SECURITIES PURCHASE AGREEMENT
SECURITIES
PURCHASE AGREEMENT
(the
"Agreement"),
dated
as of December 31, 2007, by and among RxElite, Inc., a Delaware
corporation, with headquarters located at 0000 Xxxxx Xxxx, Xxxxx 000, Xxxxxxxx,
Xxxxx 00000 (the "Company"),
and
the investors listed on the Schedule of Buyers attached hereto (individually,
a
"Buyer"
and
collectively, the "Buyers").
WHEREAS:
A. The
Company and each Buyer are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Section 4(2) of
the
Securities Act of 1933, as amended (the "1933
Act"),
and
Rule 506 of Regulation D ("Regulation D")
as
promulgated by the United States Securities and Exchange Commission (the
"SEC")
under
the 1933 Act.
B. The
Company has authorized a new series of senior secured convertible notes of
the
Company which notes shall be convertible into the Company's common stock, par
value $0.001 per share (the "Common
Stock"),
in
accordance with the terms of the Notes (as defined below).
C. Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) that aggregate principal amount of
the
Notes, in substantially the form attached hereto as Exhibit
A
(the
"Notes"),
set
forth opposite such Buyer's name in column (3) on the Schedule of Buyers
attached hereto (which aggregate amount for all Buyers shall be $10,500,000)
(as
converted, collectively, the "Conversion
Shares"),
(ii)
that aggregate number of shares (the "Common
Shares")
of the
Common Stock, set forth opposite such Buyer's name in column (4) on the Schedule
of Buyers (which aggregate amount for all Buyers shall be five million five
hundred ninety four thousand thirty three (5,594,033)), (iii) warrants, in
substantially the form attached hereto as Exhibit
B-1
(the
"Series
A Warrants"),
to
acquire up to that number of shares of Common Stock set forth opposite such
Buyer's name in column (5) on the Schedule of Buyers (as exercised,
collectively, the "Series
A Warrant
Shares")
and
(iv) warrants, in substantially the form attached hereto as Exhibit
B-2
(the
"Series
B Warrants"
and
collectively with the Series A Warrants, the "Warrants")),
to
acquire up to that number of shares of Common Stock set forth opposite such
Buyer's name in column (6) on the Schedule of Buyers (as exercised,
collectively, the "Series
B Warrant
Shares"
and
collectively with the Series A Warrant Shares, the "Warrants
Shares").
D. Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, substantially in
the
form attached hereto as Exhibit
C
(the
"Registration
Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
with respect to the Registrable Securities (as defined in the Registration
Rights Agreement) under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
E. The
Notes, the Conversion Shares, the Common Shares, the Warrants and the Warrant
Shares collectively are referred to herein as the "Securities".
F. The
Notes
will rank senior to all outstanding and future indebtedness of the Company
and
will be secured by a first priority perfected security interest in all of the
assets of the Company and the stock, equity interests and assets of each of
the
Company's subsidiaries, as evidenced by (i) pledge agreement, in the form
attached hereto as Exhibit
D
(as
amended or modified from time to time in accordance with its terms, the
"Pledge
Agreement"),
(ii)
a security agreement, in the form attached hereto as Exhibit
E
(as
amended or modified from time to time in accordance with its terms, the
"Security
Agreement"),
and
(iii) the guaranties of the subsidiaries of the Company in the form attached
hereto as Exhibit
F
(as
amended or modified from time to time in accordance with its terms, the
"Guaranty"
and,
together with the Pledge Agreement, the Security Agreement and any ancillary
documents related thereto, collectively the "Security
Documents").
NOW,
THEREFORE,
the
Company and each Buyer hereby agree as follows:
1. PURCHASE
AND SALE OF NOTES AND WARRANTS.
(a) Purchase
of Notes and Warrants.
Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
7
below, the Company shall issue and sell to each Buyer, and each Buyer severally,
but not jointly, agrees to purchase from the Company on the Closing Date (as
defined below), (w) a principal amount of Notes as is set forth opposite such
Buyer's name in column (3) on the Schedule of Buyers, (x) the number of Common
Shares as is set forth opposite such Buyer's name in column (4) on the Schedule
of Buyers, (y) Series A Warrants to acquire up to that number of Warrant Shares
as is set forth opposite such Buyer's name in column (5) on the Schedule of
Buyers and (z) Series B Warrants to acquire up to that number of Warrant Shares
as is set forth opposite such Buyer's name in column (6) on the Schedule of
Buyers (the "Closing").
(b) Closing.
The
date and time of the Closing (the "Closing
Date")
shall
be 10:00 a.m., New York City time, on the date hereof (or such later date as
is
mutually agreed to by the Company and each Buyer) after notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
6 and 7 below at the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000.
(c) Purchase
Price.
(i) The
aggregate purchase price for the Notes, the Common Shares and the Warrants
to be
purchased by each such Buyer at the Closing (the "Purchase
Price")
shall
be the amount set forth opposite each Buyer's name in column (7) of the Schedule
of Buyers. Each Buyer shall pay $1,000 for each $1,000 of principal amount
of
Notes and related Common Shares and Warrants to be purchased by such Buyer
at
the Closing.
(ii) The
Buyers and the Company agree that the Notes, the Warrants and the Common Shares
constitute an "investment unit" for purposes of Section 1273(c)(2) of the
Internal Revenue Code of 1986, as amended (the "Code").
The
Buyers and the Company mutually agree that the allocation of the issue price
of
such investment unit between the Notes, the Warrants and the Common Shares
in
accordance with Section 1273(c)(2) of the Code and Treasury Regulation Section
1.1273-2(h) shall be (i) an amount equal to the black scholes value allocated
to
the Warrants, (ii) an aggregate amount of $0.85 per share allocated to the
Common Shares and (iii) the balance of the Purchase Price allocated to the
Notes.
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(d) Form
of Payment.
On the
Closing Date, (i) each Buyer shall pay its Purchase Price to the Company for
the
Notes, the Common Shares and the Warrants to be issued and sold to such Buyer
at
the Closing, by wire transfer of immediately available funds in accordance
with
the Company's written wire instructions and (ii) the Company shall deliver
to each Buyer the Notes (allocated in the principal amounts as such Buyer shall
request) which such Buyer is then purchasing hereunder along with the Common
Shares (allocated in the amounts as such Buyer shall request) and Warrants
(allocated in the amounts as such Buyer shall request) which such Buyer is
purchasing, in each case duly executed on behalf of the Company and registered
in the name of such Buyer or its designee (so long as any such designee is
an
"accredited investor" as that term is defined in Rule 501(d) of Regulation
D).
2. BUYER'S
REPRESENTATIONS AND WARRANTIES.
Each
Buyer, severally and not jointly, represents and warrants with respect to only
itself that:
(a) No
Public Sale or Distribution.
Such
Buyer is (i) acquiring the Notes, the Common Shares and the Warrants and (ii)
upon conversion of the Notes and exercise of the Warrants (other than pursuant
to a Cashless Exercise (as defined in the Warrants)) will acquire the Conversion
Shares issuable upon conversion of the Notes and the Warrant Shares issuable
upon exercise of the Warrants, for its own account and not with a view towards,
or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempted under the 1933 Act; provided,
however,
that by
making the representations herein, such Buyer does not agree to hold any of
the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. Such Buyer is
acquiring the Securities hereunder in the ordinary course of its business.
Such
Buyer does not presently have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.
(b) Accredited
Investor Status.
Such
Buyer is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D.
(c) Reliance
on Exemptions.
Such
Buyer understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in
part
upon the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the
Securities.
(d) Information.
Such
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by such Buyer.
Such Buyer and its advisors, if any, have been afforded the opportunity to
ask
questions of the Company. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on
the
Company's representations and warranties contained herein. Such Buyer
understands that its investment in the Securities involves a high degree of
risk. Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to
its
acquisition of the Securities.
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(e) No
Governmental Review.
Such
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
(f) Transfer
or Resale.
Such
Buyer understands that except as provided in the Registration Rights Agreement:
(i) the Securities have not been and are not being registered under the 1933
Act
or any state securities laws, and may not be offered for sale, sold, assigned
or
transferred unless (A) subsequently registered thereunder, (B) such Buyer shall
have delivered to the Company an opinion of counsel, in a generally acceptable
form, to the effect that such Securities to be sold, assigned or transferred
may
be sold, assigned or transferred pursuant to an exemption from such
registration, or (C) such Buyer provides the Company with reasonable assurance
that such Securities can be sold, assigned or transferred pursuant to Rule
144
or Rule 144A promulgated under the 1933 Act, as amended, (or a successor rule
thereto) (collectively, "Rule
144");
(ii)
any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person (as defined in Section 3(s)) through whom the sale is made)
may
be deemed to be an underwriter (as that term is defined in the 0000 Xxx) may
require compliance with some other exemption under the 1933 Act or the rules
and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
Person is under any obligation to register the Securities under the 1933 Act
or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. The Securities may be pledged in connection with a bona
fide margin account or other loan or financing arrangement secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or
any
other Transaction Document (as defined in Section 3(b)), including, without
limitation, this Section 2(f).
(g) Legends.
Such
Buyer understands that the certificates or other instruments representing the
Notes and the Warrants and, until such time as the resale of the Conversion
Shares, the Common Shares and the Warrant Shares have been registered under
the
1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Conversion Shares, the Common Shares and the
Warrant Shares, except as set forth below, shall bear any legend as required
by
the "blue sky" laws of any state and a restrictive legend in substantially
the
following form (and a stop-transfer order may be placed against transfer of
such
stock certificates):
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[NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]
HAVE
BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which
it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at DTC (as defined below), unless otherwise required by state securities
laws, (i) such Securities are registered for resale under the 1933 Act, (ii)
in
connection with a sale, assignment or other transfer, such holder provides
the
Company with an opinion of counsel, in a generally acceptable form, to the
effect that such sale, assignment or transfer of the Securities may be made
without registration under the applicable requirements of the 1933 Act, or
(iii
such holder provides the Company with reasonable assurance that the Securities
can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A.
(h) Validity;
Enforcement.
