock Equivalents" means, collectively, Options and
Convertible Securities.
"Company Counsel" means St. Xxxx & Xxxxx LLC, counsel to the
Company.
"Convertible Securities" means any stock or securities (other
than Options) convertible into or exercisable or exchangeable for
Common Stock.
"Effective Date" means the date that the Registration
Statement is first declared effective by the Commission.
"Eligible Market" means any of the New York Stock Exchange,
the American Stock Exchange, the NASDAQ National Market or the NASDAQ
SmallCap Market.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Stock" means the issuance of Common Stock (A) upon
exercise or conversion of any options or other securities described in
Schedule 3.1(f) (provided that such exercise or conversion occurs in
accordance with the terms thereof, without amendment or modification)
or otherwise pursuant to any employee benefit plan described in
Schedule 3.1(f) or hereafter adopted by the Company and approved by its
shareholders or (B) in connection with any issuance of shares or grant
of options to employees, officers, directors or consultants of the
Company pursuant to a stock option plan or other incentive stock plan
duly adopted by the Company's board of directors or in respect of the
issuance of Common Stock upon exercise of any such options.
"Filing Date" means the 30th day following the Closing Date
with respect to the initial Registration Statement required to be filed
hereunder, and, with respect to any additional Registration Statements
that may be required pursuant to Section 6.1(f), the 10th day following
the date on which the Company first knows, or reasonably should have
known, that such additional Registration Statement is required under
such Section.
"Lien" means any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction.
"Losses" means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including, without
limitation, costs of preparation and reasonable attorneys' fees.
"Options" means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities.
"Person" means any individual, corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or any court or other federal, state,
local or other governmental authority or other entity of any kind.
"Per Unit Purchase Price" means $11.25.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes
any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by the Registration
Statement, and all other amendments and supplements to the Prospectus
including post effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.
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"Purchaser Counsel" has the meaning set forth in Section
6.2(a).
"Registrable Securities" means any Common Stock (including
Underlying Shares) issued or issuable pursuant to the Transaction
Documents, together with any securities issued or issuable upon any
stock split, dividend or other distribution, recapitalization or
similar event with respect to the foregoing.
"Registration Statement" means each registration statement
required to be filed under Article VI, including (in each case) the
Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed
to be incorporated by reference in such registration statement.
"Required Effectiveness Date" means (i) with respect to the
initial Registration Statement required to be filed hereunder, the 90th
day following the Closing Date, and (ii) with respect to any additional
Registration Statements that may be required pursuant to Section
6.1(f), the 30th day following the date on which the Company first
knows, or reasonably should have known, that such additional
Registration Statement is required under such Section.
"Rule 144," "Rule 415," and "Rule 424" means Rule 144, Rule
415 and Rule 424, respectively, promulgated by the Commission pursuant
to the Securities Act, as such Rules may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"Securities" means the Shares, Additional Investment Rights
and the Underlying Shares.
"Shares" means the aggregate number of shares of Common Stock,
which are being issued and sold to the Purchasers at the Closing and
set forth on the signature pages hereof.
"Subsidiary" means any Person that is "significant subsidiary"
of the Company as defined in Rule 1-02(x) of Regulation S-X under the
Securities Act.
"Trading Day" means (a) any day on which the Common Stock is
listed or quoted and traded on its primary Trading Market, or (b) if
the Common Stock is not then listed or quoted and traded on any
Eligible Market, then a day on which trading occurs on the NASDAQ
SmallCap Market (or any successor thereto), or (c) if trading ceases to
occur on the NASDAQ SmallCap Market (or any successor thereto), any
Business Day.
"Trading Market" means the NASDAQ SmallCap Market or any other
Eligible Market, or any national securities exchange, market or trading
or quotation facility on which the Common Stock is then listed or
quoted.
"Transaction Documents" means this Agreement, the Additional
Investment Rights, the Transfer Agent Instructions and any other
documents or agreements executed in connection with the transactions
contemplated hereunder.
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"Transfer Agent Instructions" means the Irrevocable Transfer
Agent Instructions, in the form of Exhibit B, executed by the Company
and delivered to and acknowledged in writing by the Company's transfer
agent.
"Underlying Shares" means the shares of Common Stock issuable
upon exercise of the Additional Investment Rights.
"Unit" means one Share and an Additional Investment Right to
acquire 0.25 shares of Common Stock.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of Units indicated below such Purchaser's name on the signature page
of this Agreement at the Per Unit Purchase Price. The Closing shall take place
at the offices of Proskauer Rose LLP immediately following the execution hereof,
or at such other location or time as the parties may agree.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be
delivered to each Purchaser the following:
(i) one or more stock certificates, free and clear of
all restrictive and other legends (except as expressly
provided in Section 4.1(b) hereof), evidencing such number of
Shares equal to the number of Units indicated below such
Purchaser's name on the signature page of this Agreement,
registered in the name of such Purchaser;
(ii) an Additional Investment Right, registered in
the name of such Purchaser, pursuant to which such Purchaser
shall have the right to acquire such number of Underlying
Shares indicated below such Purchaser's name on the signature
page of this Agreement under the heading "Additional
Investment Right Shares"1, on the terms set forth therein;
(iii) a legal opinion of Company Counsel, in the form
of Exhibit C, executed by such counsel and delivered to the
Purchasers; and
(iv) duly executed Transfer Agent Instructions
acknowledged by the Company's transfer agent.
