EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
September 28, 2004 among Diomed Holdings, Inc., a Delaware corporation (the
"Company"), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a "Purchaser" and collectively the
"Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") and Rule 506 promulgated thereunder, the Company desires
to issue and sell to each Purchaser, and each Purchaser, severally and not
jointly, desires to purchase from the Company, securities of the Company as more
fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement:
(a) capitalized terms that are not otherwise defined herein have the meanings
given to such terms in the Debentures (as defined herein), and (b) the following
terms have the meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in
Section 3.1(j).
"Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person, as such terms are used in and
construed under Rule 144 under the Securities Act. With respect to a
Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Purchaser
will be deemed to be an Affiliate of such Purchaser.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"Closing Date" means the Trading Day when all of the
Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) the
Purchasers' obligations to pay the Subscription Amount and (ii) the
Company's obligations to deliver the Securities have been satisfied or
waived.
"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 a Trading Market, the closing bid
price of the Common Stock for such date (or the nearest preceding date)
on the Trading Market on which the Common Stock is then listed or
quoted as reported by Bloomberg Financial L.P. (based on a Trading Day
from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the
Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then quoted on the OTC Bulletin Board,
the closing bid price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is
not then listed or quoted on the OTC Bulletin Board and 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 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 the
Purchasers and reasonably acceptable to the Company.
"Commission" means the Securities and Exchange Commission.
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"Common Stock" means the common stock of the Company, par
value $0.001 per share, and any securities into which such common stock
shall hereinafter have been reclassified into.
"Common Stock Equivalents" means any securities of the Company
or the Subsidiaries which would entitle the holder thereof to acquire
at any time Common Stock, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is
at any time convertible into or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.
"Company Counsel" means McGuireWoods LLP, with offices at 1345
Avenue of the Xxxxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
"Conversion Price" shall have the meaning ascribed to such
term in the Debentures.
"Debentures" means, the Variable Rate Convertible Debentures
due, subject to the terms therein, 48 months from their date of
issuance, issued by the Company to the Purchasers hereunder, in the
form of Exhibit A.
"Disclosure Schedules" shall have the meaning ascribed to such
term in Section 3.1 hereof.
"Effective Date" means the date that the initial Registration
Statement filed by the Company pursuant to the Registration Rights
Agreement is first declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
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"Exempt Issuance" means the issuance of (a) shares of Common
Stock or options to employees, officers, directors or consultants of
the Company pursuant to any stock or option plan duly adopted by a
majority of the non-employee members of the Board of Directors of the
Company or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the
exercise of or conversion of any securities issued hereunder or as
contemplated by this Agreement and related transaction documents
contemplated by Sections 2.3(a)(iii) and 2.3(b)(v) herein, convertible
securities, options or warrants issued and outstanding on the date of
this Agreement, provided that such securities have not been amended
since the date of this Agreement to increase the number of such
securities and (c) securities issued pursuant to acquisitions or
strategic transactions, provided any such issuance shall only be to a
Person which is, itself or through its subsidiaries, an operating
company in a business synergistic with the business of the Company and
in which the Company receives benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is
issuing securities primarily for the purpose of raising capital or to
an entity whose primary business is investing in securities; provided,
however, for the purpose of clause (a) herein, shares of Common Stock
or options issuable to consultants or service providers to the Company
shall not exceed 250,000 shares, in the aggregate, in any 12 month
period.
"FW" means Xxxxxxx Xxxxxxxxx LLP with offices at 000
Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000, legal
counsel to Omicron Mater Trust.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h) hereof.
"Liens" means a lien, charge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction.
"Market Price" shall mean $1.91, subject to adjustment for
reverse and forward stock splits, stock dividends, stock combinations
and other similar transactions of the Common Stock that occur after the
date of this Agreement.
"Material Adverse Effect" shall have the meaning assigned to
such term in Section 3.1(b) hereof.
"Material Permits" shall have the meaning ascribed to such
term in Section 3.1(m).
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
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"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, among the Company and the Purchasers,
in the form of Exhibit B attached hereto.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement
and covering the resale of the Warrant Shares and the Underlying Shares
by each Purchaser as provided for in the Registration Rights Agreement.
"Required Approvals" shall have the meaning ascribed to such
term in Section 3.1(e).
"Required Minimum" means, as of any date, the maximum
aggregate number of shares of Common Stock then issued or potentially
issuable in the future pursuant to the Transaction Documents, including
any Warrant Shares or Underlying Shares issuable upon exercise or
conversion in full of all Warrants and Debentures (including Underlying
Shares issuable as payment of interest), ignoring any conversion or
exercise limits set forth therein, and assuming that the Conversion
Price is at all times on and after the date of determination 75% of the
then Conversion Price on the Trading Day immediately prior to the date
of determination.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h) hereof.
"Securities" means the Debentures, the Warrants, the Warrant
Shares and the Underlying Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder Approval" means such approval as may be required
by the applicable rules and regulations of the Trading Market (or any
successor entity) from the shareholders of the Company with respect to
the transactions contemplated by the Transaction Documents, including,
without limitation, the transaction contemplated by Sections
2.3(a)(iii) and 2.3(b)(v) herein, including the issuance of all of the
Underlying Shares and shares of Common Stock issuable upon exercise of
the Warrants in excess of 19.9% of the Company's issued and outstanding
Common Stock on the Closing Date.
"Subscription Amount" means, as to each Purchaser, the
aggregate amount to be paid for Debentures and Warrants purchased
hereunder as specified below such Purchaser's name on the signature
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page of this Agreement and next to the heading "Subscription Amount,"
in United States Dollars and in immediately available funds.