This
Agreement, the Registration Rights Agreement and the Security Documents to
which
such Buyer is a party have been duly and validly authorized, executed and
delivered on behalf of such Buyer and shall constitute the legal, valid and
binding obligations of such Buyer enforceable against such Buyer in accordance
with their respective terms, except as such enforceability may be limited by
general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
(i) No
Conflicts.
The
execution, delivery and performance by such Buyer of this Agreement, the
Registration Rights Agreement and the Security Documents to which such Buyer
is
a party and the consummation by such Buyer of the transactions contemplated
hereby and thereby will not (i) result in a violation of the organizational
documents of such Buyer or (ii) conflict with, or constitute a default (or
an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which such Buyer
is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws) applicable
to
such Buyer, except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not, individually or
in
the aggregate, reasonably be expected to have a material adverse effect on
the
ability of such Buyer to perform its obligations hereunder.
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(j) Residency.
Such
Buyer is a resident of that jurisdiction specified below its address on the
Schedule of Buyers.
(k) Organization
and Standing of the Buyers.
If the
Buyer is an entity, such Buyer is a corporation, limited liability company
or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(l) No
General Solicitation.
Each
Buyer acknowledges that the Notes, the Common Shares and the Warrants were
not
offered to such Buyer by means (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television or radio or (ii) any seminar or meeting to which
such
Buyer was invited by any of the foregoing means of communications.
(m) Trading
Activities.
Other
than consummating the transactions contemplated hereunder, such Buyer has not
directly or indirectly, nor has any person acting on behalf of or pursuant
to
any understanding with such Buyer, executed any purchases or sales, including
short sales, of the securities of the Company during the period commencing
from
the time that such Buyer first received from the Company or any other person
(i)
a term sheet (written or oral) or (ii) a draft of any Transaction Document,
in
each case setting forth the material terms of the transactions contemplated
hereunder, until the date hereof.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to each of the Buyers that:
(a) Organization
and Qualification.
Each of
the Company and its "Subsidiaries"
(which
for purposes of this Agreement means any entity in which the Company directly
or
indirectly, owns any of the capital stock or holds an equity or similar
interests) are entities duly organized and validly existing in good standing
under the laws of the jurisdiction in which they are formed, and have the
requisite power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign entity to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not
have
a Material Adverse Effect. As used in this Agreement, "Material
Adverse Effect"
means
any material adverse effect on the business, properties, assets, operations,
results of operations, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby and the other Transaction Documents or by the agreements
and
instruments to be entered into in connection herewith or therewith, or on the
authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below). The Company has no Subsidiaries except
as set forth on Schedule
3(a).
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(b) Authorization;
Enforcement; Validity.
The
Company has the requisite power and authority to enter into and perform its
obligations under this Agreement, the Notes, the Registration Rights Agreement,
the Security Documents, the Irrevocable Transfer Agent Instructions (as defined
in Section 5(b)), the Warrants, and each of the other agreements entered into
by
the parties hereto in connection with the transactions contemplated by this
Agreement (collectively, the "Transaction
Documents")
and to
issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Notes, the Common Shares
and
the Warrants, the reservation for issuance and the issuance of the Conversion
Shares issuable
upon conversion of the Notes, the reservation for issuance and issuance of
Warrant Shares issuable upon exercise of the Warrants, and the granting of
a
security interest in the Collateral (as defined in the Security Documents)
have
been duly authorized by the Company's Board of Directors and (other than (i)
the
filing of appropriate UCC financing statements with the appropriate states
and
other authorities pursuant to the Security Agreement, and (ii) the filing with
the SEC of a Form D, one or more Current Reports on Form 8-K as
contemplated by Section 4(i) or as otherwise required by applicable law after
the Closing Date and one or more Registration Statements in accordance with
the
requirements of the Registration Rights Agreement) no further filing, consent,
or authorization is required by the Company, its Board of Directors or its
stockholders. This Agreement and the other Transaction Documents of even date
herewith have been duly executed and delivered by the Company, and constitute
the legal, valid and binding obligations of the Company, enforceable against
the
Company in accordance with their respective terms, except as such enforceability
may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to,
or affecting generally, the enforcement of applicable creditors' rights and
remedies.
(c) Issuance
of Securities.
The
issuance of the Notes, the Common Shares and the Warrants are duly authorized
and are free from all taxes, liens and charges with respect to the issue
thereof. As of the applicable Closing, a number of shares of Common Stock shall
have been duly authorized and reserved for issuance which equals or exceeds
130%
of the aggregate of the maximum number of shares of Common Stock (i) issuable
upon conversion of the Notes, and (ii) upon exercise of the Warrants, without
taking into account any limitations on the Conversion of the Notes or exercise
of the Warrants set forth in the Notes and Warrants, respectively). Upon
conversion or payment in accordance with the Notes or exercise in accordance
with the Warrants, as the case may be, the Conversion Shares and the Warrant
Shares, respectively, will be validly issued, fully paid and nonassessable
and
free from all preemptive or similar rights, taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. The offer and issuance by the Company
of
the Securities is exempt from registration under the 1933 Act.
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(d) No
Conflicts.
Notwithstanding anything to the contrary contained in Schedule
3(d),
the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby
and
thereby (including, without limitation, the issuance of the Notes, the Common
Shares and the Warrants, the granting of a security interest in the Collateral
and reservation for issuance and issuance of the Conversion Shares and the
Warrant Shares) will not (i) result in a violation of any certificate of
incorporation, certificate of formation, any certificate of designations or
other constituent documents of the Company or any of its Subsidiaries, any
capital stock of the Company or any of its Subsidiaries or the bylaws of the
Company or any of its Subsidiaries or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become
a
default) in any respect under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party
(including, without limitation, the Conversion Agreement specified in
Schedule
3(d)),
or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including foreign, federal and state securities laws and regulations
and
the rules and regulations of the OTC Bulletin Board (the "Principal
Market"))
applicable to the Company or any of its Subsidiaries or by which any property
or
asset of the Company or any of its Subsidiaries is bound or affected, except
in
the cases of clauses (ii) and (iii) above, for such conflicts, defaults, rights
or violations which would not, individually or in the aggregate, reasonably
be
expected to have a Material Adverse Effect.
(e) Consents.
Neither
the Company nor any of its Subsidiaries is required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents, in each case in accordance
with the terms hereof or thereof. All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the Closing
Date, and the Company and its Subsidiaries are unaware of any facts or
circumstances which might prevent the Company from obtaining or effecting any
of
the registration, application or filings pursuant to the preceding sentence.
The
Company is not in violation of the listing requirements of the Principal Market
and has no knowledge of any facts which would reasonably lead to delisting
or
suspension of the Common Stock in the foreseeable future.
(f) Acknowledgment
Regarding Buyer's Purchase of Securities.
The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm's-length purchaser with respect to the Transaction Documents and
the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company, (ii) to the Company's knowledge, an "affiliate"
of
the Company or any of its Subsidiaries (as defined in Rule 144) or (iii) to
the
knowledge of the Company, a "beneficial owner" of more than 10% of the shares
of
Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (the "1934
Act")).
The
Company further acknowledges that no Buyer is acting as a financial advisor
or
fiduciary of the Company or any of its Subsidiaries (or in any similar capacity)
with respect to the Transaction Documents and the transactions contemplated
hereby and thereby, and any advice given by a Buyer or any of its
representatives or agents in connection with the Transaction Documents and
the
transactions contemplated hereby and thereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to each
Buyer
that the Company's decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its
representatives.
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(g) No
General Solicitation; Fees.
Neither
the Company, nor any of its Subsidiaries or affiliates, nor any Person acting
on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer
or
sale of the Securities. The Company shall be responsible for the payment of
any
placement agent's fee, finder's fees, financial advisory fees, or brokers'
commissions (other than for persons engaged by any Buyer or its investment
advisor) relating to or arising out of the transactions contemplated hereby.
The
Company shall pay, and hold each Buyer harmless against, any liability, loss
or
expense (including, without limitation, attorney's fees and out-of-pocket
expenses) arising in connection with any such claim. The Company has not engaged
any placement agent, finder or other agent in connection with the sale of the
Securities.
(h) No
Integrated Offering.
None of
the Company, its Subsidiaries, any of their affiliates, and any Person acting
on
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 require registration of any of the Securities under the 1933 Act or cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable stockholder 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. None of the Company, its Subsidiaries, their
affiliates and any Person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration of any
of
the Securities under the 1933 Act or cause the offering of the Securities to
be
integrated with other offerings.
(i) Dilutive
Effect.
The
Company understands and acknowledges that the number of Conversion Shares
issuable upon conversion of the Notes and the Warrant Shares issuable upon
exercise of the Warrants will increase in certain circumstances. The Company
further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Notes in accordance with this Agreement and the Notes and
its
obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants in each case, is absolute and
unconditional regardless of the dilutive effect that such issuance may have
on
the ownership interests of other stockholders of the Company.
(j) Application
of Takeover Protections; Rights Agreement.
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 Certificate of Incorporation
(as defined in Section 3(r)) or the laws of the jurisdiction of its formation
which is or could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and any Buyer's ownership of the Securities. The
Company has not adopted a stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Common Stock or a change
in
control of the Company.
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(k) SEC
Documents; Financial Statements.
Except
as disclosed in Schedule
3(k),
since
July 13, 2007, the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the 1934 Act (all of the foregoing filed prior to
the
date hereof and all exhibits included therein and financial statements, notes
and schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC
Documents").
The
Company has delivered to the Buyers or their respective representatives true,
correct and complete copies of the SEC Documents not available on the XXXXX
system. Except as disclosed in Schedule
3(k)
as of
their respective dates, the SEC Documents complied in all material respects
with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. Except
as
disclosed in Schedule
3(k),
as of
their respective dates, the financial statements of the Company included in
the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with
respect thereto. Such financial statements have been prepared in accordance
with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is
not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement
of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are
or
were made, not misleading.
(l) Absence
of Certain Changes.
