EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of November
25, 2003, by and among Avanir Pharmaceuticals, a California corporation, with
headquarters located at 00000 Xxxxxxxx Xxxxxx Xxxx, Xxxxx 000, Xxx Xxxxx,
Xxxxxxxxxx (the "Company"), and the investors listed on the Schedule of Buyers
attached hereto (each, a "Buyer" and collectively, the "Buyers").
BACKGROUND:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933
(the "Securities Act");
B. The Company has authorized the issuance of up to 5,400,000
shares (the "Shares") of its Class A Common Stock, no par value (the "Common
Stock"); and
C. The Buyers wish to purchase, upon the terms and conditions
stated in this Agreement, the Shares in the respective amounts set forth
opposite each Buyer's name on the Schedule of Buyers and the Class A Common
Stock Warrants, in the form attached hereto as Exhibit A (the "Warrants"), to
acquire 0.6 shares of Class A Common Stock for each Share purchased hereunder
(the "Warrant Shares") (the Shares, Warrants and Warrant Shares collectively
being, the "Securities").
NOW, THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF COMMON SHARES.
1.1. Purchase of Common Shares. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 5 and 6 below,
at the closing (the "Closing") the Company shall issue and sell to each Buyer,
and each Buyer severally agrees to purchase from the Company, the respective
number of Shares set forth opposite such Buyer's name on the Schedule of Buyers,
along with Warrants to acquire the respective number of Warrant Shares set forth
opposite such Buyer's name on the Schedule of Buyers, at the respective purchase
price (the "Purchase Price") set forth opposite such Buyer's name on the
Schedule of Buyers. The purchase price per Share and the related Warrants at the
Closing shall be $1.49, which represents the closing price of the Company's
Class A common stock, as reported on the American Stock Exchange, as of one day
prior to the date of this Agreement.
1.2. Closing Date. The date and time of the Closing (the
"Closing Date") shall be 10:00 a.m. Pacific Time on the day following
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
5 and 6 below, but in no event later than December 5, 2003 (or such later date
as is mutually agreed to by the Company and the Buyers). The Closing shall occur
on the Closing Date at the offices of Xxxxxx Xxxxxx White & XxXxxxxxx LLP,
counsel to the Company, located at 0000 Xx Xxxxx Xxxxxxx Xxxxx, 0xx Xxxxx, Xxx
Xxxxx, Xxxxxxxxxx.
1.3. Form of Payment. On the Closing Date, (i) each Buyer
shall pay an amount equal to the Purchase Price to the Company for the Shares
and Warrants to be issued and sold to such Buyer at the Closing, by wire
transfer of immediately available funds in accordance with the Company's written
wire instructions, and (ii) the Company shall deliver to each Buyer, stock
certificates (the "Common Stock Certificates") representing such number of the
Shares which such Buyer is then purchasing (as indicated opposite such Buyer's
name on the Schedule of Buyers), along with the Warrants such Buyer is
purchasing (as indicated opposite such Buyer's name on the Schedule of Buyers)
hereunder, duly executed on behalf of the Company and registered in the name of
such Buyer.
2. BUYERS' REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not jointly, that:
2.1. Purchase for Own Account for Investment. Such Buyer
(i) is acquiring the Shares and the Warrants and, upon exercise of the Warrants,
will acquire the Warrant Shares (collectively are referred to herein as the
"Securities"), for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempt from registration under the Securities Act. Nothing
contained herein shall be deemed a representation or warranty by such Buyer to
hold any Securities for any period of time. Such Buyer is acquiring the
Securities hereunder in the ordinary course of its business. Such Buyer does not
have any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.
2.2. Accredited Buyer Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D, and such
Buyer is also knowledgeable, sophisticated and experienced in making, and is
qualified to make decisions with respect to, investments in securities
presenting an investment decision like that involved in the purchase of the
Securities, including investments in securities issued by the Company and
investments in comparable companies.
2.3. Reliance on Exemptions. Such Buyer understands that
the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire such securities.
2.4. Information. Such Buyer and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities that have been requested by such Buyer. Such Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the Company. Such
Buyer understands that its investment in the Securities involves a high degree
of risk. Neither such inquiries nor any other investigation conducted by or on
behalf of such Buyer or its advisors shall modify, amend or affect such Buyer's
right to rely on the truth, accuracy and
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completeness of the disclosure made to such Persons in respect of the Company or
this transaction and the Company's representations and warranties contained in
this Agreement.
2.5. No Governmental Review. Such Buyer understands that
no United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
2.6. Certain Trading Activities. No open Short Sale
(defined below) involving the Company's securities exists on the date hereof in
the name or on behalf of, or in conjunction with, such Buyer. For purposes of
this Section, "Short Sale" means all types of direct and indirect stock pledges,
forward sale contracts, options, puts, calls, short sales, swaps and similar
arrangements (including on a total return basis), and sales and other
transactions through non-U.S. broker dealers or foreign regulated brokers, but
only if executed at a time when the Buyer has no equivalent offsetting long
position in the common stock of the Company. For purposes of determining whether
the Buyer has an equivalent offsetting long position in the common stock of the
Company, any shares of common stock held by such Buyer, and any shares issuable
upon exercise of any warrants held by such Buyer, shall be both deemed to be
held as "long" by such Buyer.
2.7. Transfer or Resale. Such Buyer understands that: (i)
the Securities have not been registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, transferred, pledged or
otherwise assigned unless (A) subsequently registered thereunder, or (B) such
Buyer shall have delivered to the Company, at the expense of such Buyer or its
transferee, an opinion of counsel reasonably satisfactory to the Company, to the
effect that such Securities to be sold, transferred, pledged or otherwise
assigned may be sold, transferred, pledged or otherwise assigned pursuant to an
exemption from such registration, and (ii) any sale of the Securities made in
reliance on Rule 144 promulgated under the Securities Act or any successor rule
thereto ("Rule 144") may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of the Securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the SEC thereunder.
