SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is entered into
and dated as of January 16, 2004 (the "Execution Date"), between Millennium Cell
Inc., a Delaware corporation (the "Company"), and the investor signatory hereto
(including its successors and assigns, the "Purchaser").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act"), and Rule 506 promulgated thereunder, the Company desires
to issue and sell to the Purchaser, and the Purchaser desires to purchase from
the Company, certain securities of the Company pursuant to the terms set forth
herein.
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 the Purchaser agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall have
the meanings set forth in this Section 1.1:
"Additional Closing" means the closing of the purchase and
sale of the Additional Debentures and Additional Shares pursuant to Section 2.4.
"Additional Closing Date" means the second Business Day
immediately following the date on which the conditions set forth in Section
2.4(b) are satisfied by the Company.
"Additional Debentures" means the convertible debentures
issuable to the Purchaser at the Additional Closing, in the form of Exhibit A
hereto.
"Additional Shares" means the shares of Common Stock issuable
to the Purchaser at the Additional Closing.
"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.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York or the State of New Jersey are authorized
or required by law or other governmental action to close.
"Closing" means the closing of the purchase and sale of the
Initial Debentures and the Initial Shares pursuant to Section 2.3.
"Closing Date" means the second Business Day immediately
following the date on which the conditions set forth in Section 2.3(b) are
satisfied by the Company.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, $.001
par value per share, and any securities into which such common stock may
hereafter be reclassified.
"Common Stock Equivalents" means any securities of the Company
or the Subsidiaries which would entitle the holder thereof to acquire Common
Stock, including without limitation, any debt, preferred stock or other
instrument that is at any time convertible into or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.
"Company Counsel" means Xxxxxxx, Del Deo, Dolan, Griffinger
& Xxxxxxxxx, P.C.
"Debentures" means collectively the Initial Debentures and the
Additional Debentures.
"Effective Date" means with respect to a Registration
Statement required by the Registration Rights Agreement, the date that such
Registration Statement is first declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"First Registration Statement" means a Registration Statement
meeting the requirements set forth in the Registration Rights Agreement and
covering the resale by the Purchaser of the Initial Shares and the Underlying
Shares issuable upon conversion of the Initial Debentures.
"Initial Debentures" means the convertible debentures issuable
to the Purchaser at the Closing, in the form of Exhibit A hereto.
"Initial Shares" means the shares of Common Stock issuable to
the Purchaser at the Closing.
"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 in writing.
"Purchaser Counsel" means Xxxxx Xxxx LLP.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, between the Company and the
Purchaser, in the form of Exhibit B hereto.
"Registration Statement" means either the First Registration
Statement or the Second Registration Statement, as the context may require.
"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.
"Second Registration Statement" means a Registration Statement
meeting the requirements set forth in the Registration Rights Agreement and
covering the resale by the Purchaser of the Additional Shares and the Underlying
Shares issuable upon conversion of the Additional Debentures.
"Securities" means the Shares, the Debentures and the
Underlying Shares issued or issuable pursuant to the Transaction Documents.
"Shares" means, collectively, the Initial Shares and the
Additional Shares.
"Subsidiary" means any subsidiary of the Company that is
required to be listed in Schedule 3.1(a).
"Trading Day" means: (i) a day on which the Common Stock is
traded on a Trading Market, or (ii) if the Common Stock is not listed on a
Trading Market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.
"Trading Market" means any of the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap
Market.
"Transaction Documents" means this Agreement, the Registration
Rights Agreement, the Debentures, the Transfer Agent Instructions and any other
documents or agreements executed or delivered in connection with the
transactions contemplated hereunder.
"Transfer Agent Instructions" means the Company's transfer
agent instructions in the form of Exhibit C.
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"Underlying Shares" means the shares of Common Stock issuable
upon conversion of the Debentures.
"Unsecured Cash and Cash Equivalents" refers to cash and
cash-equivalent balances that is available for use by the Company in its
operations, excluding the deferred royalty income described in Schedule 3.1(x).
"Unsecured Indebtedness" means any indebtedness of the
Company, any outstanding secured debentures of the Company issued to Xxxxxxx
Power Systems, Inc. and any outstanding deferred royalty income described in
Schedule 3.1(x).
ARTICLE II.
PURCHASE AND SALE
2.1 Closing Venue. Subject to the terms and conditions set forth in this
Agreement, the Closing and the Additional Closing (if any) shall take place at
the offices of Purchaser Counsel on the Closing Date and, in the case of the
Additional Closing, on the Additional Closing Date, or at such other location or
time as the parties may agree.
2.2 Deliveries on Execution Date. (a) On the Execution Date, the
Company shall deliver or cause to be delivered to the Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) the legal opinion of Company Counsel, in agreed form, addressed to the
Purchaser;
(iii) the Registration Rights Agreement duly executed by the Company;
(iv) the Transfer Agent Instructions duly executed by the Company and
acknowledged by the Company's transfer agent; and
(v) the legal fee reimbursement specified in Section 5.1.
(b) On the Execution Date, the Purchaser shall deliver or cause to be delivered
to the Company the following:
(i) this Agreement duly executed by the Purchaser; and
(ii) the Registration Rights Agreement duly executed by the Purchaser.