Except
as disclosed in Schedule
3(l),
since
December 31, 2006, there has been no material adverse change and no material
adverse development in the business, properties, operations, condition
(financial or otherwise), results of operations or prospects of the Company
or
its Subsidiaries. Except as disclosed in Schedule
3(l),
since
December 31, 2006, the Company has not (i) declared or paid any dividends,
(ii)
sold any assets, individually or in the aggregate, in excess of $100,000 outside
of the ordinary course of business or (iii) had capital expenditures,
individually or in the aggregate, in excess of $100,000. Neither the Company
nor
any of its Subsidiaries has taken any steps to seek protection pursuant to
any
bankruptcy law nor does the Company have any knowledge or reason to believe
that
its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact which would reasonably lead a creditor to do so.
The Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be Insolvent
(as defined below). For purposes of this Section 3(l), "Insolvent"
means,
with respect to any Person, (i) the present fair saleable value of such Person's
assets is less than the amount required to pay such Person's total Indebtedness
(as defined in Section 3(s)), (ii) such Person is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company intends to incur
or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) such Person has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.
(m) No
Undisclosed Events, Liabilities, Developments or Circumstances.
Except
as contemplated by this Agreement or the Transactions Documents, no event,
liability, development or circumstance has occurred or currently exists, or
is
contemplated to occur with respect to the Company, its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form SB-2 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
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(n) Conduct
of Business; Regulatory Permits.
Neither
the Company nor its Subsidiaries is in violation of any term of or in default
under any certificate of designations of any outstanding series of preferred
stock of the Company, its Certificate of Incorporation or Bylaws or their
organizational charter or certificate of incorporation or bylaws, respectively.
Neither the Company nor any of its Subsidiaries is in violation of any judgment,
decree or order or any statute, ordinance, rule or regulation applicable to
the
Company or its Subsidiaries, and neither the Company nor any of its Subsidiaries
will conduct its business in violation of any of the foregoing, except for
possible violations which would not, individually or in the aggregate, have
a
Material Adverse Effect. Without limiting the generality of the foregoing,
the
Company is not in violation of any of the rules, regulations or requirements
of
the Principal Market and has no knowledge of any facts or circumstances which
would reasonably lead to delisting or suspension of the Common Stock by the
Principal Market in the foreseeable future. Since July 13, 2007, the Common
Stock has been designated for quotation on the Principal Market. Since July,
13
2007, (i) trading in the Common Stock has not been suspended by the SEC or
the
Principal Market and (ii) the Company has received no communication, written
or
oral, from the SEC or the Principal Market regarding the suspension or delisting
of the Common Stock from the Principal Market. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
regulatory authorities necessary to conduct their respective businesses, except
where the failure to possess such certificates, authorizations or permits would
not have, individually or in the aggregate, a Material Adverse Effect, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
(o) Foreign
Corrupt Practices.
Neither
the Company, nor any of its Subsidiaries, nor any director, officer, agent,
employee or other Person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the Company
or any of its Subsidiaries (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign
or
domestic government official or employee.
(p) Xxxxxxxx-Xxxxx
Act.
The
Company is in compliance with any and all applicable requirements of the
Xxxxxxxx-Xxxxx Act of 2002 that are effective as of the date hereof, and any
and
all applicable rules and regulations promulgated by the SEC thereunder that
are
effective as of the date hereof.
(q)
Transactions With Affiliates.
Except
as set forth on Schedule
3(q),
none of
the officers, directors or employees of the Company is presently a party to
any
transaction with the Company or any of its Subsidiaries (other than for ordinary
course services as employees, officers or 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 such officer, director or employee or, to
the
knowledge of the Company or any of its Subsidiaries, any corporation,
partnership, trust or other entity in which any such officer, director, or
employee has a substantial interest or is an officer, director, trustee or
partner.
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(r) Equity
Capitalization.
As of
the date hereof, the authorized capital stock of the Company consists of (i)
200,000,000 shares of Common Stock, of which as of the date hereof, 91,088,887
are issued and outstanding, 14,873,883 shares are reserved for issuance pursuant
to the Company's stock option and purchase plans and 25,177,817 shares are
reserved for issuance pursuant to securities (other than the aforementioned
options, the Notes and the Warrants) exercisable or exchangeable for, or
convertible into, shares of Common Stock and (ii) 1,000,000 shares
of
preferred stock, par value $0.001 per share, of which as of the date hereof,
none are issued and outstanding. All of such outstanding shares have been,
or
upon issuance will be, validly issued and are fully paid and nonassessable.
Except as disclosed in Schedule
3(r):
(i)
none of the Company's capital stock is subject to preemptive rights or any
other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of
its
Subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
capital stock of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company or any of its Subsidiaries; (v) there
are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933
Act
(except pursuant to the Registration Rights Agreement); (vi) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of
its
Subsidiaries is or may become bound to redeem a security of the Company or
any
of its Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance
of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's
or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect. The Company
has
furnished to the Buyers true, correct and complete copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the " Certificate
of Incorporation"),
and
the Company's Bylaws, as amended and as in effect on the date hereof (the
"Bylaws"),
and
the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof
in
respect thereto.
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12
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(s) Indebtedness
and Other Contracts.
Except
as disclosed in Schedule
3(s),
neither
the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
(as
defined below), (ii) is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument would result in a Material Adverse Effect,
(iii) is in violation of any term of or in default under any contract, agreement
or instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of
the
Company's officers, has or is expected to have a Material Adverse Effect.
Schedule
3(s)
provides
a detailed description of the material terms of any such outstanding
Indebtedness. For purposes of this Agreement: (x) "Indebtedness"
of any
Person means, without duplication (A) all indebtedness for borrowed money,
(B)
all obligations issued, undertaken or assumed as the deferred purchase price
of
property or services, including, without limitation, "capital leases" in
accordance with generally accepted accounting principles (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and
other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect
to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in
the
event of default are limited to repossession or sale of such property), (F)
all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment
of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "Contingent
Obligation"
means,
as to any Person, any direct or indirect liability, contingent or otherwise,
of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) "Person"
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
(t) Absence
of Litigation.
There
is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries, the Common Stock
or
any of the Company's Subsidiaries or any of the Company's or its Subsidiaries'
officers or directors in their capacities as such, except as set forth in
Schedule
3(t).
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13
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(u) Insurance.
The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company
nor
any such Subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such 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 at a cost that would not have a Material
Adverse Effect.
(v) Employee
Relations.
(i)
Neither the Company nor any of its Subsidiaries is a party to any collective
bargaining agreement or employs any member of a union. The Company and its
Subsidiaries believe that their relations with their employees are good. No
executive officer of the Company or any of its Subsidiaries has notified the
Company or any such Subsidiary that such officer intends to leave the Company
or
any such Subsidiary or otherwise terminate such officer's employment with the
Company or any such Subsidiary. No executive officer of the Company or any
of
its Subsidiaries, to the knowledge of the Company, is, or is now expected to
be,
in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement,
or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any
of
its Subsidiaries to any liability with respect to any of the foregoing
matters.
(ii) The
Company and its Subsidiaries are in compliance with all applicable federal,
state, local and foreign laws and regulations respecting labor, employment
and
employment practices and benefits, terms and conditions of employment and wages
and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(w) Title.
Neither
the Company nor any of its Subsidiaries own any real property. The Company
and
its Subsidiaries have good and marketable title to all personal property owned
by them which is material to the business of the Company and its Subsidiaries,
in each case free and clear of all liens, encumbrances and defects except such
as do not materially affect the value of such property and do not interfere
with
the use made and proposed to be made of such property by the Company and any
of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting
and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by
the
Company and its Subsidiaries.
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14
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(x) Intellectual
Property Rights.
The
Company and its Subsidiaries own or possess adequate rights or licenses to
use
all trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights ("Intellectual
Property Rights")
necessary to conduct their respective businesses as now conducted. Except as
set
forth in Schedule
3(x),
none of
the Company's Intellectual Property Rights have expired or terminated, or are
expected to expire or terminate, within three years from the date of this
Agreement. The Company does not have any knowledge of any infringement by the
Company or its Subsidiaries of Intellectual Property Rights of others. There
is
no claim, action or proceeding being made or brought, or to the knowledge of
the
Company or its Subsidiaries, being threatened, against the Company or its
Subsidiaries regarding its Intellectual Property Rights. The Company is unaware
of any facts or circumstances which would reasonably be expected to give rise
to
any of the foregoing infringements or claims, actions or proceedings. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual
properties.
(y) Environmental
Laws.
The
Company and its Subsidiaries (i) are in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws
to conduct their respective businesses and (iii) are in compliance with all
terms and conditions of any such permit, license or approval where, in each
of
the foregoing clauses (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term "Environmental
Laws"
means
all federal, state, local or foreign laws relating to pollution or protection
of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "Hazardous
Materials") into
the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.
(z) Subsidiary
Rights.
Except
as set forth in Schedule
3(z),
the
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
(aa) Investment
Company Status.
The
Company is not, and upon consummation of the sale of the Securities will not
be,
an "investment company," a company controlled by an "investment company" or
an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as such terms are defined in the Investment Company Act
of
1940, as amended.
(bb) Tax
Status.
The
Company and each of its Subsidiaries (i) has made or filed all foreign, federal
and state income and all other tax returns, reports and declarations required
by
any jurisdiction to which it is subject, (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to
the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority
of
any jurisdiction, and the officers of the Company know of no basis for any
such
claim.
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(cc) Internal
Accounting and Disclosure Controls.
The
Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management's
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities
at
reasonable intervals and appropriate action is taken with respect to any
difference. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-14 under the 0000 Xxx) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures designed to ensure
that information required to be disclosed by the Company in the reports that
it
files or submits under the 1934 Act is accumulated and communicated to the
Company's management, including its principal executive officer or officers
and
its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure. During the twelve months prior to
the
date hereof neither the Company nor any of its Subsidiaries have received any
notice or correspondence from any accountant relating to any material weakness
in any part of the system of internal accounting controls of the Company or
any
of its Subsidiaries
(dd) Off
Balance Sheet Arrangements.
There
is no transaction, arrangement, or other relationship between the Company and
an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its Exchange Act filings and is not so disclosed
or
that otherwise would be reasonably likely to have a Material Adverse Effect.
