SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
August 17, 2005, among Astralis Ltd., a Delaware corporation (the "Company"),
and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section
3.1(j).
"Affiliate" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person as such terms are used in and construed under
Rule 144 under the Securities Act. With respect to a Purchaser, any
investment fund or managed account that is managed on a discretionary
basis by the same investment manager as such Purchaser will be deemed to
be an Affiliate of such Purchaser.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"Closing Date" means with respect to Blue Cedar Limited, on or about
August 15, 1005; with respect to all other Purchasers, on or about
September 15, 2005 (the "Second Closing Date"), or such later date or
dates as Blue Cedar and the Company may agree.
"Closing Price" means on any particular date (a) the last reported
closing bid price per share of Common Stock on such date on the Trading
Market (as reported by Bloomberg L.P. at 4:15 PM (New York time), or (b)
if there is no such price on such date, then the closing bid price on the
Trading Market on the date nearest preceding such date (as reported by
Bloomberg L.P. at 4:15 PM (New York time) for the closing bid price for
regular session trading on such day), or (c) if the Common Stock is not
then listed or quoted on the Trading Market and if prices for the Common
Stock are then reported in the "pink sheets" published by the Pink Sheets,
LLC (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common Stock
so reported, or (d) if the shares of Common Stock are not then publicly
traded the fair market value of a share of Common Stock as determined by a
qualified independent appraiser selected in good faith by the Purchasers
of a majority in interest of the outstanding Purchasers.
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"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value
$0.0001 per share, and any other class of securities into which such
securities may hereafter have been reclassified or changed.
"Common Stock Equivalents" means any securities of the Company or
the Subsidiaries which would entitle the holder thereof to acquire at any
time Common Stock, including without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time
convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
"Company Counsel" means XxXxxxxx & English, LLP.
"Disclosure Schedules" means the Disclosure Schedules of the Company
delivered concurrently herewith.
"Effective Date" means the date that the initial Registration
Statement filed by the Company pursuant to the Registration Rights
Agreement is first declared effective by the Commission.
"Evaluation Date" shall have the meaning ascribed to such term in
Section 3.1(r).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exempt Issuance" means the issuance of (a) shares of Common Stock
or options to employees, officers, consultants or directors of the Company
pursuant to any stock or option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a
majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise of or
conversion of any Securities issued hereunder, convertible securities,
options or warrants issued and outstanding on the date of this Agreement,
provided that such securities have not been amended since the date of this
Agreement to increase the number of such securities or to decrease the
exercise or conversion price of any such securities, and (c) securities
issued pursuant to acquisitions or strategic transactions, provided any
such issuance in connection with a strategic transaction shall only be to
a Person which is, itself or through its subsidiaries, an operating
company in a business synergistic with the business of the Company and in
which the Company receives benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities.
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"GAAP" shall have the meaning ascribed to such term in Section
3.1(h).
"Intellectual Property Rights" shall have the meaning ascribed to
such term in Section 3.1(o).
"Legend Removal Date" shall have the meaning ascribed to such term
in Section 4.1(c).
"Liens" means a lien, charge, security interest, encumbrance, right
of first refusal, preemptive right or other restriction.
"Material Adverse Effect" shall have the meaning assigned to such
term in Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such term in
Section 3.1(m).
"Participation Maximum" shall have the meaning ascribed to such term
in Section 4.12.
"Per Share Purchase Price" equals $0.11, subject to adjustment for
reverse and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the date
and time of this Agreement.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"Pre-Notice" shall have the meaning ascribed to such term in Section
4.12.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened in
writing in a formal correspondence addressed to the Company and received
by the Company.
"Purchaser Party" shall have the meaning ascribed to such term in
Section 4.8.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, among the Company and the Purchasers, in
the form of Exhibit A attached hereto.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering
the resale by the Purchasers of the Shares and the Warrant Shares.
"Required Approvals" shall have the meaning ascribed to such term in
Section 3.1(e).
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"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h).
"Securities" means the Shares, the Warrants and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Common Stock issued or issuable to each
Purchaser pursuant to this Agreement.
"Short Sales" shall include all "short sales" as defined in Rule 200
of Regulation SHO under the Exchange Act.
"Stockholders Agreement" shall mean the Stockholders Agreement
between Blue Cedar Limited and the Company in the form of Exhibit D
hereto.
"Subscription Amount" means, as to each Purchaser, the aggregate
amount to be paid for Shares and Warrants purchased hereunder as specified
below such Purchaser's name on the signature page of this Agreement and
next to the heading "Subscription Amount", in United States Dollars and in
immediately available funds.