2.3 Closing Date. (a) If each of the conditions set forth in Section 2.3(b) have
been satisfied by the Company, then on the Closing Date, the Company shall issue
to the Purchaser, the Initial Debentures and the Initial Shares for an aggregate
purchase price of $6,000,000 less a loan commitment fee of $399,518 (such net
amount, the "Initial Purchase Price"). At the Closing, the Company will deliver
to the Purchaser: (1) the Initial Debentures, registered in the name of the
Purchaser, in the aggregate principal amount of $6,000,000, (2) a stock
certificate (which shall contain no restrictive legends) registered in the name
of the Purchaser, evidencing 140,180 Initial Shares, and (3) a bring-down of the
legal opinion of Company Counsel delivered on the Execution Date, addressed to
the Purchaser. The Purchaser will, against delivery of the Initial Debentures
and Initial Shares, deliver to the Company, the Initial Purchase Price, in
United States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose.
(b) Conditions Precedent to the Purchase of Initial Debentures and Initial
Shares. Notwithstanding anything to the contrary contained in this Agreement,
the obligation of the Purchaser to purchase the Initial Debentures and the
Initial Shares at the Closing is subject to the satisfaction of each of the
following conditions:
(i) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company contained in this Agreement shall
be true and correct as of the date when made and as of the Closing Date, as
though made on and as of the Closing Date (other than representations and
warranties which relate to a specific date (which shall not include
representations and warranties relating to the "date hereof") which
representations and warranties shall be true as of such specific date).
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(ii) Performance by the Company. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company between the Execution Date and the Closing Date.
(iii) First Registration Statement. The First Registration Statement shall have
been declared effective under the Securities Act by the Commission no later than
the 150th day following the Execution Date and shall have remained effective
(and the prospectus therein shall have remained available for use by the
Purchaser to resell Initial Shares and Underlying Shares issuable upon
conversion of the Initial Debentures) at all times, not subject to any actual or
threatened stop order or subject to any actual or threatened suspension at any
time prior to the Closing Date. The Company shall notify the Purchaser in
writing at such time as the Commission shall communicate to the Company that the
First Registration Statement may go effective.
(iv) No Injunction. Since the Execution Date, no statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated, amended, modified or endorsed by any court of governmental
authority of competent jurisdiction or governmental authority, stock market or
trading facility which prohibits the consummation of any of the transactions
contemplated by the Transaction Documents.
(v) Adverse Changes. Since the Execution Date, no event or series of events
shall have occurred which reasonably would be expected to have or result in a
material adverse effect on the results of operations, assets or financial
condition of the Company and the Subsidiaries, taken as a whole.
(vi) Nasdaq Listing. The Nasdaq Stock Market shall have waived application of
the 15 day prior notice contained in NASD Marketplace Rule 4310(c)(17)(D) or
such timeframe shall have expired without objection. The issuance and sale of
the Initial Debentures and Initial Shares shall not violate the rules and
regulations of the Nasdaq Stock Market, including Rule 4350.
(vii) Compliance Certificate. The Company shall have delivered to the Purchaser,
an officer's certificate stating that the conditions specified in clauses
(i)-(vi) above have been satisfied.
2.4 Additional Closing. (a) Subject to the conditions set forth in Section
2.4(b), the Company may require Purchaser to purchase up to $4,000,000 of
Additional Debentures and Additional Shares on the Additional Closing Date. The
Company shall indicate its intent to sell the Additional Debentures and the
Additional Shares by delivery to the Purchaser of a written notice which may be
delivered at any time prior to the expiration of the 15th month anniversary of
the Execution Date and indicating thereon the principal amount of Additional
Debentures up to $4,000,000 that it intends to sell at the Additional Closing,
provided, that the Company may only deliver such written notice if, on the date
of such delivery, it is in compliance in all material respects with the terms
and conditions of the Transaction Documents, no Event of Default shall exist
under the Initial Debentures, and at least $4,000,000 of principal amount of
Initial Debentures shall have been converted into Underlying Shares in
accordance with the terms thereof. The Company may only exercise the right to
elect to require the purchase of Additional Debentures and Additional Shares on
a single occasion, and there may not be more than a single Additional Closing.
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If the Company shall have timely delivered such notice, then subject to the
satisfaction of the conditions set forth in Section 2.4(b), on the Additional
Closing Date, the Company shall issue to the Purchaser the Additional Debentures
and the Additional Shares for an aggregate purchase price equal to the principal
amount of Additional Debentures specified in the Company's notice under this
Section (up to $4,000,000), less a loan commitment fee equal to (x) the product
of $228,259 and the percentage of $4,000,000 of Debentures to be issued at the
Additional Closing, less (y) $57,065 of the loan commitment fee paid in
accordance with Section 2.3 (such net amount, the "Additional Purchase Price").
At the Additional Closing, the Company will deliver to the Purchaser: (1) the
Additional Debentures, registered in the name of the Purchaser, in the aggregate
principal amount of up to $4,000,000 (as indicated in the Company's notice to
elect the sale and issuance of the Additional Debentures), (2) a stock
certificate (which shall contain no restrictive legends) registered in the name
of the Purchaser, evidencing a number of Additional Shares equal to (x) the
product of 80,091 and the percentage of $4,000,000 of Additional Debentures to
be issued at the Additional Closing, less (y) 20,022 of the Initial Shares
issued at the Closing pursuant to Section 2.3(a), and (3) a bring-down of the
legal opinion of Company Counsel delivered on the Execution Date, addressed to
the Purchaser. The Purchaser will, against delivery of its Additional Debentures
and Additional Shares, deliver to the Company, the Additional Purchase Price, in
United States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose.