2.8. Legends. Such Buyer understands that the certificates
or other instruments representing the Warrants shall and, until such time as the
resale of the Shares and the Warrant Shares (as the case may be) have been
registered under the Securities Act, the Shares and the Warrant Shares shall,
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such certificates or
instruments):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
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REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACT OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
THE ACT OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT.
2.9. Validity; Enforcement. Such Buyer has the requisite
right, power, authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such Buyer and,
assuming due execution and delivery hereof by the Company, is a valid and
binding agreement of such Buyer enforceable against such Buyer in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
2.10. Residency. Such Buyer is a resident of that state and
country specified in its address on the Schedule of Buyers.
2.11. Legal, Tax or Investment Advice. Such Buyer
understands that nothing in this Agreement or any other materials presented to
such Buyer in connection with the purchase and sale of the Securities
constitutes legal, tax or investment advice. Such Buyer has consulted such
legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of Securities.
2.12. Broker - Dealer. Such Buyer is not a registered
broker dealer.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Company Disclosure Schedule attached hereto,
the Company represents and warrants to each of the Buyers that:
3.1. Good Standing; Qualification. The Company is duly
organized and validly existing in good standing under the laws of the State of
California. Each of the Company and its subsidiaries (as defined in Rule 405
under the Securities Act) has full power and authority to own, operate and
occupy its properties and to conduct its business as presently conducted and as
described in the documents filed by the Company under the Securities Exchange
Act of 1934 (the "Exchange Act"), since September 30, 2002 through the date
hereof, including, without limitation, its Annual Report on Form 10-K for the
year ended September 30, 2002, Quarterly Reports on Form 10-Q for the three
months ended December 31, 2002, March 31, 2003 and June 30, 2003, and Proxy
Statement on Schedule 14-A for the 2003 Annual Meeting of Shareholders (the
"Exchange Act Documents") and is registered or qualified to do business and in
good standing in each jurisdiction in which the nature of the business conducted
by it or the location of the properties owned or leased by it requires such
qualification and where the failure to be so qualified would have a material
adverse effect upon the condition (financial or otherwise), earnings, business
or business prospects (such business prospects being as described
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in the Exchange Act Documents and in any press release issued by the Company
since June 30, 2003 (collectively, the "Press Releases")), properties or
operations of the Company and its subsidiaries, considered as one enterprise, or
impair the Company's ability to perform on a timely basis its obligations under
this Agreement or the Warrants (any of the foregoing, 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.
3.2. Due Authorization and Valid Issuance. (a) The Company
has all requisite power and authority to execute, deliver and perform its
obligations hereunder, and this Agreement has been duly authorized and validly
executed and delivered by the Company and, assuming due execution and delivery
hereof by the Buyers, constitute legal, valid and binding agreements of the
Company enforceable against the Company in accordance with their terms, except
as rights to indemnity and contribution may be limited by state or federal
securities laws or the public policy underlying such laws, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and (b) the Shares and Warrant Shares being
purchased by the Buyer hereunder will, upon issuance and payment therefor
pursuant to the terms hereof, be duly authorized, validly issued, fully-paid and
nonassessable.
3.3. Non-Contravention. The execution and delivery of this
Agreement, the issuance and sale of the Securities, the fulfillment of the terms
of this Agreement and the Warrants and the consummation of the transactions
contemplated hereby and thereby will not (A) conflict with or constitute a
violation of, or default (with the passage of time or otherwise) under, (i) any
contract, agreement or other instrument filed or incorporated by reference as an
exhibit to any of the Exchange Act Documents (any such contract, agreement or
instrument, an "Exchange Act Exhibit"), (ii) the charter, by-laws or other
organizational documents of the Company or any subsidiary, or (iii) assuming the
correctness of the representations and warranties of the Buyers set forth
herein, any law, administrative regulation, ordinance or order of any court or
governmental agency, arbitration panel or authority applicable to the Company or
any subsidiary or their respective properties, except in the case of clauses (i)
and (iii) for any such conflicts, violations or defaults which do not have or
would be reasonably likely to result in a Material Adverse Effect or (B) result
in the creation or imposition of any lien, encumbrance, claim, security interest
or restriction whatsoever upon any of the material properties or assets of the
Company or any subsidiary or an acceleration of indebtedness pursuant to any
obligation, agreement or condition contained in any Exchange Act Exhibit.
Assuming the correctness of the representations and warranties of the Buyers set
forth herein, no consent, approval, authorization or other order of, or
registration, qualification or filing with, any regulatory body, administrative
agency, or other governmental body in the United States or any other person is
required for the execution and delivery of this Agreement and the valid issuance
and sale of the Securities to be sold hereunder, other than such as have been
made or obtained, and except for any post-closing securities filings or
notifications required to be made under federal or state securities laws.
3.4. Capitalization. The capitalization of the Company as
of June 30, 2003 is as set forth in the most recent applicable Exchange Act
Documents, increased as set forth in the
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next sentence. The Company has not issued any capital stock since that date
other than pursuant to (i) employee benefit plans disclosed in the Exchange Act
Documents, or (ii) outstanding warrants, options or other securities disclosed
in the Exchange Act Documents. The Shares and Warrant Shares to be sold pursuant
to this Agreement and the Warrant have been duly authorized, and when issued and
paid for in accordance with the terms of this Agreement and the Warrant will be
duly and validly issued, fully paid and nonassessable. The outstanding shares of
capital stock of the Company have been duly and validly issued and are fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and were not issued in violation of any preemptive rights
or similar rights to subscribe for or purchase securities. Except as set forth
in the Exchange Act Documents, there are no outstanding rights (including,
without limitation, preemptive rights), warrants or options to acquire, or
instruments convertible into or exchangeable for, any unissued shares of capital
stock or other equity interest in the Company or any subsidiary, or any
contract, commitment, agreement, understanding or arrangement of any kind to
which the Company is a party and relating to the issuance or sale of any capital
stock of the Company or any subsidiary, any such convertible or exchangeable
securities or any such rights, warrants or options. Without limiting the
foregoing, no preemptive right, co-sale right, right of first refusal,
registration right, or other similar right exists with respect to the Securities
or the issuance and sale thereof. 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. The Company owns the entire equity interest
in each of its subsidiaries, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, other than as described in
the Exchange Act Documents. Except as disclosed in the Exchange Act Documents,
there are no shareholders agreements, voting agreements or other similar
agreements with respect to the voting of the Shares to which the Company is a
party or, to the knowledge of the Company, between or among any of the Company's
shareholders.
