Exhibit 10.1
Execution Version
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
November 1, 2005 among SIGA Technologies, Inc., a Delaware corporation (the
"Company"), and the purchasers identified on the signature pages hereto (each, a
"Purchaser" and collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), the Company desires to issue and sell to each Purchaser, and
each Purchaser, severally and not jointly, desires to purchase from the Company,
certain securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each of the
Purchasers, severally and not jointly, agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
"Additional Investment Rights" means, collectively, the Additional
Investment Rights issued and sold under this Agreement, in the form of
Exhibit A.
"Affiliate" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed
under Rule 144 under the Securities Act. With respect to a Purchaser, any
investment fund or managed account that is managed on a discretionary
basis by the same investment manager as such Purchaser will be deemed to
be an Affiliate of such Purchaser.
"Business Day" means any day other than Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
"Change of Control" means the occurrence of any of the following in
one or a series of related transactions: (i) an acquisition after the date
hereof by an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) under the Exchange Act) of more than one-third of the voting
rights or equity interests in the Company; (ii) a replacement of more than
one-third of the members of the Company's board of directors that is not
approved by those individuals who are members of the board of directors on
the date hereof (or other directors previously approved by such
individuals); (iii) a merger or consolidation of the Company or any
significant Subsidiary or a sale of more
than one-third of the assets of the Company in one or a series of related
transactions, unless following such transaction or series of transactions,
the holders of the Company's securities prior to the first such
transaction continue to hold at least two-thirds of the voting rights and
equity interests in the surviving entity or acquirer of such assets; (iv)
a recapitalization, reorganization or other transaction involving the
Company or any significant Subsidiary that constitutes or results in a
transfer of more than one-half of the voting rights or equity interests in
the Company; (v) consummation of a "Rule 13e-3 transaction" as defined in
Rule 13e-3 under the Exchange Act with respect to the Company, or (vi) the
execution by the Company or its controlling shareholders of an agreement
providing for or reasonably likely to result in any of the foregoing
events.
"Closing" means the closing of the purchase and sale of the Shares,
Additional Investment Rights and Warrants pursuant to Section 2.1.
"Closing Date" means the date of the Closing.
"Closing Price" 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 an Eligible Market or any other national
securities exchange, the closing price per share of the Common Stock for
such date (or the nearest preceding date) on the primary Eligible Market
or exchange on which the Common Stock is then listed or quoted; (b) if
prices for the Common Stock are then quoted on the OTC Bulletin Board, the
closing bid price per share of the Common Stock for such date (or the
nearest preceding date) so quoted; (c) if prices for the Common Stock are
then reported in the "Pink Sheets" published by the National Quotation
Bureau Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent closing bid price per
share of the Common Stock so reported; or (d) 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 Purchasers holding a majority of the
Securities.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value
$0.0001 per share.
"Common Stock Equivalents" means, collectively, Options and
Convertible Securities.
"Company Counsel" means Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP, counsel
to the Company.
"Convertible Securities" means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for Common Stock.
"Effective Date" means the date that the Registration Statement is
first declared effective by the Commission.
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"Eligible Market" means any of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ National Market or the NASDAQ Capital
Market.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Stock" means the issuance of Common Stock (A) upon
exercise or conversion of any options or other securities described in
Schedule 3.1(f) (provided that such exercise or conversion occurs in
accordance with the terms thereof, without amendment or modification, and
that the applicable exercise or conversion price or ratio is described in
such schedule) or otherwise pursuant to any employee benefit plan
described in Schedule 3.1(f) or hereafter adopted by the Company and
approved by its shareholders or (B) in connection with any issuance of
shares or grant of options to employees, officers, directors or
consultants of the Company pursuant to a stock option plan or other
incentive stock plan duly adopted by the Company's board of directors or
in respect of the issuance of Common Stock upon exercise of any such
options.
"Filing Date" means the 30th day following the Closing Date with
respect to the initial Registration Statement required to be filed
hereunder, and, with respect to any additional Registration Statements
that may be required pursuant to Section 6.1(f), the 10th day following
the date on which the Company first knows, or reasonably should have
known, that such additional Registration Statement is required under such
Section.
"Lien" means any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction.
"Losses" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including, without limitation, costs of
preparation and reasonable attorneys' fees.
"Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities (including all Additional
Investment Rights and Warrants that can be issued under the Transaction
Documents).
"Person" means any individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or any court or other federal, state, local or other
governmental authority or other entity of any kind.
"Per Unit Purchase Price" means $1.00.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by
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any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by the Registration
Statement, and all other amendments and supplements to the Prospectus
including post effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.
"Purchaser Counsel" has the meaning set forth in Section 6.2(a).
"Registrable Securities" means any Common Stock (including
Underlying Shares) issued or issuable pursuant to the Transaction
Documents, together with any securities issued or issuable upon any stock
split, dividend or other distribution, recapitalization or similar event
with respect to the foregoing.
"Registration Statement" means each registration statement required
to be filed under Article VI, including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and
all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Required Effectiveness Date" means (i) with respect to the initial
Registration Statement required to be filed hereunder, the 90th day
following the Closing Date and (ii) with respect to any additional
Registration Statements that may be required pursuant to Section 6.1(f),
the 30th day following the date on which the Company first knows, or
reasonably should have known, that such additional Registration Statement
is required under such Section.
"Rule 144," "Rule 415," and "Rule 424" means Rule 144, Rule 415 and
Rule 424, respectively, promulgated by the Commission pursuant to the
Securities Act, as such Rules may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities" means the Shares, Additional Investment Rights,
Warrants and the Underlying Shares.
"Shares" means the shares of Common Stock, which are being issued
and sold to the Purchasers at the Closing.
"Subsidiary" means any Person in which the Company, directly or
indirectly, owns capital stock or holds an equity or similar interest.
"Trading Day" means (a) any day on which the Common Stock is listed
or quoted and traded on its primary Trading Market, or (b) if the Common
Stock is not then listed or quoted and traded on its primary Trading
Market, then a day on which trading occurs on an Eligible Market (or any
successor thereto), or (c) if trading ceases to occur on an Eligible
Market (or any successor thereto), any Business Day.
"Trading Market" means the NASDAQ Capital Market or any other
Eligible Market, or any national securities exchange, market or trading or
quotation facility on which the Common Stock is then listed or quoted.
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"Transaction Documents" means this Agreement, the Warrants, the
Additional Investment Rights, the Transfer Agent Instructions and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.
"Transfer Agent Instructions" means the Irrevocable Transfer Agent
Instructions, in the form of Exhibit E, executed by the Company and
delivered to and acknowledged in writing by the Company's transfer agent.
"Underlying Shares" means the shares of Common Stock issuable upon
exercise of the Warrants and the Additional Investment Rights.
"Unit" means one Share, an Additional Investment Right and a Warrant
to acquire 0.50 shares of Common Stock.
"Warrant" means each Common Stock purchase warrant in the form of
Exhibit A, collectively the "Warrants".