(b) Conditions Precedent to the Purchase of Additional Debentures and Additional
Shares. Notwithstanding anything to the contrary contained in this Agreement,
the obligation of the Purchaser to purchase the Additional Debentures and the
Additional Shares at the Additional Closing is subject to the satisfaction of
each of the following conditions:
(i) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company contained in this Agreement shall
be true and correct as of the date when made and as of the Additional Closing
Date, as though made on and as of the Additional Closing Date (other than
representations and warranties which relate to a specific date (which shall not
include representations and warranties relating to the "date hereof") which
representations and warranties shall be true as of such specific date).
(ii) Performance by the Company. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company between the Closing Date and the Additional Closing Date.
(iii) Second Registration Statement. The Second Registration Statement shall
have been declared effective under the Securities Act by the Commission no later
than the 150th day following the date the Company shall have delivered to
Purchaser its notice of election under Section 2.4(a), and shall have remained
effective (and the prospectus therein shall have remained available for use by
the Purchaser to resell Additional Shares and Underlying Shares issuable upon
conversion of the Additional Debentures thereunder) at all times, not subject to
any actual or threatened stop order or subject to any actual or threatened
suspension at any time prior to the Additional Closing Date. The Company shall
notify the Purchaser in writing at such time as the Commission shall communicate
to the Company that the Second Registration Statement may go effective.
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(iv) No Injunction. Since the Execution Date, no statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated, amended, modified or endorsed by any court of governmental
authority of competent jurisdiction or governmental authority, stock market or
trading facility which prohibits the consummation of any of the transactions
contemplated by the Transaction Documents.
(v) Adverse Changes. Since the Execution Date, no event or series of events
which reasonably would be expected to have or result in a material adverse
effect on the results of operations, assets or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole.
(vi) Nasdaq Compliance. The issuance and sale of the Additional Shares and
Additional Debentures will not violate the rules and regulations of the Nasdaq
Stock Market, including Rule 4350, and the issuance of the Additional Shares and
Underlying Shares issuable upon conversion of the principal amount of Additional
Debentures, when taken together with the Initial Shares issued at the Closing
and the Underlying Shares issued and issuable upon conversion of the Initial
Debentures, shall be permitted to be issued under the Debentures without
"Shareholder Approval" (as defined in the Debentures).
(vii) Unsecured Cash and Cash Equivalents. The Unsecured Cash and Cash
Equivalents shall be no less than 120% of the sum of the outstanding principal
amount of Initial Debentures (including any accrued and unpaid interest
thereunder) and the principal amount of Additional Debentures.
(viii) Nasdaq Listing. The Nasdaq Stock Market shall have waived application of
the 15 day prior notice contained in NASD Marketplace Rule 4310(c)(17)(D) or
such timeframe shall have expired without objection.
(ix) Compliance Certificate. The Company shall have delivered to the Purchaser,
an officer's certificate stating that the conditions specified in clauses
(i)-(viii) above have been satisfied.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchaser:
(a) Subsidiaries. The Company has no direct or indirect subsidiaries other than
those listed in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the
Company owns, directly or indirectly, all of the capital stock of each
Subsidiary free and clear of any lien, charge, security interest, encumbrance,
right of first refusal or other restriction (collectively, "Liens"), and all the
issued and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar
rights. If the Company has no subsidiaries, then references in the Transaction
Documents to the Subsidiaries will be disregarded.
(b) Organization and Qualification. Each of the Company and the Subsidiaries is
an entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to conduct business and is
in good standing as a foreign corporation or other entity in each jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate 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 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
fully on a timely basis its obligations under any Transaction Document (any of
(i), (ii) or (iii), a "Material Adverse Effect"). Except as could not have or
could not reasonably be expected to result in a Material Adverse Effect, neither
the Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents.
(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
thereunder. The execution and delivery of each of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of the Company and
no further action is required by the Company. Each Transaction Document has been
(or upon delivery will be) duly executed by the Company and, when delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.
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(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not: (i) conflict with or violate any
provision of the Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
subject to obtaining the Required Approvals (as defined below), conflict with,
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (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) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or
a Subsidiary is subject (including federal and state securities laws and
regulations) (except that Shareholder Approval (as defined in the Debentures)
may be required to be sought pursuant to Section 5(d)(ii) of the Debentures), 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, individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect.
(e) Filings, Consents and Approvals. Neither the Company nor any Subsidiary is
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) the filing with the Commission of the Registration
Statements, (ii) the filings required by Section 4.8, (iii) the application with
the Trading Market on which the Common Stock is listed for the listing of the
Shares and Underlying Shares for trading thereon in the time and manner required
thereby, (iv) the filings and approvals that would be required if Shareholder
Approval is required to be sought pursuant to Section 5(d)(ii) of the
Debentures, and (v) as required by blue sky filings (collectively, the "Required
Approvals").