3.5. Legal Proceedings. There is no material legal or
governmental proceeding pending or, to the knowledge of the Company, threatened
to which the Company or any subsidiary is or may be a party or of which the
business or property of the Company or any subsidiary is subject that is not
disclosed in the Exchange Act Documents or in any of the Press Releases.
3.6. No Violations. Neither the Company nor any subsidiary
is in violation of its charter, bylaws, or other organizational document, or in
violation of any law, administrative regulation, ordinance or order of any court
or governmental agency, arbitration panel or authority applicable to the Company
or any subsidiary, which violation, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect, or is in default (and there
exists no condition which, with the passage of time or otherwise, would
constitute a default) in any material respect in the performance of Exchange Act
Exhibit, which would have or reasonably likely to result in a Material Adverse
Effect.
3.7. Governmental Permits, Etc. Each of the Company and
its subsidiaries has all necessary franchises, licenses, certificates and other
authorizations from any foreign, federal, state or local government or
governmental agency, department, or body that are currently necessary for the
operation of the business of the Company and its subsidiaries as currently
conducted and as described in the Exchange Act Documents except where the
failure to currently possess could not have or reasonably be expected to result
in a Material Adverse Effect.
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3.8. Intellectual Property. Except as specifically
disclosed in the Exchange Act Documents, (i) each of the Company and its
subsidiaries owns or possesses sufficient rights to use all patents, patent
rights, trademarks, copyrights, licenses, inventions, trade secrets, trade names
and know-how (collectively, "Intellectual Property") described or referred to in
the Exchange Act Documents as owned or possessed by it or that are necessary for
the conduct of its business as described in the Exchange Act Documents, except
where the failure to currently own or possess would not have or reasonably be
expected to result in a Material Adverse Effect, (ii) to the knowledge of the
Company, neither the Company nor any of its subsidiaries is infringing any
rights of a third party with respect to any Intellectual Property, (iii) neither
the Company nor any of its subsidiaries has received any notice of, or has any
knowledge of, any asserted infringement by the Company or any of its
subsidiaries of, any rights of a third party with respect to any Intellectual
Property that would, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect if determined adversely to the
Company and (iv) neither the Company nor any of its subsidiaries has received
any notice of, or has any knowledge of, infringement by a third party with
respect to any Intellectual Property rights of the Company or of any subsidiary
that, individually or in the aggregate, would have or reasonably be expected to
result in a Material Adverse Effect.
3.9. Financial Statements. The financial statements of the
Company and the related notes contained in the Exchange Act Documents present
fairly, in accordance with generally accepted accounting principles, the
financial position of the Company and its subsidiaries as of the dates
indicated, and the results of its operations and cash flows for the periods
therein specified consistent with the books and records of the Company and its
subsidiaries, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which are not expected to
be material in amount. Such financial statements (including the related notes)
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods therein specified, except
as may be disclosed in the notes to such financial statements, or in the case of
unaudited statements, as may be permitted by the Securities and Exchange
Commission (the "SEC") on Form 10-Q under the Exchange Act and except as
disclosed in the Exchange Act Documents.
3.10. No Material Adverse Change. Except as disclosed in
the Exchange Act Documents and the Press Releases, since June 30, 2003, there
has not been (i) any material adverse change in the financial condition or
earnings of the Company and its subsidiaries considered as one enterprise, (ii)
any obligation, direct or contingent, that is material to the Company and its
subsidiaries considered as one enterprise, incurred by the Company, except
obligations incurred in the ordinary course of business, (iii) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company or any of its subsidiaries, or (iv) any loss or damage (whether or not
insured) to the physical property of the Company or any of its subsidiaries
which has been sustained which has had or reasonably would be expected to result
in a Material Adverse Effect; provided, however, that changes in the ordinary
course of business, including but not limited to the use of cash and increases
in liabilities in the ordinary course of business, shall not be deemed to be a
material adverse change or to have a Material Adverse Effect.
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3.11. Disclosure. The representations and warranties of the
Company contained in this Section 3 as of the date hereof and as of the Closing
Date, do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except with respect to the material terms and conditions of the
transaction contemplated by this Agreement, which shall be publicly disclosed by
the Company pursuant to Section 8.9 hereof, the Company confirms that neither it
nor any person acting on its behalf has provided any Buyer with any information
that the Company believes constitutes material non-public information unless
such Buyer has executed and delivered to the Company a written agreement
regarding confidentiality and the use of such information. The Company
understands and confirms that the Buyers will rely on the foregoing
representations in effecting transactions in securities of the Company.
3.12. Securities Exchange Compliance. The Company's Class A
Common Stock is registered pursuant to Section 12(b) of the Exchange Act and is
listed on The American Stock Exchange (the "AMEX"), and the Company has taken no
action designed to, or likely to have the effect of, terminating the
registration of the Shares under the Exchange Act or de-listing the Shares from
the AMEX, nor has the Company received any notification that the SEC or the AMEX
is contemplating terminating such registration or listing.
3.13. Reporting Status. The Company has filed in a timely
manner all documents that the Company was required to file under the Exchange
Act during the 12 months preceding the date of this Agreement. All such filings
complied in all material respects with the SEC's requirements as of their
respective filing dates, and the information contained therein as of the date
thereof did not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were made not
misleading.
