EXHIBIT 99.2
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SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
May 17, 2007, among Vasogen Inc., a corporation incorporated under the Canada
Business Corporations Act (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 an effective registration statement under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), the Company desires
to issue and sell to each Purchaser, and each Purchaser, severally and not
jointly, desires to purchase from the Company, 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:
"2005 WARRANTS" means the warrants issued by the Company (i) on
October 7, 2005 and (ii) later upon acceleration of principal
repayments all in connection with the senior convertible notes issued
by Vasogen Ireland Limited, a Subsidiary of the Company (the "NOTES").
"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.
"BUSINESS DAY" means any day except Saturday, Sunday, any day
which shall be a federal legal holiday in the United States or Canada
or any day on which banking institutions in the Province of Ontario and
the State of New York are authorized or required by law or other
governmental action to close.
"CLOSING" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"CLOSING DATE" means the Trading Day when all of the
Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) the
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Purchasers' obligations to pay the Subscription Amount and (ii) the
Company's obligations to deliver the Securities have been satisfied or
waived.
"CLOSING PRICE" means $3.25375.
"COMMISSION" means the United States Securities and Exchange
Commission.
"COMMON SHARES" means the common shares of the Company, and any
other class of securities into which such securities may hereafter be
reclassified or changed into.
"COMMON SHARE EQUIVALENTS" means any securities of the Company
or the Subsidiaries which would entitle the holder thereof to acquire
at any time Common Shares, including, without limitation, any debt,
preferred shares, rights, options, warrants or other instrument that is
at any time convertible into or exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Shares.
"DISCLOSURE SCHEDULES" means the Disclosure Schedules of the
Company delivered concurrently herewith.
"DISCUSSION TIME" shall have the meaning ascribed to such term
in Section 3.2(e).
"DWAC" shall have the meaning ascribed to such term in Section
2.2(a)(iii).
"EXCHANGE ACT" means the United States Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated
thereunder.
"EXEMPT ISSUANCE" means the issuance of (a) Common Shares,
restricted share units or options to employees, officers or directors
of the Company or consultants or service providers pursuant to any
stock or option plan duly adopted by the Board of Directors of the
Company and (b) securities upon the exercise or exchange of or
conversion of any Securities issued hereunder and/or other securities
exercisable or exchangeable for or convertible into Common Shares
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,
exchange or conversion price of any such securities.
"FWS" means Xxxxxxx Xxxxxxxxx & Xxxxx LLP, with offices located
at 000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h).
"INDEBTEDNESS" shall have the meaning ascribed to such term in
Section 3.1(x).
"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed
to such term in Section 3.1(o).
"LIEN" means a lien, charge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction.
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"MARKET PRICE" means $3.16.
"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).
"NASDAQ" means whichever of the Nasdaq Capital Market or the
Nasdaq Global Market on which the Common Shares are traded.
"PERSON" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the final prospectus filed for the
Registration Statement.
"PROSPECTUS SUPPLEMENT" means the supplement to the Prospectus
complying with General Instruction II.L of Form F-10 of the Securities
Act that is filed with the Commission and delivered by the Company to
each Purchaser at or prior to the Closing.
"PURCHASER PARTY" shall have the meaning ascribed to such term
in Section 4.8.
"REGISTRATION STATEMENT" means the effective registration
statement with Commission File No. 333 -130578 which registers the sale
of the Shares, the Warrants and the Warrant Shares by the Purchasers.
"REQUIRED APPROVALS" shall have the meaning ascribed to such
term in Section 3.1(e).
"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 United States Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
"SHARE SUBSCRIPTION AMOUNT" means, as to each Purchaser, the
portion of such Purchaser's Subscription Amount attributable solely to
the Shares (and excluding the Warrants) being purchased by such
Purchaser. On a per Share basis, the portion of such Purchaser's
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Subscription Amount attributable solely to the Shares is the Market
Price and the portion attributable solely to the Warrants is $0.09375.
"SHARES" means the Common Shares 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 (but shall not be
deemed to include the location and/or reservation of borrowable Common
Shares).
"SUBSCRIPTION AMOUNT" means, as to each Purchaser, the
aggregate amount to be paid hereunder based on the number of Units
purchased multiplied by the Closing Price, 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.