(f) Issuance of the Securities. The Securities have been duly authorized and,
when issued and paid for in accordance with the Transaction Documents, will be
duly and validly issued, fully paid and nonassessable, free and clear of all
Liens. The Company has reserved from its duly authorized capital stock a number
of shares of Common Stock to be issued to the Purchaser equal to the sum of the
Initial Shares, Additional Shares and Underlying Shares issuable upon conversion
of the Debentures and such number of reserved shares of Common Stock shall be at
least equal to 7,062,774.
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(g) Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 3.1(g). No
securities of the Company are entitled to preemptive or similar rights, and 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 and except as disclosed in Schedule 3.1(g), there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. Except as disclosed in
Schedule 3.1(g), the issuance and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any Person (other
than the Purchaser) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities.
(h) SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing materials being collectively referred
to herein as the "SEC Reports" and, together with the Schedules to this
Agreement, the "Disclosure Materials") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has delivered to the Purchaser a
copy of all SEC Reports filed within the 10 days preceding the date hereof. As
of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with 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
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.
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(i) Material Changes. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in Schedule
3.1 (i) and 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 or the
identity of its auditors, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans or
deferred compensation plan. The Company does not have pending before the
Commission any request for confidential treatment of information.
(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 Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect. Except as disclosed in the SEC Reports or in Schedule
3.1(j), neither the Company nor any Subsidiary, nor any officer thereof, is or
has been, nor any director thereof is or has been for the last three years, the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty. There
has not been, and, to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or any
current or former director that was a director of the Company at any time during
the last three years 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) 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
could not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect. The Company is in compliance with the
requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules and
regulations thereunder promulgated by the Commission, in each case as applicable
to the Company, except where such noncompliance could not have or reasonably be
expected to result in a Material Adverse Effect.
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(l) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar rights that
are 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, or
reasonably be expected to result in, a Material Adverse Effect (collectively,
the "Intellectual Property Rights"). Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person
which if determined adversely to the Company would, individually or in the
aggregate have a Material Adverse Effect. 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.
(m) Transactions With Affiliates and Employees. Except as set forth in SEC
Reports and except as set forth on the attached Schedule 3.1(m), none of the
officers or directors of the Company and, to the knowledge of the Company, none
of the employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
(n) Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(o) Solvency. Based on the financial condition of the Company as of each of the
Closing Date and Additional Closing Date (and assuming that the closing on each
such date shall have occurred as scheduled and the Purchaser pays the purchase
price hereunder), (i) the Company's fair saleable value of its assets exceeds
the amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The Company
does not intend 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).
11
(p) Certain Fees. No brokerage or finder's fees or commissions are or will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Purchaser shall have no
obligation with respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement.
(q) Private Placement. Assuming the accuracy of the Purchaser's representations
and warranties set forth in Section 3.2(b)-(e), no registration under the
Securities Act is required for the offer, issuance and sale of the Securities by
the Company to the Purchaser as contemplated hereby.
(r) Form S-3 Eligibility. The Company is eligible to register the resale of
shares of Common Stock for resale by the Purchaser under Form S-3 promulgated
under the Securities Act.
(s) Listing and Maintenance Requirements. The Company has not, in the two years
preceding the date hereof, received notice (written or oral) from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market, which non-compliance has not been fully
remedied. Except as set forth in Schedule 3.1(s) 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. The issuance and
sale of the Securities hereunder does not contravene the rules and regulations
of the Trading Market and, other than as may be required to be sought pursuant
to Section 5(d)(ii) of the Debentures, no approval of the shareholders of the
Company is required for the Company to issue and deliver to the Purchaser the
maximum number of Securities contemplated by this Agreement assuming conversion
of the Debentures on the date hereof, including as may be required pursuant to
Nasdaq Rule Filing SR-NASD-2003-40 (March 14, 2003) concerning shareholder
approval requirements when officers and directors participate in discounted
private placements and Nasdaq Rule Filing SR-NASD-2003-61 (March 28, 2003)
concerning shareholder approval requirements in connection with a change of
control.
(t) Registration Rights. Except as described in Schedule 3.1(t), 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
Commission or any other governmental authority that have not been satisfied.
12
(u) 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.
(v) Application of Takeover Protections. The Company and its Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti takeover provision
under the Company's Certificate of Incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable to
the Purchaser as a result of the Purchaser and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation the Company's issuance of the Securities and the
Purchaser's ownership of the Securities.
(w) Disclosure. The Company confirms that neither it nor any other Person acting
on its behalf has provided the Purchaser or its agents or counsel with any
information that constitutes or might constitute material, non-public
information. The Company understands and confirms that the Purchaser will rely
on the foregoing representations in effecting transactions in securities of the
Company. All disclosure provided to the Purchaser regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to
this Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(x) Seniority. As of the date of this Agreement, except as set forth in Schedule
3.1(x), no indebtedness of the Company is senior to the Debentures in right of
payment, whether with respect to interest or upon liquidation or dissolution, or
otherwise.
3.2 Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents to which it is a party and otherwise to carry out its obligations
thereunder. The purchase by Purchaser of the Securities issued or issuable to it
pursuant to the terms hereof has been duly authorized by all necessary corporate
action on the part of the Purchaser. Each of this Agreement and the Registration
Rights Agreement has been duly executed by the Purchaser, and, when delivered by
the Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of the Purchaser, enforceable against it in
accordance with its terms.