"Subsequent Financing" shall have the meaning ascribed to such
term in Section 4.13.
"Subsidiary" means any subsidiary of the Company as set forth
on Schedule 3.1(a).
"Trading Day" means a day on which the Common Stock is traded
on a Trading Market.
"Trading Market" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the Nasdaq SmallCap Market, the American Stock Exchange, the
New York Stock Exchange or the Nasdaq National Market.
"Transaction Documents" means this Agreement, the Debentures,
the Warrants, the Registration Rights Agreement and any other documents
or agreements executed in connection with the transactions contemplated
hereunder.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of the Debentures and issued and issuable in lieu of
the cash payment of interest on the Debentures.
"Warrants" means collectively the Common Stock purchase
warrants, in the form of Exhibit C delivered to the Purchasers at the
Closing in accordance with Section 2.2 hereof, which Warrants shall be
exercisable immediately and have a term of exercise equal to 5 years.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the Closing Date, upon the terms and subject to the conditions
set forth herein, concurrent with the execution and delivery of this Agreement
by the parties hereto, the Company agrees to sell, and each Purchaser agrees to
purchase in the aggregate, severally and not jointly, up to $7,000,000 principal
amount of the Debentures at their face principal amount, as set forth on the
signature page hereof for each Purchaser, in the proportions set forth for each
such Purchaser. Each Purchaser shall deliver to the Company via wire transfer or
a certified check immediately available funds equal to their Subscription Amount
and the Company shall deliver to each Purchaser their respective Debenture and
Warrants as determined pursuant to Section 2.2(a)(iii) and the other items set
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forth in Section 2.2 issuable at the Closing. Upon satisfaction of the
conditions set forth in Section 2.2, the Closing shall occur at the offices of
FW, or such other location as the parties shall mutually agree.
2.2 Deliveries.
a) On the Closing Date, the Company shall deliver or
cause to be delivered to each Purchaser the
following:
(i) this Agreement duly executed by the Company;
(ii) a Debenture with a principal amount equal to
such Purchaser's Subscription Amount,
registered in the name of such Purchaser;
(iii) a Warrant registered in the name of such
Purchaser to purchase up to a number of
shares of Common Stock equal to 50% of such
Purchaser's Subscription Amount divided by
the Market Price, with an exercise price
equal to 110% of the Market Price as of the
date hereof, subject to adjustment therein;
(iv) the Registration Rights Agreement duly
executed by the Company;
(v) the written voting agreement, in the form of
Exhibit E attached hereto, of all of the
officers and directors on the date hereof to
vote all Common Stock owned by each of such
officers and directors as of the record date
for the annual meeting of shareholders of
the Company in favor of Shareholder
Approval;
(vi) a legal opinion of Company Counsel, in the
form of Exhibit D attached hereto.
b) On the Closing Date, each Purchaser shall deliver or
cause to be delivered to the Company the following:
(i) this Agreement duly executed by such
Purchaser;
(ii) such Purchaser's Subscription Amount by wire
transfer to the account as specified in
writing by the Company; and
(iii) the Registration Rights Agreement duly
executed by such Purchaser.
2.3 Closing Conditions.
a) The obligations of the Company hereunder in
connection with the Closing are subject to the
following conditions being met:
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(i) the accuracy in all material respects when
made and on the Closing Date of the
representations and warranties of the
Purchasers contained herein;
(ii) all obligations, covenants and agreements of
the Purchasers required to be performed at
or prior to the Closing Date shall have been
performed;
(iii) concurrently herewith, the Company shall
close on the sale of Common Stock and Common
Stock Equivalents realizing at least
$3,000,000 in unencumbered new gross
proceeds from such sale; and
(iv) the delivery by the Purchasers of the items
set forth in Section 2.2(b) of this
Agreement.
b) The respective obligations of the Purchasers
hereunder in connection with the Closing are subject
to the following conditions being met:
(i) the accuracy in all material respects on the
Closing Date of the representations and
warranties of the Company contained herein;
(ii) all obligations, covenants and agreements of
the Company required to be performed at or
prior to the Closing Date shall have been
performed;
(iii) the delivery by the Company of the items set
forth in Section 2.2(a) of this Agreement;
(iv) there shall have been no Material Adverse
Effect with respect to the Company since the
date hereof;
(v) concurrently herewith, the Company shall
close on the sale of Common Stock and Common
Stock Equivalents realizing at least
$3,000,000 in unencumbered new gross
proceeds from such sale; and
(vi) From the date hereof to the Closing Date,
trading in the Common Stock shall not have
been suspended by the Commission (except for
any suspension of trading of limited
duration agreed to by the Company, which
suspension shall be terminated prior to the
Closing), and, at any time prior to the
Closing Date, trading in securities
generally as reported by Bloomberg Financial
Markets shall not have been suspended or
limited, or minimum prices shall not have
been established on securities whose trades
are reported by such service, or on any
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Trading Market, nor shall a banking
moratorium have been declared either by the
United States or New York State authorities.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the disclosure schedules delivered to the
Purchasers concurrently herewith (the "Disclosure Schedules") which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser.
(a) Subsidiaries. All of the direct and indirect subsidiaries
of the Company are set forth on Schedule 3.1(a). The Company owns,
directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all the
issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase securities.
If the Company has no subsidiaries, then references in the Transaction
Documents to the Subsidiaries will be disregarded.