"SUBSIDIARY" means any subsidiary of the Company as set forth
on SCHEDULE 3.1(A).
"TRADING DAY" means a day on which the Common Shares are traded
on a Trading Market both in the United States and Canada.
"TRADING MARKET" means the following markets or exchanges on
which the Common Shares are listed or quoted for trading on the date in
question: the Nasdaq Capital Market, the Nasdaq Global Market or the
Toronto Stock Exchange.
"TRANSACTION DOCUMENTS" means this Agreement, the Warrants and
any other documents or agreements executed in connection with the
transactions contemplated hereunder.
"UNITS" means the units of Shares and Warrants to be purchased
and sold pursuant to this Agreement, each unit consisting of (i) one
Share and (ii) 0.75 of a Warrant.
"WARRANTS" means the common share purchase warrants in the form
of EXHIBIT A, delivered to the Purchasers at the Closing in accordance
with Section 2.2(a) hereof, which Warrants shall be exercisable
immediately and have a term of exercise equal to five (5) years.
"WARRANT SHARES" means the Common Shares 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, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell,
and each Purchaser agrees to purchase in the aggregate, severally and not
jointly, up to U.S.$25,000,000 of Units. Each Purchaser shall deliver to the
Company via wire transfer immediately available funds equal to its Subscription
Amount and the Company shall deliver to each Purchaser its respective Shares
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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 FWS, or such other location as the parties shall mutually agree.
2.2 DELIVERIES.
(a) On or prior to 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) legal opinions of the Company's United States
and Canadian counsels in substance satisfactory to FWS, acting
reasonably;
(iii) a copy of the irrevocable instructions to the
Company's transfer agent instructing the transfer agent to
deliver via the Depository Trust Company Deposit Withdrawal
Agent Commission System ("DWAC") Shares equal to such
Purchaser's Share Subscription Amount divided by the Market
Price, registered in accordance with the direction of such
Purchaser;
(iv) a Warrant registered in the name of such
Purchaser to purchase up to a number of Common Shares equal to
75% of the number of Common Shares contained in the Units
purchased by such Purchaser with an exercise price equal to the
Market Price, subject to adjustment therein (such Warrant
certificate may be delivered within three (3) Trading Days of
the Closing Date); and
(v) the Prospectus and the Prospectus Supplement
(which may be delivered in accordance with Rule 172 under the
Securities Act).
(b) On or prior to 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;
and
(ii) such Purchaser's Subscription Amount by wire
transfer to the account as specified in writing by the Company.
2.3 CLOSING CONDITIONS.
(a) The obligations of the Company hereunder in connection
with the Closing are subject to the following conditions being met:
(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
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(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:
(i) the accuracy in all material respects on the
Closing Date of the representations and warranties of the
Company contained herein;
(ii) all obligations, covenants and agreements of
the Company required to be performed at or prior to the Closing
Date shall have been performed;
(iii) the delivery by the Company of the items set
forth in Section 2.2(a) of this Agreement;
(iv) there shall have been no Material Adverse
Effect with respect to the Company since the date hereof; and
(v) from the date hereof to the Closing Date,
trading in the Common Shares shall not have been suspended by
the Commission or the Company's principal Trading Market
(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
L.P. 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 Securities 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 and to qualify any
representation or warranty otherwise made herein to the extent of such
disclosure, 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 shares or
other equity interests of each Subsidiary free and clear of any Liens,
and all the issued and outstanding shares 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.
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(b) ORGANIZATION AND QUALIFICATION. The Company and each of
the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and, in the case of the Company, in compliance with
applicable laws of Canada regarding its incorporation, and in the case
of the Subsidiaries, in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Neither the
Company nor any Subsidiary is in violation or default of any of the
provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and
is in compliance or good standing, as applicable, as a foreign
corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected
to result in (i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse
effect on the results of operations, assets, business, prospects or
condition (financial or otherwise) 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 hereunder and thereunder. The
execution and delivery of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on
the part of the Company and no further action is required by the
Company, its board of directors or its shareholders 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 and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company 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.