(b) At the Closing, each Purchaser shall deliver or cause to
be delivered the following an amount equal to the Per Unit Purchase
Price multiplied by the number of Units indicated below such
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Purchaser's name on the signature page of this Agreement, in United
States dollars and in immediately available funds, by wire transfer to
an account designated in writing to such Purchaser by the Company for
such purpose.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as follows:
(a) Subsidiaries. The Company has no direct or indirect
Subsidiaries other than those listed in Schedule 3.1(a). Except as
disclosed in Schedule 3.1(a), the Company owns, directly or indirectly,
all of the capital stock or comparable equity interests of each
Subsidiary free and clear of any Lien and all the issued and
outstanding shares of capital stock or comparable equity interest of
each Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and
the Subsidiaries is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation
or organization (as applicable), with the requisite power and authority
to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate or
articles of incorporation, bylaws or other organizational or charter
documents. Each of the Company and the Subsidiaries is duly qualified
to do business and is in good standing as a foreign corporation or
other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the
case may be, could not, individually or in the aggregate, (i) adversely
affect the legality, validity or enforceability of any Transaction
Document, (ii) have or result in a material adverse effect on the
results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as
a whole on a consolidated basis, or (iii) adversely impair the
Company's ability to perform fully on a timely basis its obligations
under any of the Transaction Documents (any of (i), (ii) or (iii), a
"Material Adverse Effect").
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on
the part of the Company and no further consent or action is required by
the Company, its Board of Directors or its shareholders. Each of the
Transaction Documents has been (or upon delivery will be) duly executed
by the Company and is, or when delivered in accordance with the terms
hereof, will constitute, the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
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(d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby do not and
will not (i) conflict with or violate any provision of the Company's or
any Subsidiary's certificate or articles of incorporation, bylaws or
other organizational or charter documents, (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the Company
or any Subsidiary is bound or affected, or (iii) result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state
securities laws and regulations and the rules and regulations of any
self-regulatory organization to which the Company or its securities are
subject), or by which any property or asset of the Company or a
Subsidiary is bound or affected.
(e) Issuance of the Securities. The Securities (including the
Underlying Shares) are duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens and
except as set forth on Schedule 3.1(e), shall not be subject to
preemptive rights or similar rights of shareholders. The Company has
reserved from its duly authorized capital stock the maximum number of
shares of Common Stock issuable upon exercise of the Additional
Investment Rights.
(f) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock, options and other
securities of the Company (whether or not presently convertible into or
exercisable or exchangeable for shares of capital stock of the Company)
is set forth in Schedule 3.1(f). All outstanding shares of capital
stock are duly authorized, validly issued, fully paid and nonassessable
and have been issued in compliance with all applicable securities laws.
Except as disclosed in Schedule 3.1(f), there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of
Common Stock, or contracts, commitments, understandings or arrangements
by which the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock, or securities or rights convertible
or exchangeable into shares of Common Stock. There are no anti-dilution
or price adjustment provisions contained in any security issued by the
Company (or in any agreement providing rights to security holders) and
the issue and sale of the Securities (including the Underlying Shares)
will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities. To
the knowledge of the Company, except as specifically disclosed in
Schedule 3.1(f), no Person or group of related Persons beneficially
owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or
has the right to acquire, by agreement with or by obligation binding
upon the Company, beneficial ownership of in excess of 5% of the
outstanding Common Stock, ignoring for such purposes any limitation on
the number of shares of Common Stock that may be owned at any single
time.
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(g) SEC Reports; Financial Statements. The Company has filed
all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials
(together with any materials filed by the Company under the Exchange
Act, whether or not required) being collectively referred to herein as
the "SEC Reports" and, together with this Agreement and the Schedules
to this Agreement, the "Disclosure Materials") on a timely basis or has
received a valid extension of such time of filing and has filed any
such SEC Reports prior to the expiration of any such extension. The
Company has delivered to each Purchaser true, correct and complete
copies of all SEC Reports filed within the 10 days preceding the date
hereof. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission
promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. The financial statements of the
Company included in the SEC Reports comply in all material respects
with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a
consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto,
and fairly present in all material respects the financial position of
the Company and its consolidated subsidiaries as of and for the dates
thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. All material agreements to
which the Company or any Subsidiary is a party or to which the property
or assets of the Company or any Subsidiary are subject are included as
part of or specifically identified in the SEC Reports.
(h) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports or in Schedule 3.1(h), (i)
there has been no event, occurrence or development that, individually
or in the aggregate, has had or that could result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent
or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the
Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has
not altered its method of accounting or the identity of its auditors,
except as disclosed in its SEC Reports, (iv) the Company has not
declared or made any dividend or distribution of cash or other property
to its shareholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company
has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock-based plans.
(i) Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body pending
or, to the knowledge of the Company, initiated against or affecting the
Company or any of its Subsidiaries that could, individually or in the
aggregate, have a Material Adverse Effect.
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(j) Compliance. Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has
not been waived that, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has
the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not
such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has
been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety
and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or result in a Material Adverse
Effect.
(k) Title to Assets. Except as set forth on Schedule 3.1(k),
the Company and the Subsidiaries have good and marketable title in fee
simple to all real property owned by them that is material to the
business of the Company and the Subsidiaries and good and marketable
title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for Liens as do not materially affect the
value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting
and enforceable leases of which the Company and the Subsidiaries are in
compliance.
(l) Certain Fees. Except for the fees described in Schedule
3.1(l), all of which are payable to registered broker-dealers, no
brokerage or finder's fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect
to the transactions contemplated by this Agreement, and the Company has
not taken any action that would cause any Purchaser to be liable for
any such fees or commissions.
(m) Private Placement. Neither the Company nor any Person
acting on the Company's behalf has sold or offered to sell or solicited
any offer to buy the Securities by means of any form of general
solicitation or advertising. Neither the Company nor any of its
Affiliates nor any Person acting on the Company's behalf has, directly
or indirectly, at any time within the past six months, made any offer
or sale of any security or solicitation of any offer to buy any
security under circumstances that would (i) eliminate the availability
of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale of the Securities
as contemplated hereby or (ii) cause the offering of the Securities
pursuant to the Transaction Documents to be integrated with prior
offerings by the Company for purposes of any applicable law, regulation
or stockholder approval provisions, including, without limitation,
under the rules and regulations of any Trading Market. The Company is
not, and is not an Affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. The Company
is not a United States real property holding corporation within the
meaning of the Foreign Investment in Real Property Tax Act of 1980.