"Subsequent Financing" shall have the meaning ascribed to such term
in Section 4.12.
"Subsequent Financing Notice" shall have the meaning ascribed to
such term in Section 4.12.
"Subsidiary" means any subsidiary of the Company as set forth on
Schedule 3.1(a).
"Trading Day" means a day on which the Common Stock is traded on a
Trading Market.
"Trading Market" means the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question:
the Nasdaq SmallCap Market, the American Stock Exchange, the New York
Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.
"Transaction Documents" means this Agreement, the Warrants and the
Registration Rights Agreement and any other documents or agreements
executed by the Company or the Purchasers in connection with the
transactions contemplated hereunder.
"Warrants" means collectively the Long Term Common Stock purchase
warrants and the Short Term Common Stock purchase warrants, in the forms
of Exhibits C-1 and C-2, respectively, delivered to the Purchasers at the
Closing in accordance with Section 2.2(a) hereof, which Warrants, among
other things, shall be exercisable immediately and have a term of exercise
equal to five years and one year, respectively.
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"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and each Purchaser
agrees to purchase his or its proportionate amount of Securities set forth on
the signature page of this Agreement, in the aggregate, severally and not
jointly, up to $5,000,000 of Shares and Warrants. Each Purchaser shall deliver
to the Company via wire transfer or a certified check immediately available
funds equal to their Subscription Amount and the Company shall deliver to each
Purchaser their respective Shares and Warrants as determined pursuant to Section
2.2(a) and the other items set forth in Section 2.2 issuable at the Closing.
Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3, the
Closing shall occur at the offices of Company Counsel, or such other location as
the parties shall mutually agree.
2.2 Deliveries.(a) On the Closing Date, the Company shall deliver or cause
to be delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) the Stockholders Agreement duly executed by the Company
(as to Blue Cedar Limited, only);
(iii) a legal opinion of Company Counsel, in the form of
Exhibit B attached hereto;
(iv) a copy of the irrevocable instructions to the Company's
transfer agent instructing the transfer agent to deliver, on an
expedited basis, a certificate evidencing a number of Shares equal
to such Purchaser's Subscription Amount divided by the Per Share
Purchase Price, registered in the name of such Purchaser;
(v) a Long Term Warrant registered in the name of such
Purchaser to purchase up to a number of shares of Common Stock equal
to 100% of such Purchaser's Subscription Amount divided by the Per
Share Purchase Price, with an exercise price equal $0.165, subject
to adjustment therein;
(vi) a Short Term Warrant registered in the name of such
Purchaser to purchase up to a number of shares of Common Stock equal
to two-thirds of such Purchaser's Subscription Amount divided by the
Per Share Purchase Price, with an exercise price equal $0.165,
subject to adjustment therein; and (vii) the Registration Rights
Agreement duly executed by the Company.
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(b) On the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser's Subscription Amount by wire transfer to
the account as specified in writing by the Company;
(iii) the Registration Rights Agreement duly executed by such
Purchaser; and
(iv) as to Blue Cedar Limited only, the Stockholders
Agreement.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met or waived:
(i) the accuracy in all material respects when made and on the
Closing Date of the representations and warranties of the Purchasers
contained herein;
(ii) all obligations, covenants and agreements of the
Purchasers required to be performed at or prior to the Closing Date
shall have been performed; and
(iii) the delivery by the Purchasers of the items set forth in
Section 2.2(b) of this Agreement.
(b) The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions being
met or waived:
(i) the accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained
herein;
(ii) all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date shall have
been performed;
(iii) the delivery by the Company of the items set forth in
Section 2.2(a) of this Agreement;
(iv) the delivery by the Company of a certificate executed by
the Company's Chief Executive Officer and Chief Financial Officer
certifying that the consummation of the transactions contemplated by
this Agreement (including the assumption that both the Short Term
Warrants and the Long Term Warrants have been exercised in whole) do
not and will not cause the triggering of any right by any employee,
officer or director of the Company to terminate their respective
employment agreements (whether written or oral) or to receive any
payment or other compensation whatsoever in connection therewith;
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(v) there shall have been no Material Adverse Effect with
respect to the Company since the date hereof; and
(vi) From the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission (except
for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing),
and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets shall not have
been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service,
or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities
nor shall there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of
each Purchaser, makes it impracticable or inadvisable to purchase
the Shares at the Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser:
(a) Subsidiaries. All of the direct and indirect subsidiaries of the
Company are set forth on Schedule 3.1(a). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are
fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities. If the Company has no subsidiaries,
then references in the Transaction Documents to the Subsidiaries will be
disregarded.