ARTICLE II
PURCHASE AND SALE
2.1 Subject to the terms and conditions set forth in this Agreement, at
the Closing the Company shall issue and sell to each Purchaser, and each
Purchaser shall, severally and not jointly, purchase from the Company, such
number of Units indicated below such Purchaser's name on the signature page of
this Agreement at the Per Unit Purchase Price. The Closing shall take place at
the offices of Proskauer Rose LLP immediately following the execution hereof, or
at such other location or time as the parties may agree.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be delivered
to each Purchaser the following:
(i) one or more stock certificates, free and clear of all
restrictive and other legends (except as expressly provided in Section
4.1(b) hereof), evidencing such number of Shares equal to the number of
Units indicated below such Purchaser's name on the signature page of this
Agreement, registered in the name of such Purchaser;
(ii) an Additional Investment Right, registered in the name of
such Purchaser, pursuant to which such Purchaser shall have the right to
acquire such number of Underlying Shares indicated below such Purchaser's
name on the signature page of this Agreement under the heading "Additional
Investment Right Shares";
(iii) a Warrant, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire such
number of Underlying Shares indicated below such Purchaser's name on the
signature page of this Agreement under the heading "Warrant Shares";
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(iv) a legal opinion of Company Counsel, in the form of
Exhibit C, executed by such counsel and delivered to the Purchasers;
(v) duly executed Transfer Agent Instructions; and
(vi) a certificate from a duly authorized officer certifying
on behalf of the Company that each of the conditions set forth in Section
5.1 has been satisfied;
(b) At the Closing, each Purchaser shall deliver or cause to be
delivered an amount equal to the Per Unit Purchase Price multiplied by the
number of Units indicated below such Purchaser's name on the signature page of
this Agreement under the heading "Units Purchased", in United States dollars and
in immediately available funds, by wire transfer to an account designated in
writing to such Purchaser by the Company for such purpose. The total purchase
price payable by each Purchaser shall be set forth under such Purchaser's name
on the signature page of this Agreement under the heading "Purchase Price."
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as follows:
(a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than those listed in Schedule 3.1(a). Except as disclosed in Schedule
3.1(a), the Company owns, directly or indirectly, all of the capital stock or
comparable equity interests of each Subsidiary free and clear of any Lien and
all the issued and outstanding shares of capital stock or comparable equity
interest of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the Subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not, individually or in the aggregate, (i) adversely affect the legality,
validity or enforceability of any Transaction Document, (ii) have or result in a
material adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole on a consolidated basis, or (iii) adversely
impair the Company's ability to perform fully on a timely basis its obligations
under any of the Transaction Documents (any of (i), (ii) or (iii), a "Material
Adverse Effect").
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(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company, its Board of Directors or its shareholders. Each of the
Transaction Documents has been (or upon delivery will be) duly executed by the
Company and, assuming the due authorization, execution and delivery by the other
parties thereto, is, or when delivered in accordance with the terms hereof, will
constitute, the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with or violate any provision of the Company's or any Subsidiary's certificate
or articles of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing a Company or Subsidiary debt or otherwise) or
other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations and the rules and regulations of any
self-regulatory organization to which the Company or its securities are
subject), or by which any property or asset of the Company or a Subsidiary is
bound or affected.
(e) Issuance of the Securities. The Securities (including the
Underlying Shares) are duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens and shall not be
subject to preemptive rights or similar rights of shareholders. The Company has
reserved from its duly authorized capital stock the maximum number of shares of
Common Stock issuable upon exercise of the Additional Investment Rights and the
Warrants.
(f) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock, options and other securities of the
Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in
Schedule 3.1(f). All outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance
with all applicable securities laws. Except as disclosed in Schedule 3.1(f),
there are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares of Common
Stock. There are no anti-dilution or
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price adjustment provisions contained in any security issued by the Company (or
in any agreement providing rights to security holders) and the issue and sale of
the Securities (including the Underlying Shares) will not obligate the Company
to issue shares of Common Stock or other securities to any Person (other than
the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities. To the knowledge of the Company, except as specifically
disclosed in Schedule 3.1(f), no Person or group of related Persons beneficially
owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or has the
right to acquire, by agreement with or by obligation binding upon the Company,
beneficial ownership of in excess of 5% of the outstanding Common Stock,
ignoring for such purposes any limitation on the number of shares of Common
Stock that may be owned at any single time.
(g) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or
such shorter period as the Company was required by law to file such material)
(the foregoing materials (together with any materials filed by the Company under
the Exchange Act, whether or not required) being collectively referred to herein
as the "SEC Reports" and, together with this Agreement and the Schedules to this
Agreement, the "Disclosure Materials") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has delivered to each Purchaser
true, correct and complete SEC Reports filed by the Company within the 10 days
preceding the date hereof. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified in
such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. All material
agreements to which the Company or any Subsidiary is a party or to which the
property or assets of the Company or any Subsidiary are subject are included as
part of or specifically identified in the SEC Reports.
(h) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports or in Schedule 3.1(h), (i) there has been no event, occurrence
or development that, individually or in the aggregate, has had or that could
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
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or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting or the identity of its
auditors, except as disclosed in its SEC Reports, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to its
shareholders or purchased, redeemed or made any agreements to purchase or redeem
any 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-based plans.
(i) 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 Subsidiaries that could, individually or in the aggregate, have a Material
Adverse Effect. Schedule 3.1(i) contains a complete list and summary description
of any pending or, to the knowledge of the Company, threatened proceeding
against or affecting the Company or any of its Subsidiaries, without regard to
whether it could, individually or in the aggregate, have a Material Adverse
Effect.
(j) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and, to the knowledge of the Company, 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 written notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or result in a Material Adverse Effect.
(k) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance.
(l) Certain Fees. Except for the fees described in Schedule 3.1(l),
all of which are payable to registered broker-dealers, no brokerage or finder's
fees or commissions are or will be payable by the Company to any broker,
financial advisor or consultant, finder, placement agent, investment banker,
bank or other Person with respect to the transactions contemplated by this
Agreement, and the Company has not taken any action that would cause any
Purchaser to be liable for any such fees or commissions.
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(m) Private Placement. Neither the Company nor any Person acting on
the Company's behalf has sold or offered to sell or solicited any offer to buy
the Securities by means of any form of general solicitation or advertising.
Neither the Company nor any of its Affiliates nor any Person acting on the
Company's behalf has, directly or indirectly, at any time within the past six
months, made any offer or sale of any security or solicitation of any offer to
buy any security under circumstances that would (i) eliminate the availability
of the exemption from registration under Regulation D under the Securities Act
in connection with the offer and sale of the Securities as contemplated hereby
or (ii) cause the offering of the Securities pursuant to the Transaction
Documents to be integrated with prior offerings by the Company for purposes of
any applicable law, regulation or stockholder approval provisions, including,
without limitation, under the rules and regulations of any Trading Market. The
Company is not, and is not an Affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. The Company is not a
United States real property holding corporation within the meaning of the
Foreign Investment in Real Property Tax Act of 1980.
(n) Listing and Maintenance Requirements. The Company has not, in the
two years preceding the date hereof, received notice (written or oral) from any
Trading Market on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(o) Registration Rights. Except as described in Schedule 3.1(p), the
Company has not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have not
been satisfied.
(p) Application of Takeover Protections. There is no control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
charter documents or the laws of its state of incorporation that is or could
become applicable to any of the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the
Company's issuance of the Securities and the Purchasers' ownership of the
Securities.