(d) NO CONFLICTS. Subject to compliance with the terms of
the 2005 Warrants, the execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the
Shares and the consummation by the Company of the other transactions
contemplated hereby and thereby do not and will not (i) conflict with
or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would
become a default) under, result in the creation of any Lien upon any of
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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 applicable
federal, state, provincial and territorial 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.
(e) FILINGS, CONSENTS AND APPROVALS. Subject to compliance
with the terms of the 2005 Warrants, 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 Prospectus Supplement, (iii) application(s) to each
applicable Trading Market for the listing of the Common Shares for
trading thereon in the time and manner required thereby, and (iv) such
filings or consents as are required to be made or obtained under
applicable U.S. and Canadian securities laws (collectively, the
"REQUIRED APPROVALS").
(f) ISSUANCE OF THE SECURITIES; REGISTRATION. 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 Company has reserved
from its duly authorized capital the maximum number of Common Shares
issuable pursuant to this Agreement and the Warrants. The Company has
filed with the Commission the Registration Statement on Form F-10 (File
No. 333-130578) under the Securities Act. The Registration Statement
was filed on December 21, 2005, was amended on January 5, 2006 and was
declared effective by the Commission on January 5, 2006. The filing of
the Prospectus was made in the manner and within the time period
required by General Instruction II.L of Form F-10. As of the Closing
Date, the Registration Statement will be effective under the Securities
Act and no stop order preventing or suspending the effectiveness of the
Registration Statement or suspending or preventing the use of the
Prospectus will have been issued by the Commission and no proceedings
for that purpose will have been initiated or, to the knowledge of the
Company, threatened by the Commission. The Company, if required by the
rules and regulations of the Commission, proposes to file the
Prospectus Supplement with the Commission in the manner and within the
time period required by General Instruction II.L of Form F-10. At the
time the Registration Statement and any amendments thereto became
effective, at the date of this Agreement and at the Closing Date, the
Registration Statement and any amendments thereto conformed and will
conform in all material respects to the requirements of the Securities
Act and did not and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
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or necessary to make the statements therein not misleading; and the
Prospectus and any amendments or supplements thereto, at time the
Prospectus or any amendment or supplement thereto was issued and at the
Closing Date, conformed and will conform in all material respects to
the requirements of the Securities Act and did not and will not contain
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) CAPITALIZATION. The capitalization of the Company is as
set forth on SCHEDULE 3.1(G). The Company has not issued any Common
Shares 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 Common Shares
to former directors under the Company's Directors' Share Unit Plan
pursuant to the conversion or exercise of Common Share Equivalents
outstanding as of the date of the most recently filed periodic report
under the Exchange Act and pursuant to principal repayments under the
Notes. 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, pursuant to the 2005
Warrants and as described in the Prospectus Supplement, there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exercisable or exchangeable
for, or giving any Person any right to subscribe for or acquire, any
Common Shares, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become
bound to issue additional Common Shares or Common Share Equivalents.
Subject to compliance with the terms of the 2005 Warrants, the issuance
and sale of the Securities will not obligate the Company to issue
Common Shares 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 any of such securities. All of the outstanding Common Shares of
the Company are validly issued, fully paid and non-assessable, have
been issued in compliance with all applicable U.S. and Canadian
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. Subject to obtaining the Required Approvals, no
further approval or authorization of any shareholder, the Board of
Directors of the Company or others is required for the issuance and
sale of the Securities. Except for the Shareholder Rights Plan of the
Company which as described in the SEC Reports, there are no
shareholders agreements, voting agreements or other similar agreements
with respect to the Common Shares which the Company is a party or, to
the knowledge of the Company, between or among any of the Company's
shareholders.