3.14. Listing. The Company shall comply with all
requirements of the AMEX with respect to the issuance of the Shares and the
Warrant Shares and the listing thereof on the AMEX. The Company has not, in the
two years preceding the date hereof, received notice (written or oral) from the
AMEX to the effect that the Company is not in compliance with the listing or
maintenance requirements thereof. The Company is in compliance with the listing
and maintenance requirements for continued listing of the Common Stock on the
AMEX. The issuance and sale of the Securities hereunder does not contravene the
rules and regulations of the AMEX and no approval of the shareholders of the
Company is required for the Company to issue and deliver to the Buyers the
maximum number of Securities contemplated by this Agreement and the Warrant.
3.15. No Manipulation of Stock. The Company has not taken
and will not, in violation of applicable law, take, any action designed to or
that might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Shares to facilitate the sale or resale of the
Shares.
3.16. Foreign Corrupt Practices. Neither the Company, nor
to the knowledge of the Company, any agent or other person acting on behalf of
the Company, has (i) directly or indirectly, used any corrupt funds for unlawful
contributions, gifts, entertainment or other
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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.
3.17. Accountants. To the Company's knowledge, Deloitte &
Touche LLP, who have expressed their opinion with respect to the financial
statements included in the Company's Annual Report on Form 10-K for the year
ended September 30, 2002 and who the Company expects will consent to the
incorporation by reference of their opinion in the Registration Statement, as
defined herein, and the prospectus which forms a part thereof, are independent
accountants as required by the Securities Act and the rules and regulations
promulgated thereunder.
3.18. Contracts. The contracts described in the Exchange
Act Documents are in full force and effect on the date hereof, and neither the
Company nor, to the Company's knowledge, any other party to such contracts is in
breach of or default under any of such contracts which would have or reasonably
be expected to result in a Material Adverse Effect.
3.19. Taxes. The Company 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 or might be asserted or threatened against it.
3.20. Transfer Taxes. On the Closing Date, all stock
transfer or other taxes (other than income taxes) which are required to be paid
in connection with the sale and transfer of the Shares to be sold to the Buyers
hereunder will be, or will have been, fully paid or provided for by the Company
and all laws imposing such taxes will be or will have been fully complied with.
3.21. Private Offering; Certain Registration Matters.
Assuming the correctness of the representations and warranties of the Buyers set
forth in Section 2 hereof, the offer and sale of Securities hereunder is and
will be exempt from registration under the Securities Act. The Company is
eligible to register the resale of its Common Stock for resale by the Buyers
under Form S-3 promulgated under the Securities Act. Except as disclosed in the
Exchange Act Documents, the Company has not granted or agreed to grant to any
person any rights (including "piggy-back" registration rights) to have any
securities of the Company registered with the SEC or any other governmental
authority that have not been satisfied or expired.
3.22. Disclosure Controls and Procedures; Internal
Controls. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) 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 Form 10-K or Form 10-Q, as the case may be, is being
prepared. The Company's certifying officers have evaluated the effectiveness of
the Company's disclosure controls and procedures as
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of a date within ninety (90) days prior to the filing date of the Form 10-Q for
the quarter ended June 30, 2003 (such date, the "Evaluation Date"). The Company
presented in the Form 10-Q for the quarter ended June 30, 2003 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 used 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.
3.23. Transactions With Affiliates. Except as disclosed in
the Exchange Act Documents, none of the officers or directors 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 or director or, to the knowledge of
the Company, any entity in which any officer or director has a substantial
interest or is an officer, director, trustee or partner.
3.24. No Additional Agreements. The Company does not have
any agreement or understanding with any Buyer with respect to the transactions
contemplated by this Agreement other than as specified in this Agreement.
3.25. Investment Company. The Company is not, and is not an
Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
3.26. Compliance. Neither the Company nor any subsidiary
(i) is in default under or in violation of (and no event has occurred that has
not been waived that, with notice or lapse of time or both, would result in a
default by the Company or any subsidiary under), nor has the Company or any
subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as would not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.
4. COVENANTS.
4.1. Commercially Reasonable Efforts. Each party shall use
commercially reasonable efforts to timely satisfy each of the conditions to be
satisfied by it as provided in Sections 5 and 6 of this Agreement.
4.2. Blue Sky. The Company shall, on or before the Closing
Date, take such action to obtain an exemption for or to qualify the Securities
for sale to the Buyers at the Closing pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the
00
Xxxxxx Xxxxxx. The Company shall make all filings and reports relating the offer
and sale of the Securities required under applicable securities or "Blue Sky"
laws of the states of the United States following the Closing Date.
4.3. Reporting Status. Until the earlier of (i) the date
as of which the Buyers may sell all of the Shares and the Warrant Shares without
restriction (including, without limitation, as to volume, but by complying with
the manner of sale and Form 144 filing requirements, if applicable) within a
three-month period pursuant to Rule 144 promulgated under the Securities Act, or
(ii) the date on which the Buyers shall have sold all the Shares and the Warrant
Shares (the "Registration Period"), the Company shall file all reports required
to be filed with the SEC pursuant to the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would otherwise
permit such termination. Until such time as the Buyers may sell the Shares and
Warrant Shares pursuant to Rule 144(k), if the Company is not required to file
reports pursuant to the 1934 Act, it will prepare and furnish to the Buyers and
make publicly available in accordance with Rule 144(c)(2) such information as is
required for the Buyers to sell the Shares and Warrant Shares under Rule 144.
4.4. Reservation of Shares. The Company shall take all
action necessary to, at all times, have authorized and reserved for issuance
that number of shares of Class A Common Stock issuable upon exercise of all
outstanding Warrants.
4.5. Non-Public Information. The Company covenants and
agrees that neither it nor any other Person acting on its behalf will provide
any Buyer or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Buyer shall have executed a written agreement regarding the confidentiality and
use of such information. The Company understands and confirms that each Buyer
shall be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.6. Listing. The Company shall, on or before the Closing
Date, take such to secure the listing of the Shares and the Warrant Shares on
the AMEX and shall use commercially reasonable efforts to maintain the listing
of the Company's Class A Common Stock on the AMEX or other national securities
exchange or quotation service (each, a "National Market").