(q) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their agents
or counsel with any information that constitutes or might constitute material,
nonpublic information. The Company understands and confirms that each of the
Purchasers will rely on the foregoing representations in effecting transactions
in securities of the Company. All disclosure materials provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
the Company are true and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the 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 any of its
Subsidiaries or its or their business, properties, prospects, operations or
financial conditions,
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which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed. The Company acknowledges and agrees that (i) no Purchaser makes or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2 or
(ii) any statement, commitment or promise to the Company or, to its knowledge,
any of its representatives which is or was an inducement to the Company to enter
into this Agreement or otherwise.
(r) Acknowledgment Regarding Purchasers' Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is acting solely in
the capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Purchasers'
purchase of the Securities. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
(s) Patents and Trademarks. The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights.
(t) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without a significant increase in cost.
(u) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
result in a Material Adverse Effect ("Material Permits"), and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any Material Permit.
11
(v) Transactions With Affiliates and Employees. Except as set forth in
SEC Reports filed at least ten days prior to the date hereof, none of the
officers or directors of the Company and, to the knowledge of the Company, none
of the employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
(w) Form S-3 Eligibility. The Company is eligible to register the
resale of its Common Stock for resale by the Purchasers under Form S-3
promulgated under the Securities Act.
(x) Solvency. Based on the financial condition of the Company as of
the Closing Date, (i) the Company's fair saleable value of its assets exceeds
the amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be payable on or
in respect of its debt).
(y) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(z) Xxxxxxxx-Xxxxx Act. The Company is in compliance with applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002 and applicable rules and
regulations promulgated by the Commission thereunder in effect as of the date of
this Agreement, except where such noncompliance could not be reasonably expected
to have, individually or in the aggregate, a Material Adverse Effect.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, as to itself only and for no other Purchaser, represents and warrants to
the Company as follows:
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(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The purchase by such Purchaser of the
Shares and the Warrants and Additional Investment Rights hereunder has been duly
authorized by all necessary action on the part of such Purchaser. This Agreement
has been duly executed and delivered by such Purchaser and constitutes the valid
and binding obligation of such Purchaser, enforceable against it in accordance
with its terms.
(b) Purchaser Status. At the time such Purchaser was offered the
Shares, Additional Investment Rights and the Warrants, it was, and at the date
hereof it is, an "accredited investor" as defined in Rule 501(a) under the
Securities Act.
(c) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) Securities may only be disposed of pursuant to an effective
registration statement under the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144(k), except as otherwise set
forth herein, the Company may require the transferor to provide to the Company
an opinion of counsel selected by the transferor, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with its transfer agent, without any
such legal opinion, any transfer of Securities by a Purchaser to an Affiliate of
such Purchaser, provided that the transferee certifies to the Company that it is
an "accredited investor" as defined in Rule 501(a) under the Securities Act. For
so long as any Purchaser owns Securities, the Company will not effect or
publicly announce its intention to effect any exchange, recapitalization or
other transaction that effectively requires or rewards physical delivery of
certificates evidencing the Common Stock.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of the following legend on any certificate evidencing
Securities:
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[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR
BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY SUCH SECURITIES.
Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) while a Registration Statement covering the resale of
such Securities is effective under the Securities Act, or (ii) following any
sale of such Securities pursuant to Rule 144, or (iii) if such Securities are
eligible for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission). The
Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Company's transfer agent on the Effective
Date. Following the Effective Date or at such earlier time as a legend is no
longer required for certain Securities, the Company will use reasonable best
efforts to cause its transfer agent, no later than three Trading Days following
the delivery by a Purchaser to the Company or the Company's transfer agent of a
legended certificate representing such Securities, deliver or cause to be
delivered to such Purchaser a certificate representing such Securities 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.
(c) The Company acknowledges and agrees that a Purchaser may from time
to time pledge or grant a security interest in some or all of the Securities in
connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Securities and, if required under the terms of such
agreement, loan or arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would
not be subject to approval of the Company and no legal opinion of the pledgee,
secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate Purchaser's expense,
the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.
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4.2 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. Upon the request
of any Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as any Purchaser owns Securities, if the Company
is not required to file reports pursuant to such laws, it will prepare and
furnish to the Purchasers and make publicly available in accordance with
paragraph (c) of Rule 144 such information as is required for the Purchasers to
sell the Securities under Rule 144. The Company further covenants that it will
take such further action as any holder of Securities may reasonably request to
satisfy the provisions of Rule 144 applicable to the issuer of securities
relating to transactions for the sale of securities pursuant to Rule 144.
4.3 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
4.4 Reservation and Listing of Securities. The Company shall maintain a
reserve from its duly authorized shares of Common Stock for issuance pursuant to
the Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares. The Company shall in the time and manner required by its
Trading Market, prepare and file with such Trading Market an additional shares
listing application covering the number of shares of Common Stock issuable under
the Transaction Documents and shall take all steps necessary to cause such
shares of Common Stock to be approved for listing on its Trading Market as soon
as possible.
4.5 Subsequent Placements.
(a) From the date hereof until the Effective Date, the Company will
not, directly or indirectly, offer, sell, grant any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition of) any of its or the Subsidiaries' equity or
equity equivalent securities, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life and
under any circumstances, convertible into or exchangeable or exercisable for
Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent Placement").
(b) From the Effective Date until 30 Trading Days after the Effective
Date (the "Blockout Period"), the Company will not, directly or indirectly,
effect any Subsequent Placement except as set forth in Section 4.5(e).
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(c) The Blockout Period set forth in Section 4.5(b) above shall be
extended for the number of Trading Days during such period in which (i) trading
in the Common Stock is suspended by any Trading Market, (ii) the Registration
Statement is not effective, or (iii) the prospectus included in the Registration
Statement may not be used by the Purchasers for the resale of Registrable
Securities thereunder.
(d) From the end of the Blockout Period until the one year anniversary
thereof, the Company will not, directly or indirectly, effect any Subsequent
Placement unless the Company shall have first complied with this Section 4.5(d).
(i) The Company shall deliver to each Purchaser a written
notice (the "Offer") of any proposed or intended issuance or sale or
exchange of the securities being offered (the "Offered Securities") in a
Subsequent Placement, which Offer shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they
are to be issued, sold or exchanged, and the number or amount of the
Offered Securities to be issued, sold or exchanged, (y) identify the
Persons or entities to which or with which the Offered Securities are to
be offered, issued, sold or exchanged and (z) offer to issue and sell to
or exchange with each Purchaser (A) a pro rata portion of the Offered
Securities based on such Purchaser's pro rata portion of the aggregate
purchase price paid by the Purchasers for all of the Shares purchased
hereunder (the "Basic Amount"), and (B) with respect to each Purchaser
that elects to purchase its Basic Amount, any additional portion of the
Offered Securities attributable to the Basic Amounts of other Purchasers
as such Purchaser shall indicate it will purchase or acquire should the
other Purchasers subscribe for less than their Basic Amounts (the
"Undersubscription Amount").