(n) Listing and Maintenance Requirements. The Company has not,
in the two years preceding the date hereof, received notice (written or
oral) from any Trading Market on which the Common Stock is or has been
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listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Trading Market.
The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing
and maintenance requirements.
(o) Registration Rights. Except as described in Schedule
3.1(o), the Company has not granted or agreed to grant to any Person
any rights (including "piggy-back" registration rights) to have any
securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied.
(p) Application of Takeover Protections. There is no control
share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover
provision under the Company's charter documents or the laws of its
state of incorporation that is or could become applicable to any of the
Purchasers as a result of the Purchasers and the Company fulfilling
their obligations or exercising their rights under the Transaction
Documents, including, without limitation, as a result of the Company's
issuance of the Securities and the Purchasers' ownership of the
Securities.
(q) Disclosure. The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that constitutes or might
constitute material, nonpublic information. The Company understands and
confirms that each of the Purchasers will rely on the foregoing
representations in effecting transactions in securities of the Company.
All disclosure materials provided to the Purchasers regarding the
Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of
the Company are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. No event
or circumstance has occurred or information exists with respect to the
Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly
announced or disclosed. The Company acknowledges and agrees that (i) no
Purchaser makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2 or (ii) any statement, commitment
or promise to the Company or, to its knowledge, any of its
representatives which is or was an inducement to the Company to enter
into this Agreement or otherwise.
(r) Acknowledgment Regarding Purchasers' Purchase of
Securities. The Company acknowledges and agrees that each of the
Purchasers is acting solely in the capacity of an arm's length
purchaser with respect to the Company and to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that
no Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by any
Purchaser or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby
is merely incidental to the Purchasers' purchase of the Securities. The
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Company further represents to each Purchaser that the Company's
decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
(s) Patents and Trademarks. The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or
material for use in connection with their respective businesses as
described in the SEC Reports and which the failure to so have could
have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received
a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any
Person. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights.
(t) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged.
Neither the Company nor any Subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business without a
significant increase in cost.
(u) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the
SEC Reports, except where the failure to possess such permits could
not, individually or in the aggregate, have or result in a Material
Adverse Effect ("Material Permits"), and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(v) Transactions With Affiliates and Employees. Except as set
forth in SEC Reports filed at least ten days prior to the date hereof,
none of the officers or directors of the Company and, to the knowledge
of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than
for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing
of services to or by, providing for rental of real or personal property
to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
(w) Form S-3 Eligibility. The Company is eligible to register
the resale of its Common Stock for resale by the Purchasers under Form
S-3 promulgated under the Securities Act.
(x) Solvency. Based on the financial condition of the Company
as of the Closing Date, (i) the Company's fair saleable value of its
assets exceeds the amount that will be required to be paid on or in
respect of the Company's existing debts and other liabilities
11
(including known contingent liabilities) as they mature; (ii) the
Company's assets do not constitute unreasonably small capital to carry
on its business for the current fiscal year as now conducted and as
proposed to be conducted including its capital needs taking into
account the particular capital requirements of the business conducted
by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated
uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such
debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).
(y) Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences; however, the Company makes no representation as to
whether the Company's auditors will find a material weakness in the
Company's internal controls.
(z) Xxxxxxxx-Xxxxx Act. The Company is in compliance with
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 and
applicable rules and regulations promulgated by the Commission
thereunder in effect as of the date of this Agreement, except where
such noncompliance could not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect; however,
the Company makes no representation as to whether the Company's
auditors will find a material weakness in the Company's internal
controls.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, as to itself only and for no other Purchaser, represents and warrants to
the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder. The purchase by
such Purchaser of the Shares and Additional Investment Rights hereunder
has been duly authorized by all necessary action on the part of such
Purchaser. This Agreement has been duly executed and delivered by such
Purchaser and constitutes the valid and binding obligation of such
Purchaser, enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the
Securities for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right, subject to the
12
provisions of this Agreement, at all times to sell or otherwise dispose
of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act or under an exemption
from such registration and in compliance with applicable federal and
state securities laws. Nothing contained herein shall be deemed a
representation or warranty by such Purchaser to hold Securities for any
period of time.
(c) Purchaser Status. At the time such Purchaser was offered
the Shares and the Additional Investment Rights, it was, and at the
date hereof it is, an "accredited investor" as defined in Rule 501(a)
under the Securities Act.
(d) Experience of such Purchaser. Such Purchaser, either alone
or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks
of such investment. Such Purchaser is able to bear the economic risk of
an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) Securities may only be disposed of pursuant to an
effective registration statement under the Securities Act or pursuant
to an available exemption from the registration requirements of the
Securities Act, and in compliance with any applicable state securities
laws. In connection with any transfer of Securities other than pursuant
to an effective registration statement or to the Company or pursuant to
Rule 144(k), except as otherwise set forth herein, the Company may
require the transferor to provide to the Company an opinion of counsel
selected by the transferor and reasonably satisfactory to the Company,
the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration under the Securities Act. Notwithstanding the
foregoing, the Company hereby consents to and agrees to register on the
books of the Company and with its transfer agent, 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 Company that it is an "accredited investor" as defined in Rule
501(a) under the Securities Act.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of the following legend on any
certificate evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE
FOREGOING, THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE
OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
SECURITIES.
Certificates evidencing Securities shall not be required to contain
such legend or any other legend (i) while a Registration Statement
covering the resale of such Securities is effective under the
Securities Act, or (ii) following any sale of such Securities pursuant
to Rule 144, or (iii) if such Securities are eligible for sale under
Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations
and pronouncements issued by the Staff of the Commission). The Company
shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Company's transfer agent on the
Effective Date. Following the Effective Date or at such earlier time as
a legend is no longer required for certain Securities, the Company will
no later than three Trading Days following the delivery by a Purchaser
to the Company or the Company's transfer agent of a legended
certificate representing such Securities, deliver or cause to be
delivered to such Purchaser a certificate representing such Securities
that is free from all restrictive and other legends. The Company may
not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer
set forth in this Section.
