EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of May 7,
2002, is made by and among AKSYS, LTD., a Delaware corporation, with
headquarters located at Two Marriott Drive, Lincolnshire, IL 60069 (the
"Company"), and the investors named on the signature pages hereto (the
"Investors"). Capitalized terms used herein and not otherwise defined have the
meanings given them in Article IX hereof.
RECITALS:
A. The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act and Rule 506 under Regulation D.
B. The Investors desire, upon the terms and conditions stated in this
Agreement, to purchase a total of 3,319,396 shares of Common Stock for an
aggregate purchase price of $17,559,604.84. The purchase price per share of the
Common Stock is $5.29.
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 and the rules and regulations promulgated thereunder to the
Investors.
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 SECURITIES
1.1 Purchase and Sale of Common Shares. 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, the number of Common Shares set forth beneath such Investor's
name on the signature pages hereof.
1.2 Payment at Closing. At the Closing, each Investor will pay the
aggregate purchase price for the Common Shares as set forth beneath its name on
the signature pages hereof, by wire transfer of immediately available funds in
accordance with the written wire instructions set forth on the signature page
hereto of the Company, and the Company will deliver to each Investor a
certificate representing the Common Shares so purchased by such Investor, and
the Company will deliver such certificates against delivery of the purchase
price as described above.
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 10:00 a.m. Central Time on May 10, 2002, or at another date or time agreed
upon by the parties to this Agreement (the "Closing Date"). The Closing will be
held at the offices of the Company or at such other place as the parties agree.
1.4 Independent Nature of Investors' Obligations and Rights. The
rights and obligations of each Investor under any Agreement are several and not
joint with the rights and obligations of the other Investor and an Investor
shall not be responsible in any way for the performance of the obligations of
the other Investor under any Agreement. Nothing contained herein, and no action
taken by any Investor pursuant hereto shall 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 with
respect to such obligations or the transactions contemplated hereby. Each
Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement, and it
shall not be necessary for the other Investor to be joined as an additional
party in any proceeding for such purpose.
ARTICLE II.
INVESTOR'S REPRESENTATIONS AND WARRANTIES
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 Common Shares
for its own account and not with a view to the distribution thereof; provided,
however, that by making the representation herein, the Investor reserves the
right to dispose of the Common Shares in accordance with or pursuant to an
effective registration statement or an exemption from registration under the
Securities Act.
2.2 Accredited Investor Status. The Investor is an "accredited
investor" within the meaning of Rule 501 of Regulation D. If an Investor is
subject to the Employee Retirement Income Security Act of 1974, as amended, and
is acquiring the Common Shares as a fiduciary or agent for another investor's
account, the Investor will have sole investment and voting discretion with
respect to such account and will have full power to make the acknowledgments,
representations and agreements contained herein on behalf of such account.
2.3 Reliance on Exemptions. The Investor understands that the Common
Shares 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 Common Shares.
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2.4 Information. The Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company, and materials relating to the offer and sale of the Common
Shares, if any, 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. The Investor acknowledges and understands that
its investment in the Common Shares involves a significant degree of risk,
including the risks reflected in the SEC Documents.
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 Common Shares
or an investment therein.
2.6 Transfer or Resale. The Investor understands that:
(a) the issuance of the Common Shares has not been and is
not being registered under the Securities Act or any applicable state
securities laws and, consequently, the Investor may have to bear the
risk of owning the Common Shares for an indefinite period of time
because the Common Shares may not be transferred unless (i) the resale
of the Common Shares is registered pursuant to an effective
registration statement under the Securities Act; (ii) if requested by
the Company, 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 Common
Shares to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration; (iii) the Common Shares are
sold or transferred pursuant to Rule 144; or (iv) the Common Shares
are sold or transferred to an affiliate (as defined in Rule 144) of
the Investor, in each case, subject to the restrictions set forth in
the restrictive legend set forth on the certificates representing the
Common Shares as contemplated by Section 2.7;
(b) any sale of the Common Shares made in reliance on Rule
144 may be made only in accordance with the terms of Rule 144
(including the holding period requirement, the volume limitations and
the manner of sale restrictions, if applicable), and if Rule 144 is
not applicable 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) under the Securities Act or the rules and
regulations of the SEC thereunder; and
(c) except as set forth in the Registration Rights
Agreement, neither the Company nor any other person is under any
obligation to register the Common Shares under the Securities Act or
any state securities laws or to comply with the terms and conditions
of any exemption thereunder.