(b) Organization and Qualification. Each of the Company and
the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Neither the
Company nor any Subsidiary is in violation or default of any of the
provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and
is in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be,
could not have or reasonably be expected to result in (i) a material
adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or financial condition of the
Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company's ability to perform in any material
respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a "Material Adverse Effect") and,
to its knowledge, no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification.
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations thereunder. The execution and
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delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been
duly authorized by all necessary action on the part of the Company and
no further action is required by the Company in connection therewith
other than in connection with the Required Approvals. Each Transaction
Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement
of creditors' rights generally and (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other
equitable remedies.
(d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the
Company of the other transactions contemplated thereby do not and will
not: (i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or
both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a
Company or Subsidiary debt or otherwise) to which the Company or any
Subsidiary is a party or by which any property or asset of the Company
or any Subsidiary is bound or affected, or (iii) subject to the
Required Approvals, conflict with or result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company
or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected, or (iv) conflict with or violate the
terms of any agreement by which the Company or any Subsidiary is bound
or to which any property or asset of the Company or any Subsidiary is
bound or affected; except in the case of each of clauses (ii) through
(iv), such as could not have or reasonably be expected to result in a
Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not
required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by
the Company of the Transaction Documents, other than (i) filings
required pursuant to Section 4.6, (ii) the filing with the Commission
of the Registration Statement, (iii) the notice and/or application(s)
to each applicable Trading Market for the issuance and sale of (a) the
Debentures and Warrants and the listing of the Warrant Shares and the
Underlying Shares and (b) the Common Stock and Common Stock Equivalents
issuable in connection with the transaction contemplated by Sections
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2.3(a)(iii) and 2.3(b)(v) herein, and the listing of such Common Stock,
in each case for trading thereon in the time and manner required
thereby, and (iv) the filing of Form D with the Commission and such
filings as are required to be made under applicable state securities
laws (collectively, the "Required Approvals").
(f) Issuance of the Securities. The Securities are duly
authorized and, when issued and paid for in accordance with the
applicable Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by
the Company other than restrictions on transfer provided for in the
Transaction Documents. The Underlying Shares, when issued in accordance
with the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by
the Company. The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance of the Warrant
Shares and the Underlying Shares at least equal to the Required Minimum
on the date hereof. Other than with respect to the shares of Common
Stock referred to in Sections 2.3(a)(iii) and 2.3(b)(v) hereof, the
Company has not, and to the knowledge of the Company, no Affiliate of
the Company has sold, offered for sale or solicited offers to buy or
otherwise negotiated in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or
sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the
Purchasers, or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market.
(g) Capitalization. The capitalization of the Company is as
described in the Company's most recent periodic report filed with the
Commission. The Company has not issued any capital stock since such
filing other than pursuant to the exercise of employee stock options
under the Company's stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company's employee stock
purchase plan and pursuant to the conversion or exercise of outstanding
Common Stock Equivalents. No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction
Documents. Except as described in Schedule 3.1(g), other than as a
result of the sale of the Common Stock and Common Stock Equivalents
issued to investors as contemplated in Sections 2.3(a)(iii) and
2.3(b)(v) and except as a result of the purchase and sale of the
Securities, there are no outstanding options, warrants, script rights
to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary
is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common
Stock. The issuance and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) and will not result in a right of
any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. All of the outstanding
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shares of capital stock of the Company are validly issued, fully paid
and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued
in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. Except as contemplated by the Transaction
Documents with respect to the applicable rules and regulations of the
American Stock Exchange (or any successor entity), no further approval
or authorization of any stockholder, the Board of Directors of the
Company or others is required for the issuance and sale of the
Securities. Except as disclosed in the SEC Reports, there are no
stockholders agreements, voting agreements or other similar agreements
with respect to the Company's capital stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the
Company's stockholders.
(h) SEC Reports; Financial Statements. The Company has filed
all reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing
materials, including the exhibits thereto, being collectively referred
to herein as the "SEC Reports") on a timely basis or has received a
valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their
respective dates, after giving effect to any amendments filed thereon,
the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the
SEC Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at
the time of filing. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved ("GAAP"),
except as may be otherwise specified in such financial statements or
the notes thereto and except that unaudited financial statements may
not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(i) Material Changes. Except as described in Schedule 3.1(i),
since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in the SEC
Reports, (i) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with
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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, (iv) the Company has not declared
or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase
or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or Affiliate,
except pursuant to existing Company stock option plans. The Company
does not have pending before the Commission any request for
confidential treatment of information.
(j) Litigation. Except as described in Schedule 3.1(j), there
is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened
against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental
or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an "Action") which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or
(ii) could, if there were an unfavorable decision, have or reasonably
be expected to result in a Material Adverse Effect. Except as described
in Schedule 3.1(j), neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action
involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. Except as
described in Schedule 3.1(j), there has not been, and to the knowledge
of the Company, there is not pending or contemplated, any investigation
by the Commission involving the Company or any current or former
director or officer of the Company. Except as described in Schedule
3.1(j), the Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to
the knowledge of the Company, is imminent with respect to any of the
employees of the Company which could reasonably be expected to result
in a Material Adverse Effect.
(l) 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 applicable to its business except in each
case as could not have a Material Adverse Effect.
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(m) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the
SEC Reports, except where the failure to possess such permits could not
have or reasonably be expected to result in a Material Adverse Effect
("Material Permits"), and neither the Company nor any Subsidiary has
received any notice of proceedings relating to the revocation or
modification of any Material Permit.