(c) The Company acknowledges and agrees that a Purchaser may
from time to time pledge or grant a security interest in some or all of
the Securities in connection with a bona fide margin agreement or other
loan or financing arrangement secured by the Securities and, if
required under the terms of such agreement, loan or arrangement, such
Purchaser may transfer pledged or secured Securities to the pledgees or
secured parties. Such a pledge or transfer would not be subject to
approval of the Company and no legal opinion of the pledgee, secured
party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate Purchaser's
expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the
Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend
the list of Selling Stockholders thereunder.
4.2 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any Purchaser, the Company shall deliver to
such Purchaser a written certification of a duly authorized officer as to
14
whether it has complied with the preceding sentence. As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly available
in accordance with paragraph (c) of Rule 144 such information as is required for
the Purchasers to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request to satisfy the provisions of Rule 144 applicable to the
issuer of securities relating to transactions for the sale of securities
pursuant to Rule 144.
4.3 Integration. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers.
4.4 Reservation and Listing of Securities. The Company shall maintain a
reserve from its duly authorized shares of Common Stock for issuance pursuant to
the Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares. The Company shall in the time and manner required by its
Trading Market, prepare and file with such Trading Market an additional shares
listing application covering the number of shares of Common Stock issuable under
the Transaction Documents and shall take all steps necessary to cause such
shares of Common Stock to be approved for listing on its Trading Market as soon
as possible.
4.5 Subsequent Placements.
(a) From the date hereof until the earlier of (i) the ninety
(90) day following the Closing Date or (ii) the Effective Date, the
Company will not, directly or indirectly, offer, sell, grant any option
to purchase, or otherwise dispose of (or announce any offer, sale,
grant or any option to purchase or other disposition of) any of its or
the Subsidiaries' equity or equity equivalent securities, including
without limitation any debt, preferred stock or other instrument or
security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for
Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent
Placement") if as a result of such offer, sale, grant or other
disposition, the Person entitled to acquire such equity or equity
equivalent security may do so at an effective net price to the Company
per share of Common Stock less than the Per Unit Purchase Price.
(b) From the date hereof until the one year anniversary of the
Closing Date, the Company will not, directly or indirectly, effect any
private offering of the Company's Securities ("PIPEs Securities") in
which the Company is obligated to register the PIPEs Securities with
the Commission within 180 days of the date the PIPEs Securities are
first issued by the Company, unless the Company shall have first
complied with this Section 4.5(b).
(i) The Company shall deliver to each Purchaser a
written notice (the "Offer") of any proposed or intended
issuance or sale or exchange of the securities being offered
(the "Offered Securities") in a Subsequent Placement, which
Offer shall (w) identify and describe the Offered Securities,
(x) describe the price and other terms upon which they are to
15
be issued, sold or exchanged, and the number or amount of the
Offered Securities to be issued, sold or exchanged, (y)
identify the Persons or entities to which or with which the
Offered Securities are to be offered, issued, sold or
exchanged and (z) offer to issue and sell to or exchange with
each Purchaser (A) a pro rata portion of 50% of the Offered
Securities based on such Purchaser's pro rata portion of the
aggregate purchase price paid by the Purchasers for all of the
Shares purchased hereunder (the "Basic Amount"), and (B) with
respect to each Purchaser that elects to purchase its Basic
Amount, any additional portion of the Offered Securities
attributable to the Basic Amounts of other Purchasers as such
Purchaser shall indicate it will purchase or acquire should
the other Purchasers subscribe for less than their Basic
Amounts (the "Undersubscription Amount").
(ii) To accept an Offer, in whole or in part, a
Purchaser must deliver a written notice to the Company prior
to the end of the five (5) Trading Day period of the Offer,
setting forth the portion of the Purchaser's Basic Amount that
such Purchaser elects to purchase and, if such Purchaser shall
elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Purchaser elects
to purchase (in either case, the "Notice of Acceptance"). If
the Basic Amounts subscribed for by all Purchasers are less
than the total of all of the Basic Amounts, then each
Purchaser who has set forth an Undersubcription Amount in its
Notice of Acceptance shall be entitled to purchase, in
addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided,
however, that if the Undersubscription Amounts subscribed for
exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Purchaser who has subscribed
for any Undersubscription Amount shall be entitled to purchase
on that portion of the Available Undersubscription Amount as
the Basic Amount of such Purchaser bears to the total Basic
Amounts of all Purchasers that have subscribed for
Undersubscription Amounts, subject to rounding by the Board of
Directors to the extent its deems reasonably necessary.
(iii) The Company shall have ten (10) Trading Days
from the expiration of the period set forth in Section
4.5(b)(ii) above to issue, sell or exchange all or any part of
such Offered Securities as to which a Notice of Acceptance has
not been given by the Purchasers (the "Refused Securities"),
but only to the offerees described in the Offer and only upon
terms and conditions (including, without limitation, unit
prices and interest rates) that are not more favorable to the
acquiring Person or Persons or less favorable to the Company
than those set forth in the Offer.
(iv) In the event the Company shall propose to sell
less than all the Refused Securities (any such sale to be in
the manner and on the terms specified in Section 4.5(b)(iii)
above), then each Purchaser may, at its sole option and in its
sole discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount
that shall be not less than the number or amount of the
Offered Securities that the Purchaser elected to purchase
pursuant to Section 4.5(b)(ii) above multiplied by a fraction,
16
(i) the numerator of which shall be the number or amount of
Offered Securities the Company actually proposes to issue,
sell or exchange (including Offered Securities to be issued or
sold to Purchasers pursuant to Section 4.5(b)(ii) above prior
to such reduction) and (ii) the denominator of which shall be
the original amount of the Offered Securities. In the event
that any Purchaser so elects to reduce the number or amount of
Offered Securities specified in its Notice of Acceptance, the
Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until
such securities have again been offered to the Purchasers in
accordance with Section 4.5(b)(i) above.