(h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has
complied in all material respects with requirements to file 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 or regulation to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by reference
therein, together with the Prospectus and the Prospectus Supplement,
being collectively referred to herein as the "SEC REPORTS") on a timely
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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, as applicable, and none of the SEC Reports,
when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at
the time of filing. Such financial statements have been prepared in
accordance with Canadian generally accepted accounting principles
applied on a consistent basis during the periods involved ("GAAP"),
except as may be otherwise specified in such financial statements or
the notes thereto and except that unaudited financial statements may
not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(i) MATERIAL CHANGES; UNDISCLOSED EVENTS, LIABILITIES OR
DEVELOPMENTS. 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
shareholders or purchased, redeemed or made any agreements to purchase
or redeem any Common Shares and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans and Directors' Share
Unit Plan. The Company does not have pending before the Commission any
request for confidential treatment of information. Except for the
issuance of the Securities contemplated by this Agreement or as set
forth on SCHEDULE 3.1(I), no event, liability or development has
occurred or exists with respect to the Company or its Subsidiaries or
their respective business, properties, operations or financial
condition, that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made that
has not been publicly disclosed at least one (1) Trading Day prior to
the date that this representation is made.
(j) LITIGATION. 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
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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 applicable Canadian and U.S. 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. None of the Company's or its
Subsidiaries' employees is a member of a union that relates to such
employee's relationship with the Company, and neither the Company or
any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good. No executive officer, to
the knowledge of the Company, is, or is now expected to be, in
violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such
executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing
matters. The Company and its Subsidiaries are in compliance with all
Canadian and U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(l) COMPLIANCE. Subject to bona fide disputes on contracts
entered into in the ordinary course of business, 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 and all such laws that affect the
environment, except in each case as could not reasonably be expected to
result in 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
11
("MATERIAL PERMITS"), and neither the Company nor any Subsidiary has
received any notice of proceedings relating to the revocation or
modification of any Material Permit.
(n) TITLE TO ASSETS. The Company and the Subsidiaries do
not own any real property and the Subsidiaries have good and marketable
title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for Liens as do not materially affect the
value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other
taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting
and enforceable leases with 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, trade secrets, inventions, copyrights, licenses and other
similar intellectual property 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 notice (written or otherwise)
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. The Company and its
Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse
Effect.
(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. Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.
(q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as
set forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of
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,
12
director, trustee or partner, in each case in excess of U.S.$60,000
other than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
(r) XXXXXXXX-XXXXX; INTERNAL ACCOUNTING CONTROLS. The
Company will be in material compliance with all provisions of the
Xxxxxxxx-Xxxxx Act of 2002 which are applicable to it as of the Closing
Date.
(s) CERTAIN FEES. Except as set forth in the Prospectus
Supplement, 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 the Transaction Documents.
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 the Transaction
Documents.
(t) 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.
(u) REGISTRATION RIGHTS. Except as provided under the
Registration Rights Agreement dated October 7, 2005, no Person has any
right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
(v) LISTING AND MAINTENANCE REQUIREMENTS. The Company's
Common Shares are registered pursuant to Section 12(b) of the Exchange
Act, and the Company has taken no action designed to, or which to its
knowledge is likely to have the effect of, terminating the registration
of the Common Shares under the Exchange Act nor has the Company
received any notification that the Commission is contemplating
terminating such registration. Except as publicly disclosed, the
Company has not, in the 12 months preceding the date hereof, received
notice from any Trading Market on which the Common Shares are or have
been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading
Market. Except as publicly disclosed, 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.
(w) APPLICATION OF TAKEOVER PROTECTIONS. As of the Closing
Date, the Company and its Board of Directors will 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 jurisdiction 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.
13
(x) 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 fair saleable value of the Company's assets exceeds the amount
that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not
constitute unreasonably small capital to carry on its business for the
current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected
capital requirements and capital availability thereof; and (iii) the
current cash flow of the Company, together with the proceeds the
Company would receive, were it to liquidate all of its assets, after
taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its liabilities 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). Subject to the risks disclosed in the SEC
Reports, 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 U.S.$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
U.S.$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.
(y) 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, provincial 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.
(z) 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 political activity, (ii) made any unlawful
payment to foreign government officials or employees or to any foreign
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 United States Foreign Corrupt Practices Act of 1977,
as amended.
14
(aa) ACCOUNTANTS. The Company's accountants are identified
in the Prospectus or Prospectus Supplement. To the knowledge of the
Company, 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 20-F or 40-F for the year ending
November 30, 2007, are a registered public accounting firm as required
by the Securities Act.
