Exhibit 10.21
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of July
15, 2005 is made by and among PharmaFrontiers Corp., a Texas corporation, with
headquarters located at 0000 Xxxxxxxxxx Xxxxx, Xxxxx X-0, Xxx Xxxxxxxxx, Xxxxx
00000 (the "Company"), and the investors named on the signature pages hereto,
together with their permitted transferees (the "Investors").
RECITALS:
A. The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemptions from securities registration afforded
by Section 4(2) of the Securities Act and Rule 506 under Regulation D.
B. Each of the Investors desires, upon the terms and conditions stated
in this Agreement, to purchase that number of shares of Common Stock of the
Company indicated on their signature page hereto (the "Common Shares") at $1.50
per share and to receive, in consideration for such purchase, the warrants (the
"Warrants") to acquire shares of Common Stock as described herein.
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
under which the Company has agreed to provide certain registration rights under
the Securities Act, the rules and regulations promulgated thereunder and
applicable state securities laws.
D. The capitalized terms used herein and not otherwise defined have the
meanings given them in Article IX hereof.
In consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Investors hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK
1.1 Purchase and Sale of Common Stock. At the Closing, subject to the terms
of this Agreement and the satisfaction or waiver of the conditions set forth in
Articles VI and VII hereof, the Company will issue and sell to each Investor,
and each Investor will (on a several and not a joint basis) purchase from the
Company, such number of Common Shares set forth on the Investor's signature page
at a price of $1.50 per share. The Company will add Investor's name and number
of shares purchased to Exhibit A and amend Exhibit A from time to time to add
new Investors.
1.2 Payment. At the Closing, subject to the terms of this Agreement and the
satisfaction or waiver of the conditions set forth in Articles VI and VII
hereof, each Investor will pay the purchase amount for the Common Shares as is
set forth on the Investor's signature page. Each Investor will make the payment
by wire transfer of immediately available funds in accordance with the Company's
written wire instructions; promptly after closing the Company shall deliver to
each Investor of (i) one or more stock certificates, free and clear of all
restrictive and other legends (except as expressly provided herein),
representing the Common Shares so purchased by such Investor and (ii) Warrants
in an amount determined in accordance with Section 1.4 hereof, and the Company
will deliver such stock certificates and Warrants against delivery of the
purchase price as described above. At Company's option, Company may accept the
surrender of Bridge Notes as payment for the Securities in lieu of cash.
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1.3 Closing Date. Subject to the satisfaction or waiver of the conditions
set forth in Articles VI and VII hereof, the Closing will take place at 8:00
p.m., Central Time, on or prior to July 15, 2005 (or such extended date as
determined by the Company as identified by one day prior notice from the
Company) (the "Closing Date"); provided that at any time, the Company may close
the sale with such Investors as have executed this Agreement and then hold one
or more subsequent Closings thereafter subject to the foregoing limitations on
the Closing Date. The Closing(s) will be held at the offices of Xxxxxx & Xxxxxx
LLP in Houston, Texas, or at such other place as the parties agree.
1.4 Warrants. In consideration of the purchase of the Common Shares by the
Investors, at the Closing the Company will issue three different warrants: the
"Series A Warrant," the "Series B Warrant" and the "Series C Warrant"
(collectively, the "Warrants") to each Investor. The Series A Warrant shall
entitle the Investor to purchase 1,250 shares of Common Stock for each 1,000
shares of Common Stock purchased by such Investor on the Closing Date at an
exercise price of $2.00 per share and will expire on the later of (i) February
17, 2006 or (ii) five months after the registration statement for the re-sale of
the warrant shares becomes effective. The Series B Warrant shall entitle the
Investor to purchase 500 shares of Common Stock for each 1,000 shares of Common
Stock purchased by such Investor on the Closing Date at an exercise price of
$2.90 per share and will expire on the later of (i) October 17, 2006 or (ii) 12
months after the registration statement for the re-sale of the warrant shares
becomes effective. The Series C Warrant shall entitle the Investor to purchase
1,000 shares of Common Stock for each 1,000 shares of Common Stock purchased by
such Investor on the Closing Date at an exercise price of $4.00 per share and
will expire on June 17, 2010. The Series A Warrant, Series B Warrant and Series
C Warrants will be substantially in the forms of Exhibits B, C and D,
respectively, attached hereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF INVESTORS
Each Investor represents and warrants to the Company, severally and
solely with respect to itself and its purchase hereunder and not with respect to
any other Investor, that:
2.1 Investment Purpose. The Investor is purchasing the Securities for its
own account and not with a present view toward the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration under
the Securities Act; provided, however, that by making the representations
herein, such Investor does not agree to hold any of the Securities for any
minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption from the registration requirements of the Securities
Act.
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2.2 Accredited Investor Status. The Investor is an "accredited investor" as
defined in Rule 501(a) of Regulation D. The Investor has experience as an
investor in securities representing an investment decision like that involved in
the purchase of the Securities and acknowledges that it has the knowledge,
sophistication and experience in financial and business matters as to be capable
of evaluating the merits and risks of an investment in the Securities and has
the ability to bear the economic risks of an investment in the Securities.
2.3 Reliance on Exemptions. The Investor understands that the Securities
are being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Investor's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Investor set forth herein in order to determine the
availability of such exemptions and the eligibility of the Investor to acquire
the Securities.
2.4 Information. The Investor and its advisors, if any, have reviewed the
SEC Documents and 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 the Investor or its
advisors, if any. The Investor and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigation conducted by Investor or any of its advisors
or representatives modify, amend or affect the Investor's right to rely on the
Company's representations and warranties contained in Article III below. The
Investor acknowledges and understands that its investment in the Securities
involves a significant degree of risk, including the risks reflected in the SEC
Documents, and that the market price of the Common Stock has been and continues
to be volatile and that no representation is being made as to the future value
of the Common Stock.
2.5 Governmental Review. The Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities or an
investment therein.
2.6 Transfer or Resale. The Investor understands that:
(a) except as provided in the Registration Rights Agreement, the
Securities have not been registered under the Securities Act or any
applicable state securities laws and, consequently, the Investor may have
to bear the risk of owning the Securities for an indefinite period of time
because the Securities may not be transferred unless (i) the resale of the
Securities is registered pursuant to an effective registration statement
under the Securities Act; (ii) the Investor has delivered to the Company an
opinion of counsel (in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption
from such registration; (iii) the Securities are sold or transferred
pursuant to Rule 144; or (iv) the Securities are sold or transferred to an
affiliate (as defined in Rule 144) of the Investor;
(b) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 and, 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 another exemption under the Securities Act or the rules and
regulations of the SEC thereunder;
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(c) except as set forth in the Registration Rights Agreement, neither
the Company nor any other person is under any obligation to register the
Securities under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder; and
(d) notwithstanding anything in this Agreement or the Warrants to the
contrary, the Company agrees to reregister any Common Shares or Warrant
issued to an Investor hereunder in the name of any partner or affiliate of
such Investor, and any such partner shall be deemed to be an Investor for
all purposes of this Agreement and the Registration Rights Agreement,
provided that any such partner or affiliate agrees in writing to be subject
to the terms of this Agreement and the Registration Rights Agreement to the
same extent as of such partner were an original Investor hereunder and
thereunder.
2.7 Legends. The Investor understands that until (a) the Common Shares and
the Warrants may be sold by the Investor under Rule 144(k) or (b) such time as
the resale of the Securities has been registered under the Securities Act as
contemplated by the Registration Rights Agreement, the certificates representing
the Securities will bear a restrictive legend in substantially the following
(and, subject to Article V, a stop transfer order may be placed against transfer
of the certificates for such Securities):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
(COLLECTIVELY, THE "ACTS"). THE SECURITIES MAY NOT BE OFFERED
OR SOLD IN THE ABSENCE OF THE FOLLOWING: (1) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACTS
COVERING THE TRANSACTION, (2) THE COMPANY RECEIVES AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACTS, OR (3) THE
COMPANY OTHERWISE SATISFIES ITSELF THAT REGISTRATION IS NOT
REQUIRED UNDER THE ACTS. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
The legend set forth above will be removed and the Company will issue a
certificate without the legend to the holder of any certificate upon which it is
stamped, in accordance with the terms of Article V hereof.