(v) Upon the closing of the issuance, sale or
exchange of all or less than all of the Refused Securities,
the Purchasers shall acquire from the Company, and the Company
shall issue to the Purchasers, the number or amount of Offered
Securities specified in the Notices of Acceptance, as reduced
pursuant to Section 4.5(b)(iv) above if the Purchasers have so
elected, upon the terms and conditions specified in the Offer.
The purchase by the Purchasers of any Offered Securities is
subject in all cases to the preparation, execution and
delivery by the Company and the Purchasers of a purchase
agreement relating to such Offered Securities reasonably
satisfactory in form and substance to the Purchasers and their
respective counsel.
(vi) Any Offered Securities not acquired by the
Purchasers or other persons in accordance with Section
4.5(b)(iii) above may not be issued, sold or exchanged until
they are again offered to the Purchasers under the procedures
specified in this Agreement.
(c) The restrictions contained in paragraph (a) of this
Section 4.5 shall not apply to Excluded Stock.
4.6 Securities Laws Disclosure; Publicity. The Company shall, on or
before 8:30 a.m., New York City time on February 14, 2005, issue a press release
acceptable to the Purchasers disclosing all material terms of the transactions
contemplated hereby. Within one Trading Day following the Closing Date, the
Company shall file a Current Report on Form 8-K with the Commission (the "8-K
Filing") describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to such Current Report on Form
8-K this Agreement, the form of the Additional Investment Rights, in the form
required by the Exchange Act. Thereafter, the Company shall timely file any
filings and notices required by the Commission or applicable law with respect to
the transactions contemplated hereby and provide copies thereof to the
Purchasers promptly after filing. Except with respect to the 8-K Filing and the
press release referenced above (a copy of which will be provided to the
Purchasers for their review as early as practicable prior to its filing), the
Company shall, at least one Trading Day prior to the filing or dissemination of
any disclosure required by this paragraph, provide a copy thereof to the
Purchasers for their review. The Company and the Purchasers shall consult with
each other in issuing any press releases or otherwise making public statements
or filings and other communications with the Commission or any regulatory agency
or Trading Market with respect to the transactions contemplated hereby, and
neither party shall issue any such press release or otherwise make any such
public statement, filing or other communication without the prior consent of the
other, except if such disclosure is required by law, in which case the
17
disclosing party shall promptly provide the other party with prior notice of
such public statement, filing or other communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the Purchasers with
prior notice of such disclosure. The Company shall not, and shall cause each of
its Subsidiaries and its and each of their respective officers, directors,
employees and agents not to, provide any Purchaser with any material nonpublic
information regarding the Company or any of its Subsidiaries from and after the
filing of the 8-K Filing without the express written consent of such Purchaser.
In the event of a breach of the foregoing covenant by the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees
and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Purchaser shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material nonpublic information without the prior approval by the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Purchaser shall have any liability to the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, shareholders or agents for any such disclosure. Subject to
the foregoing, neither the Company nor any Purchaser shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of any Purchaser, to make any press release or other
public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) each Purchaser shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release). Each press
release disseminated during the 12 months preceding the date of this Agreement
did not at the time of release 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 are made, not misleading.
4.7 Use of Proceeds. Except as set forth on Schedule 4.7, the Company
shall use the net proceeds from the sale of the Securities hereunder for working
capital purposes and not (i) for the satisfaction of any portion of the
Company's debt (other than payment of trade payables and accrued expenses in the
ordinary course of the Company's business and consistent with prior practices),
(ii) to redeem any Company equity or equity-equivalent securities, or (iii) to
settle any outstanding litigation.
4.8 Reimbursement. If any Purchaser or any of its Affiliates or any
officer, director, partner, controlling Person, employee or agent of a Purchaser
or any of its Affiliates (a "Related Person") becomes involved in any capacity
in any Proceeding brought by or against any Person in connection with or as a
result of the transactions contemplated by the Transaction Documents, the
Company will indemnify and hold harmless such Purchaser or Related Person for
its reasonable legal and other expenses (including the costs of any
investigation, preparation and travel) and for any Losses incurred in connection
therewith, as such expenses or Losses are incurred, excluding only Losses that
result directly from such Purchaser's or Related Person's gross negligence or
willful misconduct. In addition, the Company shall indemnify and hold harmless
each Purchaser and Related Person from and against any and all Losses, as
18
incurred, arising out of or relating to any breach by the Company of any of the
representations, warranties or covenants made by the Company in this Agreement
or any other Transaction Document, or any allegation by a third party that, if
true, would constitute such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.4(c) below. The indemnification obligations of the Company under this
paragraph shall be in addition to any liability that the Company may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Purchasers and any such
Related Persons. If the Company breaches its obligations under any Transaction
Document, then, in addition to any other liabilities the Company may have under
any Transaction Document or applicable law, the Company shall pay or reimburse
the Purchasers on demand for all costs of collection and enforcement (including
reasonable attorneys fees and expenses). Without limiting the generality of the
foregoing, the Company specifically agrees to reimburse the Purchasers on demand
for all costs of enforcing the indemnification obligations in this paragraph.
ARTICLE V
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct in
all material respects as of the date when made and as of the Closing as
though made on and as of such date; and
(b) Performance. The Company and each other Purchaser shall
have performed, satisfied and complied in all material respects with
all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior
to the Closing.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction that prohibits the consummation of any of the
transactions contemplated by the Transaction Documents;
(d) Adverse Changes. Since the date of execution of this
Agreement, no event or series of events shall have occurred that
reasonably would be expected to have or result in a Material Adverse
Effect; and
(e) No Suspensions of Trading in Common Stock; Listing.
Trading in the Common Stock shall not have been suspended by the
Commission or any Trading Market (except for any suspensions of trading
of not more than three Trading Days (whether or not consecutive) solely
to permit dissemination of material information regarding the Company)
at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for
trading on an Eligible Market;
19
5.2 Conditions Precedent to the Obligations of the Company. The
obligation of the Company to sell Securities at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Purchasers contained herein shall be true and correct
in all material respects as of the date when made and as of the Closing
Date as though made on and as of such date; and
(b) Performance. The Purchasers shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Purchasers at or prior to
the Closing.