(b) Organization and Qualification. The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization (as applicable), with the requisite
corporate power and authority to own and use its properties and assets and
to carry on its business as currently conducted. Neither the Company nor
any Subsidiary is in violation or default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing
as a foreign corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
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qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, could not have or reasonably be
expected to result in (i) a material adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material
adverse effect on the results of operations, assets, business, prospects
or financial condition of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company's ability to
perform in any material respect on a timely basis its obligations under
any Transaction Document (any of (i), (ii) or (iii), a "Material Adverse
Effect") and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail
such power and authority or qualification.
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations thereunder, except that the Company
does not have sufficient authorized Common Stock to honor exercises of the
Long Term Warrants, and will not be able to honor exercises of the Long
Term Warrants until and unless the Company files an amendment to its
Certificate of Incorporation increasing its authorized Common Stock to at
least 200,000,000 shares. Such amendment requires the approval of a
majority of the Company's outstanding Common Stock ("Shareholder
Approval"). The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary corporate
action on the part of the Company and no further action is required by the
Company in connection therewith other than in connection with the Required
Approvals. Each Transaction Document has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms
except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the
Securities and the consummation by the Company of the other transactions
contemplated thereby do not and will not (i) conflict with or violate any
provision of the Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents
(subject to Shareholder Approval in the case of the Long Term Warrants),
or (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, result in
the creation of any Lien upon any of the properties or assets of the
Company or any Subsidiary, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of
time or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including
federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as could not
have or reasonably be expected to result in a Material Adverse Effect.
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(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to,
or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) filings required pursuant to Section
4.4 of this Agreement, (ii) the filing with the Commission of the
Registration Statement, (iii) application(s) to each applicable Trading
Market for the listing of the Shares and Warrant Shares for trading
thereon in the time and manner required thereby, (iv) the filing of Form D
with the Commission and such filings as are required to be made under
applicable state securities laws, and (v) the Shareholder Approval
(collectively, the "Required Approvals").
(f) Issuance of the Securities. The Securities are duly authorized
and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other
than restrictions on transfer provided for in the Transaction Documents.
The Warrant Shares, when issued in accordance with the terms of the
Transaction Documents, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company. Subject
to Shareholder Approval, the Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement and the Warrants.
(g) Capitalization. The capitalization of the Company is as set
forth on Schedule 3.1(g). The Company has not issued any capital stock
since its most recently filed periodic report under the Exchange Act,
other than pursuant to the exercise of employee stock options under the
Company's stock option plans, the issuance of shares of Common Stock to
employees pursuant to the Company's employee stock purchase plan and
pursuant to the conversion or exercise of outstanding Common Stock
Equivalents. No Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as a result
of the purchase and sale of the Securities, except as set forth on
Schedule 3.1(g) there are no outstanding options, warrants, script rights
to subscribe to, calls or commitments of any character whatsoever relating
to, or securities, rights or obligations convertible into or exchangeable
for, or giving any Person any right to subscribe for or acquire, any
shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound
to issue additional shares of Common Stock or Common Stock Equivalents.
The issuance and sale of the Securities will not obligate the Company to
issue shares of Common Stock or other securities to any Person (other than
the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price
under such securities. All of the outstanding shares of capital stock of
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the Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and none
of such outstanding shares was issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities. No
further approval or authorization of any stockholder, the Board of
Directors of the Company or others is required for the issuance and sale
of the Securities. Except as set forth on Schedule 3.1(g), there are no
stockholders agreements, voting agreements or other similar agreements
with respect to the Company's capital stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the
Company's stockholders.
(h) SEC Reports; Financial Statements. Except as set forth on
Schedule 3.1(h), the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section 13(a)
or 15(d) thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law to file such material)
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein
as the "SEC Reports") on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when
filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified
in such financial statements or the notes thereto and except that
unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position
of the Company and its consolidated subsidiaries as of and for the dates
thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, year-end
audit adjustments.
(i) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in
a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected in the
Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock and (v) the Company has not issued
any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans. The Company does not have
pending before the Commission any request for confidential treatment of
information.
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(j) Litigation. Except as described in the SEC Reports, there is no
action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county,
local or foreign) (collectively, an "Action") which (i) adversely affects
or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action
involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not
been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or
any current or former director or officer of the Company. The Commission
has not issued any stop order or other order suspending the effectiveness
of any registration statement filed by the Company or any Subsidiary under
the Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees
of the Company which could reasonably be expected to result in a Material
Adverse Effect.