(b) Investment Intent. The Purchaser is acquiring the Securities issued or
issuable to it as principal for its own account for investment purposes only and
not with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to the Purchaser's right, subject to the
provisions of this Agreement, at all times to sell or otherwise dispose of all
or any part of such Securities pursuant to an effective registration statement
under the Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws. Nothing contained
herein shall be deemed a representation or warranty by the Purchaser to hold the
Securities issued or issuable to it for any period of time. The Purchaser is
acquiring the Securities issued or issuable to it hereunder in the ordinary
course of its business. The Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities issued or issuable to it.
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(c) Purchaser Status. At the time the Purchaser was offered the Securities
issued or issuable to it, it was, and at the date hereof it is, an "accredited
investor" as defined in Rule 501(a) under the Securities Act. The Purchaser has
not been formed solely for the purpose of acquiring the Securities issued or
issuable to it. The Purchaser is not a registered broker-dealer under Section 15
of the Exchange Act.
(d) Experience of the Purchaser. The 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 issued or issuable to it,
and has so evaluated the merits and risks of such investment. The Purchaser is
able to bear the economic risk of an investment in the Securities issued or
issuable to it and, at the present time, is able to afford a complete loss of
such investment.
(e) General Solicitation. The Purchaser is not purchasing the Securities issued
or issuable to it as a result of any advertisement, article, notice or other
communication regarding the Securities issued or issuable to it published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
(f) Access to Information. The Purchaser acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities issued or issuable to it and the merits and risks of
investing in the Securities issued or issuable to it; (ii) access to information
about the Company and the Subsidiaries and their respective financial condition,
results of operations, business, properties, management and prospects sufficient
to enable it to evaluate its investment; and (iii) the opportunity to obtain
such additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of the Purchaser or its representatives
or counsel shall modify, amend or affect the Purchaser's right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents.
14
(g) Limited Ownership. (1) With respect to the Closing, the purchase by the
Purchaser of the Securities issuable to it at the Closing (including the
Underlying Shares of Common Stock that would be issuable upon conversion of the
Initial Debentures) will not result in the Purchaser (individually or together
with other Person with whom the Purchaser has identified, or will have
identified, itself as part of a "group" in a public filing made with the
Commission involving the Company's securities) acquiring, or obtaining the right
to acquire, when added to other shares of Common Stock that it or such Persons
own or have the right to acquire, in excess of 19.999% of the Common Stock or
the voting power of the Company on a post transaction basis that assumes that
the Closing (but not the Additional Closing) shall have occurred. This
representation only covers the point in time immediately after the Closing and
does not cover any securities acquired by the Purchaser following the Closing.
The Purchaser does not presently intend to, alone or together with others, make
a public filing with the Commission to disclose that it has (or that it together
with such other Persons have) acquired, or obtained the right to acquire, as a
result of the Closing (but not the Additional Closing) (when added to any other
securities of the Company that it or they then own or have the right to acquire,
other than Additional Shares or Underlying Shares issuable in respect of
Additional Debentures which may become issuable at the Additional Closing, if
any), in excess of 19.999% of the Common Stock or the voting power of the
Company on a post transaction basis that assumes that the Closing (but not the
Additional Closing) shall have occurred.
(2) With respect to the Additional Closing, the
purchase by the Purchaser of the
Securities issuable to it at the Additional Closing (including the Underlying
Shares of Common Stock that would be issuable upon conversion of the Additional
Debentures to be issued to it at the Additional Closing as well as any
Underlying Shares of Common Stock that would be issuable upon conversion of
Initial Debentures then held by such Purchaser) will not result in the Purchaser
(individually or together with other Person with whom the Purchaser has
identified, or will have identified prior to the Additional Closing, itself as
part of a "group" in a public filing made with the Commission involving the
Company's securities) acquiring, or obtaining the right to acquire, when added
to the other shares of Common Stock that it or such Persons own or have the
right to acquire, in excess of 19.999% of the Common Stock or the voting power
of the Company on a post transaction basis that assumes that the Additional
Closing shall have occurred. This representation only covers the point in time
immediately after the Additional Closing and does not cover any securities
acquired by the Purchaser following the Additional Closing. The Purchaser does
not presently intend to, alone or together with others, make a public filing
with the Commission to disclose that it has (or that it together with such other
Persons have) acquired, or obtained the right to acquire, as a result of the
Additional Closing (when added to any other securities of the Company that it or
they then own or have the right to acquire), in excess of 19.999% of the Common
Stock or the voting power of the Company on a post transaction basis that
assumes that the Additional Closing shall have occurred.
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The Company acknowledges and agrees that the Purchaser has not and does
not make any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions. (a) Securities may only be disposed of in compliance
with state and federal securities laws. In connection with any transfer of the
Securities other than pursuant to an effective registration statement, to the
Company, to an Affiliate of the Purchaser who is an "accredited investor" as
defined in Rule 501(a) under the Securities Act or in connection with a pledge
as contemplated in Section 4.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. As a
condition of transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights of the Purchaser under
this Agreement and the Registration Rights Agreement.