(ii) To accept an Offer, in whole or in part, a Purchaser must
deliver a written notice to the Company prior to the end of the ten (10)
Trading Day period of the Offer, setting forth the portion of the
Purchaser's Basic Amount that such Purchaser elects to purchase and, if
such Purchaser shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Purchaser elects to purchase
(in either case, the "Notice of Acceptance"). If the Basic Amounts
subscribed for by all Purchasers are less than the total of all of the
Basic Amounts, then each Purchaser who has set forth an Undersubcription
Amount in its Notice of Acceptance shall be entitled to purchase, in
addition to the Basic Amounts subscribed for, the Undersubscription Amount
it has subscribed for; provided, however, that if the Undersubscription
Amounts subscribed for exceed the difference between the total of all the
Basic Amounts and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Purchaser who has subscribed for any
Undersubscription Amount shall be entitled to purchase on that portion of
the Available Undersubscription Amount as the Basic Amount of such
Purchaser bears to the total Basic Amounts of all Purchasers that have
subscribed for Undersubscription Amounts, subject to rounding by the Board
of Directors to the extent its deems reasonably necessary.
(iii) The Company shall have five (5) Trading Days from the
expiration of the period set forth in Section 4.5(d)(ii) above to issue,
sell or exchange all or any part of such Offered Securities as to which a
Notice of Acceptance has not been given by the
16
Purchasers (the "Refused Securities"), but only to the offerees described
in the Offer and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to
the acquiring Person or Persons or less favorable to the Company than
those set forth in the Offer.
(iv) In the event the Company shall propose to sell less than
all the Refused Securities (any such sale to be in the manner and on the
terms specified in Section 4.5(d)(iii) above), then each Purchaser may, at
its sole option and in its sole discretion, reduce the number or amount of
the Offered Securities specified in its Notice of Acceptance to an amount
that shall be not less than the number or amount of the Offered Securities
that the Purchaser elected to purchase pursuant to Section 4.5(d)(ii)
above multiplied by a fraction, (i) the numerator of which shall be the
number or amount of Offered Securities the Company actually proposes to
issue, sell or exchange (including Offered Securities to be issued or sold
to Purchasers pursuant to Section 4.5(c)(ii) above prior to such
reduction) and (ii) the denominator of which shall be the original amount
of the Offered Securities. In the event that any Purchaser so elects to
reduce the number or amount of Offered Securities specified in its Notice
of Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until such
securities have again been offered to the Purchasers in accordance with
Section 4.5(d)(i) above.
(v) Upon the closing of the issuance, sale or exchange of all
or less than all of the Refused Securities, the Purchasers shall acquire
from the Company, and the Company shall issue to the Purchasers, the
number or amount of Offered Securities specified in the Notices of
Acceptance, as reduced pursuant to Section 4.5(d)(iv) above if the
Purchasers have so elected, upon the terms and conditions specified in the
Offer. The purchase by the Purchasers of any Offered Securities is subject
in all cases to the preparation, execution and delivery by the Company and
the Purchasers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Purchasers and their
respective counsel.
(vi) Any Offered Securities not acquired by the Purchasers or
other persons in accordance with Section 4.5(d)(iii) above may not be
issued, sold or exchanged until they are again offered to the Purchasers
under the procedures specified in this Agreement.
(e) The restrictions contained in paragraphs (b) and (d) of this
Section 4.5 shall not apply to Excluded Stock.
4.6 Securities Laws Disclosure; Publicity. The Company shall, on or before
8:30 a.m., New York City time on November 2, 2005, issue a press release
acceptable to the Purchasers disclosing all material terms of the transactions
contemplated hereby. Prior to the second business day after the Closing Date,
the Company shall file a Current Report on Form 8-K with the Commission (the
"8-K Filing") describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to such Current Report on Form
8-K this Agreement, the form of Additional Investment Right and the form of
Warrant, in the form required by the Exchange Act. Thereafter, the Company shall
timely file any filings and notices
17
required by the Commission or applicable law with respect to the transactions
contemplated hereby and provide copies thereof to the Purchasers promptly after
filing. Except with respect to the 8-K Filing and the press release referenced
above (a copy of which will be provided to the Purchasers for their review as
early as practicable prior to its filing), the Company shall, at least two
Trading Days prior to the filing or dissemination of any disclosure required by
this paragraph that does not contain any material non-public information,
provide a copy thereof to the Purchasers for their review. The Company and the
Purchasers shall consult with each other in issuing any press releases or
otherwise making public statements or filings and other communications with the
Commission or any regulatory agency or Trading Market with respect to the
transactions contemplated hereby, and neither party shall issue any such press
release or otherwise make any such public statement, filing or other
communication without the prior consent of the other, except if such disclosure
is required by law, in which case the disclosing party shall promptly provide
the other party with prior notice of such public statement, filing or other
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except to the extent such
disclosure (but not any disclosure as to the controlling Persons thereof) is
required by law or Trading Market regulations, in which case the Company shall
provide the Purchasers with prior notice of such disclosure. The Company shall
not, and shall cause each of its Subsidiaries and its and each of their
respective officers, directors, employees and agents not to, provide any
Purchaser with any material nonpublic information regarding the Company or any
of its Subsidiaries from and after the filing of the 8-K Filing without the
express written consent of such Purchaser. In the event of a breach of the
foregoing covenant by the Company, any of its Subsidiaries, or any of its or
their respective officers, directors, employees and agents, in addition to any
other remedy provided herein or in the Transaction Documents, a Purchaser shall
have the right to 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, its Subsidiaries, or any of its or
their respective officers, directors, employees or agents. No Purchaser shall
have any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, shareholders or agents for any such
disclosure. Subject to the foregoing, neither the Company nor any Purchaser
shall issue any press releases or any other public statements with respect to
the transactions contemplated hereby; provided, however, that the Company shall
be entitled, without the prior approval of any Purchaser, to make any press
release or other public disclosure with respect to such transactions (i) in
substantial conformity with the 8-K Filing and contemporaneously therewith and
(ii) as is required by applicable law and regulations (provided that in the case
of clause (i) each Purchaser shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release).
Each press release disseminated during the 12 months preceding the date of this
Agreement did not at the time of release contain any untrue statement of a
material fact or omit 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 are made, not misleading.
4.7 Use of Proceeds. Except as set forth on Schedule 4.7, the Company
shall use the net proceeds from the sale of the Securities hereunder for working
capital purposes and not (i) for the satisfaction of any portion of the
Company's debt (other than payment of trade payables and accrued expenses in the
ordinary course of the Company's business and consistent with past
18
practice), (ii) to redeem any Company equity or equity-equivalent securities, or
(iii) to settle any outstanding litigation.
4.8 Reimbursement. If any Purchaser or any of its Affiliates or any
officer, director, partner, controlling Person, employee or agent of a Purchaser
or any of its Affiliates (a "Related Person") becomes involved in any capacity
in any Proceeding brought by or against any Person in connection with or as a
result of the transactions contemplated by the Transaction Documents, the
Company will indemnify and hold harmless such Purchaser or Related Person for
its reasonable legal and other expenses (including the costs of any
investigation, preparation and travel) and for any Losses incurred in connection
therewith, as such expenses or Losses are incurred, excluding only Losses that
result directly from such Purchaser's or Related Person's gross negligence or
willful misconduct. In addition, the Company shall indemnify and hold harmless
each Purchaser and Related Person from and against any and all Losses, as
incurred, arising out of or relating to any breach by the Company of any of the
representations, warranties or covenants made by the Company in this Agreement
or any other Transaction Document, or any allegation by a third party that, if
true, would constitute such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.4(c) below. The indemnification obligations of the Company under this
paragraph shall be in addition to any liability that the Company may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Purchasers and any such
Related Persons. The Company also agrees that neither the Purchasers nor any
Related Persons shall have any liability to the Company or any Person asserting
claims on behalf of or in right of the Company in connection with or as a result
of the transactions contemplated by the Transaction Documents, except to the
extent that any Losses incurred by the Company result from the gross negligence
or willful misconduct of the applicable Purchaser or Related Person in
connection with such transactions. If the Company breaches its obligations under
any Transaction Document, then, in addition to any other liabilities the Company
may have under any Transaction Document or applicable law, the Company shall pay
or reimburse the Purchasers on demand for all costs of collection and
enforcement (including reasonable attorneys fees and expenses). Without limiting
the generality of the foregoing, the Company specifically agrees to reimburse
the Purchasers on demand for all costs of enforcing the indemnification
obligations in this paragraph.