(n) Title to Assets. Except as described in Schedule 3.1(n),
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 and Liens for the payment of federal, state or other
taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting
and enforceable leases of which the Company and the Subsidiaries are in
compliance.
(o) 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 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, except as described in Schedule 3.1(o), there is no
existing infringement by another Person of any of the Company's
Intellectual Property Rights.
(p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged. To
the best of Company's knowledge, such insurance contracts and policies
are accurate and complete. Neither the Company nor any Subsidiary has
any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
its business without a significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as set
forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of
13
the Company is presently a party to any transaction with the Company or
any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or
any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $60,000 other
than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
(r) Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company
is in material compliance with all provisions of the Xxxxxxxx-Xxxxx Act
of 2002 which are applicable to it as of the Closing Date. The Company
and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific authorization, and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and
procedures to ensure that material information relating to the Company,
including its Subsidiaries, is made known to the certifying officers by
others within those entities, particularly during the period in which
the Company's most recently filed periodic report under the Exchange
Act, as the case may be, is being prepared. The Company's certifying
officers have evaluated the effectiveness of the Company's controls and
procedures as of the date prior to the filing date of the most recently
filed periodic report under the Exchange Act (such date, the
"Evaluation Date"). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the
certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in
the Company's internal controls (as such term is defined in Item 307(b)
of Regulation S-K under the Exchange Act) or, to the Company's
knowledge, in other factors that could significantly affect the
Company's internal controls.
(s) Certain Fees. Except as described in Schedule 3.1(s), no
brokerage or finder's fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect
to the transactions contemplated by this Agreement. Except as described
in Schedule 3.1(s), the Purchasers shall have no obligation with
14
respect to any fees or with respect to any claims made by or on behalf
of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by this
Agreement.
(t) Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no
registration under the Securities Act or any state securities laws is
required for the offer and sale of the Securities by the Company to the
Purchasers as contemplated hereby. The issuance and sale of the
Securities hereunder, and the issuance and sale of the Common Stock and
Common Stock Equivalents pursuant to the transactions contemplated by
Sections 2.3(a)(iii) and 2.3(b)(v) herein does not contravene the rules
and regulations of the Trading Market or any state securities laws.
(u) Investment Company. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the
Securities and the Common Stock and Common Stock Equivalents sold
pursuant to the transactions contemplated by Sections 2.3(a)(iii) and
2.3(b)(v) herein, will not be or be an Affiliate of, an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it
will not become subject to the Investment Company Act.
(v) Registration Rights. Except as described in Schedule
3.1(v), no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.
(w) Listing and Maintenance Requirements. The Company's Common
Stock is registered pursuant to Section 12(b) of the Exchange Act, and
the Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration. The Company has not, in the 12 months preceding the date
hereof, received notice from any Trading Market on which the Common
Stock is or has been 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 continue to be, in compliance with all such listing and
maintenance requirements.
(x) Application of Takeover Protections. The Company and its
Board of Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws
of its state of incorporation that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling
their obligations or exercising their rights under the Transaction
15
Documents, including without limitation as a result of the Company's
issuance of the Securities and the Purchasers' ownership of the
Securities.
(y) Disclosure. The Company confirms that neither it nor, to
its knowledge, 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 the Purchasers will rely on the
foregoing representations and covenants in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure Schedules to this Agreement, furnished
by or on behalf of the Company with respect to the representations and
warranties made herein are true and correct with respect to such
representations and warranties and do not contain any untrue statement
of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section
3.2 hereof.
(z) No Integrated Offering. Assuming the accuracy of the
Purchasers' representations and warranties set forth in Section 3.2,
neither the Company, nor any of its Affiliates, nor any Person acting
on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the
Securities Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any
exchange or automated quotation system on which any of the securities
of the Company are listed or designated.
(aa) Solvency. Based on the financial condition of the Company
as of the Closing Date after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder and
the sale of the Common Stock and Common Stock Equivalents sold pursuant
to the transactions contemplated by Sections 2.3(a)(iii) and 2.3(b)(v)
herein, (i) the Company's fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the
Company's existing debts and other liabilities (including known
contingent liabilities) as they mature; (ii) the Company's assets do
not constitute unreasonably small capital to carry on its business for
the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the
Company, and projected capital requirements and capital availability
thereof; and (iii) the current cash flow of the Company, together with
the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash,
would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend
16
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).
(bb) Tax Status. Except for matters that would not,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect, the Company and each Subsidiary
has filed all necessary federal, state and foreign income and franchise
tax returns and has paid or accrued all taxes shown as due thereon, and
the Company has no knowledge of a tax deficiency which has been
asserted or threatened against the Company or any Subsidiary.
(cc) No General Solicitation. Neither the Company nor any
person acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general advertising.
The Company has offered the Securities for sale only to the Purchasers
and certain other "accredited investors" within the meaning of Rule 501
under the Securities Act.
(dd) Foreign Corrupt Practices. Neither the Company, nor to
the knowledge of the Company, any agent or other person acting on
behalf of the Company, has (i) directly or indirectly, used any corrupt
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity,
(ii) made any unlawful payment to foreign or domestic government
officials or employees or to any foreign or domestic political parties
or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its
behalf of which the Company is aware) which is in violation of law, or
(iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(ee) Accountants. The Company's accountants are set forth on
Schedule 3.1(ee) of the Disclosure Schedule. To the Company's
knowledge, such accountants, who the Company expects will express their
opinion with respect to the financial statements to be included in the
Company's Annual Report on Form 10-KSB for the year ended December 31,
2004 are independent accountants as required by the Securities Act.