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2.8 Authorization; Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of the Investor and are valid and binding agreements of the Investor,
enforceable in accordance with their terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and the application of general
principles of equity.
2.9 Residency. The Investor is a resident of the jurisdiction set forth
immediately below such Investor's name on the signature pages hereto.
2.10 No Intent to Effect a Change of Control. The Investor has no present
intent to change or influence the control of the Company within the meaning of
Rule 13d-1 of the Exchange Act.
2.11 No Hedging. The Investor has not established any hedge or other
position in the Common Stock that is outstanding on the Closing Date, which is
designed to or could reasonably be expected to lead to or result in any sale of
the Common Shares. For purposes hereof, a "hedge or other position" would
include effecting any short sale or having in effect any short position or any
purchase, sale or grant of any put option, call option or prepaid forward
contract with respect to the Common Stock of the Company or with respect to any
security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from the Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company, and each of its Subsidiaries, as applicable, represents
and warrants to the Investors that:
3.1 Organization and Qualification. All of the direct and indirect
Subsidiaries of the Company are set forth on Schedule 3.1. The Company owns,
directly or indirectly, all of the capital stock or other equity interests of
each of its Subsidiaries free and clear of any Liens, and all the issued and
outstanding shares of capital stock of each of its Subsidiaries are validly
issued and are fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities. The Company and its Subsidiaries
are duly incorporated, validly existing and in good standing under the laws of
the jurisdictions in which they are incorporated, with full power and authority
(corporate and other) to own, lease, use and operate their properties, if any,
and to carry on their businesses as and where now owned, leased, used, operated
and conducted. The Company is duly qualified to do business and is in good
standing in every jurisdiction in which the nature of the business conducted by
it makes such qualification necessary, except where the failure to be so
qualified or in good standing would not have a Material Adverse Effect.
3.2 Authorization; Enforcement. (a) The Company has all requisite corporate
power and authority to enter into and to perform its obligations under this
Agreement, the Registration Rights Agreement and the Warrants, to consummate the
transactions contemplated hereby and thereby and to issue the Securities in
accordance with the terms hereof and thereof; (b) the execution, delivery and
performance of this Agreement, the Registration Rights Agreement and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation the issuance of
the Common Shares, the Warrants and the Warrant Shares and reservation for
issuance of the Warrant Shares) have been duly authorized by the Company's Board
of Directors and no further consent or authorization of the Company, its Board
or Directors, or its stockholders is required; (c) this Agreement, the
Registration Rights Agreement and the Warrants have been duly executed by the
Company; and (d) each of this Agreement, the Registration Rights Agreement and
the Warrants constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its respective terms, except
as may be limited by any applicable bankruptcy, insolvency, reorganization, or
moratorium or similar laws affecting the rights of creditors generally and the
application of general principles of equity.
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3.3 Capitalization. As of the date prior to the Closing Date hereof, the
authorized capital stock of the Company consisted of (i) 50,000,000 shares of
Common Stock, par value $0.05 per share, of which 14,121,743 shares were issued
and outstanding; 2,000,000 shares were reserved for issuance under the Option
Plan; and 9,697,779 shares were reserved for issuance pursuant to outstanding
warrants and 5,659,573 shares were reserved for issuance pursuant to outstanding
convertible notes (provided that if all of the convertible notes and associated
warrants are exchanged pursuant to the exchange offer as described in the
Private Placement Memorandum, the Company will issue a total of 5,659,573shares
and reserve a total of 15,563,825 shares for issuance upon exercise of warrants
issued in the exchange offer); and (ii) 10,000,000 shares of preferred stock, no
par value per share, of which no shares were issued and outstanding. All of such
outstanding shares of capital stock have been, or upon issuance will be, duly
authorized, validly issued, fully paid and nonassessable. No shares of capital
stock of the Company, including the Common Shares and the Warrant Shares, are
subject to preemptive rights or any other similar rights of the other
stockholders of the Company or any liens or encumbrances imposed through the
actions or failure to act of the Company. Except as set forth in the SEC
Documents and the transactions contemplated hereby, there are no outstanding
options, warrants, scrip, rights to subscribe for, puts, calls, rights of first
refusal, agreements, understandings, claims or other commitments or rights of
any character whatsoever relating to, or securities or rights convertible into,
exercisable for, or exchangeable for any shares of capital stock of the Company,
or arrangements by which the Company is or may become bound to issue additional
shares of capital stock of the Company.
Except as disclosed in the Private Placement Memorandum 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 Investors) 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. Except as
disclosed in the Private Placement Memorandum, all of the outstanding shares of
capital stock of the Company are validly issued, fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws, and
none of such outstanding shares was issued in violation of any preemptive rights
or similar rights to subscribe for or purchase securities. No further approval
or authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Securities. Except as
disclosed in the Private Placement Memorandum, there are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Company's capital stock to which the Company is a party or, to the knowledge of
the Company, between or among any of the Company's stockholders. The Company's
Certificate of Incorporation and the Company's By-laws, each as in effect on the
date hereof, filed as exhibits to the Company's SEC Documents, are true and
correct copies of each such document.
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3.4 Issuance of Securities. The Common Shares and the Warrants have been
duly authorized and, upon issuance in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable, free from all
taxes, liens, claims, encumbrances and charges with respect to the issuance
thereof, will not be subject to preemptive rights or other similar rights of
stockholders of the Company, and will not impose personal liability on the
holders thereof. The Warrant Shares have been duly authorized and reserved for
issuance, and, upon exercise of the Warrants in accordance with the terms
thereof, will be validly issued, fully paid and non-assessable, and free from
all taxes, liens, claims and encumbrances and charges with respect to the
issuance thereof and will not be subject to preemptive rights or other similar
rights of stockholders of the Company and will not impose personal liability
upon the holder thereof.
3.5 Outstanding Debt. The Company has no Indebtedness for Borrowed Money
(as hereinafter defined) except for the Bridge Notes and as otherwise set forth
in the SEC Documents. The Company is not in default in the payment of the
principal of or interest or premium on any such Indebtedness for Borrowed Money,
and no event has occurred or is continuing under the provisions of any
instrument, document or agreement evidencing or relating to any such
Indebtedness for Borrowed Money which with the lapse of time or the giving of
notice, or both, would constitute an event of default thereunder.
3.6 No Conflicts; No Violation.
(a) The execution, delivery and performance of this Agreement, the
Registration Rights Agreement and the Warrants by the Company, and the
consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Common Shares,
the Warrants and the Warrant Shares and reservation for issuance of the
Warrant Shares) do not and will not (i) conflict with or result in a
violation of any provision of the Certificate of Incorporation or By-laws,
(ii) violate or conflict with, or result in a breach of any provision of,
or constitute a default (or an event which with notice or lapse of time or
both could become a default) under, or give to others any rights of
termination, amendment (including without limitation, the triggering of any
anti-dilution provision), acceleration or cancellation of, any agreement,
indenture, patent, patent license, or instrument to which the Company is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including U.S. federal and state securities laws and
regulations and regulations of any self-regulatory organizations to which
the Company or its securities are subject) applicable to the Company or by
which any property or asset of the Company is bound or affected (except for
such conflicts, breaches, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or
in the aggregate, have a Material Adverse Effect).
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(b) The Company is not in violation of its Certificate of
Incorporation, By-laws or other organizational documents and the Company is
not in default (and no event has occurred which with notice or lapse of
time or both could put the Company in default) under, and the Company has
not taken any action or failed to take any action that (and no event has
occurred which, without notice or lapse of time or both) would give to
others any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Company is a party
or by which any property or assets of the Company is bound or affected,
except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect.