(ee) Ranking
of Notes.
Except
as set forth on Schedule
3(ee),
no
Indebtedness of the Company is senior to or ranks pari
passu
with the
Notes in right of payment, whether with respect of payment of redemptions,
interest, damages or upon liquidation or dissolution or otherwise.
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(ff) Eligibility
for Registration.
The
Company is eligible to register the Conversion Shares, the Common Shares and
the
Warrant Shares for resale by the Buyers using Form SB-2 promulgated under the
1933 Act, subject to the cutbacks pursuant to Rule 415 of the 1933 Act
contemplated in the Registration Rights Agreement.
(gg) Transfer
Taxes.
On the
Closing Date, all stock transfer or other taxes (other than income or similar
taxes) which are required to be paid in connection with the sale and transfer
of
the Securities to be sold to each Buyer hereunder will be, or will have been,
fully paid or provided for by the Company, and all applicable laws imposing
such
taxes will be or will have been complied with.
(hh) Manipulation
of Price.
The
Company has not, and to its knowledge no one acting on its behalf has, (i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
(ii) Acknowledgement
Regarding Buyers' Trading Activity.
It is
understood and acknowledged by the Company that (i) none of the Buyers have
been
asked to agree, nor has any Buyer agreed, to desist from purchasing or selling,
long and/or short, securities of the Company, or "derivative" securities based
on securities issued by the Company or to hold the Securities for any specified
term; (ii) any Buyer, and counter parties in "derivative" transactions to which
any such Buyer is a party, directly or indirectly, presently may have a "short"
position in the Common Stock, and (iii) each Buyer shall not be deemed to have
any affiliation with or control over any arm's length counter-party in any
"derivative" transaction. The Company further understands and acknowledges
that
(a) one or more Buyers may engage in hedging and/or trading activities at
various times during the period that the Securities are outstanding, including,
without limitation, during the periods that the value of the Conversion Shares
and the Warrant Shares are being determined and (b) such hedging and/or trading
activities, if any, can reduce the value of the existing stockholders' equity
interest in the Company both at and after the time the hedging and/or trading
activities are being conducted. The Company acknowledges that such
aforementioned hedging and/or trading activities do not constitute a breach
of
this Agreement, the Notes, the Warrants or any of the documents executed in
connection herewith.
(jj) U.S.
Real Property Holding Corporation.
The
Company is not, nor has ever been, a U.S. real property holding corporation
within the meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company shall so certify upon any Buyer's request.
(kk) Bank
Holding Company Act.
Neither
the Company nor any of its Subsidiaries is subject to the Bank Holding Company
Act of 1956, as amended (the "BHCA")
and to
regulation by the Board of Governors of the Federal Reserve System (the
"Federal
Reserve").
Neither the Company nor any of its Subsidiaries or affiliates owns or controls,
directly or indirectly, five percent (5%) or more of the outstanding shares
of
any class of voting securities or twenty-five percent (25%) or more of the
total
equity of a bank or any entity that is subject to the BHCA and to regulation
by
the Federal Reserve. Neither the Company nor any of its Subsidiaries or
affiliates exercises a controlling influence over the management or policies
of
a bank or any entity that is subject to the BHCA and to regulation by the
Federal Reserve.
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(ll) Disclosure.
The
Company confirms that neither it, nor any other Person acting on its behalf
has
provided any of the Buyers or their agents or counsel with any information
that
constitutes or could reasonably be expected to constitute material, nonpublic
information. The Company understands and confirms that each of the Buyers will
rely on the foregoing representations in effecting transactions in securities
of
the Company. All disclosure provided by the Company, its Subsidiaries, its
officers or directors, its agents or its counsel to the Buyers regarding the
Company, or any of its Subsidiaries, their business and the transactions
contemplated hereby, including the Schedules to this Agreement, is true and
correct and does not contain any untrue statement of a material fact or omit
to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
Each press release issued by the Company or any of its Subsidiaries during
the
twelve (12) months preceding the date of this Agreement did not at the time
of
release contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or information
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, prospects, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
4. COVENANTS.
(a) Best
Efforts.
Each
party shall use its best efforts timely to satisfy each of the conditions to
be
satisfied by it as provided in Sections 6 and 7 of this Agreement.
(b) Form
D
and Blue Sky.
The
Company agrees to file a Form D with respect to the Securities as required
under
Regulation D and to provide a copy thereof to each Buyer reasonably promptly
after such filing. The Company shall, reasonably promptly (and in no event
later
than 15 days) after the Closing Date, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for or to
qualify the Securities for sale to the Buyers at the Closing pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the states of the
United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Buyers reasonably promptly
after such filing. The Company shall make all filings and reports relating
to
the offer and sale of the Securities required under applicable securities or
"Blue Sky" laws of the states of the United States following the Closing Date.
(c) Reporting
Status.
Until
the date on which the Investors (as defined in the Registration Rights
Agreement) shall have sold all the Conversion Shares and Warrant
Shares and
none
of the Notes or Warrants
is outstanding (the "Reporting
Period"),
the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination.
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(d) Use
of
Proceeds.
The
Company will use up to $6,500,000 the proceeds from the sale of the Securities
for mergers and acquisitions, and the remainder of the proceeds shall be used
for general corporate and for working capital purposes and not for except as
set
forth on Schedule
4(d),
(i) the
repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries, (ii) the redemption or repurchase of any of its or its
Subsidiaries' equity securities or (iii) the settlement of any claims, actions
or proceedings against the Company or any of its Subsidiaries.
(e) Financial
Information.
The
Company agrees to send the following to each Investor (as defined in the
Registration Rights Agreement) during the Reporting Period (i) unless the
following are filed with the SEC through XXXXX and are available to the public
through the XXXXX system, within one (1) Business Day after the filing thereof
with the SEC, a copy of its Annual Reports and Quarterly Reports on Form 10-K,
10-KSB, 10-Q or 10-QSB, any Current Reports on Form 8-K and any registration
statements (other than on Form S-8) or amendments filed pursuant to the 1933
Act, and (ii) copies of any notices and other information made available or
given to the stockholders of the Company generally, contemporaneously with
the
making available or giving thereof to the stockholders. As used herein,
"Business
Day"
means
any day other than Saturday, Sunday or other day on which commercial banks
in
The City of New York are authorized or required by law to remain
closed.
(f) Listing.
The
Company shall promptly secure the listing of all of the Registrable Securities
(as defined in the Registration Rights Agreement) upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock
is
then listed (subject to official notice of issuance) and shall maintain such
listing of all Registrable Securities from time to time issuable under the
terms
of the Transaction Documents. The Company shall maintain the Common Stocks'
authorization for quotation on the Principal Market. Neither the Company nor
any
of its Subsidiaries shall take any action which would be reasonably expected
to
result in the delisting or suspension of the Common Stock on the Principal
Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(f).
(g) Fees.
The
Company shall reimburse Castlerigg Master Investments Ltd. (a Buyer) or its
designee(s) (in addition to any other expense amounts paid to any Buyer prior
to
the date of this Agreement) for all reasonable costs and expenses incurred
in
connection with the transactions contemplated by the Transaction Documents
(including all reasonable legal fees and disbursements in connection therewith,
documentation and implementation of the transactions contemplated by the
Transaction Documents and due diligence in connection therewith), which amount
shall be withheld by such Buyer from its Purchase Price at the Closing. The
Company shall be responsible for the payment of any placement agent's fees,
finder's fees, financial advisory fees, or broker's commissions (other than
for
Persons engaged by any Buyer) relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold each Buyer harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorney's fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment, other than for Persons engaged
by
any Buyer. Except as otherwise set forth in the Transaction Documents, each
party to this Agreement shall bear its own expenses in connection with the
sale
of the Securities to the Buyers.
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(h) Pledge
of Securities.
The
Company acknowledges and agrees that the Securities may be pledged by an
Investor in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Investor effecting a pledge of Securities shall
be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(f) hereof; provided that
an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(f) hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an
Investor.
(i) Disclosure
of Transactions and Other Material Information.
On or
before 8:30 a.m., New York City time, on the second Business
Day following the date of this Agreement, the Company shall issue a press
release and file a Current Report on Form 8-K describing the terms of the
transactions contemplated by the Transaction Documents in the form required
by
the 1934 Act and attaching the material Transaction Documents (including,
without limitation, this Agreement, the form of the Notes, the form of Warrant,
the form the Registration Rights Agreement and the form of Security Documents
as
exhibits to such filing (including all attachments, the "8-K
Filing").
No
later than two (2) months after the Closing date, the Company shall file a
Current Report on Form 8-K disclosing all information disclosed in Schedule
4(i)
(the
"Second
8-K Filing").
From
and after the filing of the Second 8-K Filing with the SEC, no Buyer shall
be in
possession of any material, nonpublic information received from the Company,
any
of its Subsidiaries or any of their respective officers, directors, employees
or
agents, that is not disclosed in the 8-K Filing. The Company shall not, and
shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents, not to, provide any Buyer with any
material, nonpublic information regarding the Company or any of its Subsidiaries
from and after the filing of the 8-K Filing with the SEC without the express
written consent of such Buyer. If a Buyer has, or believes it has, received
any
such material, nonpublic information regarding the Company or any of its
Subsidiaries, it shall provide the Company with written notice thereof. The
Company shall, within three (3) Trading Days (as defined in the Notes) of
receipt of such notice, make public disclosure of such material, nonpublic
information. In the event of a breach of the foregoing covenant by the Company,
any of its Subsidiaries, or any of its or their respective officers, directors,
employees and agents, in addition to any other remedy provided herein or in
the
Transaction Documents, a Buyer shall have the right to make a public disclosure,
in the form of a press release, public advertisement or otherwise, of such
material, nonpublic information without the prior approval by the Company,
its
Subsidiaries, or any of its or their respective officers, directors, employees
or agents. No Buyer shall have any liability to the Company, its Subsidiaries,
or any of its or their respective officers, directors, employees, stockholders
or agents for any such disclosure except where, as a result of the willful
misconduct or gross negligence of such Buyer, any such disclosure contains
an
untrue statement of a material fact or omits 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. Subject
to the foregoing, neither the Company, its Subsidiaries nor any Buyer shall
issue any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall
be
entitled, without the prior approval of any Buyer, to make any press release
or
other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as
is
required by applicable law and regulations (provided that in the case of clause
(i) each Buyer shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release). Without the
prior written consent of any applicable Buyer, and except as contemplated by
the
prior subsection (i) or as required by applicable law or regulation, neither
the
Company nor any of its Subsidiaries or affiliates shall disclose the name of
such Buyer in any filing, announcement, release or otherwise.