(l) Compliance. Except as set forth on Schedule 3.1(l), neither the
Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse
of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument
to which it is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or
(iii) is or has been in violation of any statute, rule or regulation of
any governmental authority, including without limitation all foreign,
federal, state and local laws applicable to its business except in each
case of (i), (ii) and (iii) as could not have a Material Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not have or
reasonably be expected to result in a Material Adverse Effect ("Material
Permits"), and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any
Material Permit.
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(n) Title to Assets. The Company and the Subsidiaries do not own any
real property. The Company owns good and marketable title in all personal
property owned by them that is material to the business of the Company and
the Subsidiaries, in each case free and clear of all Liens, except for
Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent
nor subject to penalties. Except as set forth on Schedule 3.1(n), any real
property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable
leases of which the Company and the Subsidiaries are in compliance.
(o) Patents and Trademarks. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses
and other similar rights necessary or material for use in connection with
their respective businesses as described in the SEC Reports and which the
failure to so have could have a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any Subsidiary
has received a written notice that the Intellectual Property Rights used
by the Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by
another Person of any of the Intellectual Property Rights of others.
(p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged, including, but not
limited to, directors and officers insurance coverage at least equal to
the aggregate Subscription Amount. To the best of Company's knowledge,
such insurance contracts and policies are accurate and complete. Neither
the Company nor any Subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as set forth
in the SEC Reports or as set forth on Schedule 3.1(q), none of the
officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or,
to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an
officer, director, trustee or partner, in each case in excess of $60,000
other than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
12
(r) Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company is in
material compliance with all provisions of the Xxxxxxxx-Xxxxx Act of 2002
which are applicable to it as of the Closing Date. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed
such disclosure controls and procedures to ensure that material
information relating to the Company, including its Subsidiaries, is made
known to the certifying officers by others within those entities,
particularly during the period in which the Company's most recently filed
periodic report under the Exchange Act, as the case may be, is being
prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures as of the date
prior to the filing date of the most recently filed periodic report under
the Exchange Act (such date, the "Evaluation Date"). The Company presented
in its most recently filed periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company's internal controls (as such term is defined in
Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company's
knowledge, in other factors that could significantly affect the Company's
internal controls.
(s) Certain Fees. Except as set forth in Schedule 3.1(s), no
brokerage or finder's fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. Except as set forth in
Schedule 3.1(s), the Purchasers shall have no obligation with respect to
any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement.
(t) Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchasers as contemplated hereby. The
issuance and sale of the Securities hereunder does not contravene the
rules and regulations of the Trading Market.
(u) Investment Company. The Company is not, and is not an Affiliate
of, and immediately after receipt of payment for the Securities, will not
be or be an Affiliate of, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended. The Company shall conduct
its business in a manner so that it will not become subject to the
Investment Company Act.
13
(v) Registration Rights. Other than as set forth on Schedule 3.1(v)
and each of the Purchasers, no Person has any right to cause the Company
to effect the registration under the Securities Act of any securities of
the Company.
(w) Listing and Maintenance Requirements. The Company's Common Stock
is registered pursuant to Section 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
that the Commission is contemplating terminating such registration. The
Company has not, in the 12 months preceding the date hereof, received
notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with
the listing or maintenance requirements of such Trading Market. The
Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
(x) Application of Takeover Protections. The Company and its Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company's Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company's issuance of the Securities and the
Purchasers' ownership of the Securities.
(y) Disclosure. The Company confirms that, neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information that constitutes or might
constitute material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing representations
and covenants in effecting transactions in securities of the Company. All
disclosure provided to the Purchasers regarding the Company, its business
and the transactions contemplated hereby, including the Disclosure
Schedules to this Agreement, furnished by or on behalf of the Company with
respect to the representations and warranties made herein are true and
correct with respect to such representations and warranties and do not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The
Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2
hereof.
(z) No Integrated Offering. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances
that would cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act or any
applicable shareholder approval provisions, including, without limitation,
under the rules and regulations of any Trading Market on which any of the
securities of the Company are listed or designated.
14
(aa) Solvency. Based on the financial condition of the Company as of
the Closing Date after giving effect to the receipt by the Company of the
proceeds from the sale of the Securities hereunder, (i) the Company's fair
saleable value of its assets exceeds the amount that will be required to
be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature; (ii)
the Company's assets are reasonably expected to be sufficient for it to
carry on its business for the current fiscal year as now conducted and as
proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the
Company, and projected capital requirements and capital availability
thereof; and (iii) the current cash flow of the Company, together with the
proceeds the Company would receive, were it to liquidate all of its assets
on the date hereof, after taking into account all anticipated uses of the
cash, would be sufficient to pay all amounts on or in respect of its debt
outstanding on the date hereof when such amounts are required to be paid.