2.7 Legends. The Investor understands that until (a) the Common Shares
may be sold under Rule 144(k) or (b) such time as the Common Shares have been
sold pursuant to an effective registration statement under the Securities Act or
in compliance with Rule 144, the certificates representing such Common Shares
will bear a restrictive legend in substantially the
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following form (and a stop-transfer order may be placed against transfer of the
certificates for such Common Shares):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR
ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
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.
2.8 Authorization; Enforcement. This Agreement, the Registration
Rights Agreement and all other agreements, documents and instruments
contemplated hereby and thereby have been duly and validly authorized, executed
and delivered on behalf of the Investor and are valid and binding agreements of
the Investor enforceable against Investor in accordance with their respective
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 (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
2.9 No Conflicts; No Violation.
(a) The execution, delivery and performance of this
Agreement by the Investor will not (i) conflict with or result in a
violation of any provision of its charter documents or (ii) to the
knowledge of Investor, result in a violation of any law, rule,
regulation, order, judgment or decree applicable to the Investor.
(b) The Investor 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.
2.10 Residency. The Investor is a resident of the jurisdiction set
forth immediately below such Investor's name on the signature pages hereto.
2.11 Acknowledgments Regarding Placement Agent. Investor acknowledges
that U.S. Bancorp Xxxxx Xxxxxxx is acting as placement agent (the "Placement
Agent") for the Common Shares being offered hereby and will be compensated by
the Company for acting in such capacity. Investor further acknowledges that the
Placement Agent has acted solely as placement agent for the Company in
connection with the offering of the Common
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Shares by the Company, that if the Placement Agent provided any information and
data to Investor in connection with the transactions contemplated hereby, that
such information and data have not been subjected to independent verification by
the Placement Agent, and that the Placement Agent makes no representation or
warranty with respect to the accuracy or completeness of such information, data
or other related disclosure material. Investor further acknowledges that in
making its decision to enter into this Agreement and purchase the Common Shares
it has relied on its own examination of the Company and the terms of, and
consequences, of holding the Common Shares. Investor further acknowledges that
the provisions of this Section 2.11 are also for the benefit of, and may also be
enforced by, the Placement Agent.
2.12 No Public Offering. Investor has not received any information
relating to the Common Shares or the Company, and is not purchasing the Common
Shares as a result of, any form of general solicitation or general advertising,
including but not limited to, any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio or pursuant to any seminar or meeting whose attendees
were invited by any general solicitation or general advertising.
2.13 Short Positions. Investor will not use any of the Common Shares
acquired pursuant to this Agreement to cover any short position in the Common
Stock if doing so would be in violation of applicable securities laws.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors that:
3.1 Organization and Qualification. The Company is duly incorporated,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full corporate power and authority to own, lease,
use and operate its properties and to carry on its business 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 in each such jurisdiction
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 all other agreements,
documents and instruments contemplated hereby and thereby, to consummate the
transactions contemplated hereby and thereby and to issue the Common Shares in
accordance with the terms hereof; (b) the execution, delivery and performance of
this Agreement, the Registration Rights Agreement and all other agreements,
documents and instruments contemplated hereby and thereby by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including without limitation the issuance of the Common 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
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and all other agreements, documents and instruments contemplated hereby and
thereby have been or will be duly executed by the Company; and (d) each of this
Agreement, the Registration Rights Agreement and all other agreements, documents
and instruments contemplated hereby and thereby constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization, or moratorium or similar laws affecting the rights of creditors
generally and the application of general principles of equity and except as the
indemnification agreements of the Company in the Registration Rights Agreement
may be legally unenforceable.