ARTICLE V
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing as though made on and as
of such date; and
(b) Performance. The Company and each other Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and
19
conditions required by the Transaction Documents to be performed, satisfied or
complied with by it at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;
(d) Adverse Changes. Since the date of execution of this Agreement, no
event or series of events shall have occurred that reasonably would be expected
to have or result in a Material Adverse Effect; and
(e) No Suspensions of Trading in Common Stock; Listing. Trading in the
Common Stock shall not have been suspended by the Commission or any Trading
Market (except for any suspensions of trading of not more than three Trading
Days (whether or not consecutive) solely to permit dissemination of material
information regarding the Company) at any time since the date of execution of
this Agreement, and the Common Stock shall have been at all times since such
date listed for trading on an Eligible Market;
5.2 Conditions Precedent to the Obligations of the Company. The obligation
of the Company to sell Securities at the Closing is subject to the satisfaction
or waiver by the Company, at or before the Closing, of each of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of the Purchasers contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made on
and as of such date; and
(b) Performance. The Purchasers shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing.
ARTICLE VI
REGISTRATION RIGHTS
6.1 Shelf Registration
(a) As promptly as possible, and in any event on or prior to the
Filing Date, the Company shall prepare and file with the Commission a "Shelf"
Registration Statement covering the resale of all Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith as the
Purchasers may consent) and shall contain (except if otherwise directed by the
Purchasers) the "Plan of Distribution" attached hereto as Exhibit D.
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(b) The Company shall use its best efforts to cause the Registration
Statement to be declared effective by the Commission as promptly as possible
after the filing thereof, but in any event prior to the Required Effectiveness
Date, and shall use its best efforts to keep the Registration Statement
continuously effective under the Securities Act until the fifth anniversary of
the Effective Date or such earlier date when all Registrable Securities covered
by such Registration Statement have been sold publicly (the "Effectiveness
Period").
(c) The Company shall notify each Purchaser in writing promptly (and
in any event within one Trading Day) after receiving notification from the
Commission that the Registration Statement has been declared effective.
(d) If: (i) any Registration Statement is not filed on or prior to the
Filing Date (if the Company files such Registration Statement without affording
the Purchasers the opportunity to review and comment on the same as required by
Section 6.2(a) hereof, the Company shall not be deemed to have satisfied this
clause (i)), or (ii) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 461 promulgated under the Securities Act,
within five Trading Days after the date that the Company is notified (orally or
in writing, whichever is earlier) by the Commission that a Registration
Statement will not be "reviewed," or will not be subject to further review, or
(iii) the Company fails to respond to any comments made by the Commission within
10 Trading Days after the receipt of such comments, or (iv) a Registration
Statement filed hereunder is not declared effective by the Commission by the
Required Effectiveness Date, or (v) after a Registration Statement is filed with
and declared effective by the Commission, such Registration Statement ceases to
be effective as to all Registrable Securities to which it is required to relate
at any time prior to the expiration of the Effectiveness Period without being
succeeded within 10 Trading Days by an amendment to such Registration Statement
or by a subsequent Registration Statement filed with and declared effective by
the Commission, or (vi) an amendment to a Registration Statement is not filed by
the Company with the Commission within ten Trading Days after the Commission's
having notified the Company that such amendment is required in order for such
Registration Statement to be declared effective, or (vii) the Common Stock is
not listed or quoted, or is suspended from trading on an Eligible Market for a
period of three Trading Days (which need not be consecutive Trading Days) (any
such failure or breach being referred to as an "Event," and for purposes of
clause (i) or (iv) the date on which such Event occurs, or for purposes of
clause (ii) the date on which such five Trading Day period is exceeded, or for
purposes of clauses (iii), (v) or (vi) the date which such ten Trading
Day-period is exceeded, or for purposes of clause (vii) the date on which such
three Trading Day period is exceeded, being referred to as "`Event Date"), then:
(x) on each such Event Date the Company shall pay to each Purchaser an amount in
cash, as partial liquidated damages and not as a penalty, equal to 1% of the
aggregate purchase price paid by such Purchaser pursuant to the Purchase
Agreement; and (y) on each monthly anniversary of each such Event Date thereof
(if the applicable Event shall not have been cured by such date) until the
applicable Event is cured, the Company shall pay to each Purchaser an amount in
cash, as partial liquidated damages and not as a penalty, equal to 1% of the
aggregate purchase price paid by such Purchaser pursuant to the Purchase
Agreement. Such payments shall be in partial compensation to the Purchasers and
shall not constitute the Purchaser's exclusive remedy for such events. If the
Company fails to pay any liquidated damages pursuant to this Section in full
within seven days after the date payable, the Company will pay interest thereon
at a rate of 18% per annum (or such lesser maximum amount that is permitted to
be paid by applicable law) to the
21
Purchaser, accruing daily from the date such liquidated damages are due until
such amounts, plus all such interest thereon, are paid in full.
(e) The Company shall not, prior to the Effective Date of the
Registration Statement, prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
(other than as contemplated in the Transaction Documents) under the Securities
Act of any of its equity securities.
(f) If the Company issues to the Purchasers any Common Stock pursuant
to the Transaction Documents that is not included in the initial Registration
Statement, then the Company shall file an additional Registration Statement
covering such number of shares of Common Stock on or prior to the Filing Date
and shall use its best efforts, but in no event later than the Required Filing
Date, to cause such additional Registration Statement to become effective by the
Commission.
6.2 Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish to each
Purchaser and any counsel designated by any Purchaser (each, a "Purchaser
Counsel", and Iroquois Master Fund Ltd. has initially designated Proskauer Rose
LLP "LP Counsel") copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of each Purchaser and Purchaser
Counsel, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file a Registration Statement or any such Prospectus or any amendments or
supplements thereto to which Purchasers holding a majority of the Registrable
Securities shall reasonably object.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten days, to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably possible
provide the Purchasers true and complete copies of all correspondence from and
to the Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in
22
accordance with the intended methods of disposition by the Purchasers thereof
set forth in the Registration Statement as so amended or in such Prospectus as
so supplemented
(c) Notify the Purchasers of Registrable Securities to be sold and
Purchaser Counsel as promptly as reasonably possible, and (if requested by any
such Person) confirm such notice in writing no later than one Trading Day
thereafter, of any of the following events: (i) the Commission notifies the
Company whether there will be a "review" of any Registration Statement; (ii) the
Commission comments in writing on any Registration Statement (in which case the
Company shall deliver to each Purchaser a copy of such comments and of all
written responses thereto); (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the Commission or any other
Federal or state governmental authority requests any amendment or supplement to
any Registration Statement or Prospectus or requests additional information
related thereto; (v) the Commission issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (vi) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction, or the initiation or threat of any Proceeding for such
purpose; or (vii) the financial statements included in any Registration
Statement become ineligible for inclusion therein or any statement made in any
Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference is untrue in any material respect or any
revision to a Registration Statement, Prospectus or other document is required
so that it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(d) Use its best efforts to avoid the issuance of or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.