The Company does not intend to incur debts beyond its ability to pay such
debts as they mature (taking into account the timing and amounts of cash
to be payable on or in respect of its debt). The Company has no knowledge
of any facts or circumstances which lead it to believe that it will file
for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date. The SEC
Reports set forth as of the dates thereof all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this
Agreement, "Indebtedness" shall mean (a) any liabilities for borrowed
money or amounts owed in excess of $50,000 (other than trade accounts
payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of Indebtedness
of others, whether or not the same are or should be reflected in the
Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value
of any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.
(bb) INTENTIONALLY OMITTED.
(cc) Tax Status. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect, the Company and each Subsidiary has filed all necessary
federal, state and foreign income and franchise tax returns and has paid
or accrued all taxes shown as due thereon, and the Company has no
knowledge of a tax deficiency which has been asserted or threatened
against the Company or any Subsidiary.
(dd) No General Solicitation. Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the Securities
by any form of general solicitation or general advertising. The Company
has offered the Securities for sale only to the Purchasers and certain
other "accredited investors" within the meaning of Rule 501 under the
Securities Act.
15
(ee) Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of
the Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed
to disclose fully any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) which is in
violation of law, or (iv) violated in any material respect any provision
of the Foreign Corrupt Practices Act of 1977, as amended.
(ff) Accountants. The Company's accountants are set forth on
Schedule 3.1(ff) of the Disclosure Schedule. To the Company's knowledge,
such accountants, who the Company expects will express their opinion with
respect to the financial statements to be included in the Company's Annual
Report on Form 10-KSB for the year ending December 31, 2005, are a
registered public accounting firm as required by the Securities Act.
(gg) Acknowledgment Regarding Purchasers' Purchase of Securities.
The Company acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm's length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby. The
Company further acknowledges that no Purchaser is acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement and the transactions contemplated hereby and any
advice given by any Purchaser or any of their respective representatives
or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Purchasers' purchase of
the Securities. The Company further represents to each Purchaser that the
Company's decision to enter into this Agreement has been based solely on
the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
(hh) Acknowledgement Regarding Purchasers' Trading Activity.
Anything in this Agreement or elsewhere herein to the contrary
notwithstanding (except for Section 4.15 hereof), it is understood and
agreed by the Company (i) that none of the Purchasers have been asked to
agree, nor has any Purchaser 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) that past or future open market or other
transactions by any Purchaser, including Short Sales, and specifically
including, without limitation, Short Sales or "derivative" transactions,
before or after the closing of this or future private placement
transactions, may negatively impact the market price of the Company's
publicly-traded securities; (iii) that any Purchaser, and counter parties
in "derivative" transactions to which any such Purchaser is a party,
directly or indirectly, presently may have a "short" position in the
Common Stock, and (iv) that each Purchaser 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
16
that (a) one or more Purchasers may engage in hedging activities at
various times during the period that the Securities are outstanding,
including, without limitation, during the periods that the value of the
Warrant Shares deliverable with respect to Securities are being determined
and (b) such hedging activities (if any) could reduce the value of the
existing stockholders' equity interests in the Company at and after the
time that the hedging activities are being conducted. The Company
acknowledges that such aforementioned hedging activities do not constitute
a breach of any of the Transaction Documents.
(ii) 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 (other than for the placement agent's placement 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.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by such
Purchaser of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate or similar action on the part
of such Purchaser. Each Transaction Document to which it is a party has
been duly executed by such Purchaser, and when delivered by such Purchaser
in accordance with the terms hereof, will constitute the valid and legally
binding obligation of such Purchaser, enforceable against it in accordance
with its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(b) Own Account. Such Purchaser understands that the Securities are
"restricted securities" and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the Securities
as principal for its own account and not with a view to or for
distributing or reselling such Securities or any part thereof in violation
of the Securities Act or any applicable state securities law, has no
present intention of distributing any of such Securities in violation of
the Securities Act or any applicable state securities law and has no
arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not
17
limiting such Purchaser's right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal
and state securities laws) in violation of the Securities Act or any
applicable state securities law. Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. Such
Purchaser does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on
which it exercises any Warrants, it will be either: (i) an "accredited
investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8)
under the Securities Act or (ii) a "qualified institutional buyer" as
defined in Rule 144A(a) under the Securities Act. Such Purchaser is not
required to be registered as a broker-dealer under Section 15 of the
Exchange Act.