(ff) Seniority. Except as described in Schedule 3.1(gg), As of
the Closing Date, no indebtedness of the Company is senior to the
Debentures in right of payment, whether with respect to interest or
upon liquidation or dissolution, or otherwise, other than indebtedness
secured by purchase money security interests (which is senior only as
to underlying assets covered thereby) and capital lease obligations
(which is senior only as to the property covered thereby).
(gg) No Disagreements with Accountants and Lawyers. There are
no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the accountants and
lawyers formerly or presently employed by the Company which
individually or in the aggregate could reasonably be expected to result
17
in a Material Adverse Effect and the Company is current with respect to
any fees owed to its accountants and lawyers.
(hh) Acknowledgment Regarding Purchasers' Purchase of
Securities. The Company acknowledges and agrees that each of the
Purchasers is acting solely in the capacity of an arm's length
purchaser with respect to the Transaction Documents and the
transactions contemplated hereby. The Company further acknowledges that
no Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by any
Purchaser or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby
is merely incidental to the Purchasers' purchase of the Securities. The
Company further represents to each Purchaser that the Company's
decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate or
similar action on the part of such Purchaser. Each Transaction Document
to which it is a party has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof,
will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except
(i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(b) Purchaser Representation. Such Purchaser understands that
the Securities are "restricted securities" and have not been registered
under the Securities Act or any applicable state securities law and is
acquiring the Securities as principal for its own account and not with
a view to or for distributing, reselling or offering such Securities or
any part thereof, has no present intention of distributing or offering
any of such Securities and has no arrangement or understanding with any
other persons regarding the distribution of such Securities (this
representation and warranty not limiting such Purchaser's right to sell
18
the Securities pursuant to the Registration Statement or otherwise in
compliance with applicable federal and state securities laws). Such
Purchaser is acquiring the Securities hereunder in the ordinary course
of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute or
sell any of the Securities.
(c) Purchaser Status. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is, and on each date
on which it exercises any Warrants or converts any Debentures it will
be either: (i) an "accredited investor" as defined in Rule 501(a)(1),
(a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a
"qualified institutional buyer" as defined in Rule 144A(a) under the
Securities Act. Such Purchaser is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act.
(d) Experience of Such Purchaser. Such Purchaser, either alone
or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks
of such investment. Such Purchaser is able to bear the economic risk of
an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
(e) Short Sales. Each Purchaser represents that during the 30
days prior to the execution of this Agreement, neither it nor any
Persons over which the Purchaser has direct control, have made any
short sales of, or granted any option for the purchase of or entered
into any hedging or similar transaction with the same economic effect
as a short sale, in the Common Stock.
(f) No General Solicitation. Such Purchaser is not purchasing
the Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or
radio or presented at any seminar or any other general solicitation or
general advertisement.
(g) Limit to Representations and Warranties of Purchaser. The
Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set
forth in this Section 3.2.
(h) Certain Laws. Neither the Purchaser nor (if the Purchaser
is an individual) any Person who is a member of the Purchaser's
household or immediate family, nor any Person who otherwise may have an
indirect interest in securities or other property owned by the
Purchaser has been designated as, and that neither you or any of the
foregoing is under the control of, a "suspected terrorist" as defined
in Executive Order 13224. The Purchaser acknowledges that the Company
seeks to comply with all applicable laws covering money laundering and
related activities. In furtherance of those efforts, the Purchaser
hereby represents, warrants and agrees that: (i) none of the cash or
property that Purchaser will pay or will contribute to the Company has
19
been or shall be derived from, or related to, any activity that is
deemed criminal under United States law; and (ii) no contribution or
payment by the Purchaser to the Company, to the extent that they are
within Purchaser's control, shall cause the Company to be in violation
of the Untied States Bank Secrecy Act, the United States Money
Laundering Control Act of 1986 or the Untied States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement
or Rule 144, to the Company or to an Affiliate of a Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), the Company
may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion and shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities
under the Securities Act. As a condition of transfer, any such
transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement
and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of a legend on any of the Securities
in the following form:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [EXERCISABLE] [CONVERTIBLE]] HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL
BE REASONABLY ACCEPTABLE TO LEGAL COUNSEL TO THE COMPANY. THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
20
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from
time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of
the Securities to a financial institution that is an "accredited
investor" as defined in Rule 501(a) under the Securities Act and who
agrees to be bound by the provisions of the Transaction Documents and,
if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval of
the Company and no legal opinion of legal counsel 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, if the Securities are subject to registration
pursuant to the Registration Rights Agreement, the preparation and
filing of any required prospectus supplement under Rule 424(b)(3) under
the Securities Act or other applicable provision of the Securities Act
to appropriately amend the list of Selling Stockholders thereunder.