3.3 Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (a) 50,000,000 shares of Common Stock, par
value $.01 per share, of which 22,144,469 shares are issued and outstanding, and
949,934 shares are reserved for issuance under the Company's stock award plans
and warrants, respectively, and (b) 1,000,000 shares of preferred stock, par
value $.01 per share, 50,000 of which have been designated Junior Participating
Preferred Stock, Series A, none of which are issued and outstanding. All of such
outstanding shares of common stock are duly authorized, validly issued, fully
paid and nonassessable. No shares of capital stock of the Company, including the
Common Shares issuable pursuant to this Agreement, are subject to preemptive
rights or any other similar rights of the stockholders of the Company or any
liens or encumbrances imposed through the actions or failure to act of the
Company. Except for stock options and other awards under the Option Plans,
rights to acquire stock under the 423 Plan, warrants issued by the Company on
December 19, 2001 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 that could require the Company to issue
additional shares of capital stock of the Company. Except for the Private
Placement Registration Rights Agreements, there are no agreements or
arrangements (other than the Registration Rights Agreement) under which the
Company is obligated to register the sale of any of its securities under the
Securities Act. There are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) that will be triggered by the issuance of the Common
Shares. The Company has made available to the Investors true and correct copies
of the Company's Amended and Restated Certificate of Incorporation as in effect
on the date hereof and the Company's By-laws as in effect on the date hereof and
the terms of any securities (other than employee stock options) convertible into
or exercisable for Common Stock of the Company.
3.4 Issuance of Common Shares. The Common Shares are 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 issue thereof, and will not
be subject to preemptive rights of stockholders of the Company.
3.5 No Conflicts; No Violation.
(a) The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and all other agreements,
documents and instruments contemplated hereby and thereby by the
Company and the consummation by the Company of the transactions
contemplated hereby
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and thereby (including, without limitation, the issuance of the Common
Shares) will not (i) conflict with or result in a violation of any
provision of the Amended and Restated Certificate of Incorporation or
By-laws of the Company or (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 in the case of clauses (ii) and (iii) for such
conflicts, breaches, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually
or in the aggregate, have a Material Adverse Effect.
(b) The Company is not in violation of its Amended and
Restated Certificate of Incorporation or By-laws 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 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
defaults as would not, individually or in the aggregate, have a
Material Adverse Effect.
(c) The Company is not conducting its business in violation
of any law, ordinance or regulation of any governmental entity, except
where the failure to so comply would not, 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 and 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 and the
Registration Rights Agreement, in each case in accordance with the
terms hereof or thereof, or to issue and sell the Common Shares in
accordance with the terms hereof. Assuming the accuracy of the
representations and warranties of the Investors in this Agreement, all
consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the date hereof. The Company
is not in violation of the listing requirements of Nasdaq.
3.6 SEC Documents; Financial Statements; Liabilities. Since
December 31, 2000, the Company has timely filed all reports, schedules, forms,
statements and other
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documents required to be filed by it with the SEC pursuant to the Securities Act
or reporting requirements of 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").
The Company has made available to each Investor true and complete copies of 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. The financial
statements of the Company included in the SEC Documents 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
as set forth in the financial statements included in the SEC Documents, the
Company has no liabilities, contingent or otherwise, other than (A) liabilities
incurred in the ordinary course of business subsequent to December 31, 2001, (B)
liabilities of the type not required under generally accepted accounting
principles to be reflected in such financial statements or (C) other liabilities
which would not, individually or in the aggregate, have Material Adverse Effect.
3.7 Absence of Certain Changes. Except as disclosed in the SEC
Documents or any press release by the Company, since December 31, 2001, there
has been no material adverse change in the assets, liabilities, business,
properties, operations, financial condition or results of operations of the
Company, taken as a whole.
3.8 Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, 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.
3.9 Intellectual Property Rights. The Company owns or possesses the
licenses or rights to use 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"), except where
the failure to possess such licenses or rights to use would not have,
individually or in the aggregate, a Material Adverse Effect. There is no claim
or action or proceeding pending or, to the Company's Knowledge, threatened that
challenges the right of the Company with respect to any Intellectual Property.
3.10 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
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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.
To the Knowledge of the Company, there are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know 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. To the
Company's Knowledge, none of the Company's tax returns is presently being
audited by any taxing authority.
3.11 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 it under
applicable Environmental Laws to conduct its business as presently conducted and
(iii) is in compliance with all terms and conditions of any such permit, license
or approval, except where, in each of the three foregoing clauses, the failure
to so comply would not have, individually or in the aggregate, a Material
Adverse Effect.
3.12 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances within the prior six months that would
require registration under the Securities Act of the issuance of the Common
Shares to the Investors.