(d) Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.
(e) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
(f) Access to Information. Such Purchaser has received copies of and
has reviewed and understands all SEC Reports (including the information
set forth in sections contained in such SEC Reports entitled "RISK
FACTORS"). Such Purchaser has had access during the course of this
transaction, and prior to sale, to all information necessary to enable
Purchaser and his or its purchaser representative (as defined in Rule
501(h) under the Securities Act), if any, to evaluate the merits and risks
of the investment in the Securities, and Purchaser and his or its
purchaser representative have had the opportunity to ask questions of and
receive answers from the officers and directors of the Company, or any
person or persons acting on its behalf, concerning the terms and
conditions of the offering and to obtain any additional information, to
the extent that the Company possesses such information or could acquire it
without unreasonable effort or expense, necessary to verify information
contained in the SEC Reports, the Transaction Documents and this Agreement
or to which Purchaser has had access; and all questions raised by
Purchaser or his or its purchaser representative, if any, have been
answered to the full satisfaction of Purchaser.
(g) Risks Relating to the Company's Business. Such Purchaser is
aware of and understands the risks involved in the Company's business and
affairs, including, in particular, risks common to development stage
biotechnology companies (as discussed in the sections contained in the SEC
18
Reports entitled "RISK FACTORS"). Such Purchaser has sufficient knowledge
and experience in financial and business matters and the biotechnology
industry so as to be capable of evaluating the merits and risks of
investing in the Securities. Such Purchaser has acquired sufficient
information about the Company's business to reach an informed and
knowledgeable decision to invest in the Securities under this Agreement.
(h) Short Sales and Confidentiality. Other than the transaction
contemplated hereunder, such Purchaser has not directly or indirectly, nor
has any Person acting on behalf of or pursuant to any understanding with
such Purchaser, executed any disposition, including Short Sales (but not
including the location and/or reservation of borrowable shares of Common
Stock), in the securities of the Company during the period commencing from
the time that such Purchaser first received a term sheet from the Company
or any other Person setting forth the material terms of the transactions
contemplated hereunder until the date hereof ("Discussion Time").
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers
manage separate portions of such Purchaser's assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser's assets, the
representation set forth above shall only apply with respect to the
portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.
Other than to other Persons party to this Agreement and to their
respective counsel, such Purchaser has maintained the confidentiality of
all disclosures made to it in connection with this transaction (including
the existence and terms of this transaction).
The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions. (a) The Securities may only be disposed of in
compliance with state and federal securities laws. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or Rule 144, to the Company or to an affiliate of a Purchaser or
in connection with a pledge as contemplated in Section 4.1(b), the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the Securities
Act. As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the
rights of a Purchaser under this Agreement and the Registration Rights
Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of a legend on any of the Securities in the
following form:
19
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the
Securities to a financial institution that is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and who agrees to be bound
by the provisions of this Agreement and the Registration Rights Agreement
and, if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured parties.
Such a pledge or transfer would not be subject to approval of the Company
and no legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice
shall be required of such pledge. At Purchaser's expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are subject to
registration pursuant to the Registration Rights Agreement, the
preparation and filing of any required prospectus supplement under Rule
424(b)(3) under the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders
thereunder.
(c) Certificates evidencing the Shares and Warrant Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)), (i)
while a registration statement (including the Registration Statement)
covering the resale of such security is effective under the Securities
Act, or (ii) following any sale of such Shares or Warrant Shares pursuant
to Rule 144, or (iii) if such Shares or Warrant Shares are eligible for
sale under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission).
The Company shall cause its counsel to issue a legal opinion to the
Company's transfer agent promptly after the Effective Date if required by
the Company's transfer agent to effect the removal of the legend
hereunder. If all or any portion of a Warrant is exercised at a time when
there is an effective registration statement to cover the resale of the
Warrant Shares, such Warrant Shares shall be issued free of all legends.
The Company agrees that following the Effective Date or at such time as
such legend is no longer required under this Section 4.1(c), it will, no
later than three Trading Days following the delivery by a Purchaser to the
Company or the Company's transfer agent of a certificate representing
20
Shares or Warrant Shares, as the case may be, issued with a restrictive
legend (such third Trading Day, the "Legend Removal Date"), deliver or
cause to be delivered to such Purchaser a certificate representing such
shares that is free from all restrictive and other legends. The Company
may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer
set forth in this Section. Certificates for Securities subject to legend
removal hereunder shall be transmitted by the transfer agent of the
Company to the Purchasers by crediting the account of the Purchaser's
prime broker with the Depository Trust Company System.