(b) The Purchaser agrees to the imprinting, so long as is required by this
Section 4.1(b), of the following legend on the certificates evidencing the
Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH
THESE SECURITIES ARE CONVERTIBLE] HAVE [NOT] BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES [AND THE SECURITIES ISSUABLE UPON
CONVERSION OF THESE SECURITIES] MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
The Company acknowledges and agrees that the Purchaser may
from time to time pledge pursuant to a bona fide margin agreement or grant a
security interest in some or all of the Securities issued or issuable to it and,
if required under the terms of such arrangement, the Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties. Such a pledge
or transfer would not be subject to approval of the Company and no legal opinion
of the pledgee, secured party or pledgor shall be required in connection
therewith, provided, that the Company's transfer agent may require a legal
opinion to issue a certificate in the name of such pledgee or secured party if
such pledgee or secured party requires registration of the applicable Securities
in its name. Further, no notice shall be required of such pledge. At the
appropriate Purchaser's expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities
including the preparation and filing of any required prospectus supplement under
Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders
thereunder.
16
(c) Certificates evidencing the Shares or Underlying Shares shall not contain
any legend (including the legend set forth in Section 4.1(b)): (i) while a
registration statement (including the Registration Statement) covering the
resale of such Shares or Underlying Shares is effective under the Securities
Act, or (ii) following any sale of such Shares or Underlying Shares pursuant to
Rule 144, or (iii) if such Shares or Underlying Shares are eligible for sale
under Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The Company shall cause
its counsel to issue the legal opinion included in the Transfer Agent
Instructions to the Company's transfer agent on the Effective Date. If all or
any portion of a Debenture is converted at a time when there is a effective
registration statement to cover the resale of the Underlying Shares, such
Underlying Shares shall be issued free of all legends. The Company agrees that
following the Effective Date or at such time as such legend is no longer
required for Shares or Underlying Shares under this Section 4.1(c), it will, no
later than three Trading Days following the delivery by the Purchaser to the
Company or the Company's transfer agent of a certificate representing Shares or
Underlying Shares issued with a restrictive legend, deliver or cause to be
delivered to the Purchaser a certificate representing such Shares or Underlying
Shares that is free from all restrictive or other legends. The Company may not
make any notation on its records or give instructions to any transfer agent of
the Company that enlarge the restrictions on transfer set forth in this Section.
4.2 Unconditional Performance. The Company acknowledges that the issuance of the
Securities will result in dilution of the outstanding shares of Common Stock.
The Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim that the Company may
have against the Purchaser and shall only be subject to a non-appealable order
of the Commission.
4.3 Furnishing of Information. As long as the Purchaser owns the Securities
issued or issuable to it, 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. Upon the request of any such Person, the Company shall deliver
to such Person a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. As long as the Purchaser
owns the Securities issued or issuable to it, if the Company is not required to
file reports pursuant to such laws, it will prepare and furnish to the Purchaser
and make publicly available in accordance with Rule 144(c) such information as
is required for the Purchaser to sell the Securities under Rule 144.
17
4.4 Integration. The Company shall not, and shall use its best efforts to ensure
that no Affiliate of the Company shall, sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the applicable Securities to the Purchaser, or that would be
integrated with the offer or sale of the applicable Securities for purposes of
the rules and regulations of any Trading Market, if such integration would
result in a violation of any such rule or regulation.
4.5 Listing of Securities. The Company shall: (i) in the time and manner
required by each Trading Market on which the Common Stock is listed, prepare and
file with such Trading Market an additional shares listing application covering
the Shares and the Underlying Shares, (ii) take all steps necessary to cause
such shares to be approved for listing on each Trading Market on which the
Common Stock is listed as soon as possible thereafter, (iii) provide to the
Purchaser evidence of such listing, and (iv) maintain the listing of such shares
on each such Trading Market or another eligible securities market.
4.6 Reservation of Shares. The Company shall maintain a reserve from its duly
authorized shares of Common Stock to comply with its conversion obligations
under the Debentures pursuant to the Transaction Documents. If on any date the
Company would be, if notice of exercise or conversion were to be delivered on
such date, precluded from issuing the number of Underlying Shares, as the case
may be, issuable upon conversion in full of the Debentures due to the
unavailability of a sufficient number of authorized but unissued or reserved
shares of Common Stock, then the Board of Directors of the Company shall
promptly prepare and mail to the stockholders of the Company proxy materials
requesting authorization to amend the Company's certificate of incorporation to
increase the number of shares of Common Stock which the Company is authorized to
issue so as to provide enough shares for issuance of the Underlying Shares. In
connection therewith, the Board of Directors shall (a) adopt proper resolutions
authorizing such increase, (b) recommend to and otherwise use its best efforts
to promptly and duly obtain stockholder approval to carry out such resolutions
(and hold a special meeting of the stockholders as soon as practicable, but in
any event not later than the 60th day after delivery of the proxy materials
relating to such meeting) and (c) within five Business Days of obtaining such
stockholder authorization, file an appropriate amendment to the Company's
certificate of incorporation to evidence such increase.
4.7 Subsequent Placements and Registration Statements.
(a) From the Execution Date through and including the date the First
Registration Statement is declared effective by the Commission and from the date
that the Company delivers an election notice under Section 2.4(a) through and
including the date the Second Registration Statement is declared effective by
the Commission, the Company will not: (i) directly or indirectly, offer, sell or
grant any option to purchase (or announce any offer, sale, grant or any option
to purchase) any of its Common Stock or Common Stock Equivalents, or (ii) file a
registration statement (other than on a Form S-8 and pursuant to the
Registration Rights Agreement) with the Commission with respect to any
securities of the Company.