(c) Certificates evidencing the Warrant Shares and the
Underlying Shares shall not contain any legend (including the legend
set forth in Section 4.1(b) hereof): (i) while a registration statement
(including the Registration Statement) covering the resale of such
security is effective under the Securities Act, or (ii) following any
sale of such Warrant Shares and Underlying Shares pursuant to Rule 144,
or (iii) if such Warrant Shares and Underlying Shares are eligible for
sale under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission); provided, however, in connection with the issuance of the
Underlying Shares and the Warrant Shares, each Purchaser, severally and
not jointly with the other Purchasers, hereby agrees to adhere to and
abide by all prospectus delivery requirements under the Securities Act
and rules and regulations of the Commission. The Company shall cause
its counsel to issue a legal opinion to the Company's transfer agent
promptly after the Effective Date if required by the Company's transfer
agent to effect the removal of the legend hereunder. If all or any
portion of a Debenture or Warrant is converted or exercised (as
applicable) at a time when there is an effective registration statement
to cover the resale of the Underlying Shares or the Warrant Shares, or
if such Underlying Shares or the Warrant Shares may be sold under Rule
144(k) or if such legend is not otherwise required under applicable
requirements of the Securities Act (including judicial interpretations
thereof) then such Underlying Shares and Warrant Shares shall be issued
free of all legends. The Company agrees that at such time as such
legend is no longer required under this Section 4.1(c), it will, no
later than three Trading Days following the delivery by a Purchaser to
the Company or the Company's transfer agent of a certificate
representing Underlying Shares or the Warrant Shares, as applicable,
issued with a restrictive legend (such third Trading Day, the "Legend
21
Removal Date"), deliver or cause to be delivered to such Purchaser a
certificate representing such shares 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. Notwithstanding
the foregoing, the Purchasers agree that if at any time after the
Legend Removal Date a legend would be legally required under applicable
requirements of the Securities Act (including judicial interpretations
and pronouncements issued by the staff of the Commission) to be placed
upon the certificates evidencing the Warrant Shares and the Underlying
Shares, then the Company shall issue stop-transfer instructions to its
transfer agent to prevent the transfer of such Securities.
(d) In addition to such Purchaser's other available remedies,
the Company shall pay to a Purchaser, in cash, as partial liquidated
damages and not as a penalty, for each $1,000 of Underlying Shares or
the Warrant Shares (based on the Closing Price of the Common Stock on
the date such Securities are submitted to the Company's transfer agent)
delivered for removal of the restrictive legend and subject to this
Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day
5 Trading Days after such damages have begun to accrue) for each
Trading Day after the Legend Removal Date until such certificate is
delivered without a legend. Nothing herein shall limit such Purchaser's
right to pursue actual damages for the Company's failure to deliver
certificates representing any Securities as required by the Transaction
Documents, and such Purchaser shall have the right to pursue all
remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief.
(e) Each Purchaser, severally and not jointly with the other
Purchasers, agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1
is predicated upon the Company's reliance that the Purchaser will sell
any Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom.
(f) Until the 6 month anniversary of the Effective Date, the
Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent
of the Purchasers holding a majority in principal amount outstanding of
the Debentures.
4.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Securities may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial if the Company undertakes
another financing which triggers the anti-dilution protections of the Debentures
and the Warrants. The Company further acknowledges that its obligations under
the Transaction Documents, including without limitation its obligation to issue
the Underlying Shares and the Warrant Shares pursuant to the Transaction
Documents, are unconditional and absolute and not subject to any right of set
off, counterclaim, delay or reduction, regardless of the effect of any such
dilution or any claim the Company may have against any Purchaser and regardless
22
of the dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.
4.3 Furnishing of Rule 144 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. As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
4.4 Integration. Other than with respect to the sale of Common Stock
and Common Stock Equivalents contemplated by Sections 2.3(a)(iii) and 2.3(b)(v)
herein, the Company shall not sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.
4.5 Conversion and Exercise Procedures. The form of Notice of Exercise
included in the Warrants and the form of Notice of Conversion included in the
Debentures set forth the totality of the procedures required of the Purchasers
in order to exercise the Warrants or convert the Debentures. No additional legal
opinion or other information or instructions shall be required of the Purchasers
to exercise their Warrants or convert their Debentures. The Company shall honor
exercises of the Warrants and conversions of the Debentures and shall deliver
Underlying Shares and Warrant Shares in accordance with the terms, conditions
and time periods set forth in the Transaction Documents.
4.6 Securities Laws Disclosure; Publicity. The Company shall, by 8:30
a.m. Eastern time on the Trading Day following the date hereof, file a Current
Report on Form 8-K, reasonably acceptable to each Purchaser disclosing the
material terms of the transactions contemplated hereby and attaching the
Transaction Documents thereto as exhibits. The Company and each Purchaser shall
consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser
shall issue any such press release or otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
any Purchaser, or without the prior consent of each Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the
23
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
(i) as required by federal securities law in connection with the registration
statement contemplated by the Registration Rights Agreement and (ii) 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 permitted under subclause (i) or (ii).
4.7 Shareholders Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
4.8 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.9 Use of Proceeds. Except as set forth on Schedule 4.9 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and not for the satisfaction of any
portion of the Company's debt (other than payment of trade payables in the
ordinary course of the Company's business and prior practices), to redeem any
Company equity or equity-equivalent securities or to settle any outstanding
litigation.
4.10 Reimbursement. If any Purchaser becomes involved in any capacity
in any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
24
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.
4.11 Indemnification of Purchasers. Subject to the provisions of this
Section 4.11, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, partners, employees and agents (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser's representation, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).
If any action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. Any Purchaser Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Purchaser Party except to the extent that (i)
the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Purchaser
Party. The Company will not be liable to any Purchaser Party under this
Agreement (i) for any settlement by an Purchaser Party effected without the
Company's prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party's breach of any of
the representations, warranties, covenants or agreements made by the Purchasers
in this Agreement or in the other Transaction Documents.
4.12 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents.
(b) If, on any date, the number of authorized but unissued
(and otherwise unreserved) shares of Common Stock is less than the
Required Minimum on such date, then the Board of Directors of the
25
Company shall use commercially reasonable efforts to amend the
Company's certificate or articles of incorporation to increase the
number of authorized but unissued shares of Common Stock to at least
the Required Minimum at such time, as soon as possible and in any event
not later than the 75th day after such date.