(e) Furnish to each Purchaser and Purchaser Counsel, without charge,
at least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(f) Promptly deliver to each Purchaser and Purchaser Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Purchasers in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
(g) (i) In the time and manner required by each Trading Market,
prepare and file with such Trading Market an additional shares listing
application covering all of the Registrable Securities; (ii) take all steps
necessary to cause such Registrable Securities to be approved for listing on
each Trading Market as soon as possible thereafter; (iii) provide to the
23
Purchasers evidence of such listing; and (iv) maintain the listing of such
Registrable Securities on each such Trading Market or another Eligible Market.
(h) Prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the selling
Purchasers and each applicable Purchaser Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Purchaser requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement.
(i) Cooperate with the Purchasers to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration Statement, which certificates shall
be free, to the extent permitted by this Agreement, of all restrictive legends,
and to enable such Registrable Securities to be in such denominations and
registered in such names as any such Purchasers may request.
(j) Upon the occurrence of any event described in Section 6.2(c)(vii),
as promptly as reasonably possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(k) Cooperate with any due diligence investigation undertaken by the
Purchasers in connection with the sale of Registrable Securities, including,
without limitation, by making available any documents and information; provided
that the Company will not deliver or make available to any Purchaser material,
nonpublic information unless such Purchaser specifically requests in advance to
receive material, nonpublic information in writing.
(l) If Holders of a majority of the Registrable Securities being
offered pursuant to a Registration Statement select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, by providing customary legal opinions, comfort letters and
indemnification and contribution obligations.
(m) Comply with all applicable rules and regulations of the
Commission.
6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including without limitation (a)
all registration and filing fees and expenses, including without limitation
those related to filings with the Commission, any Trading Market and in
24
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the
Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company, (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, and (f) all listing fees to be paid
by the Company to the Trading Market.
6.4 Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Purchaser,
the officers, directors, partners, members, agents, brokers (including brokers
who offer and sell Registrable Securities as principal as a result of a pledge
or any failure to perform under a margin call of Common Stock), investment
advisors and employees of each of them, each Person who controls any such
Purchaser (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the officers, directors, partners, members, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all Losses, as incurred, arising out of
or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that (i)
such untrue statements, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. The
Company shall notify the Purchasers promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Purchasers. Each Purchaser shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
any omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of prospectus
25
or supplement thereto, in the light of the circumstances under which they were
made) not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Purchaser to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (i) such untrue statements or
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Purchaser hereunder be greater in
amount than the dollar amount of the net proceeds received by such Purchaser
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii) the
named parties to any such Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an
26
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten Trading
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 6.4(a)
or (b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.4(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6.5 Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of
27
Registrable Securities pursuant to the Registration Statement. Each Purchaser
further agrees that, upon receipt of a notice from the Company of the occurrence
of any event of the kind described in Sections 6.2(c)(v), (vi) or (vii), such
Purchaser will discontinue disposition of such Registrable Securities under the
Registration Statement until such Purchaser's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 6.2(j), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.
6.6 No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Purchasers in such capacity pursuant hereto)
may include securities of the Company in the Registration Statement other than
the Registrable Securities, and the Company shall not after the date hereof
enter into any agreement providing any such right to any of its security
holders.
6.7 Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Trading Day following the date of this Agreement;
provided that no such termination will affect the right of any party to xxx for
any breach by the other party (or parties).
7.2 Fees and Expenses. At the Closing, the Company shall pay to Iroquois
Master Fund Ltd. an aggregate of $25,000 for their legal fees and expenses
incurred in connection with the preparation and negotiation of this Agreement,
of which amount $10,000 has been previously paid by the Company. In lieu of the
foregoing remaining payment, Iroquois Capital LP may retain such amount at the
Closing. Except as expressly set forth in the Transaction Documents to the
contrary, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all
28
transfer agent fees, stamp taxes and other taxes and duties levied in connection
with the issuance of the Securities.
7.3 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents. Notwithstanding anything to the contrary
herein, Securities may be assigned to any Person in connection with a bona fide
margin account or other loan or financing arrangement secured by such Company
Securities.
7.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
deposit with a nationally recognized overnight courier service, or (d) upon
actual receipt by the party to whom such notice is required to be given. The
addresses and facsimile numbers for such notices and communications are those
set forth on the signature pages hereof, or such other address or facsimile
number as may be designated in writing hereafter, in the same manner, by any
such Person.
7.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Purchasers under Article VI and
that does not directly or indirectly affect the rights of other Purchasers may
be given by Purchasers holding at least a majority of the Registrable Securities
to which such waiver or consent relates.
7.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
7.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign
29
this Agreement or any rights or obligations hereunder without the prior written
consent of the Purchasers. Any Purchaser may assign its rights under this
Agreement to any Person to whom such Purchaser assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions hereof that apply to the
"Purchasers." Notwithstanding anything to the contrary herein, Securities may be
assigned to any Person in connection with a bona fide margin account or other
loan or financing arrangement secured by such Securities.
7.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.8 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
7.9 GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY SUBMIT TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY
THE COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE
COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND PURCHASERS HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.
7.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and/or exercise of
the Securities, as applicable.
7.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it
30
being understood that both parties need not sign the same counterpart. In the
event that any signature is delivered by facsimile transmission, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile signature page were an original thereof.
7.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
7.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
7.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
7.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser hereunder or pursuant to the Warrants or any Purchaser
enforces or exercises its rights hereunder or 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 by 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.
31
7.17 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
7.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Securities pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other Person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. The Company hereby confirms that it understands that the
Purchasers are not acting as a "group" as that term is used in Section 13(d) of
the Exchange Act. Each Purchaser acknowledges that no other Purchaser has acted
as agent for such Purchaser in connection with making its investment hereunder
and that no other Purchaser will be acting as agent of such Purchaser in
connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser represents that it has been represented by its own separate legal
counsel in its review and negotiations of this Agreement and the Transaction
Documents and each party represents and confirms that Proskauer Rose LLP
represents only Iroquois Master Fund Ltd. in connection with this Agreement and
the other Transaction Documents.
[SIGNATURE PAGES TO FOLLOW]
32
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized signatories as of the date first
indicated above.
SIGA Technologies, Inc.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President and Chief Financial Officer
Address for Notice:
000 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxx
With a copy to: Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
IROQUOIS MASTER FUND LTD.
By: /s/ Xxxxxx Xxxxxxxxx
-----------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Authorized Signatory
Purchase Price 500,000
-------
Units Purchased: 500,000
-------
Warrant Shares: 250,000
-------
Additional Investment Right Shares: 500,000
-------
Address for Notice:
Iroquois Master Fund Ltd.
000 Xxxxxxxxx Xxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxxx Xxxxxxxxx
With a copy to: Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
Cranshire Capital, L.P.