3.13 No Brokers. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments relating to this Agreement or the transactions contemplated hereby,
except with respect to U.S. Bancorp Xxxxx Xxxxxxx whose commissions and fees
will be paid for by the Company.
3.14 Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which
the Company is engaged.
3.15 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, individually or in the
aggregate, have a Material Adverse Effect.
3.16 Investment Company Status. The Company is not and upon consummation of
the sale of the Common Shares 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.
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3.17 No General Solicitation. Neither the Company nor, to the Knowledge of
the Company, any person acting for the Company, has conducted any "general
solicitation" (as such term is defined in Regulation D) with respect to any of
the Common Shares being offered hereby. The Company will not distribute any
offering material in connection with the sale of the Common Shares prior to the
Closing Date, other than this Agreement, the Registration Rights Agreement and
the SEC Documents.
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 Common Shares, if required under
Regulation D, and to provide a copy thereof to each Investor promptly after such
filing. The Company will take such action as it reasonably determines to be
necessary, if any, to qualify the Common Shares 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 shall, not later than prior to the opening of
trading on the second business day immediately following the Closing Date, issue
a press release disclosing all material terms of the transactions contemplated
hereby. The Company will file with the SEC a Current Report on Form 8-K
disclosing this Agreement and the transactions contemplated hereby within 10
business days after the Closing Date.
4.3 Reporting Status; Eligibility to Use Form S-3. 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 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. The Company currently meets, and will use its reasonable best
efforts to continue to meet, the "registrant eligibility" requirements for a
secondary offering set forth in the general instructions to Form S-3 to enable
the registration of the Registrable Securities (as defined in the Registration
Rights Agreement). The Company has no reason to believe its independent auditors
will withhold their consent to the inclusion of their audit opinion concerning
the Company's financial statements which are included in the Registration
Statement.
4.4 Expenses. The Company and each Investor is liable for, and will pay,
its own expenses incurred in connection with the negotiation, preparation,
execution and delivery of this Agreement and the other agreements to be executed
in connection herewith, including, without limitation, attorneys' and
consultants' fees and expenses.
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4.5 Financial Information. The financial statements of the Company will be
prepared in accordance with United States generally accepted accounting
principles consistently applied with past practice, and will fairly present in
all material respects the consolidated financial position of the Company and
results of its operations and cash flows as of, and for the periods covered by,
such financial statements (subject, in the case of unaudited statements, to
normal year-end audit adjustments).
4.6 Listing. The Company will, for so long as any Investor owns any of the
Common Shares, maintain the listing and trading of its Common Stock (including
the Common Shares) on Nasdaq, 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, as applicable. Until an Investor
transfers, assigns or sells all of the Common Shares owned by it, the Company
will promptly provide to each Investor copies of any notices it receives
regarding the continued eligibility of the Common Stock for listing on Nasdaq or
other principal exchange or quotation system on which the Common Stock is
listed. The Company has not received a notice of non-compliance with Nasdaq
listing standards.
4.7 Compliance with Law. As long as an Investor owns any of the Common
Shares, the Company will use commercially reasonable efforts to 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, the
failure to comply with which would have a Material Adverse Effect.
4.8 No Integration. The Company will not make any offers or sales of any
security (other than the Common Shares) under circumstances that would cause the
offering of the Common Shares to be integrated with any other offering of
securities by the Company (i) for the purpose of any stockholder approval
provision applicable to the Company or its securities or (ii) for purposes of
any registration requirement under the Securities Act.
4.9 Sales by Investors. Each Investor will sell any Common Shares 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 Common
Shares in violation of federal or state securities laws.
ARTICLE V.
TRANSFER AGENT INSTRUCTIONS; REMOVAL OF LEGENDS
5.1 Issuance of Certificates. The Company will instruct its transfer agent
to issue a certificate, registered in the name of each Investor or its nominee,
for the Common Shares. All such certificates will bear the restrictive legend
described in Section 2.7, except as otherwise specified in this Article V. In
addition, the Company will issue irrevocable Transfer Agent Instructions to the
transfer agent in the form of Exhibit A hereto. The Company will not give to its
transfer agent any instruction with respect to the Common Shares other than as
11
contemplated by Article V and stop transfer instructions to give effect to
Section 2.7 hereof (prior to registration of the Common Shares under the
Securities Act). Nothing in this Section will affect in any way the Investors'
obligations and agreements set forth in Section 2.7 hereof to comply with all
applicable prospectus delivery requirements, if any, upon resale of the Common
Shares.