4.7. Restriction on Sales, Short Sales and Hedging
Transactions. The Buyers will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Shares or the Warrant Shares,
or sell short or enter into any hedging transaction with respect to the Shares
or Warrant Shares except in compliance with the Securities Act, the Securities
Exchange Act of 1934, as amended, applicable state securities laws and the
respective rules and regulations promulgated thereunder.
4.8. Limitation on Issuances of Securities. During the
period which is the longer of (i) 90 days after the Closing Date or (ii) 60 days
after the Registration Statement is declared effective, the Company shall not
issue any Common Stock or rights, warrants, options or other securities or debt
instruments that are convertible into, or exchangeable for, shares of Common
Stock or any other securities without the prior written consent of 66 2/3% in
interest of
11
the Buyers' or except pursuant to employee benefit or stock option or incentive
plans and other outstanding securities disclosed in the Exchange Act Documents.
During the six months following the Closing Date, the Company shall not issue
any "Future Priced Securities" as such term is described by NASD IM-4350-1.
4.9. Securities Laws Disclosure; Publicity. No later than
9:00 am eastern time on the business day following Closing, the Company shall
issue a press release reasonably acceptable to the Buyers disclosing the
transactions contemplated hereby and file a Current Report on Form 8-K, within
the time period required by such form, disclosing the transactions contemplated
hereby. In addition, the Company will make such other filings and notices in the
manner and time required by the SEC and the National Market on which the Common
Stock is listed. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Buyer, or include the name of any Buyer in any filing
with the Commission (other than the Registration Statement and any exhibits to
filings made in respect of this transaction in accordance with periodic filing
requirements under the Exchange Act) or any regulatory agency or National
Market, without the prior written consent of such Buyer, except to the extent
such disclosure is required by law or National Market regulations, in which case
the Company shall provide the Buyers with prior notice of such disclosure.
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Shares to
each Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:
5.1. Such Buyer shall have executed this Agreement and the
Investor Questionnaire, in the form attached hereto as Exhibit B, and delivered
the same to the Company.
5.2. Such Buyer shall have delivered to the Company the
Purchase Price for the Shares and the related Warrants being purchased by such
Buyer at the Closing by wire transfer of immediately available funds pursuant to
the wire instructions provided by the Company.
5.3. The representations and warranties of such Buyer
shall be true and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified as to
materiality in Section 2 above, in which case, such representations and
warranties shall be true and correct without further qualification) as of the
date when made and as of the Closing Date, as though made at that time (except
for representations and warranties that speak as of a specific date), and such
Buyer shall have performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Buyer at or prior to the Closing
Date.
5.4. The Company shall have received the approval for the
listing of the Shares and Warrant Shares on the AMEX, as provided in Section
4.6.
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5.5. The aggregate value of the Securities to be purchased
by the Buyers under this Agreement shall be no less than $5,000,000.
6. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Shares at the
Closing is subject to the satisfaction, at or before the Closing Date of each of
the following conditions, provided that these conditions are for each Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion
by providing the Company with prior written notice thereof:
6.1. The Company shall have executed this Agreement and
delivered same to such Buyer.
6.2. The SEC or the AMEX shall not have suspended trading
in the Company's Class A Common Stock.
6.3. The representations and warranties of the Company
shall be true and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case, such representations and
warranties shall be true and correct without further qualification) as of the
date when made and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date. Such Buyer shall have received a certificate, executed by the Chief
Financial Officer of the Company, dated as of the Closing Date to the foregoing
effect.
6.4. Such Buyer shall have received the opinion of the
Company's counsel, dated as of the Closing Date, in the form attached hereto as
Exhibit C.
6.5. The Company shall have executed and delivered to such
Buyer the Warrants and the Stock Certificates (in such denominations as such
Buyer shall request) for the Shares and Warrants being purchased by such Buyer
at the Closing.
6.6. The Company shall have reserved out of its authorized
and unissued Class A Common Stock a sufficient number of shares for the purpose
of effecting the exercise of the Warrants.
6.7. The Company shall have made all filings under all
applicable federal and state securities laws necessary, if any, to consummate
the issuance of the Securities pursuant to this Agreement in compliance with
such laws.
6.8. The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by this Agreement as
such Buyer or its counsel shall reasonably request, including a certificate
executed by a Company officer that the Company has received binding commitments
under this Agreement to sell a minimum of $5,000,000 of Securities in the
aggregate.
13
7. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT.