(d) In addition to such Purchaser's other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated damages
and not as a penalty, for each $1,000 of Shares or Warrant Shares (based
on the Closing Price of the Common Stock on the date such Securities are
submitted to the Company's transfer agent accompanied by all requisite
documentation) delivered for removal of the restrictive legend and subject
to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day
thirty (30) Trading Days after such damages have begun to accrue) for each
Trading Day after the tenth Trading Day after the Legend Removal Date
until such certificate is delivered without a legend. Nothing herein shall
limit such Purchaser's right to pursue actual damages for the Company's
failure to deliver certificates representing any Securities as required by
the Transaction Documents, and such Purchaser shall have the right to
pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief.
(e) Each Purchaser, severally and not jointly with the other
Purchasers, agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1 is
predicated upon the Company's reliance on the agreement of each Purchaser
that such Purchaser will only sell Securities in compliance with either
the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption therefrom and
all state securities laws. In that regard, each Purchaser, severally and
not jointly with the other Purchasers, agrees that they (i) will only sell
Securities pursuant to a registration statement provided by the Company
pursuant to Section 3(f) of the Registration Rights Agreement; (ii) will
deliver a prospectus provided by the Company in accordance with Section
3(g) of the Registration Rights Agreement to each person who purchases
Securities from them pursuant to the Registration Statement; (iii) will
cease the use of such prospectus and the sale of any Securities thereunder
if and when notified by the Company that such prospectus may not be used
in accordance with Section 3(d) of the Registration Rights Agreement; and
(iv) will sell securities only pursuant to the applicable state securities
laws.
(f) Until the one month anniversary of the Effective Date, the
Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of
the Purchasers holding a majority in interest of the Shares.
21
4.2 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.
4.3 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
4.4 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern time on the Trading Day following the date hereof, issue a Current
Report on Form 8-K, reasonably acceptable to each Purchaser disclosing the
material terms of the transactions contemplated hereby, and shall attach the
Transaction Documents thereto. The Company and each Purchaser shall consult with
each other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or
without the prior consent of each Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under subclause
(i) or (ii).
4.5 Shareholder Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholder rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
22
4.6 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company. The Shareholder Agreement between the Company and Blue Cedar
Limited shall be deemed such a written agreement as to Blue Cedar.
4.7 Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade payables incurred by the Company
prior to the date hereof in the ordinary course of the Company's business and
prior practices), to redeem any Common Stock or Common Stock Equivalents or to
settle any outstanding litigation.
4.8 Indemnification of Purchasers. Subject to the provisions of this
Section 4.8, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, partners, employees and agents (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser's representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).
If any action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. Any Purchaser Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Purchaser Party except to the extent that (i)
the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Purchaser
Party. The Company will not be liable to any Purchaser Party under this
Agreement (i) for any settlement by a Purchaser Party effected without the
Company's prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party's breach of any of
the representations, warranties, covenants or agreements made by the Purchasers
in this Agreement or in the other Transaction Documents.
23
4.9 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants, subject,
in the case of the Long Term Warrants, to the receipt of Shareholder Approval.
4.10 Listing of Common Stock. The Company hereby agrees to use best
efforts to maintain the listing of the Common Stock on a Trading Market, and as
soon as reasonably practicable following the Closing (but not later than the
earlier of the Effective Date and the first anniversary of the Closing Date).
The Company further agrees, if the Company applies to have the Common Stock
traded on any other Trading Market, it will include in such application all of
the Shares and Warrant Shares, and will take such other action as is necessary
to cause all of the Shares and Warrant Shares to be listed on such other Trading
Market as promptly as possible. The Company will take all action reasonably
necessary to continue the listing and trading of its Common Stock on a Trading
Market and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Trading Market.
4.11 Equal Treatment of Purchasers. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.
4.12 Short Sales and Confidentiality. Each Purchaser severally and not
jointly with the other Purchasers covenants that neither it nor any affiliates
or agents acting on its behalf or pursuant to any understanding with it will
execute any Short Sales during the period after the Discussion Time and ending
at the time that the transactions contemplated by this Agreement are first
publicly announced as described in Section 4.4. Each Purchaser, severally and
not jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in Section 4.4, such Purchaser will maintain, the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction). Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser, that the Commission currently takes the position that coverage of
short sales of shares of the Common Stock "against the box" prior to the
Effective Date of the Registration Statement with the Securities is a violation
of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under
Section A, of the Manual of Publicly Available Telephone Interpretations, dated
July 1997, compiled by the Office of Chief Counsel, Division of Corporation
Finance. Notwithstanding the foregoing, no Purchaser makes any representation,
warranty or covenant hereby that it will not engage in Short Sales in the
securities of the Company after the time that the transactions contemplated by
this Agreement are first publicly announced as described in Section 4.4.