5.2 Unrestricted Securities. If, unless otherwise required by applicable
state securities laws, (a) the Common Shares represented by a certificate have
been sold under an effective registration statement filed under the Securities
Act, (b) a holder of Common Shares provides the Company with an opinion of
counsel, if requested by the Company, in form, substance and scope customary for
opinions of counsel in comparable transactions, which counsel and opinion shall
be reasonably satisfactory to the Company, to the effect that a public sale or
transfer of such Common Shares may be made without registration under the
Securities Act and such sale may occur without restriction on the timing or
manner of such sale or transfer or (c) the Common Shares represented by a
certificate can be sold without restriction as to the number of securities sold
under Rule 144(k), the Company will permit the transfer of the Common Shares,
and the transfer agent will issue one or more certificates, free from any
restrictive legend, in such name and in such denominations as specified by such
holder in accordance with the Transfer Agent Instructions. Notwithstanding
anything herein to the contrary, the Common Shares may be pledged as collateral
in connection with a bona fide margin account or other lending arrangement;
provided that such pledge will not alter the provisions of this Article V with
respect to the removal of restrictive legends.
5.3 Enforcement of Provision. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Investor by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Article V will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section,
that the Investor will be entitled, in addition to all other available remedies,
to an injunction restraining any breach and requiring immediate transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
ARTICLE VI.
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The obligation of the Company to issue and sell the Common Shares 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 the Registration Rights Agreement and
will have delivered such Agreement 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.
12
6.3 The Investor will have completed, executed and delivered to the Company
an Investor Questionnaire in the form attached hereto as Exhibit E (the
"Investor Questionnaire").
6.4 The representations and warranties of the Investor, including
representations and warranties made in the Investor Questionnaire, 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.
6.5 No 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.
ARTICLE VII.
CONDITIONS TO EACH 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 such Investor at any time in
its sole discretion:
7.1 The Company will have executed the Registration Rights Agreement and
will have delivered such Agreement to the Investor.
7.2 The Company will have delivered to such Investor a duly executed
certificate, against payment therefor, representing the Common Shares as
specified in Section 1.1 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 in all material
respects 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.
7.4 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 contained in
Section 7.3.
7.5 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
13
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.
7.6 Trading and listing of the Common Stock on Nasdaq must not have been
suspended by the SEC or Nasdaq.
7.7 Such Investor will have received an opinion of the Company's counsel,
dated as of the Closing Date substantially in the form attached hereto as
Exhibit B.
7.8 The irrevocable Transfer Agent Instructions, in substantially the
form attached hereto as Exhibit A will have been delivered to the Company's
transfer agent and acknowledged in writing by such transfer agent.
ARTICLE VIII.
INDEMNIFICATION
In consideration of each Investor's execution and delivery of this
Agreement and its acquisition of the Common Shares hereunder, and in addition to
all of the Company's other obligations under this Agreement and the Registration
Rights Agreement, the Company will defend, protect, indemnify and hold harmless
each Investor and each other holder of the Common Shares to whom rights are
assigned as permitted by Section 10.7 of this Agreement and all of their
stockholders, officers, directors, employees 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 (the "Indemnified Liabilities"), incurred 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 or breach of this Agreement or the Registration Rights Agreement by
the Company. 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. Notwithstanding the foregoing, the
indemnification agreement contained in this Article VIII does not apply to
amounts paid in settlement of Indemnified Liabilities if such settlement is made
without the prior written consent of the Company, which consent will not be
unreasonably withheld. The Company may participate in, and assume and control,
the defense of any claim with counsel mutually satisfactory to the Company and
the Indemnities. If, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnitee and the
indemnifying party is inappropriate due to actual or potential conflicts of
interest between the
14
Indemnitee and any other party represented by such counsel in such proceeding or
the actual or potential defendants in, or targets of, any such action including
the Indemnitee, and any such Indemnitee reasonably determines that there may be
legal defenses available to such Indemnitee that are different from or in
addition to those available to the indemnifying party, then the Indemnitee is
entitled to assume such defense and may retain its own counsel, with the
reasonable, out-of-pocket fees and expenses to be paid by the indemnifying
party. The Company will pay for only one separate legal counsel for the
Indemnitees collectively, and such legal counsel will be selected by the
Indemnitees holding a majority in interest of the Common Shares held by all
Indemnitees.