(c) The Company is not conducting, and, so long as any Investor owns
any of the Securities, will not conduct, its business in violation of any
law, ordinance or regulation of any governmental entity, the failure to
comply with which would, individually or in the aggregate, have a Material
Adverse Effect.
(d) Except as specifically contemplated by this Agreement and as
required under the Securities Act and any applicable state securities laws
or any listing agreement with any securities exchange or automated
quotation system, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self regulatory agency in
order for it to execute, deliver or perform any of its obligations under
this Agreement, the Warrants or the Registration Rights Agreement, in each
case in accordance with the terms hereof or thereof, or to issue and sell
the Common Shares and the Warrants in accordance with the terms hereof and
to issue the Warrant Shares upon exercise of the Warrants.
3.7 SEC Documents, Financial Statements. Since June 1, 2004, the Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting requirements of the
Securities Act and the Exchange Act (all of the foregoing filed prior to the
date hereof and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits) incorporated by reference
therein, being hereinafter referred to herein as the "SEC Documents"). As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Exchange Act or the Securities Act, as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable to
the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except for the Bridge Notes and as set forth in the financial
statements included in the SEC Documents, the Company has no liabilities,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business subsequent to December 31, 2004, and liabilities of the type not
required under generally accepted accounting principles to be reflected in such
financial statements.
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3.8 Absence of Certain Changes. Except as disclosed in the SEC Documents or
in the Private Placement Memorandum, since the date of the latest audited
financial statements included within the SEC Documents, (i) there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
The Company does not have pending before the Commission any request for
confidential treatment of.
3.9 Absence of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, arbitrator, public board,
government or administrative agency, regulatory or self-regulatory organization
or body pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its officers or directors acting as such that
could, individually or in the aggregate, have a Material Adverse Effect. The
Company is not aware of any facts or circumstances which would reasonably be
expected to give rise to any such action or proceeding. Neither the Company nor
any of its Subsidiaries, nor any director or officer thereof, is or has been the
subject of any action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty. There
has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the SEC involving the Company or any current
or former director or officer of the Company. The SEC has not issued any stop
order or other order suspending the effectiveness of any registration statement
filed by the Company or any of its Subsidiaries under the Exchange Act or the
Securities Act
3.10 Intellectual Property Rights.
(a) To the Company's knowledge, Schedule 3.10 accurately sets forth
all patents, patent applications, patent rights, inventions, know-how,
trade secrets, trademarks, trademark applications, service marks, service
names, trade names and copyrights necessary to enable it to conduct its
business as now operated (the "Intellectual Property") that is material to
Company's business (collectively, the "Company's IP"). The Company either
owns or has a valid license to the Company's IP free and clear of any
claim, security interest, lien, pledge, option, charge or encumbrance of
any kind whatsoever. The Company's rights in Company's IP are in full force
and effect. Company's IP has not been used or enforced or failed to be used
or enforced in a manner that would result in the abandonment, cancellation
or unenforceability of any of Company's rights in and to Company's IP.
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(b) Except as set forth in Schedule 3.10, Company has not transferred
any rights or interest in, or granted any exclusive license with respect
to, any of its Intellectual Property, to any third party.
(c) All Intellectual Property of the Company and its Subsidiaries is
currently in compliance with all legal requirements (including timely
filings, proofs and payments of fees) and is valid and enforceable. No
Intellectual Property of the Company or its Subsidiaries which is necessary
for the conduct of Company's and each of its Subsidiaries' respective
businesses as currently conducted or as currently proposed to be conducted
has been or is now involved in any cancellation, dispute or litigation,
and, to the Company's knowledge, no such action is threatened. No patent of
the Company or its Subsidiaries has been or is now involved in any
interference, reissue, re-examination or opposition proceeding.
(d) All of the licenses and sublicenses and consent, royalty or other
agreements concerning Intellectual Property which are necessary for the
conduct of the Company's and each of its Subsidiaries' respective
businesses as currently conducted, or, to the knowledge of the Company, as
currently proposed to be conducted to which the Company or any Subsidiary
is a party or by which any of their assets are bound (other than generally
commercially available, non-custom, off-the-shelf software application
programs having a retail acquisition price of less than $10,000 per
license) (collectively, "License Agreements") are valid and binding
obligations of the Company or its Subsidiaries that are parties thereto
and, to the Company's knowledge, the other parties thereto, enforceable in
accordance with their terms, except to the extent that enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws affecting the enforcement of
creditors' rights generally, and, to the Company's knowledge, there exists
no event or condition which will result in a material violation or breach
of or constitute (with or without due notice or lapse of time or both) a
default by the Company or any of its Subsidiaries under any such License
Agreement.
(e) To the Company's knowledge, the Company and its Subsidiaries own
or have the valid right to use all of the Intellectual Property that is
necessary for the conduct of the Company's and each of its Subsidiaries'
respective businesses as currently conducted, or, to the knowledge of the
Company, as currently proposed to be conducted and for the ownership,
maintenance and operation of the Company's and its Subsidiaries' properties
and assets, free and clear of all liens, encumbrances, adverse claims or
obligations to license all such owned Intellectual Property and
Confidential Information, other than licenses entered into in the ordinary
course of the Company's and its Subsidiaries' businesses. To the Company's
knowledge, the Company and its Subsidiaries have a valid and enforceable
right to use all third party Intellectual Property and Confidential
Information used or held for use in the respective businesses of the
Company and its Subsidiaries.
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(f) To the Company's knowledge, the conduct of the Company's and its
Subsidiaries' businesses as currently conducted does not infringe or
otherwise impair or conflict with (collectively, "Infringe") any
Intellectual Property rights of any third party or any confidentiality
obligation owed to a third party, and, to the Company's knowledge, the
Intellectual Property and Confidential Information of the Company and its
Subsidiaries which are necessary for the conduct of Company's and each of
its Subsidiaries' respective businesses as currently conducted are not
being Infringed by any third party. There is no litigation or order pending
or outstanding or, to the Company's knowledge, threatened or imminent, that
seeks to limit or challenge or that concerns the ownership, use, validity
or enforceability of any Intellectual Property or Confidential Information
of the Company and its Subsidiaries and the Company's and its Subsidiaries'
use of any Intellectual Property or Confidential Information owned by a
third party, and, to the Company's knowledge, there is no valid basis for
the same.
(g) The consummation of the transactions contemplated hereby and by
the other Transaction Documents will not result in the alteration, loss,
impairment of or restriction on the Company's or any of its Subsidiaries'
ownership or right to use any of the Intellectual Property or Confidential
Information which is necessary for the conduct of Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted.
(h) The Company and its Subsidiaries have taken reasonable steps to
protect the Company's and its Subsidiaries' rights in their Intellectual
Property and Confidential Information. Each employee, consultant and
contractor who has had access to Confidential Information which is
necessary for the conduct of Company's and each of its Subsidiaries'
respective businesses as currently conducted or as currently proposed to be
conducted has executed an agreement to maintain the confidentiality of such
Confidential Information and has executed appropriate agreements that are
substantially consistent with the Company's standard forms thereof. Except
under confidentiality obligations, there has been no material disclosure of
any of the Company's or its Subsidiaries' Confidential Information to any
third party.
3.11 Compliance. Neither the Company nor any of its Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws applicable to its business except in each case as could not have
a Material Adverse Effect.
11
3.12 No Materially Adverse Contracts, Etc. The Company is not subject to
any charter, corporate or other legal restriction, or any judgment, decree,
order, rule or regulation which in the reasonable judgment of the Company's
officers has or is expected in the future, individually or in the aggregate, to
have a Material Adverse Effect. The Company is not a party to any contract or
agreement which in the reasonable judgment of the Company's officers has or is
expected to have a Material Adverse Effect.
3.13 Tax Status. The Company has made or filed all federal, state and
foreign income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith, and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the Company knows of no basis for any such claim. The
Company has not executed a waiver with respect to the statute of limitations
relating to the assessment or collection of any foreign, federal, state or local
tax. None of the Company's tax returns is presently being audited by any taxing
authority.