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(j) Restriction
on Redemption and Cash Dividends.
Except
for the redemption of up to 350,000 shares of Common Stock held by the former
holders of the Series A Preferred Stock of RxElite Holdings, Inc. that is due
within fifty (50) days of December 31, 2008 at a redemption price of $4.00
per
share, so long as any Notes are outstanding, the Company shall not, directly
or
indirectly, redeem, or declare or pay any cash dividend or distribution on,
the
Common Stock without the prior express written consent of the holders of Notes
representing not less than a majority of the aggregate principal amount of
the
then outstanding Notes.
(k) Additional
Notes; Variable Securities; Dilutive Issuances.
So long
as any Buyer beneficially owns any Securities, the Company will not issue any
Notes other than to the Buyers as contemplated hereby, and the Company shall
not
issue any other securities that would cause a breach or default under the Notes.
For so long as any Notes or Warrants remain outstanding, the Company shall
not,
in any manner, issue or sell any rights, warrants or options to subscribe for
or
purchase Common Stock or directly or indirectly convertible into or exchangeable
or exercisable for Common Stock at a price which varies or may vary with the
market price of the Common Stock, including by way of one or more reset(s)
to
any fixed price unless the conversion, exchange or exercise price of any such
security cannot be less than the then applicable Conversion Price (as defined
in
the Notes) with respect to the Common Stock into which any Note is convertible
or the then applicable Exercise Price (as defined in the Warrants) with respect
to the Common Stock into which any Warrant is exercisable. For so long as any
Notes or Warrants remain outstanding, the Company shall not, in any manner,
enter into or affect any Dilutive Issuance (as defined in the Notes) if the
effect of such Dilutive Issuance is to cause the Company to be required to
issue
upon conversion of any Note or exercise of any Warrant any shares of Common
Stock in excess of that number of shares of Common Stock which the Company
may
issue upon conversion of the Notes and exercise of the Warrants without
breaching the Company's obligations under the rules or regulations of the
Principal Market or any applicable Eligible Market (as defined in the
Registration Rights Agreement).
(l) Corporate
Existence.
So long
as any Buyer beneficially owns any Securities, the Company shall not be party
to
any Fundamental Transaction (as defined in the Notes) unless the Company is
in
compliance with the applicable provisions governing Fundamental Transactions
set
forth in the Notes and the Warrants.
(m) Reservation
of Shares.
So long
as any Buyer owns any Securities, the Company shall take all action necessary
to
at all times have authorized, and reserved for the purpose of issuance, no
less
than 130% of the sum of the number of shares of Common Stock
issuable
(i) upon conversion of the Notes and (ii) upon exercise of the Warrants then
outstanding (without taking into account any limitations on the conversion
of
the Notes or exercise of the Warrants set forth in the Notes and Warrants,
respectively).
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(n) Conduct
of Business.
The
business of the Company and its Subsidiaries shall not be conducted in violation
of any law, ordinance or regulation of any governmental entity, except where
such violations would not result, either individually or in the aggregate,
in a
Material Adverse Effect.
(o) Additional
Issuances of Securities.
(i) For
purposes of this Section 4(o), the following definitions shall
apply.
(1) "Convertible
Securities"
means
any stock or securities (other than Options) convertible into or exercisable
or
exchangeable for shares of Common
Stock.
(2) "Options"
means
any rights, warrants or options to subscribe for or purchase shares of
Common
Stock or
Convertible Securities.
(3) "Common
Stock Equivalents"
means,
collectively, Options and Convertible Securities.
(ii) Except
with respect to the Company's Registration Statement on Form SB-2 (File No.
333-146641) originally filed with the SEC on October 30, 2007 (which may be
amended or supplemented, but not to register more securities), from the date
hereof until the earlier of the date when all Registrable Securities (as defined
in the Registration Rights Agreement) have been registered or may be sold
without the requirement to be in compliance with Rule 144(c)(1) and otherwise
without restriction or limitation pursuant to Rule 144 (the "Trigger
Date"),
the
Company will not, directly or indirectly, file any registration statement with
the SEC other than the Registration Statement (as defined in the Registration
Rights Agreement). From the date hereof until the Trigger Date, the Company
will
not, (i) directly or indirectly, offer, sell, grant any option to purchase,
or
otherwise dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition of) any of its or its Subsidiaries' equity or
equity equivalent securities, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life
and
under any circumstances, convertible into or exchangeable or exercisable for
shares of Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent
Placement")
or
(ii) be party to any solicitations, negotiations or discussions with regard
to
the foregoing. Solely for the purpose of the immediately preceding sentence,
"Subsequent Placement" shall exclude (i) any Common Stock issued or issuable
upon conversion or exercise of equity securities in connection with any
strategic acquisition by the Company, the primary purpose of which is not to
raise equity capital and (ii) any debt, preferred stock, Common Stock or Common
Stock Equivalents issued in connection with the full redemption of the Notes
issued to the Buyers.
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(iii) From
the
Trigger Date until the second anniversary of the Closing Date, the Company
will
not, directly or indirectly, effect any Subsequent Placement unless the Company
shall have first complied with this Section 4(o)(iii).
(1) The
Company shall deliver to each Buyer an irrevocable written notice
(the "Offer
Notice"),
of
any proposed or intended issuance or sale or exchange (the "Offer")
of the
securities being offered (the "Offered
Securities")
in a
Subsequent Placement, which Offer Notice shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they
are to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the persons or
entities (if known) to which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (z) offer to issue and sell to or
exchange with such Buyers all of the Offered Securities, allocated among such
Buyers (a) based on such Buyer's pro rata portion of the aggregate principal
amount of Notes purchased hereunder (the "Basic
Amount"),
and
(b) with respect to each Buyer that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic Amounts
of other Buyers as such Buyer shall indicate it will purchase or acquire should
the other Buyers subscribe for less than their Basic Amounts (the "Undersubscription
Amount").
Notwithstanding the foregoing, if the Company would be required to disclose
material non-pubic information to any Buyer in connection with the delivery
of
any Offer Notice, the Company shall first ask such Buyer if it would be willing
to receive material non-public information (without disclosing any material
non-public information to such Buyer). If such Buyer elects to receive material
non-public information in connection with an Offer Notice, upon delivery of
such
Offer Notice, such Buyer shall maintain the confidentiality of the information
identified as material non-public information contained in such Offer Notice
until such information is publicly disclosed (other than disclosure to its
officers, director, partners, members, agents or advisors or as required to
be
disclosed by law or legal process). If such Buyer elects not to receive material
non-public information, the Company shall not be required to deliver any Offer
Notice that contains material non-public information.
(2) To
accept
an Offer, in whole or in part, such Buyer must deliver a written notice to
the
Company prior to the end of the tenth (10th)
Business Day after such Buyer's receipt of the Offer Notice (the "Offer
Period"),
setting forth the portion of such Buyer's Basic Amount that such Buyer elects
to
purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the "Notice
of Acceptance").
If
the Basic Amounts subscribed for by all Buyers are less than the total of all
of
the Basic Amounts, then each Buyer who has set forth an Undersubscription Amount
in its Notice of Acceptance shall be entitled to purchase, in addition to the
Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
for; provided,
however,
that if
the Undersubscription Amounts subscribed for exceed the difference between
the
total of all the Basic Amounts and the Basic Amounts subscribed for (the
"Available
Undersubscription Amount"),
each
Buyer who has subscribed for any Undersubscription Amount shall be entitled
to
purchase only that portion of the Available Undersubscription Amount as the
Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers that
have subscribed for Undersubscription Amounts, subject to rounding by the
Company to the extent it deems reasonably necessary. Notwithstanding
anything to the contrary contained herein, if the Company desires to modify
or
amend the terms and conditions of the Offer prior to the expiration of the
Offer
Period, the Company may deliver to the Buyers a new Offer Notice and the Offer
Period shall expire on the tenth (10th) Business Day after such Buyer's receipt
of such new Offer Notice.
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(3) The
Company shall have five (5) Business Days from the expiration of the Offer
Period above to offer, issue, sell or exchange all or any part of such Offered
Securities as to which a Notice of Acceptance has not been given by the Buyers
(the "Refused
Securities"),
but
only to the offerees described in the Offer Notice (if so described therein)
and
only upon terms and conditions (including, without limitation, unit prices
and
interest rates) that are not more favorable to the acquiring person or persons
or less favorable to the Company than those set forth in the Offer Notice and
(ii) to publicly announce (a) the execution of such Subsequent Placement
Agreement, and (b) either (x) the consummation of the transactions contemplated
by such Subsequent Placement Agreement or (y) the termination of such Subsequent
Placement Agreement, which shall be filed with the SEC on a Current Report
on
Form 8-K with such Subsequent Placement Agreement and any documents contemplated
therein filed as exhibits thereto.
(4) In
the
event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section
4(o)(iii)(3) above), then each Buyer may, at its sole option and in its sole
discretion, reduce the number or amount of the Offered Securities specified
in
its Notice of Acceptance to an amount that shall be not less than the number
or
amount of the Offered Securities that such Buyer elected to purchase pursuant
to
Section 4(o)(iii)(2) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to Section 4(o)(iii)(3) above prior to such
reduction) and (ii) the denominator of which shall be the original amount of
the
Offered Securities. In the event that any Buyer so elects to reduce the number
or amount of Offered Securities specified in its Notice of Acceptance, the
Company may not issue, sell or exchange more than the reduced number or amount
of the Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(o)(iii)(1)
above.