18
(b) The Company will not, directly or indirectly, offer, sell or issue any
Common Stock or Common Stock Equivalents, in a transaction intended to be exempt
from the registration requirements of the Securities Act (a "Subsequent Private
Placement") from the Execution Date until the earlier to occur of (x) twelve
months from the Effective Date of the First Registration Statement, or (y) the
date on which the Purchaser no longer holds 20% or more of the Securities
(including Underlying Shares), issued or issuable (which shall not include
Additional Shares or Underlying Shares in respect of Additional Debentures until
following the Additional Closing) to the Purchaser pursuant to the Transaction
Documents, unless (i) the Company delivers to the Purchaser a written notice
(the "Subsequent Private Placement Notice") of its intention to effect such
Subsequent Private Placement, which Subsequent Private Placement Notice shall
describe in reasonable detail the proposed terms of such Subsequent Private
Placement, the amount of proceeds intended to be raised thereunder, the Person
with whom such Subsequent Private Placement is proposed to be effected, and
attached to which shall be a term sheet or similar document relating thereto and
(ii) the Purchaser shall not have notified the Company by 6:30 p.m. (New York
City time) on the tenth Trading Day after its receipt of the Subsequent
Placement Notice of its willingness to provide (or to cause its designee to
provide), subject to completion of mutually acceptable documentation, up to the
greater of 20% of such financing or six million dollars ($6,000,000) (the
"Subsequent Financing Amount") to the Company on the same terms set forth in the
Subsequent Private Placement Notice. If the Purchaser shall fail to so notify
the Company of its willingness to participate in the Subsequent Financing
Amount, the Company may effect the remaining portion of such Subsequent
Placement on the terms and to the Persons set forth in the Subsequent Private
Placement Notice. The Company shall provide the Purchaser with a second
Subsequent Private Placement Notice and the Purchaser will again have the right
of first refusal set forth above in this paragraph (b), if the Subsequent
Placement subject to the initial Subsequent Private Placement Notice is not
consummated for any reason on the terms set forth in such Subsequent Placement
Notice within 45 Trading Days after the date of the initial Subsequent Placement
Notice with the Person identified in the Subsequent Placement Notice.
(c) The restrictions contained in Section 4.7(a)(i) and (b) shall not apply to
any grant or issuance by the Company of, or the filing by the Company of any
registration statement relating thereto following the Effective Date of the
First Registration Statement and the Second Registration Statement (as
applicable), any of the following:
(i) Any grant of an option or warrant for Common Stock or issuance of any shares
of Common Stock upon the exercise or exchange (but only if such exchange does
not, directly or indirectly, result in a reduction of the exercise price
therefor on a per share basis) of any options or warrants to employees, officers
and directors of or consultants to the Company pursuant to any stock option
plan, employee stock purchase plan or similar plan or incentive or consulting
arrangement approved by the Company's board of directors;
(ii) Any rights or agreements to purchase Common Stock Equivalents outstanding
on the date hereof and as specified in Schedule 3.1(g) (but not as to any
amendments or other modifications to the number of Common Stock issuable
thereunder, the terms set forth therein, or the exercise price set forth
therein);
19
(iii) Any Common Stock or Common Stock Equivalents issued for consideration
other than cash pursuant to a merger, consolidation, acquisition or other
similar business combination;
(iv) Any issuances of Common Stock or Common Stock Equivalents to a Person which
is or will be, itself or through its subsidiaries, an operating company in a
business related to or complementary with the business of the Company and in
which the Company receives reasonably material benefits in addition to the
investment of funds, but shall not include a transaction in which the Company is
issuing securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities;
(v) Any Common Stock Equivalents that entitle the holders thereof to acquire up
to 500,000 shares of Common Stock issued pursuant to any equipment leasing
arrangement;
(vi) Any Common Stock or Common Stock Equivalents issued to pay all or a portion
of any investment banking, finders or similar fee or commission, which entitles
the holders thereof to acquire shares of Common Stock at a price not less than
the market price of the Common Stock on the date of such issuance and which is
not subject to any adjustments other than on account of stock splits and reverse
stock splits;
(vii) The issuance of any warrants or debentures or any shares of Common Stock
issued upon: (x) the exercise of warrants issued by the Company pursuant to the
June 19, 2002 Securities Purchase Agreement (the "June Purchase Agreement"), (y)
the exercise of any warrants issued by the Company pursuant to the October 31,
2002 Securities Purchase Agreement (the "October Purchase Agreement"), and (z)
the conversion of debentures issued pursuant to the October Purchase Agreement.
(viii) A bona fide underwritten public offering of the Common Stock resulting in
gross proceeds in excess of $15 million to the Company (it being understood that
equity line transactions, including any on going warrant financing, or any
similar arrangements shall not constitute a bona fide underwritten public
offering of the Common Stock for the purposes hereof).