3.14 Certain Transactions. Except as disclosed in the SEC Documents, and
other than the grant of stock options, employment agreements or the ownership of
other securities and rights disclosed in filings under the Exchange Act, none of
the officers, directors, or employees of the Company is presently a party to any
transaction with the Company (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 employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or employee
has a substantial interest or is an officer, director, trustee or partner.
3.15 Environmental Laws. The Company (i) is in compliance with all
applicable foreign federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii)
has received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct its business and (iii) is in compliance
with all terms and conditions of any such permit, license or approval where, in
each of the three foregoing clauses, the failure to so comply would have,
individually or in the aggregate, a Material Adverse Effect.
3.16 Disclosure. No information relating to or concerning the Company set
forth in this Agreement or provided to the Investors pursuant to Section 2.4
hereof or otherwise provided in connection with the transactions contemplated
hereby, including without limitation any oral or written statements made or
given by the officers of the Company, or any of the Company's agents, to any
Investor, or any Investor's agent, taken as a whole, contained any untrue
statement of a material fact nor omitted to state any material fact necessary in
order to make the statements made herein or therein, in light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or
its business, properties, operations or financial conditions, which, under
applicable law, rule or regulation, requires immediate public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed. The Company acknowledges and agrees that no Investor makes or has
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Article II hereof
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3.17 Acknowledgment Regarding Investors' Purchase of Securities. The
Company acknowledges and agrees that each Investor is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Investor is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Investor or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to such Investor's purchase of the Securities and has not been relied
on by the Company in any way. The Company further represents to each Investor
that the Company's decision to enter into this Agreement has been based solely
on an independent evaluation by the Company and its representatives. The Company
acknowledges that the issuance of the Securities may result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligations
under the Transaction Documents, including without limitation its obligation to
issue the Warrant 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 the Company may have against any Investor and regardless of the
dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company. Anything in this Agreement or elsewhere herein to
the contrary notwithstanding (except for Section 2.11 hereof), it is understood
and agreed by the Company (i) that none of the Investors have been asked to
agree, nor has any Investor agreed, to desist from purchasing or selling, long
and/or short, securities of the Company, or "derivative" securities based on
securities issued by the Company or to hold the Securities for any specified
term; (ii) that past or future open market or other transactions by any
Investor, including short sales, and specifically including, without limitation,
short sales or "derivative" transactions, before or after the closing of this or
future private placement transactions, may negatively impact the market price of
the Company's publicly-traded securities; (iii) that any Investor, and counter
parties in "derivative" transactions to which any such Investor is a party,
directly or indirectly, presently may have a "short" position in the Common
Stock, and (iv) that each Investor shall not be deemed to have any affiliation
with or control over any arm's length counter-party in any "derivative"
transaction.
3.18 No Integrated Offering. Except for the rights of holders of the Bridge
Loan Shares, neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf, has directly or indirectly made any offers or
sales in any security or solicited any offers to buy any security under
circumstances that would require registration under the Securities Act of the
issuance of the Securities to the Investors.
3.19 No Brokers. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions or finder's fees relating to
this Agreement or the transactions contemplated hereby other than Sanders,
Morris, Xxxxxx, Inc.
13
3.20 Permits; Compliance. The Company is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted, except
those the failure of which to possess would not, individually or in the
aggregate, have a Material Adverse Effect (collectively, the "Company Permits"),
and there is no action pending or, to the knowledge of the Company, threatened
regarding suspension or cancellation of any of the Company Permits. The Company
is not in conflict with, or in default or violation of, any of the Company
Permits, except for any such conflicts, defaults or violations which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. Since October 31, 2004, the Company has not received
any notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect. None of the Company's products have received the FDA approval
required to sell such products.
3.21 Title to Property. The Company has good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by it which is material to the business of the Company. Any real
property and facilities held under lease by the Company are held by it under
valid and enforceable leases with such exceptions as would not have a Material
Adverse Effect.
3.22 Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as is prudent
and customary in the businesses in which the Company is engaged. To the best of
Company's knowledge, such insurance contracts and policies are accurate and
complete. The Company has no reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
3.23 Internal Accounting Controls. The Company is in material compliance
with all provisions of the Xxxxxxxx-Xxxxx Act of 2002 which are applicable to it
as of the Closing Date. The Company maintains a system of internal accounting
controls sufficient, in the judgment of the Company's board of directors, to
provide reasonable assurance that (a) transactions are executed in accordance
with management's general or specific authorizations, (b) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (c) access to assets is permitted only in accordance with
management's general or specific authorization, (d) the recorded accountability
for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences, and (e) financial
reporting and the preparation of financial statements for external purposes in
accordance with U.S. generally accepted accounting principles are reliable.
3.24 Employment Matters. The Company is in compliance with all federal,
state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours
except where failure to be in compliance would not have a Material Adverse
Effect. There are no pending investigations involving the Company by the U.S.
Department of Labor or any other governmental agency responsible for the
enforcement of such federal, state, local or foreign laws and regulations. There
is no unfair labor practice charge or complaint against the Company pending
before the National Labor Relations Board or any strike, picketing, boycott,
dispute, slowdown or stoppage pending or, threatened against or involving the
Company. No representation question exists respecting the employees of the
Company, and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is currently pending under any expired or existing collective
bargaining agreements of the Company. No material labor dispute with the
employees of the Company exists or, to the knowledge of the Company, is
imminent.
14
3.25 Foreign Corrupt Practices. Neither the Company, nor to the knowledge
of the Company, any agent or other person acting on behalf of the Company, has
(i) directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.
3.26 No Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers.
3.27 Investment Company Status. The Company is not and upon consummation of
the sale of the Securities will not be an "investment company," a company
controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
3.28 No General Solicitation. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
3.29 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 or other
similar anti-takeover provision under the laws of the state of its incorporation
which is or could become applicable to the Investors as a result of the
transactions contemplated by this Agreement, including, without limitation, the
Company's issuance of the Securities and the Investors' ownership of the
Securities.
15
ARTICLE IV
COVENANTS
4.1 Best Efforts. Each party will use its best efforts to satisfy in a
timely fashion each of the conditions to be satisfied by it under Articles VI
and VII of this Agreement.
4.2 Form D; Blue Sky Laws. The Company will file a Notice of Sale of
Securities on Form D with respect to the Securities, as required under
Regulation D, and will provide a copy thereof to each Investor promptly after
such filing. The Company will, on or before the Closing Date, take such action
as it reasonably determines to be necessary to qualify the Securities for sale
to the Investors under this Agreement under applicable securities (or "blue
sky") laws of the states of the United States (or to obtain an exemption from
such qualification), and will provide evidence of any such action so taken to
the Investors on or prior to the date of the Closing. The Company will file with
the SEC a Current Report on Form 8-K disclosing this Agreement and the
transactions contemplated hereby within four business days after the Closing
Date and will make any required notice filings with state securities law
authorities on a timely basis.
4.3 Reporting Status. The Company's Common Stock is registered under
Section 12 of the Exchange Act. Throughout the Registration Period (as defined
in the Registration Rights Agreement), the Company will use its best efforts to
timely file all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC under the reporting requirements of the
Exchange Act, and the Company will not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.
4.4 Use of Proceeds. The Company will use the proceeds from the sale of the
Securities to pay clinical trial expenses, research and development expenses,
various outstanding liabilities, working capital and overhead costs, capital
expenditures to expand manufacturing, a license fee to the University of Chicago
as disclosed in the Private Placement Memorandum, certain fees to the Placement
Agent as disclosed in the Private Placement Memorandum and for general corporate
purposes.