(c) The Company shall, if applicable: (i) in the time and
manner required by the Trading Market, prepare and file with such
Trading Market an additional shares listing application covering a
number of shares of Common Stock at least equal to the Required Minimum
on the date of such application, (ii) take all steps necessary to cause
such shares of Common Stock to be approved for listing on the Trading
Market as soon as possible thereafter, (iii) provide to the Purchasers
evidence of such listing, and (iv) maintain the listing of such Common
Stock on any date at least equal to the Required Minimum on such date
on such Trading Market or another Trading Market. In addition, the
Company shall hold a special meeting of shareholders (which may also be
at the annual meeting of shareholders) on or before January 31, 2005
for the purpose of obtaining Shareholder Approval, with the
recommendation of the Company's Board of Directors that such proposal
be approved, and the Company shall solicit proxies from its
shareholders in connection therewith in the same manner as all other
management proposals in such proxy statement and all
management-appointed proxyholders shall vote their proxies in favor of
such proposal.
4.13 Participation in Future Financing. From the date hereof until the
Debentures are no longer outstanding (but in any event for at least one year
from the date hereof), upon any financing by the Company or any of its
Subsidiaries of Common Stock or Common Stock Equivalents (a "Subsequent
Financing"), each Purchaser shall have the right to participate in up to the
greater of (i) 25% of the Subsequent Financing and (ii) an amount equal to the
aggregate principal amount of all Debentures then outstanding (the
"Participation Maximum"). At least 5 Trading Days prior to the closing of the
Subsequent Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing ("Pre-Notice"), which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a "Subsequent Financing Notice"). Upon the
request of a Purchaser, and only upon a request by such Purchaser, for a
Subsequent Financing Notice, the Company shall promptly, but no later than 1
Trading Day after such request, deliver a Subsequent Financing Notice to such
Purchaser. The Subsequent Financing Notice shall describe in reasonable detail
the proposed terms of such Subsequent Financing, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Financing is
proposed to be effected, and attached to which shall be a term sheet or similar
document relating thereto. If by 5:30 p.m. (New York City time) on the 5th
Trading Day after all of the Purchasers have received the Pre-Notice,
notifications by the Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to participate) is, in the
aggregate, less than the total amount of the Participation Maximum, then the
Company may effect the remaining portion of such Subsequent Financing on the
terms and to the Persons set forth in the Subsequent Financing Notice. If the
Company receives no notice from a Purchaser as of such 5th Trading Day, such
Purchaser shall be deemed to have notified the Company that it does not elect to
26
participate. The Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of participation
set forth above in this Section 4.13, if the Subsequent Financing subject to the
initial Subsequent Financing Notice is not consummated for any reason on the
terms set forth in such Subsequent Financing Notice within 60 Trading Days after
the date of the initial Subsequent Financing Notice. In the event the Company
receives responses to Subsequent Financing Notices from Purchasers seeking to
purchase more than the aggregate amount of the Participation Maximum, each such
Purchaser shall have the right to purchase their Pro Rata Portion (as defined
below) of the Participation Maximum. "Pro Rata Portion" is the ratio of (x) the
Subscription Amount of Securities purchased by a participating Purchaser and (y)
the sum of the aggregate Subscription Amount of all participating Purchasers.
Notwithstanding the foregoing, this Section 4.13 shall not apply in respect of
an Exempt Issuance or the sale of Common Stock and Common Stock Equivalents
issued pursuant to the transaction contemplated by Sections 2.3(a)(iii) and
2.3(b)(v) herein.
4.14 Subsequent Equity Sales.
(a) Other than with respect to the shares of Common Stock and
Common Stock Equivalents referred to in Sections 2.3(a)(iii) and
2.3(b)(v) herein, from the date hereof until 90 days after the
Effective Date, neither the Company nor any Subsidiary shall issue
shares of Common Stock or Common Stock Equivalents; provided, however,
the 90 day period set forth in this Section 4.14 shall be extended for
the number of Trading Days during such period in which (y) trading in
the Common Stock is suspended by any Trading Market, or (z) following
the Effective Date, the Registration Statement is not effective or the
prospectus included in the Registration Statement may not be used by
the Purchasers for the resale of the Warrant Shares and the Underlying
Shares. In addition to the limitations set forth herein, from the date
hereof until such time as no Purchaser holds more than 10% of any of
the Securities initially issued hereunder, the Company shall be
prohibited from effecting or enter into an agreement to effect any
Subsequent Financing involving a "Variable Rate Transaction" or an "MFN
Transaction" (each as defined below). The term "Variable Rate
Transaction" shall mean a transaction in which the Company issues or
sells (i) any debt or equity securities other than an Exempt Issuance
that are convertible into, exchangeable or exercisable for, or include
the right to receive additional shares of Common Stock either (A) at a
conversion, exercise or exchange rate or other price that is based upon
and/or varies with the trading prices of or quotations for the shares
of Common Stock at any time after the initial issuance of such debt or
equity securities, or (B) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the initial
issuance of such debt or equity security or upon the occurrence of
specified or contingent events directly or indirectly related to the
business of the Company or the market for the Common Stock. The term
"MFN Transaction" shall mean a transaction in which the Company issues
or sells any securities in a capital raising transaction or series of
related transactions which grants to an investor the right to receive
additional shares based upon future transactions of the Company on
terms more favorable than those granted to such investor in such
offering; provided, however, this prohibition shall not be interpreted
to preclude the Company from granting an investor standard full ratchet
or weighted average anti-dilution protections for a warrant on a
27
convertible instrument. Notwithstanding the foregoing, this Section
4.14 shall not apply in respect of an Exempt Issuance, except that no
Variable Rate Transaction or MFN Transaction shall be an Exempt
Issuance.