4.8 Securities Laws Disclosure; Publicity. The Company shall, within one
Business Day after each of the Execution Date, the Closing Date and the
Additional Closing Date, issue a press release and file a Current Report on Form
8-K reasonably acceptable to the Purchaser disclosing all material terms of the
transactions contemplated hereby. The Company and the Purchaser shall consult
with each other in issuing any press releases with respect to the transactions
contemplated hereby. Notwithstanding the foregoing, other than in any
Registration Statement filed pursuant to the Registration Rights Agreement and
filings related thereto, the Company shall not publicly disclose the name of the
Purchaser, or include the name of the Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of the Purchaser, except to the extent such disclosure is required by
law or Trading Market regulations, in which case the Company shall provide the
Purchaser with prior notice of such disclosure.
20
4.9 Non-Public Information. The Company covenants and agrees that neither it nor
any other Person acting on its behalf will provide the Purchaser or its agents
or counsel with any information that the Company believes constitutes material
non-public information, unless prior thereto the Purchaser shall have executed a
written agreement regarding the confidentiality and use of such information. The
Company understands and confirms that the Purchaser shall be relying on the
foregoing representations in effecting transactions in securities of the
Company.
4.10 Use of Proceeds. The Company shall not use any of the net proceeds from the
sale of the Securities hereunder for the satisfaction of any portion of the
Company's debt (other than payment of trade payables in the ordinary course of
the Company's business and prior practices), to redeem any Company equity or
equity equivalent securities or to extend any loans to its Affiliates.
4.11 Indemnification of Purchaser. The Company hereby indemnifies and holds the
Purchaser and its directors, officers, shareholders, partners, employees and
agents (each, a "Purchaser Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation (collectively, "Losses") that any the
Purchaser Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy, or any allegation by a third party
that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents. The Company will reimburse the
Purchaser for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The Company and the
Purchaser Party may not, without the prior written consent of the other, agree
to any settlement of any claim or action with respect to which the Company is
required to indemnify the Purchaser Party pursuant to this Section 4.11.
4.12 Shareholders Rights Plan. No claim will be made or enforced by the Company
or any other Person that the Purchaser is an "Acquiring Person" under any
shareholders rights plan or similar plan or arrangement in effect or hereafter
adopted by the Company, or that the Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving Shares or
Underlying Shares under the Transaction Documents or under any other agreement
between the Company and the Purchaser.
4.13 Ratio of Cash and Cash-Equivalents to Unsecured Indebtedness. At all times
when there shall be any principal amount of Debentures outstanding, the Company
will not permit the ratio of its Unsecured Cash and Cash-Equivalents balances to
Unsecured Indebtedness to be less than 0.80 to 1. If the Company becomes aware
of a violation of this covenant at the close of any Business Day, the Company
shall disclose such violation to the Purchaser within two Business Days and
concurrently with any such disclosure to Purchaser make such public filings as
required by applicable law and Trading Market regulations to publicly disclose
such event in order to comply with Section 4.9.
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ARTICLE V.
MISCELLANEOUS
5.1 Fees and Expenses. The Company has agreed to pay $20,000 on the Execution
Date as reimbursement for its legal and other fees and expenses incurred in
connection with the investigation and negotiation of the transaction and the
preparation and negotiation of the Transaction Documents. Other than as
specified above, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the issuance of
any Securities.
5.2 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchaser such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.
5.3 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
specified in this Section prior to 6:30 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 specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The addresses for such notices and communications are those set forth on the
signature pages hereof, or such other address as may be designated in writing
hereafter, in the same manner, by such Person.
5.4 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 the Purchaser or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought. No waiver of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.
5.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
22
5.6 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 the Purchaser. The Purchaser may assign its
rights under this Agreement and the Registration Rights Agreement to any Person
to whom the Purchaser assigns or transfers any Securities.
5.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.11.
5.8 Governing Law; Venue; Waiver of 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 agrees that all 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, Borough of Manhattan. Each party hereto 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 the any of the
Transaction Documents), 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, that such Proceeding is improper. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such 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 legal proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby. If either
party shall commence a Proceeding to enforce any provisions of a Transaction
Document, then the prevailing party in such Proceeding shall be reimbursed by
the other party for its attorneys fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such Proceeding.
5.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing Date and the Additional Closing Date,
as applicable, and the delivery and conversion of the Securities.
23
5.10 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.11 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.12 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever the 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 the 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.
5.13 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.14 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, the Purchaser and the
Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
5.15 Payment Set Aside. To the extent that the Company makes a payment or
payments to the Purchaser pursuant to any Transaction Document or the 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
24
(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.
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SIGNATURE PAGES FOR PURCHASER FOLLOWS]
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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.
MILLENNIUM CELL INC.
By: /s/ Xxxxxxx X. Xxxx
----------------------------------------------------
Name: Xxxxxxx X. Xxxx, Ph.D.
Title: President, Chief Executive Officer &
Acting Chief Financial Officer
Address for Notice:
0 Xxxxxxxxxx Xxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With a copy to:
Xxxxxxx, Del Deo, Dolan, Griffinger
&Vecchione, P.C
Xxx Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Phone (000) 000-0000
Fax (000) 000-0000
Attn: Xxxxxx Xxxx Xxxxxxx, Esq.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASER FOLLOWS]
26
MAINFIELD ENTERPRISES, INC.
By: /s/ Avi Vigder
----------------------------------------------------
Name: Avi Vigder
Title: Authorized Signatory
Address for Notice:
c/o Sage Capital Corp.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn.: Eldad Gal
27