4.5 Financial Statements. The financial statements of the Company will be
prepared in accordance with United States generally accepted accounting
principles, consistently applied, and will fairly present in all material
respects the consolidated financial position of the Company and results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
4.6 Listing. On or before the day the registration statement for the resale
of the Common Shares and the sale of the Warrant Shares becomes effective, the
Company will secure the listing of the Common Shares and the Warrant Shares upon
each national securities exchange or automated quotation system, including
without limitation the Nasdaq (including the OTCBB), if any, upon which shares
of Common Stock are then listed (subject to official notice of issuance). So
long as any Investor owns any of the Securities, the Company will use its best
efforts to obtain and, so long as any Investor owns any of the Securities,
maintain the listing and trading of its Common Stock on Nasdaq (including the
OTCBB), the American Stock Exchange or the New York Stock Exchange and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers, Inc. and such exchanges or automated quotation system, as applicable.
16
4.7 Solvency; Corporate Existence; Compliance with Law. The Company (both
before and after giving effect to the transactions contemplated by this
Agreement) is solvent (i.e., its assets have a fair market value in excess of
the amount required to pay its probable liabilities on its existing debts as
they become absolute and matured) and currently the Company has no information
that would lead it to reasonably conclude that the Company would not have, nor
does it intend to take any action that would impair its ability to pay its debts
from time to time incurred in connection therewith as such debts mature. The
Company will conduct its business in compliance with all applicable laws, rules
and regulations of the jurisdictions in which it is conducting business,
including, without limitation, all applicable local, state and federal
environmental laws and regulations, where the failure to comply with such would
have a Material Adverse Effect.
4.8 Insurance. The Company will maintain liability, casualty and other
insurance (subject to customary deductions and retentions) with responsible
insurance companies against such risk of the types and in the amounts
customarily maintained by companies of comparable size and in lines of business
of the Company.
4.9 Reservation of Shares. The Company will at all times have authorized,
and reserved for the purpose of issuance, a sufficient number of shares of
Common Stock to provide for the full exercise of the Warrants and the issuance
of the Warrant Shares in connection therewith (based upon the exercise price of
the Warrants in effect from time to time). The Company will not reduce the
number of shares of Common Stock reserved for issuance upon exercise of the
Warrants, without the consent of all the Investors. If at any time the number of
shares of Common Stock authorized and reserved for issuance is below the Warrant
Shares issued and issuable upon exercise of the Warrants (based on the exercise
price of the Warrants then in effect), the Company will promptly take all
corporate action necessary to authorize and reserve a sufficient number of
shares, including, without limitation, calling a special meeting of stockholders
to authorize additional shares to meet the Company's obligations under this
Section 4.11, in the case of an insufficient number of authorized shares, and
using its best efforts to obtain stockholder approval of an increase in such
authorized number of shares.
4.10 Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement; provided
that an Investor and its pledgee shall be required to comply with the provisions
of Section 2.6 hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor.
17
4.11 Disclosure of Transactions and Other Material Information. The Company
shall, by 8:30 p.m. Eastern time on the earlier of August 1, 2005 or the
Effective Date (the "Required Disclosure Date"), issue a press release and by
12:00 p.m. Eastern time on the same day, issue a Current Report on Form 8-K,
each reasonably acceptable to a majority in interest of the Investors disclosing
(i) any material nonpublic information provided to any Investor, and (ii) the
material terms of the transactions contemplated hereby, and, with respect to the
Current Report, shall attach the Transaction Documents thereto as exhibits. The
Company shall not, and shall cause each Subsidiary and each of its respective
officers, directors, employees and agents, not to, provide any Investor with any
material nonpublic information regarding the Company or any Subsidiary from and
after the Closing Date without the express written consent of such Investor. In
the event of a breach of the foregoing covenant by the Company, any Subsidiary,
or its each of respective officers, directors, employees and agents, in addition
to any other remedy provided herein or in the Transaction Documents, such
Investor shall have the right to demand that the Company make a public
disclosure, and if the Company fails to do so within two business days, the
Investor may make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material nonpublic information without the
prior approval by the Company, each Subsidiary, or each of its respective
officers, directors, employees or agents. In such event, such Investor shall
provide a copy of such public disclosure to the Company at or prior to the
dissemination of such disclosure to the public. No Investor shall have any
liability to the Company, any Subsidiary, or any of its or their respective
officers, directors, employees, stockholders or agents for any such disclosure
unless such Investor acts with negligence or willful misconduct. Subject to the
foregoing, neither the Company nor any Investor shall issue any press releases
or any other public statements with respect to the transactions contemplated
hereby naming the other party without the prior approval of the other party;
which approval shall not be unreasonably withheld or delayed; provided, however,
that the Company shall be entitled, without the prior approval of any Investor,
to make any press release or other public disclosure with respect to such
transactions (i) in a Current Report on Form 8-K in compliance with the
requirements of the Exchange Act, and (ii) as may otherwise be required by
applicable law and regulations, including the applicable rules and regulations
of the Nasdaq (provided that in the case of clause (i) each Investor shall be
provided a copy of any proposed press release to be issued by the Company at
least one day prior to its release). In addition to any other rights or claims
an Investor may have, if the Company fails to make the public disclosure
required by the first sentence of this Section, then (i) the Company shall (a)
pay each Investor an aggregate amount equal to (1) five percent (5%) of the
total purchase price paid by the Investor for the Securities hereunder for each
thirty (30) day period (or portion thereof) elapsing from the Required
Disclosure Date until Company makes the required disclosure in accordance with
this Section 4.11 (the "Disclosure Date"), plus (2) (b) in the event that the
VWAP on the first Trading Day after the Disclosure Date is less than the VWAP on
the Required Disclosure Date, the amount of such difference multiplied by the
number of Securities and (ii) without any further action required, the Exercise
Price of the Series A Warrants shall be automatically reduced to equal $1.50 per
share and the Expiration Date of the Series A Warrants shall be extended one day
for each day elapsing from the Required Disclosure Date until the Disclosure
Date. The amounts payable as partial liquidated damages pursuant to this
paragraph shall be payable in lawful money of the United States beginning on the
fifth day following the Required Disclosure Date and on the fifth day of each
successive month thereafter. If the Company fails to pay any partial liquidated
damages pursuant to this Section in full within seven days after the date
payable, the Company will pay interest thereon at a rate 9% per annum (or such
lesser maximum amount that is permitted to be paid by applicable law) to the
Investor, accruing daily from the date such partial liquidated damages are due
until such amounts, plus all such interest thereon, are paid in full.
18
4.12 Sales by Investors. Each Investor will sell any Securities sold by it
in compliance with applicable prospectus delivery requirements, if any, or
otherwise in compliance with the requirements for an exemption from registration
under the Securities Act and the rules and regulations promulgated thereunder.
No Investor will make any sale, transfer or other disposition of the Securities
in violation of federal or state securities laws. Investor acknowledges that
Investor has been provided with material nonpublic information and agrees to not
publicly disclose such information until it has been publicly disclosed by the
Company. Investor further acknowledges that Investor may not engage in a
transaction to buy or sell any of the Company's securities until such
information is publicly disclosed by the Company pursuant to Section 4.11 above
or otherwise becomes public information.
4.13 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Investors.
4.14 Conversion and Exercise Procedures. The form of Notice of Exercise
included in the Warrants sets forth the totality of the procedures required of
the Investors in order to exercise the Warrants. No additional legal opinion or
other information or instructions shall be required of the Investors to exercise
their Warrants. The Company shall honor exercises of the Warrants and shall
deliver Warrant Shares in accordance with the terms, conditions and time periods
set forth in the Transaction Documents.