7.1. Registration Procedures and Other Matters.
(a) The Company shall:
(i) as soon as possible but in any
event not later than the 30th day after the Closing Date (or,
if such day is a Saturday, Sunday or holiday, then by the next
succeeding business day), file a registration statement on
Form S-3 to enable the resale of the Shares and the Warrant
Shares by the Buyers from time to time (the "Registration
Statement") through the AMEX or in privately-negotiated
transactions;
(ii) use commercially reasonable efforts
to cause a Registration Statement to be declared effective by
the SEC as soon as possible, but in any event not later than
the earlier of (a) the 90th day following the Closing Date,
and (b) the fifth trading day following the date on which the
Company is notified by the SEC that the Registration Statement
will not be reviewed or is no longer subject to further review
and comments;
(iii) use commercially reasonable efforts
to prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus
used in connection therewith (the "Prospectus") as may be
necessary to keep the Registration Statement continuously
current, effective and free from any material misstatement or
omission to state a material fact for a period not exceeding,
with respect to each Buyer's Shares and Warrant Shares
purchased hereunder from the date it is first declared
effective until, the earlier of (A) two years from the date of
the final exercise of all of the Warrants, (B) the date on
which the Buyer may sell all Shares and Warrant Shares then
held by the Buyer without restriction by the volume
limitations of Rule 144(k) of the Securities Act, or (iii) the
public sale of all of the Shares and the Warrant Shares (such
period, the "Effectiveness Period");
(iv) if (A) the Registration Statement
is not filed on or prior to the date of filing required
pursuant to Section 7.1(a), (B) the Registration Statement is
not declared effective on or prior to the date required by
Section 7.1(a)(ii), or (C) notwithstanding Section 7.2, after
the date first declared effective by the SEC and prior to the
expiration of the Effectiveness Period, the Registration
Statement ceases to be effective and available to each Buyer
as to its Shares and Warrant Shares (whether pursuant to
Section 7.2(c), or otherwise) without being succeeded within
twenty trading days by an effective amendment thereto or by a
subsequent registration statement filed with and declared
effective by the SEC, (any such failure being referred to as
an "EVENT" and the date of such failure being the "EVENT
DATE"), then, in addition to any other rights available to the
Holders under this Agreement or applicable law: (x) on each
such Event Date the Company shall pay to each Holder an amount
in cash, as liquidated damages and not as a penalty, equal to
one percent (1.0%) of the aggregate purchase price
14
paid by such Holder pursuant to the Purchase Agreement; and
(y) on each monthly anniversary of each such Event Date
thereof (if the applicable Event shall not have been cured by
such date) until the applicable Event is cured, the Company
shall pay to each Holder an amount in cash, as liquidated
damages and not as a penalty, equal to one percent (1.0%) of
the aggregate purchase price paid by such Holder pursuant to
the Purchase Agreement. If the Company fails to pay any
liquidated damages pursuant to this Section in full within
seven days after the date payable, the Company will pay
interest thereon at a rate of 12% per annum (or such lesser
maximum amount that is permitted to be paid by applicable law)
to the Holder, accruing daily from the date such liquidated
damages are due until such amounts, plus all such interest
thereon, are paid in full. The liquidated damages pursuant to
the terms hereof shall apply on a pro rata basis for any
portion of a month prior to the cure of an Event;
(v) furnish to the Buyer with respect
to the Shares and the Warrant Shares registered under the
Registration Statement such number of copies of the
Registration Statement, Prospectuses and Preliminary
Prospectuses in conformity with the requirements of the
Securities Act and such other documents as the Buyer may
reasonably request in writing, in order to facilitate the
public sale or other disposition of all or any of the Shares
or Warrant Shares by the Buyer; provided, however, that the
obligation of the Company to deliver copies of Prospectuses or
Preliminary Prospectuses to the Buyer shall be subject to the
receipt by the Company of reasonable assurances from the Buyer
that the Buyer will comply with the applicable provisions of
the Securities Act and of such other securities or blue sky
laws as may be applicable in connection with any use of such
Prospectuses or Preliminary Prospectuses;
(vi) file documents required of the
Company for blue sky clearance in states specified in writing
by the Buyer and use its commercially reasonable efforts to
maintain such blue sky qualifications during the period the
Company is required to maintain the effectiveness of the
Registration Statement pursuant to Section 7.1(c); provided,
however, that the Company shall not be required to qualify to
do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so
consented;
(vii) bear all expenses in connection
with the procedures in paragraph (a) through (e) of this
Section 7.1 (other than any underwriting discounts or
commissions, brokers' fees and similar selling expenses, and
any other fees or expenses incurred by the Buyer, including
attorneys' fees); and
(viii) advise the Buyer in writing
promptly after it shall receive notice or obtain knowledge of
the issuance of any stop order by the SEC delaying or
suspending the effectiveness of the Registration Statement or
of the initiation or threat of any proceeding for that
purpose; and it will promptly use its commercially reasonable
efforts to prevent the issuance of any stop order or to obtain
its withdrawal at the earliest possible moment if such stop
order should be issued.
15
(b) Notwithstanding anything to the contrary
herein, the Registration Statement shall cover only the Shares and the Warrant
Shares. In no event at any time before the Registration Statement becomes
effective with respect to the Shares shall the Company publicly announce or file
any other registration statement, other than registrations on Form S-8, without
the prior written consent of 66 -2/3% in interest of the Buyers.
(c) The Registration Statement shall contain
(except if otherwise agreed by the Holders) the "Plan of Distribution" attached
hereto as Annex A, subject to such revisions thereto as may be requested by the
Securities and Exchange Commission.
7.2. Transfer of Shares After Registration; Suspension.
(a) The Buyer agrees that it will not effect any
disposition of the Securities or its right to purchase the Securities that would
constitute a "sale" within the meaning of the Securities Act, except as
contemplated in the Registration Statement referred to in Section 7.1 and as
described below or as otherwise permitted by law, and that it will promptly
notify the Company of any material changes in the information set forth in the
Registration Statement regarding the Buyer or its plan of distribution.
(b) Except in the event that paragraph (c) below
applies, the Company shall (i) if deemed necessary by the Company, prepare and
file from time to time with the SEC a post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or a supplement
or amendment to any document incorporated therein by reference or file any other
required document so that such Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
so that, as thereafter delivered to purchasers of the Shares and Warrant Shares
being sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; (ii) provide the Buyer copies of any
documents filed pursuant to Section 7.2(b)(i) as the Buyer may reasonably
request; and (iii) inform each Buyer that the Company has complied with its
obligations in Section 7.2(b)(i) (or that, if the Company has filed a
post-effective amendment to the Registration Statement which has not yet been
declared effective, the Company will notify the Buyer to that effect, will use
its commercially reasonable efforts to secure the effectiveness of such
post-effective amendment as promptly as possible and will promptly notify the
Buyer pursuant to Section 7.2(b)(i) hereof when the amendment has become
effective).
(c) Subject to paragraph (d) below, in the event
of: (i) any request by the SEC or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to a Registration Statement or related Prospectus or
for additional information; (ii) the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose;
(iii) the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; or (iv) any event or circumstance which, upon the
advice of its
16
counsel, necessitates the making of any changes in the Registration Statement or
Prospectus, or any document incorporated or deemed to be incorporated therein by
reference, so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; then the Company shall deliver a certificate in writing to the Buyer
(the "Suspension Notice") to the effect of the foregoing and, upon receipt of
such Suspension Notice, the Buyer will refrain from selling any Shares and
Warrant Shares pursuant to the Registration Statement (a "Suspension") until the
Buyer's receipt of copies of a supplemented or amended Prospectus prepared and
filed by the Company, or until it is advised in writing by the Company that the
current Prospectus may be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in any such Prospectus. In the event of any Suspension, the Company will use its
commercially reasonable efforts to cause the use of the Prospectus so suspended
to be resumed as soon as reasonably practicable within 20 trading days after the
delivery of a Suspension Notice to the Buyer.