(b) Unless Shareholder Approval has been obtained and deemed
effective in accordance with the rules and regulations of the Trading
Market, the Company shall not make any issuance whatsoever of Common
Stock or Common Stock Equivalents to the extent such issuance would
otherwise cause an adjustment of the Conversion Price of the Debentures
or the Exercise Price of the Warrants, or the exercise price of any
Common Stock Equivalents issued pursuant to the transactions
contemplated by Sections 2.3(a)(iii) and 2.3(b)(v) herein, below the
applicable Floor Prices (as defined in the Debentures and Warrants).
Any Purchaser shall be entitled to obtain injunctive relief against the
Company to preclude any such issuance, which remedy shall be in
addition to any right to collect damages and the Company expressly
waives any requirement that any court require the Purchasers to post
any bond in connection therewith.
4.15 Equal Treatment of Purchasers. No consideration shall be offered
or paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. Further, the
Company shall not make any payment of principal or interest on the Debentures in
amounts which are disproportionate to the respective principal amounts
outstanding on the Debentures at any applicable time. For clarification
purposes, this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser, and is intended to
treat for the Company the Debenture holders as a class and shall not in any way
be construed as the Purchasers acting in concert or as a group with respect to
the purchase, disposition or voting of Securities or otherwise.
4.16 Maturity Date Limited Trading Restriction. If the Company duly
elects to redeem the Debentures on the Maturity Date by the issuance of shares
of Common Stock pursuant to Section 5(c)(ii) of the Debentures, each Purchaser
(and its permitted assigns) covenants that during the 20 Trading Day period
immediately prior to the Maturity Date used to determine the conversion price of
the Debentures, neither it nor any Persons over which the Purchaser has direct
control, shall make any short sales of, or granted any option for the purchase
of or entered into any hedging or similar transaction with the same economic
effect as a short sale, in the Common Stock.
ARTICLE V.
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, by
written notice to the other parties, if the Closing has not been consummated on
or before November 15, 2004; provided that no such termination will affect the
right of any party to xxx for any breach by the other party (or parties).
28
5.2 Fees and Expenses. At the Closing, the Company has agreed to
reimburse Omicron Master Trust ("Omicron") up to $40,000, for its actual,
reasonable, out-of-pocket legal fees and expenses, of which the Company paid
$25,000 prior to the Closing. Accordingly, in lieu of the foregoing payments,
the aggregate amount that Omicron is to pay for the Debentures and the Warrants
at the Closing shall be reduced by $15,000. The Company shall deliver, prior to
the Closing, a completed and executed copy of the Closing Statement, attached
hereto as Annex A. Except as expressly set forth in the Transaction Documents to
the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the issuance of
any Securities.
5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
5.5 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.6 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.
29
5.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".
5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.
5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. The parties hereby waive all
rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
5.10 Survival. The representations and warranties contained herein
shall survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable for the applicable statue of limitations.
30
5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.13 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; provided,
however, in the case of a rescission of a conversion of a Debenture or exercise
of a Warrant, the Purchaser shall be required to return any shares of Common
Stock subject to any such rescinded conversion or exercise notice.
5.14 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.
5.15 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. Without limiting the generality of the
foregoing, the Company expressly agrees that its breach of Section 4.14(b) would
cause each Purchaser irreparable harm, and consents to granting of injunctive
relief by any court having jurisdiction to preclude any such issuance of
securities.
31
5.16 Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.17 Usury. To the extent it may lawfully do so, the Company hereby
agrees not to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or advantage of,
usury laws wherever enacted, now or at any time hereafter in force, in
connection with any claim, action or proceeding that may be brought by any
Purchaser in order to enforce any right or remedy under any Transaction
Document. Notwithstanding any provision to the contrary contained in any
Transaction Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for payments in the
nature of interest shall not exceed the maximum lawful rate authorized under
applicable law (the "Maximum Rate"), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of them, when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate applicable to
the Transaction Documents from the effective date forward, unless such
application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner of handling
such excess to be at such Purchaser's election.
5.18 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. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
32
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only Omicron. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience of
the Company and not because it was required or requested to do so by the
Purchasers.
5.19 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
(SIGNATURE PAGES FOLLOW)
33
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
DIOMED HOLDINGS, INC. Address for Notice:
-------------------
By: /s/ XXXXX X. XXXXX, XX. ONE DUNDEE PARK
-------------------------- XXXXXXX, XX 00000
Name: Xxxxx X. Xxxxx, Xx. ATTN: CHIEF EXECUTIVE OFFICER
Title: Chief Executive Officer (000) 000-0000 TELEPHONE
(000) 000-0000 FACSIMILE
With a copy to (which shall not constitute notice):
McGuireWoods LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
(000) 000-0000 Telephone
(000) 000-0000 Facsimile
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
34
[PURCHASER SIGNATURE PAGE TO DIO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: ______________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Email Address of Authorized Entity:_____________________________________________
Address for Notice of Investing Entity:
Address for Delivery of Securities for Investing Entity (if not same as above):
Subscription Amount: $______________________ principal amount of Debentures
Warrant Shares: ____________________________
US Tax ID Number:
35