ARTICLE VI
REGISTRATION RIGHTS
6.1 Shelf Registration
(a) As promptly as possible, and in any event on or prior to
the Filing Date, the Company shall prepare and file with the Commission
a "Shelf" Registration Statement covering the resale of all Registrable
Securities for an offering to be made on a continuous basis pursuant to
Rule 415. The Registration Statement shall be on Form S-3 (except if
the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on
another appropriate form in accordance herewith as the Purchasers may
consent) and shall contain (except if otherwise directed by the
Purchasers) the "Plan of Distribution" attached hereto as Exhibit C.
(b) The Company shall use its best efforts to cause the
Registration Statement to be declared effective by the Commission as
promptly as possible after the filing thereof, but in any event prior
to the Required Effectiveness Date, and shall use its best efforts to
keep the Registration Statement continuously effective under the
Securities Act until all Registrable Securities covered by such
Registration Statement have been sold publicly or are no longer
outstanding or when such Securities can be sold pursuant to paragraph
(k) of Rule 144 (the "Effectiveness Period").
(c) The Company shall notify each Purchaser in writing
promptly (and in any event within one Trading Day) after receiving
notification from the Commission that the Registration Statement has
been declared effective.
(d) If: (i) any Registration Statement is not filed on or
prior to the Filing Date (if the Company files such Registration
Statement without affording the Purchasers the opportunity to review
and comment on the same as required by Section 6.2(a) hereof, the
Company shall not be deemed to have satisfied this clause (i)), or (ii)
the-Company fails to file with the Commission a request for
acceleration in accordance with Rule 461 promulgated under the
Securities Act, within five Trading Days after the date that the
Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or
will not be subject to further review, or (iii) the Company fails to
respond to any comments made by the Commission within 10 Trading Days
after the receipt of such comments, or (iv) a Registration Statement
20
filed hereunder is not declared effective by the Commission by the
Required Effectiveness Date, or (v) after a Registration Statement is
filed with and declared effective by the Commission, such Registration
Statement ceases to be effective as to all Registrable Securities to
which it is required to relate at any time prior to the expiration of
the Effectiveness Period without being succeeded within 20 Trading Days
by an amendment to such Registration Statement or by a subsequent
Registration Statement filed with and declared effective by the
Commission, or (vi) an amendment to a Registration Statement is not
filed by the Company with the Commission within 20 Trading Days after
the Commission's having notified the Company that such amendment is
required in order for such Registration Statement to be declared
effective, or (vii) the Common Stock is not listed or quoted, or is
suspended from trading on an Eligible Market for a period of three
Trading Days (which need not be consecutive Trading Days) (any such
failure or breach being referred to as an "Event," and for purposes of
clause (i) or (iv) the date on which such Event occurs, or for purposes
of clause (ii) the date on which such five Trading Day period is
exceeded, or for purposes of clauses (iii), (v) or (vi) the date which
such ten Trading Day-period is exceeded, or for purposes of clause
(vii) the date on which such three Trading Day period is exceeded,
being referred to as "Event Date"), then: (x) on each such Event Date
the Company shall pay to each Purchaser an amount in cash, as partial
liquidated damages and not as a penalty, equal to 1% of the aggregate
purchase price paid by such Purchaser pursuant to the Purchase
Agreement; and (y) on each monthly anniversary of each such Event Date
thereof (if the applicable Event shall not have been cured by such
date) until the applicable Event is cured, the Company shall pay to
each Purchaser an amount in cash, as partial liquidated damages and not
as a penalty, equal to 1% of the aggregate purchase price paid by such
Purchaser pursuant to the Purchase Agreement. Such payments shall be in
partial compensation to the Purchasers and shall not constitute the
Purchaser's exclusive remedy for such events. If the Company fails to
pay any liquidated damages pursuant to this Section in full within
seven days after the date payable, the Company will pay interest
thereon at a rate of 18% per annum (or such lesser maximum amount that
is permitted to be paid by applicable law) to the Purchaser, accruing
daily from the date such liquidated damages are due until such amounts,
plus all such interest thereon, are paid in full.
(e) The Company shall not, prior to the Effective Date of the
Registration Statement, prepare and file with the Commission a
registration statement relating to an offering for its own account or
the account of others (other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or as contemplated in the
Transaction Documents) under the Securities Act of any of its equity
securities.
(f) If the Company issues to the Purchasers any Common Stock
pursuant to the Transaction Documents that is not included in the
initial Registration Statement, then the Company shall file an
additional Registration Statement covering such number of shares of
Common Stock on or prior to the Filing Date and shall use it best
efforts, but in no event later than the Required Filing Date, to cause
such additional Registration Statement to become effective by the
Commission.
6.2 Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:
21
(a) Not less than three Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or
supplement thereto (including any document that would be incorporated
or deemed to be incorporated therein by reference), the Company shall
(i) furnish to each Purchaser and any counsel designated by any
Purchaser (each, a "Purchaser Counsel", and Iroquois Capital, L.P. has
initially designated Proskauer Rose LLP "LP Counsel") copies of all
such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject
to the review of each Purchaser and Purchaser Counsel, and (ii) cause
its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company
shall not file a Registration Statement or any such Prospectus or any
amendments or supplements thereto to which Purchasers holding a
majority of the Registrable Securities shall reasonably object in
writing.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and
the Prospectus used in connection therewith as may be necessary to keep
the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in
order to register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus to be amended
or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond
as promptly as reasonably possible, and in any event within ten Trading
Days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as
reasonably possible provide the Purchasers true and complete copies of
all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply in all material respects with
the provisions of the Securities Act and the Exchange Act with respect
to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with
the intended methods of disposition by the Purchasers thereof set forth
in the Registration Statement as so amended or in such Prospectus as so
supplemented
(c) Notify the Purchasers of Registrable Securities to be sold
and Purchaser Counsel as promptly as reasonably possible, and (if
requested by any such Person) confirm such notice in writing no later
than two Trading Day thereafter, of any of the following events: (i)
the Commission notifies the Company whether there will be a "review" of
any Registration Statement; (ii) the Commission comments in writing on
any Registration Statement (in which case the Company shall deliver to
each Purchaser a copy of such comments and of all written responses
thereto); (iii) any Registration Statement or any post-effective
amendment is declared effective; (iv) the Commission or any other
Federal or state governmental authority requests any amendment or
supplement to any Registration Statement or Prospectus or requests
additional information related thereto; (v) the Commission issues any
stop order suspending the effectiveness of any Registration Statement
or initiates any Proceedings for that purpose; (vi) the Company
receives notice of any suspension of the qualification or exemption
from qualification of any Registrable Securities for sale in any
jurisdiction, or the initiation or threat of any Proceeding for such
purpose; or (vii) the financial statements included in any Registration
Statement become ineligible for inclusion therein or any statement made
in any Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference is
untrue in any material respect or any revision to a Xxxxxxxxxxxx
00
Xxxxxxxxx, Xxxxxxxxxx or other document is required so that it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) Use its best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of (i) any order suspending the
effectiveness of any Registration Statement, or (ii) any suspension of
the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, as soon as
possible.