-----------------------
(Name of Purchaser)
By: /s/ Xxxxxxxx Xxxxx
----------------------------------
Name: Xxxxxxxx Xxxxx
Title: President - Downsview Capital
The General Partner
Purchase Price $500,000
--------
Units Purchased: 500,000
--------
Warrant Shares: 250,000
--------
Additional Investment Right Shares: 500,000
--------
Address for Notice:
000 Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxxxxx, XX 00000
Facsimile No.: 000-000-0000
Telephone No.: 000-000-0000
Attn: Xxxxxxxx Xxxxx
Omicron Master Trust
--------------------
(Name of Purchaser)
By: /s/ Xxxxx Xxxxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Managing Partner
Purchase Price $500,000
--------
Units Purchased: 500,000
--------
Warrant Shares: 250,000
--------
Additional Investment Right Shares: 500,000
--------
Address for Notice:
000 Xxxxx Xxx.
00xx Xx
Xxx Xxxx, XX 00000
Facsimile No.: 000 000-0000
Telephone No.: 000-000-0000
Attn: Xxxxx Xxxx
SMITHFIELD FIDUCIARY LLC
------------------------
(Name of Purchaser)
By: /s/ Xxxx X. Chill
-------------------------------
Name: Xxxx X. Chill
Title: Authorized Signatory
Purchase Price $500,000
--------
Units Purchased: 500,000
--------
Warrant Shares: 250,000
--------
Additional Investment Right Shares: 500,000
--------
Address for Notice:
c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxx X. Xxxxxx/ Xxxx X. Chill
Exhibits:
---------
A Form of Additional Investment Right
B Form of Warrant
C Form of Opinion of Company Counsel
D Plan of Distribution
E Form of Transfer Agent Instructions
Execution Version
EXHIBIT A
NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
SIGA TECHNOLOGIES, INC.
ADDITIONAL INVESTMENT RIGHT
Additional Investment Right No. [ ] Dated: November ___, 2005
SIGA Technologies, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, [Name of Holder] or its registered assigns
(the "Holder"), is entitled to purchase from the Company up to a total of [ ](1)
shares of common stock (the "Common Stock"), of the Company (each such share, an
"Additional Investment Right Share" and all such shares, the "Additional
Investment Right Shares") at an exercise price equal to $1.10 per share (as
adjusted from time to time as provided in Section 9, the "Exercise Price"), at
any time and from time to time from and after the date hereof and through and
including the 90th Trading Day following the Effective Date, but not including
the Effective Date (the "Expiration Date"), and subject to the following terms
and conditions. This Additional Investment Right (this "Additional Investment
Right") is one of a series of similar Additional Investment Rights issued
pursuant to that certain Securities Purchase Agreement, dated as of the date
hereof, by and among the Company and the Purchasers identified therein (the
"Purchase Agreement"). All such Additional Investment Rights are referred to
herein, collectively, as the "Additional Investment Rights."
1. Definitions. In addition to the terms defined elsewhere in this
Additional Investment Right, capitalized terms that are not otherwise defined
herein have the meanings given to such terms in the Purchase Agreement.
----------------------
(1) Up to Holder's pro rata share of $2MM.
2. Registration of Additional Investment Right. The Company shall register
this Additional Investment Right, upon records to be maintained by the Company
for that purpose (the "Additional Investment Right Register"), in the name of
the record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Additional Investment Right as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the contrary.
3. Registration of Transfers. The Company shall register the assignment
and transfer of any portion of this Additional Investment Right in the
Additional Investment Right Register, upon surrender of this Additional
Investment Right, with the Form of Assignment attached hereto duly completed and
signed, to the Transfer Agent or to the Company at its address specified herein.
Upon any such registration or transfer, a new Additional Investment Right to
purchase Common Stock, in substantially the form of this Additional Investment
Right (any such new Additional Investment Right, a "New Additional Investment
Right"), evidencing the portion of this Additional Investment Right so
transferred shall be issued to the transferee and a New Additional Investment
Right evidencing the remaining portion of this Additional Investment Right not
so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Additional Investment Right by the transferee thereof
shall be deemed the acceptance by such transferee of all of the rights and
obligations of a holder of an Additional Investment Right.
4. Exercise and Duration of Additional Investment Right.
(a) This Additional Investment Right shall be exercisable by the
registered Holder at any time and from time to time on or after the date hereof
to and including the Expiration Date. At 6:30 P.M., New York City time on the
Expiration Date, the portion of this Additional Investment Right not exercised
prior thereto shall be and become void and of no value. Notwithstanding anything
to the contrary herein, the Expiration Date shall be extended for each day
following the Effective Date that the Registration Statement is not effective.
(b) The Holder may exercise this Additional Investment Right by
delivering to the Company (i) the original Additional Investment Right and an
exercise notice, in the form attached hereto (the "Exercise Notice"),
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Additional Investment Right Shares as to which this Additional
Investment Right is being exercised, and the date such items are delivered to
the Company (as determined in accordance with the notice provisions hereof) is
an "Exercise Date." Execution and delivery of the Exercise Notice shall have the
same effect as cancellation of the original Additional Investment Right and
issuance of a New Additional Investment Right evidencing the right to purchase
the remaining number of Additional Investment Right Shares.
5. Delivery of Additional Investment Right Shares.
(a) Upon exercise of this Additional Investment Right, the Company
shall promptly (but in no event later than three Trading Days after the Exercise
Date) issue or cause to be issued and cause to be delivered to or upon the
written order of the Holder and in such name or names as the Holder may
designate, a certificate for the Additional
2
Investment Right Shares free of restrictive legends unless a registration
statement covering the resale of the Additional Investment Right Shares and
naming the Holder as a selling stockholder thereunder is not then effective and
the Additional Investment Right Shares are not freely transferable without
volume restrictions pursuant to Rule 144 under the Securities Act. The Holder,
or any Person so designated by the Holder to receive Additional Investment Right
Shares, shall be deemed to have become holder of record of such Additional
Investment Right Shares as of the Exercise Date. The Company shall, upon request
of the Holder, use its best efforts to deliver Additional Investment Right
Shares hereunder electronically through the Depository Trust Corporation or
another established clearing corporation performing similar functions.
(b) This Additional Investment Right is exercisable, either in its
entirety or, from time to time, for a portion of the number of Additional
Investment Right Shares. Upon surrender of this Additional Investment Right
following one or more partial exercises, the Company shall issue or cause to be
issued, at its expense, a New Additional Investment Right evidencing the right
to purchase the remaining number of Additional Investment Right Shares.
(c) In addition to any other rights available to a Holder, if the
Company fails to deliver to the Holder a certificate representing Additional
Investment Right Shares on the third Trading Day after the date on which
delivery of such certificate is required by this Additional Investment Right,
and if after such third Trading Day the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Additional Investment Right Shares that the Holder
anticipated receiving from the Company (a "Buy-In"), then the Company shall,
within three Trading Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Stock and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the Closing
Price on the date of the event giving rise to the Company's obligation to
deliver such certificate.
(d) The Company's obligations to issue and deliver Additional
Investment Right Shares in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the Holder to enforce
the same, any waiver or consent with respect to any provision hereof, the
recovery of any judgment against any Person or any action to enforce the same,
or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to
the Company or any violation or alleged violation of law by the Holder or any
other Person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of Additional Investment Right Shares. Nothing herein shall limit a
Holder's right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Additional
Investment Right as required pursuant to the terms hereof.