(bb) 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 thereby. 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 the Transaction
Documents and the transactions contemplated thereby and any advice
given by any Purchaser or any of their respective representatives or
agents in connection with the Transaction Documents and the
transactions contemplated thereby 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 and the other Transaction Documents has been based solely on
the independent evaluation of the transactions contemplated hereby by
the Company and its representatives.
(cc) ACKNOWLEDGEMENT REGARDING PURCHASERS' TRADING ACTIVITY.
Anything in this Agreement or elsewhere herein to the contrary
notwithstanding (except for Sections 3.2(e) and 4.12 hereof), it is
understood and acknowledged 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, and
specifically including, without limitation, Short Sales or "derivative"
transactions, before or after the closing of this transaction, 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 Shares; 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 that (a) one or more Purchasers may engage in hedging
activities at various times during the period that the Securities are
outstanding, and (b) such hedging activities (if any) could reduce the
value of the existing shareholders' 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.
(dd) REGULATION M COMPLIANCE. The Company has not, and to
its knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities, (ii)
sold, bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay to
any person any compensation for soliciting another to purchase any
15
other securities of the Company, other than, in the case of clauses
(ii) and (iii), compensation paid to the Company's placement agents in
connection with the placement of the Securities.
(ee) DISCLOSURE. Except with respect to the material terms
and conditions of the transactions contemplated by the Transaction
Documents, 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 it believes constitutes or might
constitute material, non-public information which is not otherwise
disclosed in the Prospectus Supplement. The Company understands and
confirms that the Purchasers will rely on the foregoing representation
in effecting transactions in securities of the Company.
(ff) TRADING MARKET COMPLIANCE. Neither the Company, nor any
of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any sales of any security, under
circumstances that would cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of any
applicable shareholder approval provisions of any Trading Market on
which any of the securities of the Company are listed or designated.
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 hereunder and 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 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 direct or indirect arrangement or understandings with any
other persons to distribute or regarding the distribution of such
Securities (this representation and warranty not limiting such
Purchaser's right to sell the Securities in compliance with applicable
16
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.
(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) SHORT SALES AND CONFIDENTIALITY PRIOR TO THE DATE
HEREOF. 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, in the securities of
the Company during the period commencing from the time that such
Purchaser first received a term sheet (written or oral) 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,
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).
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 TRANSFER RESTRICTIONS. (a) If all or any portion of a Warrant
is exercised at a time when there is an effective registration statement to
cover the issuance or resale of the Warrant Shares, such Warrant Shares shall
be issued free of all legends. If all or any portion of a Warrant is exercised
on a cashless basis at a time when there is no effective registration statement
to cover the issuance or resale of the Warrant Shares, such Warrant Shares
shall be issued free of all legends.
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 and applicable Canadian securities laws. The Company further
17
covenants that it will take such further action as any holder of Warrants and
Warrant Shares may reasonably request, to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the requirements of the exemption 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 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
9:30 a.m. (New York City time) on the Trading Day immediately following the
date hereof, issue a widely disseminated press release disclosing the material
terms of the transactions contemplated hereby and within one (1) Trading Day
following the date hereof shall file a Current Report on Form 6-K which shall
attach the material 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 or delayed, 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 filing of final Transaction Documents (including
signature pages thereto) with the Commission 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 this subclause (ii).
4.5 SHAREHOLDER RIGHTS PLAN. No claim will be made or enforced by
the Company or, with the consent of the Company, any other Person, that any
Purchaser is an "Acquiring Person" under any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or similar anti-takeover 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.
4.6 NON-PUBLIC INFORMATION. Except with respect to the material
terms and conditions of the transactions contemplated by the Transaction
Documents, 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.
18
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 in the
ordinary course of the Company's business and prior practices), to redeem any
Common Shares or Common Share 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 each Purchaser and its
directors, officers, shareholders, members, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person
who controls such Purchaser (within the meaning of Section 15 of the Securities
Act and Section 20 of the Exchange Act), and the directors, officers,
shareholders, agents, members, partners or employees (and any other Persons
with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling
persons (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 shareholder 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 shareholder
or any violations by the Purchaser of applicable Canadian or U.S. 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 reasonably acceptable to the Purchaser
Party. 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, in which case the Company shall be
responsible for the reasonable fees and expenses of no more than one such
separate counsel. 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 such Purchaser
Party in this Agreement or in the other Transaction Documents.