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser's assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser's assets, the covenant set forth above
shall only apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to purchase the Securities covered by
this Agreement.
24
4.13 Delivery of Securities After Closing. The Company shall deliver, or
cause to be delivered, the respective Securities purchased by each Purchaser to
such Purchaser within 3 Trading Days of the Closing Date.
4.14 Most Favored Nation. If, during the period ending 180 days after the
Second Closing Date, the Company initiates a Subsequent Financing, each
Purchaser shall have the right to exchange their respective Securities purchased
hereunder for an equal Subscription Amount of the securities sold in such
Subsequent Financing, under the same terms and conditions as are received by the
other investors in such Subsequent Financing.
4.15 Shareholder Approval. The Company shall hold a special meeting of
shareholders (which may also be at the annual meeting of shareholders) at the
earliest practical date, but in no event later than 60 days from the First
Closing date, for the purpose of obtaining Shareholder Approval, with the
recommendation of the Company's Board of Directors that such proposal be
approved, and the Company shall solicit proxies from its shareholders in
connection therewith in the same manner as all other management proposals in
such proxy statement and all management-appointed proxyholders shall vote their
proxies in favor of such proposal. If the Company does not obtain Shareholder
Approval at the first meeting, the Company shall call a meeting every four
months thereafter to seek Shareholder Approval until the earlier of the date
Shareholder Approval is obtained or the Long Term Warrants are no longer
outstanding. The Company shall set the record date for such meeting immediately
after the earlier of the second Closing Date or September 30, 2005, and shall
not issue any voting securities between the date hereof and such record date
except pursuant to the Transaction Documents.
ARTICLE V.
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers, by written notice
to the other parties, if the Closing has not been consummated on or before
October 31, 2005; provided, however, that no such termination will affect the
right of any party to xxx for any breach by the other party (or parties).
5.2 Fees and Expenses. The Company shall deliver, prior to the Closing, a
completed and executed copy of the Closing Statement, attached hereto as Annex
A. Except as expressly set forth in the Transaction Documents to the contrary,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. Notwithstanding the forgoing, the Company shall pay the
attorneys fees hereunder incurred by Lipworth Capital Limited, the placement
agent in connection with the transactions contemplated by this Agreement, in the
amount of $10,000.00. The Company shall pay all transfer agent fees, stamp taxes
and other taxes and duties levied in connection with the delivery of any
Securities.
25
5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the 2nd Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
5.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.6 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser properly assigns or transfers any Securities in accordance with the
terms of this Agreement, provided such transferee agrees in writing to be bound,
with respect to the transferred Securities, by the provisions hereof that apply
to the "Purchasers".
5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8.
26
5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New Jersey, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the federal courts sitting in the District of
New Jersey or the Superior Court of Essex County. Each party hereby irrevocably
submits to the exclusive jurisdiction of the federal courts sitting in the
District of New Jersey or the Superior Court of Essex County for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery of the Shares and Warrant Shares.
5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
27
5.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.17 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. The Company has
elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested
to do so by the Purchasers.
28
5.18 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
5.19 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
(Signature Pages Follow)
29
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
ASTRALIS LTD. Address for Notice:
By: -----------------------------------------------
Name:
Title:
With a copy to (which shall not constitute notice):
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
30
[PURCHASER SIGNATURE PAGES TO ASTR SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Purchaser:
--------------------------------------------------------
Signature of Authorized Signatory of Purchaser:
--------------------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Purchaser:
-----------------------------------------------
Telephone:
Fax:
Address for Notice of Purchaser:
Address for Delivery of Securities for Purchaser (if not same as above):
Subscription Amount:
Shares:
Long Term Warrant Shares:
Short Term Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
31
Annex A
CLOSING STATEMENT
Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $5,000,000 of Common Stock and
Warrants from Astralis Ltd. (the "Company"). All funds will be wired into the
account maintained by the Company. All funds will be disbursed in accordance
with this Closing Statement.
Disbursement Date: August ___, 2005
--------------------------------------------------------------------------------
I. PURCHASE PRICE
Gross Proceeds to be Received in Trust $
II. DISBURSEMENTS
$
$
$
$
$
Total Amount Disbursed: $
WIRE INSTRUCTIONS:
To:
-------------------------------------
To:
-------------------------------------
32