(5) Upon
the
closing of the issuance, sale or exchange of all or less than all of the Refused
Securities, the Buyers shall acquire from the Company, and the Company shall
issue to the Buyers, the number or amount of Offered Securities specified in
the
Notices of Acceptance, as reduced pursuant to Section 4(o)(iii)(3) above if
the
Buyers have so elected, upon the terms and conditions specified in the Offer.
The purchase by the Buyers of any Offered Securities is subject in all cases
to
the preparation, execution and delivery by the Company and the Buyers of a
purchase agreement relating to such Offered Securities reasonably satisfactory
in form and substance to the Buyers and their respective counsel.
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(6) Any
Offered Securities not acquired by the Buyers or other persons in accordance
with Section 4(o)(iii)(3) above may not be issued, sold or exchanged until
they
are again offered to the Buyers under the procedures specified in this
Agreement.
(7) The
Company and the Buyers agree that if any Buyer elects to participate in the
Offer, neither the agreement regarding the Subsequent Placement (the
"Subsequent
Placement Agreement")
with
respect to such Offer nor any other transaction documents related thereto
(collectively, the "Subsequent
Placement Documents")
shall
include any term or provisions whereby any Buyer shall be required to agree
to
any restrictions in trading as to any securities of the Company owned by such
Buyer prior to such Subsequent Placement.
(8) Notwithstanding
anything to the contrary in this Section 4(o) and unless otherwise agreed to
by
the Buyers, the Company shall either confirm in writing to the Buyers that
the
transaction with respect to the Subsequent Placement has been abandoned or
shall
publicly disclose its intention to issue the Offered Securities, in either
case
in such a manner such that the Buyers will not be in possession of material
non-public information, by the fifteenth (15th)
Business Day following delivery of the Offer Notice. If by the fifteenth
(15th)
Business Day following delivery of the Offer Notice no public disclosure
regarding a transaction with respect to the Offered Securities has been made,
and no notice regarding the abandonment of such transaction has been received
by
the Buyers, such transaction shall be deemed to have been abandoned and the
Buyers shall not be deemed to be in possession of any material, non-public
information with respect to the Company. Should the Company decide to pursue
such transaction with respect to the Offered Securities, the Company shall
provide each Buyer with another Offer Notice and each Buyer will again have
the
right of participation set forth in this Section 4(o)(iii). The Company shall
not be permitted to deliver more than one such Offer Notice to the Buyers in
any
60-day period.
(iv) The
restrictions contained in subsections (ii) and (iii) of this Section 4(o) shall
not apply in connection with the issuance of any Excluded Securities (as defined
in the Notes).
(p) Collateral
Agent.
(i) Each
Buyer hereby (a) appoints Castlerigg Master Investments Ltd., as the collateral
agent hereunder and under the other Security Documents (in such capacity, the
"Collateral
Agent"),
and
(b) authorizes the Collateral Agent (and its officers, directors, employees
and
agents) to take such action on such Buyer's behalf in accordance with the terms
hereof and thereof. The Collateral Agent shall not have, by reason hereof or
any
of the other Security Documents, a fiduciary relationship in respect of any
Buyer. Neither the Collateral Agent nor any of its officers, directors,
employees and agents shall have any liability to any Buyer for any action taken
or omitted to be taken in connection hereof or any other Security Document
except to the extent caused by its own gross negligence or willful misconduct,
and each Buyer agrees to defend, protect, indemnify and hold harmless the
Collateral Agent and all of its officers, directors, employees and agents
(collectively, the "Indemnitees")
from
and against any losses, damages, liabilities, obligations, penalties, actions,
judgments, suits, fees, costs and expenses (including, without limitation,
reasonable attorneys' fees, costs and expenses) incurred by such Indemnitee,
whether direct, indirect or consequential, arising from or in connection with
the performance by such Indemnitee of the duties and obligations of Collateral
Agent pursuant hereto or any of the Security Documents. The Collateral Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected
in so
acting or refraining from acting) upon the instructions of the holders of at
least a majority in principal amount of the Notes then outstanding, and such
instructions shall be binding upon all holders of Notes; provided,
however,
that
the Collateral Agent shall not be required to take any action which, in the
reasonable opinion of the Collateral Agent, exposes the Collateral Agent to
liability or which is contrary to this Agreement or any other Transaction
Document or applicable law.
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(ii) The
Collateral Agent shall be entitled to rely upon any written notices, statements,
certificates, orders or other documents or any telephone message believed by
it
in good faith to be genuine and correct and to have been signed, sent or made
by
the proper Person, and with respect to all matters pertaining to this Agreement
or any of the other Transaction Documents and its duties hereunder or
thereunder, upon advice of counsel selected by it.
(iii) The
Collateral Agent may resign from the performance of all its functions and duties
hereunder and under the Notes and the Security Documents at any time by giving
at least ten (10) Business Days prior written notice to the Company and each
holder of the Notes. Such resignation shall take effect upon the acceptance
by a
successor Collateral Agent of appointment as provided below. Upon any such
notice of resignation, the holders of a majority of the outstanding principal
under the Notes shall appoint a successor Collateral Agent. Upon the acceptance
of the appointment as Collateral Agent, such successor Collateral Agent shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Collateral Agent, and the retiring Collateral Agent shall be
discharged from its duties and obligations under this Agreement, the Notes
and
the other Security Documents. After any Collateral Agent's resignation hereunder
, the provisions of this Section 4(p) shall inure to its benefit. If a successor
Collateral Agent shall not have been so appointed within said ten (10) Business
Day period, the retiring Collateral Agent shall then appoint a successor
Collateral Agent who shall serve until such time, if any, as the holders of
a
majority of the outstanding principal under the Notes appoint a successor
Collateral Agent as provided above.
(q) Trading
in Common Stock.
From
the date hereof and through the earlier of (i) the Initial Effective Date (as
defined in the Registration Rights Agreement) and (ii) the Initial Effectiveness
Deadline, each Buyer agrees that it shall not, directly or indirectly in its
own
capacity or through an agent, engage in any short sales (as defined in Rule
200
of Regulation SHO under the 0000 Xxx) with respect to the Common Stock, or
any
hedging transaction or securitization, including obtaining shares of Common
Stock to borrow, which establishes any short position with respect to the Common
Stock, whether on a U.S. domestic exchange or any foreign exchange, provided
that the foregoing shall not restrict any Buyer from selling any or all of
the
Common Shares during such time period, which shall not be by a short sale.
Furthermore, for so long as such Buyer owns any Notes, such Buyer shall not
maintain a Net Short Position. For purposes of this Section, a "Net
Short Position"
by a
Buyer means a position whereby such Buyer has executed one or more sales of
Common Stock that is marked as a short sale and that is executed at a time
when
such Buyer has no equivalent offsetting long position in the Common Stock or
contract for the foregoing. For purposes of determining whether a Buyer has
an
equivalent offsetting long position in the Common Stock, all Common Stock (i)
that is owned by such Buyer or (ii) that would be issuable upon conversion
or
exercise in full of all Securities then held by such Buyer (assuming that such
Securities were then fully convertible or exercisable, notwithstanding any
provisions to the contrary, and giving effect to any conversion or exercise
price adjustments that would take effect given only the passage of time) shall
be deemed to be held long by such Buyer.
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(r) Public
Information.
At any
time during the period commencing from the six (6) month anniversary of the
Closing Date and ending at such time that all of the Securities can be sold
without the requirement to be in compliance with Rule 144(c)(1) and otherwise
without restriction or limitation pursuant to Rule 144, if a registration
statement is not available for the resale of all of the Securities
and the
Company shall fail for any reason to satisfy the current public information
requirement under Rule 144 (a "Public
Information Failure")
then,
as partial relief for the damages to any holder of Securities by reason of
any
such delay in or reduction of its ability to sell the Securities (which remedy
shall not be exclusive of any other remedies available at law or in equity),
the
Company shall pay to each such holder an amount in cash equal to one percent
(1.0%) of the aggregate Purchase Price of such holder's Securities on the day
of
a Public Information Failure and on every thirtieth day (pro rated for periods
totaling less than thirty days) thereafter until the earlier of (i) the date
such Public Information Failure is cured and (ii) such time that such public
information is no longer required pursuant to Rule 144. The payments to which
a
holder shall be entitled pursuant to this Section 4(r) are referred to herein
as
"Public
Information Failure Payments."
Public
Information Failure Payments
shall be paid on the earlier of (I) the last day of the calendar month during
which such Public Information Failure Payments
are incurred and (II) the third Business Day after the event or failure giving
rise to the Public Information Failure Payments
is cured. In the event the Company fails to make Public Information
Failure Payments
in a timely manner, such Public Information Failure Payments
shall bear interest at the rate of 1.5% per month (prorated for partial months)
until paid in full.
(s) Additional
Relief.
If the
Company shall fail for any reason or for no reason to issue to the Buyer
unlegended certificates or issue such Common Shares to such Buyer by electronic
delivery at the applicable balance account at DTC within three (3) Trading
Days
after the receipt of documents necessary for the removal of the legend set
forth
in Section 2(g) above (the "Removal
Date"),
then
in addition to all other remedies available to the Buyer, if on or after the
Trading Day immediately following such three Trading Day period, the Buyer
purchases (in an open market transaction or otherwise) shares of Common Stock
to
deliver in satisfaction of a sale by the Buyer of such Common Shares that the
Buyer anticipated receiving without legend from the Company (a "Buy-In"),
then
the Company shall, within three (3) Business Days after the Buyer's request
and
in the Buyer's discretion, either (i) pay cash to the Buyer in an amount equal
to the Buyer's total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased (the "Buy-In
Price"),
at
which point the Company's obligation to deliver such unlegended Common Shares
shall terminate, or (ii) promptly honor its obligation to deliver to the Buyer
such unlegended Common Shares as provided above and pay cash to the Buyer in
an
amount equal to the excess (if any) of the Buy-In Price over the product of
(A)
such number of shares of Common Stock, times (B) the Closing Bid Price (as
defined in the Warrants) on the Removal Date.
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27
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(t) Closing
Documents.