The indemnification provisions set forth above shall not be available to
any Indemnitee to the extent (i) that such Indemnitee is in material breach of
any provision of this Agreement or the Registration Rights Agreement or (ii) the
Indemnified Liabilities are covered under the indemnification provisions set
forth in Article VI of the Registration Rights Agreement or otherwise relate to
the Registration Rights Agreement, in which case the Registration Agreement
shall control the terms of any indemnification obligation of the Company
relating to such Indemnified Liabilities.
ARTICLE IX.
DEFINITIONS
9.1 "423 Plan" means the Aksys, Ltd. 2001 Employee Stock Purchase Plan.
9.2 "Closing" means the closing of the purchase and sale of the Common
Shares under this Agreement.
9.3 "Closing Date" has the meaning set forth in Section 1.3.
9.4 "Common Shares" means the shares of Common Stock sold pursuant to this
Agreement.
9.5 "Common Stock" means the common stock, par value $0.01 per share, of
the Company.
9.6 "Company" means Aksys, Ltd.
9.7 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
9.8 "Indemnified Liabilities" has the meaning set forth in Article VIII.
9.9 "Indemnitees" has the meaning set forth in Article VIII.
9.10 "Intellectual Property" has the meaning set forth in Section 3.9.
9.11 "Investors" means the investors whose names are set forth on the
signature pages of this Agreement, and their permitted transferees.
15
9.12 "Knowledge" means the actual knowledge, without independent
---------
investigation.
9.13 "Material Adverse Effect" means a material adverse effect on (a) the
assets, liabilities, financial condition, prospects or results of operation of
the Company's business, 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.
9.14 "Nasdaq" means the Nasdaq National Market System.
9.15 "Option Plans" means the Aksys, Ltd. 1996 Stock Awards Plan and the
Aksys, Ltd. 1993 Stock Option Plan, as amended.
9.16 "Placement Agent" has the meaning set forth in Section 2.11.
9.17 "Private Placement Registration Rights Agreements" means (i) the
Registration Rights Agreement, dated as of April 7, 2000, by and among the
Company and the investors named on the signature pages thereto, (ii) the
Registration Rights Agreement, dated as of August 14, 2000, by and among the
Company and the investors named on the signature pages thereto, and (iii) the
Registration Rights Agreement, dated as of December 19, 2001, by and among the
investors named on the signature pages thereto.
9.18 "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, by and among the parties to this
Agreement, in the form attached
hereto as Exhibit C.
9.19 "Regulation D" means Regulation D as promulgated by the SEC under the
Securities Act.
9.20 "Rule 144" and "Rule 144(k)" mean Rule 144 and Rule 144(k),
respectively, promulgated under the Securities Act, or any successor rule.
9.21 "SEC" means the United States Securities and Exchange Commission.
9.22 "SEC Documents" has the meaning set forth in Section 3.6.
9.23 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
9.24 "Transfer Agent Instructions" means the transfer agent instructions as
defined in Exhibit A.
16
ARTICLE X.
GOVERNING LAW; MISCELLANEOUS
10.1 Governing Law; Jurisdiction. This Agreement will be governed by and
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States federal and state courts located in
the State of Delaware with respect to any dispute arising under this Agreement,
the agreements entered into in connection herewith or the transactions
contemplated hereby or thereby.
10.2 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.
10.3 Headings. The headings of this Agreement are for convenience of
reference only, are not part of this Agreement and do not affect its
interpretation.
10.4 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.
10.5 Entire Agreement; Amendments. This Agreement and the Registration
Rights Agreement (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, representations,
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. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
10.6 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 or by facsimile, in each case addressed to a party. Any
notice sent by courier (including a recognized overnight delivery service) will
be deemed received one business day after being sent. The addresses for such
communications are:
17
If to the Company: Aksys, Ltd.
Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to an Investor: To the address set
forth immediately below such
Investor's name on the signature
pages hereto.
Each party will provide written notice to the other parties of any change
in its address.