(d) Notwithstanding the foregoing paragraphs of
this Section 7.2, the Buyer shall not be prohibited from selling Shares under
the Registration Statement as a result of Suspensions on more than two occasions
of not more than 20 trading days each in any twelve month period.
(e) Provided that a Suspension is not then in
effect, the Buyer may sell the Shares and the Warrant Shares under the
Registration Statement, provided that it arranges for delivery of a current
Prospectus to the transferee of such Shares or Warrant Shares, as applicable.
The Company shall provide such number of current Prospectuses to the Buyer as
the Buyer may reasonably request, and shall supply copies to any other parties
reasonably requiring such Prospectuses.
7.3. Indemnification.
(a) The Company agrees to indemnify and hold
harmless each Selling Shareholder (defined below), the officers, directors,
agents, investment advisors and employees of each of them, each natural person,
corporation, partnership, limited liability company or other business entity
(each, a "Person") who controls any such Selling Shareholder (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law from and against any losses,
claims, damages or liabilities to which any such Person(s) may become subject
(under the Securities Act or otherwise) insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) arise out of, or
are based upon (i) any Untrue Statement (defined below), or (ii) any failure by
the Company to fulfill any undertaking included in the Registration Statement,
as amended or supplemented from time to time, which indemnification will include
reimbursement for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim, or preparing to defend any such action, proceeding or claim, provided,
17
however, that the Company shall not be liable in any such case to the extent
that such loss, claim, damage or liability arises out of, or is based upon, an
Untrue Statement made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Selling Shareholder
specifically for use in preparation of the Registration Statement, as amended or
supplemented from time to time (including, without limitation, information set
forth in the Investor Questionnaire), or the failure of such Selling Shareholder
to comply with its covenants and agreements contained in Section 7.2 hereof
respecting sale of the Shares or Warrant Shares or any statement or omission in
any Prospectus that is corrected in any subsequent Prospectus that was delivered
to the Selling Shareholder prior to the pertinent sale or sales by the Selling
Shareholder. The Company shall reimburse each Selling Shareholder for the
indemnifiable amounts provided for herein on demand as such expenses are
incurred.
(b) The Buyer agrees to indemnify and hold
harmless the Company (and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act, each officer of the Company who
signs the Registration Statement and each director of the Company) from and
against any losses, claims, damages or liabilities to which the Company (or any
such officer, director or controlling person) may become subject (under the
Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, (i) any Untrue Statement if such Untrue Statement was made in
reliance upon and in conformity with written information furnished by or on
behalf of the Buyer specifically for use in preparation of the Registration
Statement, as amended or supplemented from time to time (including, without
limitation, information set forth in the Investor Questionnaire), or (ii) the
failure of such Selling Shareholder to comply with its covenants and agreements
contained in Section 7.2 hereof respecting sale of the Shares or Warrant Shares
or any statement or omission in any Prospectus that is corrected in any
subsequent Prospectus that was delivered to the Selling Shareholder prior to the
pertinent sale or sales by the Selling Shareholder; and the Buyer will reimburse
the Company or such officer, director or controlling person, as the case may be,
for any reasonable legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim. The Buyer
shall reimburse the Company or such officer, director or controlling person, as
the case may be, for the indemnifiable amounts provided for herein on demand as
such expenses are incurred. Notwithstanding the foregoing, the Buyer's aggregate
obligation to indemnify the Company and such officers, directors and controlling
persons shall be limited to the net amount received by the Buyer from the sale
of Shares or Warrant Shares that are the subject of such loss.
(c) Promptly after receipt by any indemnified
person of a notice of a claim or the beginning of any action in respect of which
indemnity is to be sought against an indemnifying person pursuant to this
Section 7.3, such indemnified person shall notify the indemnifying person in
writing of such claim or of the commencement of such action, but the omission to
so notify the indemnifying person will not relieve it from any liability which
it may have to any indemnified person under this Section 7.3 (except to the
extent that such omission materially and adversely affects the indemnifying
person's ability to defend such action) or from any liability otherwise than
under this Section 7.3. Subject to the provisions hereinafter stated, in case
any such action shall be brought against an indemnified person, the indemnifying
person shall be entitled to participate therein, and, to the extent that it
shall elect by written notice delivered to the indemnified person promptly after
receiving the aforesaid notice from such
18
indemnified person, shall be entitled to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified person. After notice from
the indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel (together with appropriate local
counsel) for all indemnified parties. In no event shall any indemnifying person
be liable in respect of any amounts paid in settlement of any action unless the
indemnifying person shall have approved the terms of such settlement; provided
that such consent shall not be unreasonably withheld or delayed. No indemnifying
person shall, without the prior written consent of the indemnified person,
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified person is or could have been a party and indemnification
could have been sought hereunder by such indemnified person, unless such
settlement includes an unconditional release of such indemnified person from all
liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in this
Section 7.3 is unavailable to or insufficient to hold harmless an indemnified
person under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to therein, then each indemnifying person shall contribute to the amount paid or
payable by such indemnified person as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and the
Buyer, as well as any other Selling Shareholders under such Registration
Statement on the other in connection with the statements or omissions or other
matters which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, in the case of an Untrue Statement, whether the Untrue Statement
relates to information supplied by the Company on the one hand or an Buyer or
other Selling Shareholder on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
Untrue Statement. The Company and the Buyer agree that it would not be just and
equitable if contribution pursuant to this subsection (d) were determined by pro
rata allocation (even if the Buyer and other Selling Shareholders were treated
as one entity for such purpose) or by any other method of allocation which does
not take into account the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified person as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), the Buyer shall not be required to contribute
any amount in excess of the amount by which the net amount received by the Buyer
from any and all sales of the Securities to which such loss relates exceeds the
amount of any damages which such Buyer has otherwise been required to pay by
reason of such Untrue Statement. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to
19
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Buyer's obligations in this subsection to contribute
shall be in proportion to its sale of Securities to which such loss relates and
shall not be joint with any other Selling Shareholders.