On or
prior to fourteen (14) calendar days after the Closing Date, the Company agrees
to deliver, or cause to be delivered, to each Buyer and Xxxxxxx Xxxx & Xxxxx
LLP executed copies of the Transaction Documents, Securities and other document
required to be delivered to any party pursuant to Section 7 hereof.
(u) Deposit
Account Control Agreements.
Within
forty-five (45) days following the Closing Date, the Company shall deliver
to
the Collateral Agent, deposit account control agreements in a form satisfactory
to the Collateral Agent in its reasonable discretion duly executed by the
Company and the depositary institution, for each of the following accounts
of
the Company: (1) account No. 00000000 maintained at Bank of America, N.A. and
(ii) account No.224-25380-1-1-OCY maintained at Bank of America Securities,
LLC.
(v) Assignment
for Security.
Within
ten (10) days following the Closing Date, the Company shall deliver to the
Collateral Agent duly executed Assignments for Security in the form attached
as
Exhibit A to the Security Agreement with respect to the trademarks and patents
reflected on Schedule II to the Security Agreement.
(w) Tacking.
The
Company hereby acknowledges and agrees that for purposes of Rule 144 holding
periods, upon foreclosure of the shares of Common Stock pursuant to the Tiburon
Pledge Agreement (as defined below) in accordance with its terms, the
recipient(s) of those shares will be entitled to tack their holding period
such
that the holding period will begin no later than the Closing Date, and for
so
long as any holder of such shares represents that it is not an affiliate of
the
Company at the time of any proposed sale of such shares pursuant to Rule 144
and
was not an affiliate of the Company for the previous three months, the Company
shall not require a legal opinion in connection with (i) legend removal under
Rule 144 so long as the holder has held, including any applicable tacking
periods, such shares of Common Stock for at least one (1) year, or (ii) legend
removal upon a resale in compliance with Rule 144 so long as the holder has
held, including any applicable tacking period, such shares of Common Stock
for
at least six (6) months.
(x) Legal
Opinion.
No
later than ten (10) Business Days after the Closing Date, the Company shall
cause one or more law firms reasonably acceptable to the Buyers to deliver
legal
opinions with respect to the Put Option Agreement and the Tiburon Pledge
Agreement that are reasonably acceptable to the Buyers.
(y) Delivery
of Pledged Shares.
No
later than five (5) Business Days after the Closing Date, the Company hereby
covenants and agrees to cause Tiburon LLC to deliver to the Collateral Agent
the
shares of Common Stock required to be delivered to the Collateral Agent pursuant
to the Tiburon Pledge Agreement along with duly executed blank stock
powers.
5. REGISTER;
TRANSFER AGENT INSTRUCTIONS.
(a) Register.
The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Notes and the Warrants in which the Company
shall record the name and address of the Person in whose name the Notes
and the
Warrants have been issued (including the name and address of each transferee),
the principal amount of Notes held by such Person, the number of Conversion
Shares issuable upon conversion of the Notes and Warrant Shares issuable upon
exercise of the Warrants held by such Person. The Company shall keep the
register open and available at all times during business hours for inspection
of
any Buyer or its legal representatives.
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28
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(b) Transfer
Agent Instructions.
The
Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates or credit shares to the
applicable balance accounts at The Depository Trust Company ("DTC"),
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares, the Common Shares and the Warrant Shares issued at the
Closing or upon conversion of the Notes or exercise of the Warrants in such
amounts as specified from time to time by each Buyer to the Company upon
conversion of the Notes or exercise of the Warrants in the form of Exhibit
G
(the
"Irrevocable
Transfer Agent Instructions").
The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer instructions
to
give effect to Section 2(g) hereof, will be given by the Company to its transfer
agent, and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the other Transaction Documents. If a Buyer effects a sale, assignment
or
transfer of the Securities in accordance with Section 2(f), the Company shall
permit the transfer and shall promptly instruct its transfer agent to issue
one
or more certificates or credit shares to the applicable balance accounts at
DTC
in such name and in such denominations as specified by such Buyer to effect
such
sale, transfer or assignment. In the event that such sale, assignment or
transfer involves the Common Shares, Conversion Shares or Warrant Shares sold,
assigned or transferred pursuant to an effective registration statement or
pursuant to Rule 144, the transfer agent shall issue such Securities to the
Buyer, assignee or transferee, as the case may be, without any restrictive
legend. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to a Buyer. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5(b) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5(b), that
a
Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.
6. CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Notes and the related
Common Shares and Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
(i) Such
Buyer shall have executed each of the Transaction Documents to which it is
a
party and delivered the same to the Company.
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29
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(ii) Such
Buyer and each other Buyer shall have delivered to the Company the Purchase
Price set forth opposite such Buyer's and each other Buyer's name in column
(7)
of the Schedule of Buyers (less, in the case of Castlerigg Master Investments
Ltd., the amounts withheld pursuant to Section 4(g)) for the Notes and the
related Common Shares and Warrants being purchased by such Buyer at the Closing
by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(iii) The
representations and warranties of such Buyer shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as
of a
specific date which shall be true and correct as of such specified date), and
such Buyer shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by such Buyer at or prior to the Closing
Date.
7. CONDITIONS
TO EACH BUYER'S OBLIGATION TO PURCHASE.
The
obligation of each Buyer hereunder to purchase the Notes and
the
related Common Shares and Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit
and
may be waived by such Buyer at any time in its sole discretion by providing
the
Company with prior written notice thereof:
(i) The
Company shall have duly executed and delivered to such Buyer (A) each of the
Transaction Documents and, (B) the Notes (in such principal amounts as set
forth
opposite such Buyer's name in column (3) of the Schedule of Buyers), being
purchased by such Buyer at the Closing pursuant to this Agreement, (C) the
related Common Shares (in such amounts as set forth opposite such Buyer's name
in Column (4) of the Schedule of Buyers) and (D) the related Warrants (in such
amounts as set forth opposite such Buyer's name in Columns (5) and (6) of the
Schedule of Buyers) being purchased by such Buyer at the Closing pursuant to
this Agreement.
(ii) Such
Buyer shall have received the opinion of Xxxxxx and Xxxxx, LLP, the Company's
outside counsel, dated as of the Closing Date, in substantially the form of
Exhibit H
attached
hereto.
(iii) The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit G
attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(iv) The
Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company and each of its Subsidiaries in
such
entity's jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within 10 days of the
Closing Date.
(v) The
Company shall have delivered to such Buyer a certificate evidencing the
Company's qualification as a foreign corporation and good standing issued by
the
Secretary of State (or comparable office) of each jurisdiction in which the
Company conducts is required to be so qualified, as of a date within 10 days
of
the Closing Date.
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30
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(vi) The
Company shall have delivered to such Buyer a certified copy of the Certificate
of Incorporation as certified by the Secretary of State of the State (or
comparable office of Delaware within ten (10) days of the Closing
Date.
(vii) The
Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company's Board
of
Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate
of
Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
form attached hereto as Exhibit I.
(viii) The
representations and warranties of the Company shall be true and correct as
of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date
which shall be true and correct as of such specified date) and the Company
shall
have performed, satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Closing Date.
Such
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the Closing Date, to the foregoing effect and as
to
such other matters as may be reasonably requested by such Buyer in the form
attached hereto as Exhibit
J.
(ix) The
Company shall have delivered to such Buyer a letter from the Company's transfer
agent certifying the number of shares of Common Stock outstanding as of a date
within five days of the Closing Date.
(x) The
Company shall have caused Tiburon LLC to execute and deliver to the Buyer the
Put Option Agreement by and between the Buyers and Tiburon LLC in the form
attached hereto as Exhibit
K
(the
"Put
Option Agreement").
(xi) The
Company shall have caused Tiburon LLC to execute and deliver to the Collateral
Agent the Pledge Agreement by and between the Collateral Agent and Tiburon
LLC
in the form attached hereto as Exhibit
L
(the
"Tiburon
Pledge Agreement").
(xii) The
Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by the
SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of the
Closing Date, either (A) in writing by the SEC or the Principal Market or (B)
by
falling below the minimum listing maintenance requirements of the Principal
Market.
(xiii) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities.
(xiv) In
accordance with the terms of the Security Documents, the Company shall have
delivered to the Collateral Agent (i) certificates representing the
Subsidiaries' shares of capital stock, along with duly executed blank stock
powers and (ii) appropriate financing statements on Form UCC-1 to be duly filed
in such office or offices as may be necessary or, in the opinion of the
Collateral Agent, desirable to perfect the security interests purported to
be
created by each Security Document.
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31
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(xv) Within
one (1) Business Day prior to the Closing, the Company shall have delivered
or
caused to be delivered to each Buyer (A) certified copies of UCC search results,
listing all effective financing statements which name as debtor the Company
or
any of its Subsidiaries filed in the prior five years to perfect an interest
in
any assets thereof, together with copies of such financing statements, none
of
which, except as otherwise agreed in writing by the Buyers, shall cover any
of
the Collateral (as defined in the Security Documents) and the results of
searches for any tax lien and judgment lien filed against such Person or its
property, which results, except as otherwise agreed to in writing by the Buyers
shall not show any such Liens (as defined in the Security Documents); and (B)
a
perfection certificate, duly completed and executed by the Company and each
of
its Subsidiaries, in form and substance satisfactory to the Buyers.
(xvi) The
Company shall have delivered to such Buyer such other documents relating to
the
transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request.
8. TERMINATION.
In
the
event that the Closing shall not have occurred with respect to a Buyer on or
before five (5) Business Days from the date hereof due to the Company's or
such
Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above
(and the nonbreaching party's failure to waive such unsatisfied condition(s)),
the nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided,
however,
that if
this Agreement is terminated pursuant to this Section 8 due to the Company's
failure to satisfy the conditions set forth in Section 7 above, the Company
shall remain obligated to reimburse the non-breaching Buyers for the expenses
described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing
Law; Jurisdiction; Jury Trial.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
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, 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 brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
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32
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(b) Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
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;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if
the
signature were an original, not a facsimile signature.
(c) Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) Severability.