10.7 Successors and Assigns. This Agreement is binding upon and inures to
the benefit of the parties and their successors and permitted 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 Common Shares pursuant to the terms of this Agreement or to assign the
Investor's rights hereunder to any such affiliate transferee pursuant to the
terms of this Agreement. Notwithstanding any assignment as provided herein to an
affiliate of an Investor, each Investor shall thereafter remain fully
responsible and liable for performance of all of its obligations under this
Agreement. Notwithstanding the foregoing, any transferee who purchases the
Common Shares in a public sale shall not have any rights under this Agreement.
10.8 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 or entity; provided, however, that the provisions in Section 2.11
relating to acknowledgments regarding the Placement Agent are intended for the
benefit of the Placement Agent.
10.9 Survival. The representations and warranties of the Company set forth
herein will survive for two (2) years following the Closing hereunder. The
Company makes no representations or warranties in any oral or written
information provided to Investors, other than the representations and warranties
included herein.
18
10.10 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.
10.11 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.
10.12 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.
* * * *
19
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:
AKSYS, LTD.
By:
-------------------------------------
Name:
------------------------------
Title:
------------------------------
20
OMNIBUS SIGNATURE PAGE TO
AKSYS, LTD.
SECURITIES PURCHASE AGREEMENT
The undersigned hereby executes and delivers the Securities Purchase
Agreement to which this Signature Page is attached, which, together with all
counterparts of the Agreement and Signature Pages of the other Investors and the
Company to said Agreement, shall constitute one and the same document in
accordance with the terms of the Agreement.
Sign Name:
--------------------------------------
Print Name:
-------------------------------------
Address:
----------------------------------------
Telephone:
--------------------------------------
Facsimile:
--------------------------------------
Attention:
--------------------------------------
Number of Shares:
-------------------------------
21
Exhibit A Transfer Agent Instructions
22
Exhibit B Form of Legal Opinion
23
Exhibit C Registration Rights Agreement
24
Exhibit D
STOCK CERTIFICATE QUESTIONNAIRE
Please provide us with the following information:
1. The exact name that your Shares are to be
registered in (this is the name that will appear ---------------------
on your stock certificate(s)). You may use a
nominee name if appropriate:
2. The relationship between the Investor and the
registered holder listed in response to item 1 ---------------------
above:
3. The mailing address, contact name and
telephone number of the registered holder listed ---------------------
in response to item 1 above:
4. The Social Security Number or Tax
Identification Number of the registered holder ---------------------
listed in the response to item 1 Above:
25
Exhibit E
INVESTOR QUESTIONNAIRE
(all information will be treated confidentially)
To: AKSYS, LTD.
This Investor Questionnaire ("Questionnaire") must be completed by each
potential investor in connection with the offer and sale of the shares of the
common stock, par value $0.01 per share (the "Securities"), of Aksys, Ltd. (the
"Company"). The Securities are being offered and sold by the Company pursuant to
that certain Securities Purchase Agreement, dated May ___, 2002 (the "Securities
Purchase Agreement"), without registration under the Securities Act of 1933, as
amended (the "Securities Act"), and the securities laws of certain states, in
reliance on the exemptions contained in Section 4 of the Securities Act and on
Regulation D promulgated thereunder and in reliance on similar exemptions under
applicable state laws. The Company must determine that a potential investor
meets certain suitability requirements before offering or selling Securities to
such investor. The purpose of this Questionnaire is to assure the Company that
each investor will meet the applicable suitability requirements. The information
supplied by you will be used in determining whether you meet such criteria, and
reliance upon the private offering exemption from registration is based in part
on the information herein supplied.
This Questionnaire does not constitute an offer to sell or a solicitation
of an offer to buy any security. Your answers will be kept strictly
confidential. However, by signing this Questionnaire you will be authorizing the
Company to provide a completed copy of this Questionnaire to such parties as the
Company deems appropriate in order to ensure that the offer and sale of the
Securities will not result in a violation of the Securities Act or the
securities laws of any state and that you otherwise satisfy the suitability
standards applicable to purchasers of the Securities. All potential investors
must answer all applicable questions and complete, date and sign this
Questionnaire. Please print or type your responses and attach additional sheets
of paper if necessary to complete your answers to any item.