4.15 Prohibited Transactions.
(a) From the date hereof until the expiration of fifteen (15) Trading
Days after a registration statement filed pursuant to the Registration
Rights Agreement has been declared effective, the Company will not,
directly or indirectly, offer, sell, grant any option to purchase, or
otherwise dispose of any of its equity securities or securities convertible
into its equity securities. Notwithstanding the foregoing, the Company may,
at any time, (i) issue any equity securities it is obligated to issue
pursuant to any agreement to which it is a party as of the date hereof,
including but not limited to all agreements with the Investors, placement
agents, consultants and licensors, and any amendment thereto subsequent
hereto, provided any such amendment is approved by a majority of the Board
of Directors, (ii) issue options, equity securities or similar awards to
employees, consultants and directors of the Company upon approval of a
majority of the non-employee members of the Board of Directors of the
Company or a majority of the members of a committee of non-employee
directors established for such purpose, (iii) issue equity securities as a
dividend or distribution with respect to all of the outstanding Common
Stock, (iv) issue equity securities or securities convertible into equity
securities to any bank or equipment lessor in connection with a financing
or equipment lease, or (v) issue Common Stock as a result of a reduction in
the exercise price of any of the Series A Warrants, the Series B Warrants
or Series C Warrants, (vi) issue Common Stock or options for Common Stock
pursuant to the Amended and Restated License Agreement dated December 30,
2004 with the University of Chicago, including any amendments thereto
approved by a majority of the Board of Directors, (vii) issue Common Stock
pursuant to a "Strategic Transaction" approved by a majority of the Board
of Directors. A "Strategic Transaction" shall mean (x) any transaction with
an acquiror, acquisition target company or merger partner, or (y) a joint
venture, corporate alliance, research agreement or licensing transaction
with respect to one or more technologies, assets, compounds, compound
families, and/or products or product candidates, 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; or (viii) issue common stock and Warrants in a
second offering (the "Second Offering") on terms the same as those
contained herein; provided such Second Offering is for an aggregate amount
no greater than the difference of $10 million and the aggregate amount
raised pursuant to this Agreement; and provided that the Second Offering is
consummated within thirty days of the last Closing Date hereunder.
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(b) From the date hereof until the second anniversary of the Closing
Date, the Company shall be prohibited from effecting or entering into an
agreement to effect any Subsequent Financing involving a "Variable Rate
Transaction". The term "Variable Rate Transaction" shall mean a transaction
in which the Company issues or sells (i) any debt or equity securities that
are convertible into, exchangeable or exercisable for, or include the right
to receive additional shares of Common Stock either (A) at a conversion,
exercise or exchange rate or other price that is based upon and/or varies
with the trading prices of or quotations for the shares of Common Stock at
any time after the initial issuance of such debt or equity securities, or
(B) with a conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt or equity
security or upon the occurrence of specified or contingent events directly
or indirectly related to the business of the Company or the market for the
Common Stock or (ii) enters into any agreement, including, but not limited
to, an equity line of credit, whereby the Company may sell securities at a
future determined price.
Notwithstanding anything contained herein or in the Registration Rights
Agreement to the contrary, either as part of the sale to Investors, or any time
subsequent to the Closing Date, Company may offer shares of Common Stock, at a
conversion price of $1.50 per share, and the Series A Warrants, Series B
Warrants and Series C Warrants plus up to 20,000 shares per $100,000 of Bridge
Note principle to holders of the Bridge Notes in exchange for the Bridge Notes
and the right to a warrant (the "Bridge Warrant") associated with the Bridge
Notes; provided the Company reserves the right to issue an additional number of
shares to the Bridge Warrant holders as approved by the Company's Board of
Directors in order to facilitate such an exchange. Such Warrants will be
exercisable for the same number of shares (i.e. warrant coverage) as if they had
been sold pursuant to this Agreement, with the same exercise prices and other
terms and shall be coterminous with the other Series A Warrants, Series B
Warrants and Series C Warrants, as the case may be. In such event, the Company
may offer the Bridge Note holders the same registration rights as provided in
the Registration Rights Agreement. Notwithstanding anything contained herein or
in the Registration Rights Agreement to the contrary, the Company may include in
the Registration Statement filed pursuant to the Registration Rights Agreement
the resale of: (i) all shares issued to the Bridge Note holders, both previously
and upon conversion or exchange of the Bridge Notes and Bridge Warrants, or upon
exercise of the Bridge Warrants or any Warrants issued to them, (ii) shares, and
shares issuable upon exercise of warrants, issued to the placement agents and
consultants in connection with the sale of the Notes and the sale of securities
pursuant to this Agreement; (iii) shares issued to Xxxxxxx Xxxxxx Xxxxxx
pursuant to the Company's engagement letter and Placement Agent Agreement; (iv)
shares issued to the University of Chicago pursuant to an Amended and Restated
License Agreement dated December 30, 2004; as may be amended; (v) up to
approximately 1,812,000 shares held by Xx. Xxxxxx Xxxxxxx and Xxxxxx & Xxxxxxxxx
PC and (vi) shares issued to purchasers in a Second Offering including shares
issuable to such purchasers upon exercise of Warrants issued in the Second
Offering.
20
ARTICLE V
TRANSFER AGENT INSTRUCTIONS; REMOVAL OF LEGENDS
5.1 Issuance of Certificates. The Company shall instruct its transfer agent
to issue certificates, registered in the name of each Investor or its nominee,
for Common Shares and Warrant Shares in such amounts as specified from time to
time by each Investor to the Company issuable upon exercise of the Warrants in
accordance with their terms. All costs and expenses related to the removal of
the legends and the reissuance of any Securities shall be borne by the Company.
So long as required by this Article V, all such certificates will bear the
restrictive legend described in Section 2.7, except as otherwise specified in
this Article V. Nothing in this Section 5.1 will affect in any way the
Investors' obligations and agreement set forth in Section 2.7 hereof to comply
with all applicable prospectus delivery requirements, if any, upon resale of the
Common Shares and the Warrant Shares.
5.2 Unrestricted Securities.
(a) Subject to Section 4.12 hereof, certificates evidencing the Common
Shares and Warrant Shares shall not contain any legend (including the
legend set forth in Section 2.7 hereof): (i) while a registration statement
(including the Registration Statement) covering the resale of such security
is effective under the Securities Act, or (ii) following any sale of such
Common Shares or Warrant Shares pursuant to Rule 144, or (iii) if such
Common Shares or Warrant Shares are eligible for sale under Rule 144(k), or
(iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements
issued by the staff of the Commission). If all or any portion of a Warrant
is converted or exercised (as applicable) at a time when there is an
effective registration statement to cover the resale of the Common Shares
or Warrant Shares, or if such Common Shares or Warrant Shares may be sold
under Rule 144(k) or if such legend is not otherwise required under
applicable requirements of the Securities Act (including judicial
interpretations thereof) then such Common Shares or Warrant Shares, as
applicable, shall be issued free of all legends. The Company agrees that
following the Effective Date or at such time as such legend is no longer
required under this Section 5.2, it will, no later than five Trading Days
following the delivery by an Investor to the Company or the Company's
transfer agent of a certificate representing Common Shares or Warrant
Shares, as applicable, issued with a restrictive legend (such third Trading
Day, the "Legend Removal Date"), deliver or cause to be delivered to such
Investor a certificate representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that
enlarge the restrictions on transfer set forth in this Section.
Certificates for Securities subject to legend removal hereunder shall be
transmitted by the transfer agent of the Company to the Investors by
crediting the account of the Investor's prime broker with the Depository
Trust Company System.
21
(b) In addition to such Investor's other available remedies, the
Company shall pay to an Investor, in cash, as partial liquidated damages
and not as a penalty, for each $1,000 of Common Shares (or Warrant Shares
underlying a Warrant tendered for legend removal) (based on the VWAP of the
Common Stock on the date such Securities are submitted to the Company's
transfer agent) delivered for removal of the restrictive legend and subject
to Section 5.2(a), $10 per Trading Day (increasing to $20 per Trading Day 5
Trading Days after such damages have begun to accrue) for each Trading Day
after the Legend Removal Date until such certificate is delivered without a
legend. Nothing herein shall limit such Investor's right to pursue actual
damages for the Company's failure to deliver certificates representing any
Securities as required by the Transaction Documents, and such Investor
shall have the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific performance
and/or injunctive relief, without the necessity of showing economic loss
and without any bond or other security being required.