If any
provision of this Agreement is prohibited by law or otherwise determined to
be
invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Agreement so long as this Agreement
as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does
not
substantially impair the respective expectations or reciprocal obligations
of
the parties or the practical realization of the benefits that would otherwise
be
conferred upon the parties. The parties will endeavor in good faith negotiations
to replace the prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to that of the
prohibited, invalid or unenforceable provision(s).
(e) Entire
Agreement; Amendments.
This
Agreement and the other Transaction Documents supersede all other prior oral
or
written agreements between the Buyers, the Company, their affiliates and Persons
acting on their behalf with respect to the matters discussed herein, and this
Agreement, the other Transaction Documents and the instruments referenced herein
and therein contain the entire understanding of the parties with respect to
the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of
this Agreement may be amended other than by an instrument in writing signed
by
the Company and the holders of at least a majority of the aggregate number
of
Registrable Securities issued and issuable hereunder and under the Notes, and
any amendment to this Agreement made in conformity with the provisions of this
Section 9(e) shall be binding on all Buyers and holders of Securities, as
applicable. No provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought. No such
amendment shall be effective to the extent that it applies to less than all
of
the holders of the applicable Securities then outstanding. 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 also is offered to all of the parties to the Transaction
Documents, holders of Notes or holders of the Warrants, as the case may be.
The
Company has not, directly or indirectly, made any agreements with any Buyers
relating to the terms or conditions of the transactions contemplated by the
Transaction Documents except as set forth in the Transaction Documents. Without
limiting the foregoing, the Company confirms that, except as set forth in this
Agreement, no Buyer has made any commitment or promise or has any other
obligation to provide any financing to the Company or
otherwise.
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33
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(f) Notices.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with an overnight courier service,
in
each case properly addressed to the party to receive the same. The addresses
and
facsimile numbers for such communications shall be:
|
If
to the Company:
|
||
|
0000
Xxxxx Xxxx
|
||
|
Xxxxx
000
|
||
|
Xxxxxxxx,
Xxxxx 00000
|
||
|
Telephone:
|
000-000-0000
|
|
|
Facsimile:
|
000-000-0000
|
|
|
Attention:
|
Xxxxxxxx
Xxxxxxxx
|
|
|
With
a copy to:
|
||
|
Xxxxxx
and Xxxxx, LLP
|
||
|
000
Xxxx 00xx Xxxxxx, Xxxxx 0000
|
||
|
Xxx
Xxxx, XX 00000
|
||
|
Telephone:
|
000-000-0000
|
|
|
Facsimile:
|
212-918-8989
|
|
|
Attention:
|
Xxxxxx
X. Xxxxxx, Esq.
|
|
|
If
to the Transfer Agent:
|
||
|
Empire
Stock Transfer Inc.
|
||
|
0000
Xxxxx Xxxx Xxxxxxx, Xxxxx 000
|
||
|
Xxxxxxxxx,
Xxxxxx 00000
|
||
|
Telephone:
|
000-000-0000
|
|
|
Facsimile:
|
000-000-0000
|
|
|
Attention:
|
Xxxxxxx
Xxxxxx
|
|
If
to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
with copies to such Buyer's representatives as set forth on the Schedule of
Buyers,
with
a
copy (for informational purposes only) to:
|
Xxxxxxx
Xxxx & Xxxxx LLP
|
|
|
000
Xxxxx Xxxxxx
|
|
|
Xxx
Xxxx, Xxx Xxxx 00000
|
|
|
Telephone:
|
(000)
000-0000
|
|
Facsimile:
|
(000)
000-0000
|
|
Attention:
|
Xxxxxxx
X. Xxxxx, Esq.
|
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34
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or
to
such other address and/or facsimile number and/or to the attention of such
other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by an
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including any purchasers of the Notes
or the Warrants. The Company shall not assign this Agreement or any rights
or
obligations hereunder without the prior written consent of the holders of at
least a majority of the aggregate number of Registrable Securities issued and
issuable hereunder, including by way of a Fundamental Transaction (unless the
Company is in compliance with the applicable provisions governing Fundamental
Transactions set forth in the Notes and the Warrants). A Buyer may assign some
or all of its rights hereunder without the consent of the Company, in which
event such assignee shall be deemed to be a Buyer hereunder with respect to
such
assigned rights.
(h) No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
(i) Survival.
Unless
this Agreement is terminated under Section 8, the representations and warranties
of the Company and the Buyers contained in Sections 2 and 3, and the agreements
and covenants set forth in Sections 4, 5 and 9 shall survive the Closing. Each
Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.
(j) Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(k) Indemnification.
In
consideration of each Buyer's execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of
the
Company's other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each other holder
of
the Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons' agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees")
from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnified
Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to
(a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
or
any other certificate, instrument or document contemplated hereby or thereby
or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought
on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status
of
such Buyer or holder of the Securities as an investor in the Company pursuant
to
the transactions contemplated by the Transaction Documents. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities that is permissible under applicable
law.
Except as otherwise set forth herein, the mechanics and procedures with respect
to the rights and obligations under this Section 9(k) shall be the same as
those
set forth in Section 6 of the Registration Rights Agreement. This Section 9(k)
shall not apply to any Indemnified Liabilities to the extent that such
Indemnified Liabilities result from the willful misconduct or gross negligence
of any Buyer.
-
35
-
(l) No
Strict Construction.
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.
(m) Remedies.
Each
Buyer and each holder of the Securities shall have all rights and remedies
set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract
and
all of the rights which such holders have under any law. Any Person having
any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or all
of
its obligations under the Transaction Documents, any remedy at law may prove
to
be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek temporary and permanent injunctive relief in any
such
case without the necessity of proving actual damages and without posting a
bond
or other security.
(n) Rescission
and
Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever any Buyer 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 Buyer 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.
-
36
-
(o) Payment
Set Aside.
To the
extent that the Company makes a payment or payments to the Buyers hereunder
or
pursuant to any of the other Transaction Documents or the Buyers enforce or
exercise their rights hereunder or thereunder, and such payment or payments
or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under any
law
(including, without limitation, any bankruptcy law, foreign, 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.
(p) Independent
Nature of Buyers' Obligations and Rights.
The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under
any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall
be
deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
do not so constitute, a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group, and the Company will not assert any such claim
with respect to such obligations or the transactions contemplated by the
Transaction Documents and the Company acknowledges that, to the Company's
knowledge, the Buyers are not acting in concert or as a group with respect
to
such obligations or the transactions contemplated by the Transaction Documents.
The Company acknowledges and each Buyer confirms that it has independently
participated in the negotiation of the transaction contemplated hereby with
the
advice of its own counsel and advisors. Each Buyer shall be entitled to
independently protect and enforce its rights, including, without limitation,
the
rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Buyer to be joined as an additional
party in any proceeding for such purpose.
[Signature
Page Follows]
-
37
-
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
|
COMPANY:
|
|
|
By:
|
/s/ Xxxxxxxx Xxxxxxxx |
|
Name:
Xxxxxxxx Xxxxxxxx
|
|
|
Title:
President and Chief Executive Officer
|
|
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
|
BUYERS:
|
|
|
CASTLERIGG
MASTER INVESTMENTS LTD.
|
|
| By: | XXXXXXX ASSET MANAGEMENT CORP. |
|
By:
|
/s/ Xxxxx Xxxx |
|
Name:
Xxxxx Xxxx
|
|
|
Title:
Senior Managing Director
|
|
SCHEDULE
OF BUYERS
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
(7)
|
(8)
|
|
Buyer
|
Address
and
Facsimile
Number
|
Aggregate
Principal
Amount
of
Notes
|
Number of
Common
Shares
|
Number of
Series
A Warrant Shares
|
Number of
Series
B Warrant Shares
|
Purchase
Price
|
Legal Representative's
Address and Facsimile
Number
|
|
Castlerigg
Master Investments Ltd.
|
c/o
Sandell Asset Management
00
Xxxx 00xx Xx
00xx
Xxxxx
Xxx
Xxxx, XX 00000
Attention:
Cem Hacioglu/Xxxxxxx Xxxxxxx
Fax:
000-000-0000
Telephone:
000-000-0000
Residence:
British Virgin Islands
|
$10,500,000
|
5,594,033
|
13,985,083
|
4,661,694
|
$10,500,000
|
Xxxxxxx
Xxxx & Xxxxx LLP
000
Xxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxxx Xxxxx, Esq.
Facsimile:
(000) 000-0000
Telephone:
(000) 000-0000
|
EXHIBITS
|
Exhibit
A
|
Form
of Notes
|
|
Exhibit
B-1
|
Form
of Series A Warrants
|
|
Exhibit
B-2
|
Form
of Series B Warrants
|
|
Exhibit
C
|
Form
of Registration Rights Agreement
|
|
Exhibit
D
|
Form
of Pledge Agreement
|
|
Exhibit
E
|
Form
of Security Agreement
|
|
Exhibit
F
|
Form
of Guaranty
|
|
Exhibit
G
|
Form
of Irrevocable Transfer Agent Instructions
|
|
Exhibit
H
|
Form
of Opinion of Company's Counsel
|
|
Exhibit
I
|
Form
of Secretary's Certificate
|
|
Exhibit
J
|
Form
of Officer's Certificate
|
|
Exhibit
K
|
Form
of Put Option Agreement
|
|
Exhibit
L
|
Form
of Tiburon Pledge Agreement
|
SCHEDULES
|
Subsidiaries
|
|
|
Schedule
3(k)
|
SEC
Documents
|
|
Schedule
3(l)
|
Absence
of Certain Changes
|
|
Schedule
3(q)
|
Transactions
with Affiliates
|
|
Schedule
3(r)
|
Equity
Capitalization
|
|
Schedule
3(s)
|
Indebtedness
and Other Contracts
|
|
Schedule
3(t)
|
Absence
of Litigation
|
|
Schedule
3(x)
|
Intellectual
Property Rights
|
|
Schedule
3(z)
|
Subsidiary
Rights
|
|
Schedule
3(ee)
|
Ranking
of Notes
|
|
Use
of Proceeds
|
|
|
Schedule
4(i)
|
Disclosure
of Transactions and Other Material
Information
|