A. BACKGROUND INFORMATION
Name:
---------------------------------------------------------------------------
Business Address:
---------------------------------------------------------------
(Number and Street)
--------------------------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number: ( )
---------------------------------------------------
Residence Address:
-------------------------------------------------------------
(Number and Street)
--------------------------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number: ( )
--------------------------------------------------
If an individual:
Age: Citizenship: Where registered to vote:
---- ----------- --------------------
If a corporation, partnership, limited liability company, trust or other entity:
Type of entity:
-----------------------------------------------------------------
Jurisdiction of formation: Date of formation:
-------------- ------------------
Social Security or Taxpayer Identification No.
---------------------------------
Send all correspondence to (check one): Residence Address Business Address
--- ----
26
B. STATUS AS ACCREDITED INVESTOR
The undersigned is an "accredited investor" as such term is defined in
Regulation D under the Securities Act, at the time of execution of the Stock
Purchase Agreement and the sale of the Securities the undersigned falls within
one or more of the following categories (Please initial one or more, as
applicable):
_____(1) a bank as defined in Section 3(a)(2) of the Securities Act, or a
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934; an insurance company as defined in Section 2(13) of the
Securities Act; an investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section 2(a)(48) of
that act; a Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; a plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; an employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with the investment decisions made
solely by persons that are accredited investors;/1/
_____(2) a private business development company as defined in Section 202(a)(22)
of the Investment Adviser Act of 1940;
_____(3) an organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended, corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the Securities
offered, with total assets in excess of $5,000,000;
_____(4) a natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of such person's purchase of the Securities
exceeds $1,000,000;
_____(5) a natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
_____(6) a trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Securities offered, whose purchase is directed
by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D;
and
_____(7) an entity in which all of the equity owners are accredited investors
(as defined above).
----------------------
/1/ As used in this Questionnaire, the term "net worth" means the excess of
total assets over total liabilities. In computing net worth for the purpose
of subsection (4), the principal residence of the investor must be valued
at cost, including cost of improvements, or at recently appraised value by
an institutional lender making a secured loan, net of encumbrances. In
determining income, the investor should add to the investor's adjusted
gross income any amounts attributable to tax exempt income received, losses
claimed as a limited partner in any limited partnership, deductions claimed
for depreciation, contributions to an XXX or XXXXX retirement plan, alimony
payments, and any amount by which income from long-term capital gains has
been reduced in arriving at adjusted gross income.
27
C. REPRESENTATIONS
The undersigned hereby represents and warrants to the Company as follows:
1. Any purchase of the Securities would be solely for the account of the
undersigned and not for the account of any other person or with a view to any
resale or distribution thereof.
2. The information contained herein is complete and accurate and may be
relied upon by the Company, and the undersigned will notify the Company
immediately of any material change in any of such information occurring prior to
the closing, if any, with respect to the purchase of Securities by the
undersigned or any co-purchaser.
3. There are no suits, pending litigation, or claims against the
undersigned that could materially affect the net worth of the undersigned as
reported in this Questionnaire.
4. The undersigned acknowledges that there may occasionally be times when
the Company, based on the advice of its counsel, determines that it must suspend
the use of the prospectus forming a part of the Registration Statement (as
defined in the Registration Rights Agreement) until such time as an amendment to
the Registration Statement has been filed by the Company and declared effective
by the Securities and Exchange Commission or until the Company has amended or
supplemented such prospectus. The undersigned is aware that, in such event, the
Securities may not be subject to ready liquidation, and that any Securities
purchased by the undersigned may have to be held during such suspension. The
overall commitment of the undersigned to investments which are not readily
marketable is not excessive in view of the undersigned's net worth and financial
circumstances, and any purchase of the Securities will not cause such commitment
to become excessive. The undersigned is able to bear the economic risk of an
investment in the Securities.
5. The undersigned has carefully considered the potential risks relating to
the Company and a purchase of the Securities, and fully understands that the
Securities are speculative investments which involve a high degree of risk of
loss of the undersigned's entire investment. Among others, the undersigned has
carefully considered each of the risks described under the heading "Risk
Factors" in the Company's Annual Report on Form 10-K for the year ended December
31, 2001.
28
IN WITNESS WHEREOF, the undersigned has executed this Questionnaire this _____
day of _____, 2002, and declares under oath that it is truthful and correct.
Print Name
By:
-----------------------------------------
Signature
Title:
--------------------------------------
(required for any purchaser that is
a corporation, partnership, trust or
other entity)
29