(c) Each Investor, severally and not jointly with the other Investors,
agrees that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 5.2 is predicated upon
the Company's reliance that the Investor will sell any Securities pursuant
to either the registration requirements of the Securities Act, including
any applicable prospectus delivery requirements, or an exemption therefrom.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The obligation of the Company to issue and sell the Common Shares and
Warrants to each Investor at the Closing is subject to the satisfaction by such
Investor, on or before the Closing Date, of each of the following conditions.
These conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
6.1 The Investor will have executed this Agreement and the Registration
Rights Agreement and will have delivered those agreements to the Company.
6.2 The Investor will have delivered the purchase price for the Common
Shares to the Company in accordance with this Agreement.
6.3 The representations and warranties of the Investor must be true and
correct in all material respects as of the Closing Date as though made at that
time (except for representations and warranties that speak as of a specific
date, which representations and warranties must be correct as of such date), and
the Investor will have performed and complied in all material respects with the
covenants and conditions required by this Agreement to be performed or complied
with by the Investor at or prior to the Closing.
6.4 No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction will have been enacted, entered, promulgated or endorsed by
or in any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
22
ARTICLE VII
CONDITIONS TO THE INVESTOR'S OBLIGATION TO PURCHASE
The obligation of each Investor hereunder to purchase the Common Shares
from the Company at the Closing is subject to the satisfaction, on or before the
Closing Date, of each of the following conditions. These conditions are for each
Investor's respective benefit and may be waived by any Investor at any time in
its sole discretion:
7.1 The Company will have executed this Agreement and the Registration
Rights Agreement and each such Agreement will have been delivered the Investor.
7.2 The Company will have delivered to the Investors duly executed
certificates representing the Common Shares and duly executed Warrants in the
amounts and forms specified in Sections 1.1 and 1.4 hereof.
7.3 The representations and warranties of the Company must be true and
correct in all material respects as of the Closing as though made at that time
(except for representations and warranties that speak as of a specific date,
which representations and warranties must be true and correct as of such date)
and the Company must have performed and complied in all material respects with
the covenants and conditions required by this Agreement to be performed or
complied with by the Company at or prior to the Closing. The Investor must have
received a certificate or certificates dated as of the Closing Date and executed
by the Chief Executive Officer or the Chief Financial Officer of the Company
certifying as to the matters in contained in this Section 7.3 and as to such
other matters as may be reasonably requested by such Investor, including, but
not limited to, the Company's Certificate of Incorporation, By-laws, Board of
Directors' resolutions relating to the transactions contemplated hereby and the
incumbency and signatures of each of the officers of the Company who may execute
on behalf of the Company any document delivered at the Closing.
7.4 No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction will have been enacted, entered, promulgated or endorsed by
or in any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
7.5 Trading and listing of the Common Stock on the Nasdaq OTCBB must not
have been suspended by the SEC or the Nasdaq, nor shall Nasdaq have notified the
Company of any failure of the Company to meet any of the continued listing
standards.
7.6 The Investors will have received an opinion of the Company's counsel,
dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Investors.
23
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Company. In consideration of each Investor's
execution and delivery of this Agreement and its acquisition of the Securities
hereunder, and in addition to all of the Company's other obligations under this
Agreement, the Registration Rights Agreement, and the Warrants, the Company will
defend, protect, indemnify and hold harmless each Investor and each other holder
of the Securities and all of their stockholders, officers, directors, employees,
advisors and direct or indirect investors and any of the foregoing person's
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (regardless of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements and the
costs of collection and enforcement of the terms of this Agreement and the
Transaction Documents (the "Indemnified Liabilities"), incurred or suffered by
an Indemnitee as a result of, or arising out of, or relating to (a) any breach
of any representation or warranty made by the Company herein or in any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained herein
or in any other certificate, instrument or document contemplated hereby or
thereby, or (c) any cause of action, suit or claim brought or made against such
Indemnitee and arising out of or resulting from the execution, delivery,
performance, breach or enforcement of this Agreement, the Registration Rights
Agreement or the Warrants by the Company; provided, however, that, with respect
to this clause (c), the Company shall not be liable to the extent such
Indemnified Liabilities are finally determined by a court of competent
jurisdiction to have resulted primarily and directly from the Investors'
negligence or willful misconduct. To the extent that the foregoing undertaking
by the Company is unenforceable for any reason, the Company will make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities that is permissible under applicable law.
ARTICLE IX
DEFINITIONS
9.1 "Additional Shares" has the meaning set forth in Section 4.13.
9.2 "Bridge Loan Shares" means those shares of Common Stock issued in
connection with the Bridge Notes.
9.3 "Bridge Notes" means those promissory notes for an aggregate principal
amount of $6.1 million issued by the Company between September 2004 and
February, 2005.
9.4 "Closing" means the closing of the purchase and sale of the Common
Shares.
9.5 "Closing Date" has the meaning set forth in Section 1.3.
9.6 "Common Shares" has the meaning set forth in the recitals.
24
9.7 "Common Stock" means the common stock, par value $0.05 per share, of
the Company.
9.8 "Company" means PharmaFrontiers Corp.
9.9 "Company Permit" has the meaning set forth in Section 3.19.
9.10 "Effective Date" means the date that the initial Registration
Statement filed by the Company pursuant to the Registration Rights Agreement is
first declared effective by the SEC.
9.11 "Environmental Laws" has the meaning set forth in Section 3.14.
9.12 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
9.13 "Indebtedness for Borrowed Money" shall include only (i) indebtedness
of the Company and its Subsidiaries incurred as the result of a direct borrowing
of money, and (ii) guarantees by the Company and its Subsidiaries of
indebtedness of third parties, and shall not include any other indebtedness
including, but not limited to, indebtedness incurred with respect to trade
accounts, equipment leases, and intercompany loans.
9.14 "Indemnified Liabilities" has the meaning set forth in Article VIII.
9.15 "Indemnitees" has the meaning set forth in Article VIII.
9.16 "Intellectual Property" has the meaning set forth in Section 3.10.
9.17 "Investors" means the investors whose names are set forth on the
signature pages of this Agreement, and their permitted transferees.
9.18 "Material Adverse Effect" means a material adverse effect on (a) the
assets, liabilities, business, properties, operations, financial condition,
prospects or results of operations of the Company and its Subsidiaries, taken as
a whole, or (b) the ability of the Company to perform its obligations pursuant
to the transactions contemplated by this Agreement or under the agreements or
instruments to be entered into or filed in connection herewith.
9.19 "Nasdaq" means the Nasdaq SmallCap Market.
9.20 "Option Plan" means the Company's 2004 Stock Option Plan, including
all amendments thereto.
9.21 "OTCBB" means the OTC Bulletin Board operated by the National
Association of Security Dealers, Inc.
9.22 "Private Placement Memorandum" means the Private Placement Memorandum
dated March 1, 2005 issued by the Company and to which this Agreement is an
Exhibit.
25
9.23 "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement and among the parties to this
Agreement, in the form attached hereto as Exhibit C.
9.24 "Regulation D" means Regulation D as promulgated by the SEC under the
Securities Act.
9.25 "Rule 144" and "Rule 144(k)" mean Rule 144 and Rule 144(k),
respectively, promulgated under the Securities Act, or any successor rule.
9.26 "SEC" means the Securities and Exchange Commission.
9.27 "SEC Documents" has the meaning set forth in Section 3.7.
9.28 "Securities" means the Common Shares, Warrants and Warrant Shares.
9.29 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar successor statute.
9.30 "Subsidiaries" means any entity in which the Company, directly or
indirectly, owns capital stock or holds an equity or similar interest.
9.31 "Trading Day" means a day on which the OTC Bulletin Board, Nasdaq
SmallCap Market, American Stock Exchange or such other securities market, in any
such case which at the time constitutes the principal securities market for the
Common Stock, is open for general trading of securities.
9.32 "Trading Market" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the OTC
Bulletin Board, the Nasdaq SmallCap Market, the American Stock Exchange, the New
York Stock Exchange or the Nasdaq National Market.
9.33 "Transaction Documents" shall have the meaning set forth in Section
10.16.