(e) The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7.3, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 7.3 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement as required by the Securities
Act and the Exchange Act. The parties are advised that federal or state public
policy as interpreted by the courts in certain jurisdictions may be contrary to
certain of the provisions of this Section 7.3, and the parties hereto hereby
expressly waive and relinquish any right or ability to assert such public policy
as a defense to a claim under this Section 7.3 and further agree not to attempt
to assert any such defense.
(f) For the purpose of this Section 7.3:
(i) the term "Selling Shareholder"
means the Buyer and any affiliate of such Buyer;
(ii) the term "Registration Statement"
shall include the Prospectus in the form first filed with the SEC pursuant to
Rule 424(b) of the Securities Act or filed as part of the Registration Statement
at the time of effectiveness if no Rule 424(b) filing is required, and any
exhibit, supplement or amendment included in or relating to the Registration
Statement referred to in Section 7.1; and
(iii) the term "Untrue Statement" means
any untrue statement or alleged untrue statement, or any omission or alleged
omission to state in the Registration Statement, as amended or supplemented from
time to time, a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
7.4. Information Available. So long as the Registration
Statement is effective covering the resale of Shares and Warrant Shares owned by
the Buyer, the Company will, at Buyer's written request, furnish to the Buyer:
(a) as soon as practicable after it is
available, one copy of (i) its Annual Report to Shareholders (which Annual
Report shall contain financial statements audited in accordance with generally
accepted accounting principles by a national firm of certified public
accountants), (ii) its Annual Report on Form 10-K and (iii) its Quarterly
Reports on Form 10-Q (the foregoing, in each case, excluding exhibits);
(b) any and all exhibits to the reports set
forth in Section 7.4(a) as filed with the SEC and all other information that is
made available to shareholders; and
(c) an adequate number of copies of the
Prospectuses to supply to any other party requiring such Prospectuses.
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8. GOVERNING LAW; MISCELLANEOUS.
8.1. Governing Law; Jurisdiction; Jury Trial. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party hereto hereby irrevocably
waives personal service of process and consents to process being served in any
suit, action or proceeding arising under or relating to this Agreement (a
"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. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any Proceeding. If either party shall commence a Proceeding to enforce
any provisions of this Agreement, then the prevailing party in such Proceeding
shall be reimbursed by the other party for its reasonable attorney's fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding. Each party agrees that all Proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement (whether brought against a party hereto or its
respective affiliates, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New York, Borough of
Manhattan, (the "Courts"). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any Proceeding, any claim that it is not personally subject to the jurisdiction
of any such Court, or that such Proceeding has been commenced in an improper or
inconvenient forum.
8.2. Counterparts. This Agreement may be executed in two
or more identical counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other parties; provided that a facsimile
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
8.3. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
8.4. Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
8.5. Entire Agreement; Amendments. This Agreement
supersedes all other prior oral or written agreements between the Buyers, the
Company, their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein. No provision of this Agreement may be amended other than
by an
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instrument in writing signed by the Company and the holders of at least 66 2/3%
of the Shares, and no provision hereof may be waived other than by an instrument
in writing signed by the party against whom enforcement is sought. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Shares then outstanding.
8.6. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Avanir Pharmaceuticals
00000 Xxxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attn: Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
0000 Xx Xxxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attn: Xxxx Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to a Buyer: at the address and facsimile number
set forth on the Schedule of Buyers attached hereto,
with copies to such Buyer's representatives, if any,
specified on the Schedule of Buyers,
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party in accordance with the above provisions five (5) days prior to
the effectiveness of such change.
8.7. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Shares. A Buyer may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Company, except for assignments to affiliates of Buyer or
to other Buyers.
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8.8. No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
8.9. Publicity. The Company and each Buyer shall have the
right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure with respect to such
transactions as is required by applicable law and regulations (although each
Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).
8.10. Further Assurances. Each party shall do and perform,
or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
8.11. Termination. In the event that the Closing shall not
have occurred with respect to a Buyer within five (5) business days from the
Closing Date due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the non-breaching party's
failure to waive such unsatisfied condition(s)), the non-breaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party.
8.12. Placement Agent. The Company acknowledges that it has
engaged Xxxxxx & Xxxxxxx as placement agent in connection with the sale of the
Securities, which placement agent may have formally or informally engaged other
agents on its behalf. The Company shall be responsible for the payment of any
placement agent's fees or broker's commissions relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) in connection with any
such claim.
8.13. Remedies. Each Buyer and each holder of the
Securities shall have all rights and remedies set forth in this Agreement and
all of the rights that such holders have under any law. Any person having any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
8.14. Obligations of Buyers Several and Not Joint. The
obligations of each Buyer hereunder are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way for
the performance of the obligations of any other Buyer under any Agreement.
Nothing contained herein, and no action taken by any Buyer hereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group
23
with respect to such obligations or the transactions contemplated hereby,
provided that such obligations or the transactions contemplated hereby may be
modified, amended or waived in accordance with Section 8.5 of this Agreement.
Each Buyer shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement (provided,
that such rights may be modified, amended or waived in accordance with Section
8.5), and it shall not be necessary for any other Buyer to be joined as an
additional party in any proceeding for such purpose.
* * *
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IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed on the date first written
above.
COMPANY:
AVANIR PHARMACEUTICALS
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxxx, Ph.D.
Chief Executive Officer
THE BUYER'S SIGNATURE TO THE INVESTOR QUESTIONNAIRE DATED OF EVEN DATE HEREWITH
SHALL CONSTITUTE THE BUYER'S SIGNATURE TO THIS SECURITIES PURCHASE AGREEMENT.
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