(e) Furnish to each Purchaser and Purchaser Counsel, without
charge, at least one conformed copy of each Registration Statement and
each amendment thereto, including financial statements and schedules,
all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(f) Promptly deliver to each Purchaser and Purchaser Counsel,
without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement
thereto as such Persons may reasonably request. The Company hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Purchasers in connection with the
offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto.
(g) (i) In the time and manner required by each Trading
Market, prepare and file with such Trading Market an additional shares
listing application covering all of the Registrable Securities; (ii)
take all steps necessary to cause such Registrable Securities to be
approved for listing on each Trading Market as soon as possible
thereafter; (iii) provide to the Purchasers evidence of such listing;
and (iv) maintain the listing of such Registrable Securities on each
such Trading Market or another Eligible Market.
(h) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the
selling Purchasers and each applicable Purchaser Counsel in connection
with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer
and sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any Purchaser requests in writing, to keep
each such registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration
Statement.
(i) Cooperate with the Purchasers to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a Registration
Statement, which certificates shall be free, to the extent permitted by
this Agreement, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in
such names as any such Purchasers may request.
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(j) Upon the occurrence of any event described in Section
6.2(c)(vii), as promptly as reasonably possible, prepare a supplement
or amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered,
neither the Registration Statement nor such Prospectus will contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(k) Cooperate with any due diligence investigation undertaken
by the Purchasers in connection with the sale of Registrable
Securities, including, without limitation, by making available any
documents and information; provided that the Company will not deliver
or make available to any Purchaser material, nonpublic information
unless such Purchaser specifically requests in advance to receive
material, nonpublic information in writing.
(l) If Holders of a majority of the Registrable Securities
being offered pursuant to a Registration Statement select underwriters
for the offering, the Company shall enter into and perform its
obligations under an underwriting agreement, in usual and customary
form, including, without limitation, by providing customary legal
opinions, comfort letters and indemnification and contribution
obligations.
(m) Comply with all applicable rules and regulations of the
Commission.
6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including without limitation (a)
all registration and filing fees and expenses, including without limitation
those related to filings with the Commission, any Trading Market and in
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the
Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company, (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, and (f) all listing fees to be paid
by the Company to the Trading Market.
6.4 Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Purchaser, the officers, directors, partners, members,
agents, investment advisors and employees of each of them, each Person
who controls any such Purchaser (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, partners, members, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law,
from and against any and all Losses, as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus
or form of prospectus or supplement thereto, in the light of the
24
circumstances under which they were made) not misleading, except to the
extent, but only to the extent, that (i) such untrue statements,
alleged untrue statements, omissions or alleged omissions are based
solely upon information regarding such Purchaser furnished in writing
to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such
Purchaser's proposed method of distribution of Registrable Securities
and was reviewed and expressly approved in writing by such Purchaser
expressly for use in the Registration Statement, such Prospectus or
such form of Prospectus or in any amendment or supplement thereto or
(ii) in the case of an occurrence of an event of the type specified in
Section 6.2(c)(v)-(vii), the use by such Purchaser of an outdated or
defective Prospectus after the Company has notified such Purchaser in
writing that the Prospectus is outdated or defective and prior to the
receipt by such Purchaser of the Advice contemplated in Section 6.5.
The Company shall notify the Purchasers promptly of the institution,
threat or assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.
(b) Indemnification by Purchasers. Each Purchaser shall,
severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the
Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted
by applicable law, from and against all Losses (as determined by a
court of competent jurisdiction in a final judgment not subject to
appeal or review) arising solely out of any untrue statement of a
material fact contained in the Registration Statement, any Prospectus,
or any form of prospectus, or in any amendment or supplement thereto,
or arising solely out of any omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case
of any Prospectus or form of prospectus or supplement thereto, in the
light of the circumstances under which they were made) not misleading
to the extent, but only to the extent, that such untrue statement or
omission is contained in any information so furnished in writing by
such Purchaser to the Company specifically for inclusion in such
Registration Statement or such Prospectus or to the extent that (i)
such untrue statements or omissions are based solely upon information
regarding such Purchaser furnished in writing to the Company by such
Purchaser expressly for use therein, or to the extent that such
information relates to such Purchaser or such Purchaser's proposed
method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus
or in any amendment or supplement thereto or (ii) in the case of an
occurrence of an event of the type specified in Section
6.2(c)(v)-(vii), the use by such Purchaser of an outdated or defective
Prospectus after the Company has notified such Purchaser in writing
that the Prospectus is outdated or defective and prior to the receipt
by such Purchaser of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Purchaser hereunder be greater
in amount than the dollar amount of the net proceeds received by such
Purchaser upon the sale of the Registrable Securities giving rise to
such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party shall
promptly notify the Person from whom indemnity is sought (the
25
"Indemnifying Party") in writing, and the Indemnifying Party shall
assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent
that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further
review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless: (i) the
Indemnifying Party has agreed in writing to pay such fees and expenses;
or (ii) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii)
the named parties to any such Proceeding (including any impleaded
parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel
that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at the expense of
the Indemnifying Party, the Indemnifying Party shall not have the right
to assume the defense thereof and such counsel shall be at the expense
of the Indemnifying Party). The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld or delayed.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in
respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party
from all liability on claims that are the subject matter of such
Proceeding.
All fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in
a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten Trading Days of written
notice thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may
require such Indemnified Party to undertake to reimburse all such fees
and expenses to the extent it is finally judicially determined that
such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section
6.4(a) or (b) is unavailable to an Indemnified Party (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses,
in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well
26
as any other relevant equitable considerations. The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission of a material fact, has been taken or made
by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the
limitations set forth in Section 6.4(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection
with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided
for in this Section was available to such party in accordance with its
terms.
The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6.4(d) were
determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred
to in the immediately preceding paragraph. Notwithstanding the
provisions of this Section 6.4(d), no Purchaser shall be required to
contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of
the Registrable Securities subject to the Proceeding exceeds the amount
of any damages that such Purchaser has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained
in this Section are in addition to any liability that the Indemnifying
Parties may have to the Indemnified Parties.
6.5 Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement until such Purchaser's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 6.2(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
6.6 No Piggyback on Registrations. Except as set forth on Schedule
3.1(o), neither the Company nor any of its security holders (other than the
Purchasers in such capacity pursuant hereto) may include securities of the
Company in the Registration Statement other than the Registrable Securities, and
the Company shall not after the date hereof enter into any agreement providing
any such right to any of its security holders.
6.7 Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
27
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Trading Day following the date of this Agreement;
provided that no such termination will affect the right of any party to xxx for
any breach by the other party (or parties).
7.2 Fees and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
issuance of the Securities.
7.3 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents. Notwithstanding anything to the contrary
herein, Securities may be assigned to any Person in connection with a bona fide
margin account or other loan or financing arrangement secured by such Company
Securities.
7.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section 7.4 prior to 6:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 6:30
p.m. (New York City time) on any Trading Day, (c) the Trading Day following the
date of deposit with a nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The addresses and facsimile numbers for such notices and communications are
those set forth on the signature pages hereof, or such other address or
facsimile number as may be designated in writing hereafter, in the same manner,
by any such Person.
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7.5 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Purchasers under Article VI and that does not directly or indirectly affect the
rights of other Purchasers may be given by Purchasers holding at least a
majority of the Registrable Securities to which such waiver or consent relates.
7.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
7.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Purchasers." Notwithstanding anything to the contrary herein,
Securities may be assigned to any Person in connection with a bona fide margin
account or other loan or financing arrangement secured by such Securities.
7.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.8 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
7.9 Governing Law; Venue; Waiver Of Jury Trial. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN
THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE
BROUGHT BY THE COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR
WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH
RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY
IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING
29
BROUGHT BY THE COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND PURCHASERS HEREBY WAIVE ALL
RIGHTS TO A TRIAL BY JURY.
7.10 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and/or
exercise of the Securities, as applicable.
7.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
7.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
7.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
30
7.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
7.16 Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser hereunder or pursuant to the Additional Investment
Rights or any Purchaser enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company by a
trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
7.17 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
7.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Securities pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other Person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. The Company hereby confirms that it understands and agrees
that the Purchasers are not acting as a "group" as that term is used in Section
13(d) of the Exchange Act. Each Purchaser acknowledges that no other Purchaser
has acted as agent for such Purchaser in connection with making its investment
31
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser represents that it has been represented by its own separate legal
counsel in its review and negotiations of this Agreement and the Transaction
Documents and each party represents and confirms that Proskauer Rose LLP
represents only Iroquois Capital, L.P. in connection with this Agreement and the
other Transaction Documents.
[Signature pages to follow]
32
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized signatories as of the date first
indicated above.
QMED, INC.
By: /s/ Xxxxxxx X. Xxx
-------------------------------
Name: Xxxxxxx X. Xxx
Title: President & CEO
Address for Notice:
00 Xxxxxxxxxxx Xxx
Xxxxxxxxx, XX 00000
Facsimile No.: 732.544.5404
Telephone No.: 000.000.0000
Attn:
With a copy to: St. Xxxx & Xxxxx, L.L.C.
Xxx Xxxx Xxxxx Xxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Tel.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
Purchaser: IROQUOIS CAPITAL, L.P.
By: /s/ Xxxxxx Xxxxxxxxx
Name: Xxxxxx Xxxxxxxxx
Title: Partner
Number of Units: 144,444
Additional Investment Right Shares: 36,111
Address for Notice:
Iroquois Capital, L.P.
000 Xxxxxxxxx Xxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxxx Xxxxxxxxx
With a copy to: Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
Purchaser: Smithfield Fiduciary LLC
By: /s/ Xxxx X. Chill
------------------------------
Name: Xxxx X. Chill
Title: Authorized Signatory
Number of Units: 144,444
Additional Investment Right Shares: 36,111
Address for Notice:
c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxx X. Xxxxxx/Xxxx Chill
Purchaser: Omicron Master Trust
By: /s/ Xxxxx Xxxxxxxxx
Name: Xxxxx Xxxxxxxxx
Title: Managing Partner
Number of Units: 168,889
Additional Investment Right Shares: 42,222
Address for Notice:
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxx Xxxxxxxxx/Xxxxx Xxxx
Purchaser: Cranshire Capital, L.P.
By: /s/ Xxxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: President - Downsfield Capital
The General Partner
Number of Units: 177,778
Additional Investment Right Shares: 44,444
Address for Notice:
Cranshire Capital, L.P.
000 Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxxx Xxxxx
Exhibits:
A Form of Additional Investment Right
B Transfer Agent Instructions
C Opinion of Company Counsel
D Plan of Distribution