9.34 "VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg Financial L.P.
(based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then quoted on the OTC Bulletin Board, the
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
listed or quoted on the OTC Bulletin Board and if prices for the Common Stock
are then reported in the "Pink Sheets" published by the Pink Sheets, LLC (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported; or (c) in
all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Investors and
reasonably acceptable to the Company.
26
9.35 "Warrant Shares" means the shares of Common Stock issuable upon the
exercise (or otherwise) of the Warrants.
9.36 "Warrants" means the Series A Warrants, Series B Warrants and Series C
Warrants to purchase shares of Common Stock, in the forms attached hereto as
Exhibits C, D and E, respectively.
ARTICLE X
TERMINATION; GOVERNING LAW; MISCELLANEOUS
10.1 Termination. This Agreement may be terminated by any Investor, as to
such Investor's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Investors, by written notice
to the other parties, if the Closing has not been consummated on or before July
15, 2005; provided, however, that no such termination will affect the right of
any party to xxx for any breach by the other party (or parties).
10.2 Governing Law; Jurisdiction. This Agreement will be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws. The parties hereto hereby submit to the
jurisdiction of the United States federal and state courts located in the State
of New York with respect to any dispute arising under this Agreement, the
agreements entered into in connection herewith or the transactions contemplated
hereby or thereby.
10.3 Counterparts; Signatures by Facsimile. This Agreement may be executed
in two or more counterparts, all of which are considered one and the same
agreement and will become effective when counterparts have been signed by each
party and delivered to the other parties. This Agreement, once executed by a
party, may be delivered to the other parties hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
10.4 Headings. The headings of this Agreement are for convenience of
reference only, are not part of this Agreement and do not affect its
interpretation.
10.5 Severability. If any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
will be deemed modified in order to conform with such statute or rule of law.
Any provision hereof that may prove invalid or unenforceable under any law will
not affect the validity or enforceability of any other provision hereof.
10.6 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Investor pursuant to any Transaction Document or an Investor
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
27
10.7 Entire Agreement. This Agreement, the Registration Rights Agreement
and the Warrants (including all schedules and exhibits thereto) constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement supersedes all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof.
10.8 Investor Approvals. Except as otherwise specifically provided herein,
in each case in which approval of the Investors is required by the terms of this
Agreement, such requirement shall be satisfied only upon receipt of the written
consent of each Investor.
10.9 Amendments, Changes, Waivers, etc. Neither this Agreement nor any
provision hereof may be amended, changed, waived, discharged or terminated
orally, but only by a statement in writing signed by Investors agreeing to
purchase, or after the Closing, holding not less than 80% of the shares of
Common Stock sold hereunder; notwithstanding the foregoing the following
provisions may not be amended except in a writing signed by the party against
which enforcement of the amendment is sought: Article 1, Sections 4.10 through
4.16, Article V, Article VII, Section 10.1, 10.8, 10.9, 10.13, 10.17 and 10.18
and any provisions herein that specify liquidated damages or penalties. The
terms of the agreements attached as Exhibits hereto may only be amended
according to the terms of such agreements.
10.10 Notices. Any notices required or permitted to be given under the
terms of this Agreement must be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and will be effective five days
after being placed in the mail, if mailed by regular U.S. mail, or upon receipt,
if delivered personally, by courier (including a recognized overnight delivery
service) or by facsimile, in each case addressed to a party. The addresses for
such communications are:
If to the Company: PharmaFrontiers Corp.
0000 Xxxxxxxxxx Xxxxx, Xxxxx X-0
The Xxxxxxxxx, Xxxxx 00000
Attn: Xxxxx XxXxxxxxxx, President
Facsimile: (000) 000-0000
With a copy to: Xxxxxx & Xxxxxx L.L.P.
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
If to an Investor: To the address set forth immediately below such
Investor's name on the signature pages hereto`
28
Each party will provide written notice to the other parties of any
change in its address.
10.11 Successors and Assigns. This Agreement is binding upon and inures to
the benefit of the parties and their successors and assigns. The Company will
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the Investors, and no Investor may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Company. Notwithstanding the foregoing, an Investor may assign
all or part of its rights and obligations hereunder to any of its "affiliates,"
as that term is defined under the Securities Act, without the consent of the
Company so long as the affiliate is an accredited investor (within the meaning
of Regulation D under the Securities Act) and agrees in writing to be bound by
this Agreement. This provision does not limit the Investor's right to transfer
the Securities pursuant to the terms of this Agreement or to assign the
Investor's rights hereunder to any such transferee pursuant to the terms of this
Agreement.
10.12 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.
10.13 Survival. All representations and warranties contained herein shall
survive the execution and delivery of this Agreement, any investigation at any
time made by the Investors or on their behalf, and the sale and purchase of the
Common Shares and the Warrants and payment therefor. All statements contained in
any certificate, instrument or other writing delivered by or on behalf of the
Company pursuant hereto or in connection with or contemplation of the
transactions herein contemplated (other than legal opinions) shall constitute
representations and warranties by the Company hereunder.
10.14 Publicity. The Company may make any press release or SEC or Nasdaq
filings with respect to such transactions as are required by applicable law and
regulations (including NASD requirements) without the prior approval of the
Investors (although the Company will make reasonable efforts to consult with the
Investors in connection with any such press release prior to its release and
filing).
10.15 Further Assurances. Each party will do and perform, or cause to be
done and performed, all such further acts and things, and will execute and
deliver all other agreements, certificates, instruments and documents, as
another 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.
10.16 No Strict Construction. The language used in this Agreement is 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.
10.17 Equitable Relief. The Company recognizes that, if it fails to perform
or discharge any of its obligations under this Agreement, any remedy at law may
prove to be inadequate relief to the Investors. The Company therefore agrees
that the Investors are entitled to temporary and permanent injunctive relief in
any such case without the necessity of proving actual damages.
29
10.18 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
10.19 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any of the Warrant, Registration Rights
Agreement or this Agreement (collectively, the "Transaction Documents") are
several and not joint with the obligations of any other Investor, and no
Investor shall be responsible in any way for the performance of the obligations
of any other Investor under any Transaction Document. The decision of each
Investor to purchase Common Shares pursuant to the Transaction Documents has
been made by each Investor independently of any other Investor. Nothing
contained herein or in any Transaction Document, and no action taken by any
Investor pursuant thereto, shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investors are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Investor shall be entitled to independently protect
and enforce its rights, including without limitation the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. Each Investor acknowledges that no other Investor
has acted as agent for the Investor in connection with making its investment
hereunder and that no other Investor will be acting as agent of the Investor in
connection with monitoring its investment in the Common Shares or enforcing its
rights under the Transaction Documents. Each Investor has been represented by
its own separate legal counsel in their review and negotiation of the
Transaction Documents. The Company has elected to provide all Investors with the
same terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Investors.
30
IN WITNESS WHEREOF, the undersigned Investors and the Company have
caused this Agreement to be duly executed as of the date first above written.
COMPANY:
PHARMAFRONTIERS CORP.
By: /s/ Xxxxx X. XxXxxxxxxx
-----------------------------------------
Xxxxx X. XxXxxxxxxx, President
[Signatures continued on next page]
31
INVESTOR:
INVESTOR'S NAME:
----------------------------
By: /s/
-----------------------------------------
Print Name:
---------------------------------
Title:
--------------------------------------
Number of Shares:
---------------------------
Aggregate Purchase Amount: $________________
INVESTOR'S ADDRESS:
--------------------------------------------
--------------------------------------------
--------------------------------------------
(any notice hereunder to this Investor shall include a copy to):
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
Attn:
-----------------------------------
[Signature Page to PharmaFrontiers Corp. Securities Purchase Agreement]
32
SCHEDULE 3.1
TO
SECURITIES PURCHASE AGREEMENT
SUBSIDIARIES
1. Opexa Pharmaceuticals, Inc. a Delaware corporation
2. Al Magnus, Inc., a Texas corporation