19
4.9 RESERVATION OF COMMON SHARES. 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 Shares for the purpose of enabling the Company to issue Shares
pursuant to this Agreement and Warrant Shares pursuant to any exercise of the
Warrants.
4.10 LISTING OF COMMON SHARES. The Company hereby agrees to use
reasonable best efforts to maintain the listing of the Common Shares on a
Trading Market, and as soon as reasonably practicable following the Closing
(but not later than the Closing Date) to list all of the Shares and Warrant
Shares on such Trading Market. The Company further agrees, if the Company
applies to have the Common Shares 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 use its reasonable best efforts to continue the listing and trading of its
Common Shares 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 AFTER THE DATE HEREOF. Each
Purchaser severally and not jointly with the other Purchasers covenants that
neither it nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any Short Sales during the period commencing
at 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). 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.
20
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 three (3) Trading Days of the Closing Date.
4.14 REVERSE OR FORWARD SHARE SPLITS. The Company undertakes not to
effect any reverse or forward share splits, share combinations or other similar
transaction in respect of Common Shares for a period of three (3) months from
the date first written above.
4.15 SUBSEQUENT EQUITY SALES. Other than an Exempt Issuance or the
issuance of the Securities hereunder, from the date hereof until 60 days after
the Closing Date, neither the Company nor any Subsidiary shall issue Common
Shares or Common Share Equivalents.
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 May 25, 2007; 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. Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties
levied in connection with the delivery of any Securities to the Purchasers.
5.3 ENTIRE AGREEMENT. The Transaction Documents, together with the
exhibits and schedules thereto, the Prospectus and the Prospectus Supplement
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. or Canadian 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.
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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 waived provision 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 any 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.
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 (other than by
merger). Any Purchaser may assign any or all of its rights under this Agreement
to any Person to whom such Purchaser assigns or transfers any Securities,
provided such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction Documents 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.
5.9 GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective Affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in the
City of New York, borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an 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 other 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 reasonable attorneys' fees and other
costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.
22
5.10 SURVIVAL. The representations and warranties contained herein
as at the date of Closing 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 or by e-mail delivery of a ".pdf" (or
similar) format data file, 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 or ".pdf" (or
similar) signature page were an original thereof.
5.12 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
5.13 RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding anything to
the contrary contained in (and without limiting any similar provisions of) any
of the other 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.
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 (in the case of mutilation), 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. The applicant for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs (including
customary indemnity) 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 contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
23
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 or non-performance of the
obligations of any other Purchaser under any Transaction Document. Nothing
contained herein or in any other 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. For reasons of administrative convenience only,
Purchasers and their respective counsel have chosen to communicate with the
Company through FWS. FWS does not represent all of the Purchasers but only
Xxxxxx & Xxxxxxx, LLC, who has acted as placement agents to the transaction.
The Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.
5.18 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)
24
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.
VASOGEN INC. 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]
[PURCHASER SIGNATURE PAGES TO VSGN 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:____________________________________________________
Fax Number of Purchaser: ______________________________________________________
Address for Notice of Purchaser:
Address for Delivery of Securities for Purchaser (if not same as above):
Subscription Amount: U.S.$
EIN Number:
[SIGNATURE PAGES CONTINUE]
SCHEDULE 3.1(A)
SUBSIDIARIES
The Company has the following, wholly-owned subsidiaries:
1. Vasogen, Corp.
2. Vasogen Ireland Limited
SCHEDULE 3.1(G)
CAPITALIZATION
As of May 17, 2007
(in millions)
-------------
Common shares outstanding 17.5
Options outstanding 0.8
Warrants outstanding 2.5
Deferred share units and restricted stock units 0.1
SCHEDULE 3.1(I)
None.
SCHEDULE 4.7
USE OF PROCEEDS
We intend to use any net proceeds from the sale of Units pursuant to this
Agreement for working capital purposes, including the following:
o to fund the continued development of our Celacade(TM) technology;
o to fund the continued development of VP025; and
o for general corporate purposes.
EXHIBIT A
FORM OF WARRANT
[SEE ATTACHED]