6. Charges, Taxes and Expenses. Issuance and delivery of certificates for
shares of Common Stock upon exercise of this Additional Investment Right shall
be made without charge
3
to the Holder for any issue or transfer tax, withholding tax, transfer agent fee
or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the registration of any
certificates for Additional Investment Right Shares or Additional Investment
Rights in a name other than that of the Holder or an Affiliate thereof. The
Holder shall be responsible for all other tax liability that may arise as a
result of holding or transferring this Additional Investment Right or receiving
Additional Investment Right Shares upon exercise hereof.
7. Replacement of Additional Investment Right. If this Additional
Investment Right is mutilated, lost, stolen or destroyed, the Company shall
issue or cause to be issued in exchange and substitution for and upon
cancellation hereof, or in lieu of and substitution for this Additional
Investment Right, a New Additional Investment Right, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity, if requested. Applicants for
a New Additional Investment Right under such circumstances shall also comply
with such other reasonable regulations and procedures and pay such other
reasonable third-party costs as the Company may prescribe.
8. Reservation of Additional Investment Right Shares. The Company
covenants that it will at all times reserve and keep available out of the
aggregate of its authorized but unissued and otherwise unreserved Common Stock,
solely for the purpose of enabling it to issue Additional Investment Right
Shares upon exercise of this Additional Investment Right as provided herein, the
number of Additional Investment Right Shares which are then issuable and
deliverable upon the exercise of this entire Additional Investment Right, free
from preemptive rights or any other contingent purchase rights of persons other
than the Holder (after taking into account the adjustments and restrictions of
Section 9, if any). The Company covenants that all Additional Investment Right
Shares issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable. The Company will
take all such action as may be necessary to assure that such shares of Common
Stock may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of any securities exchange or automated
quotation system upon which the Common Stock may be listed.
9. Certain Adjustments. The Exercise Price and number of Additional
Investment Right Shares issuable upon exercise of this Additional Investment
Right are subject to adjustment from time to time as set forth in this Section
9.
(a) Stock Dividends and Splits. If the Company, at any time while this
Additional Investment Right is outstanding, (i) pays a stock dividend on its
Common Stock or otherwise makes a distribution on any class of capital stock
that is payable in shares of Common Stock, (ii) subdivides outstanding shares of
Common Stock into a larger number of shares, or (iii) combines outstanding
shares of Common Stock into a smaller number of shares, then in each such case
the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding immediately before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event. Any adjustment made pursuant to
clause (i) of this paragraph shall become effective
4
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution, and any adjustment pursuant to clauses
(ii) or (iii) of this paragraph shall become effective immediately after the
effective date of such subdivision or combination.
(b) Pro Rata Distributions. If the Company, at any time while this
Additional Investment Right is outstanding, distributes to holders of Common
Stock (i) evidences of its indebtedness, (ii) any security (other than a
distribution of Common Stock covered by the preceding paragraph), (iii) rights
or warrants to subscribe for or purchase any security, or (iv) any other asset
(in each case, "Distributed Property"), then in each such case the Exercise
Price in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution shall be adjusted (effective
on such record date) to equal the product of such Exercise Price times a
fraction of which the denominator shall be the average of the Closing Prices for
the five Trading Days immediately prior to (but not including) such record date
and of which the numerator shall be such average less the then fair market value
of the Distributed Property distributed in respect of one outstanding share of
Common Stock, as determined by the Company's independent certified public
accountants that regularly examine the financial statements of the Company (an
"Appraiser"). In such event, the Holder, after receipt of the determination by
the Appraiser, shall have the right to select an additional appraiser (which
shall be a nationally recognized accounting firm), in which case such fair
market value shall be deemed to equal the average of the values determined by
each of the Appraiser and such appraiser. As an alternative to the foregoing
adjustment to the Exercise Price, at the request of the Holder delivered before
the 90th day after such record date, the Company will deliver to such Holder,
within five Trading Days after such request (or, if later, on the effective date
of such distribution), the Distributed Property that such Holder would have been
entitled to receive in respect of the Additional Investment Right Shares for
which this Additional Investment Right could have been exercised immediately
prior to such record date. If such Distributed Property is not delivered to a
Holder pursuant to the preceding sentence, then upon expiration of or any
exercise of the Additional Investment Right that occurs after such record date,
such Holder shall remain entitled to receive, in addition to the Additional
Investment Right Shares otherwise issuable upon such exercise (if applicable),
such Distributed Property.
(c) Fundamental Transactions. If, at any time while this Additional
Investment Right is outstanding, (i) the Company effects any merger or
consolidation of the Company with or into another Person, (ii) the Company
effects any sale of all or substantially all of its assets in one or a series of
related transactions, (iii) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (iv) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(other than as a result of a subdivision or combination of shares of Common
Stock covered by Section 9(a) above) (in any such case, a "Fundamental
Transaction"), then the Holder shall have the right thereafter to receive, upon
exercise of this Additional Investment Right, the same amount and kind of
securities, cash or property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of the number of Additional Investment
Right Shares then issuable upon exercise in full of this Additional Investment
Right (the "Alternate Consideration"). The aggregate Exercise Price for
5
this Additional Investment Right will not be affected by any such Fundamental
Transaction, but the Company shall apportion such aggregate Exercise Price among
the Alternate Consideration in a reasonable manner reflecting the relative value
of any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any exercise of this Additional
Investment Right following such Fundamental Transaction. In the event of a
Fundamental Transaction, the Company or the successor or purchasing Person, as
the case may be, shall execute with the Holder a written agreement providing
that:
(x) this Additional Investment Right shall thereafter entitle
the Holder to purchase the Alternate Consideration in accordance with
this section 9(c),
(y) in the case of any such successor or purchasing Person,
upon such consolidation, merger, statutory exchange, combination, sale
or conveyance such successor or purchasing Person shall be jointly and
severally liable with the Company for the performance of all of the
Company's obligations under this Additional Investment Right and the
Purchase Agreement, and
(z) if registration or qualification is required under the
Exchange Act or applicable state law for the public resale by the
Holder of shares of stock and other securities so issuable upon
exercise of this Additional Investment Right, all rights applicable to
registration of the Common Stock upon exercise of this Additional
Investment Right shall apply to the Alternate Consideration.
If, in the case of any Fundamental Transaction, the Alternate Consideration
includes shares of stock, other securities, other property or assets of a Person
other than the Company or any such successor or purchasing Person, as the case
may be, in such Fundamental Transaction, then such written agreement shall also
be executed by such other Person and shall contain such additional provisions to
protect the interests of the Holder as the Board of Directors of the Company
shall reasonably consider necessary by reason of the foregoing. At the Holder's
request, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new Additional Investment Right
consistent with the foregoing provisions and evidencing the Holder's right to
purchase the Alternate Consideration for the aggregate Exercise Price upon
exercise thereof. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (c) and
insuring that the Additional Investment Right (or any such replacement security)
will be similarly adjusted upon any subsequent transaction analogous to a
Fundamental Transaction. If any Fundamental Transaction constitutes or results
in a Change of Control, then at the request of the Holder delivered before the
90th day after such Fundamental Transaction, the Company (or any such successor
or surviving entity) will purchase the Additional Investment Right from the
Holder for a purchase price, payable in cash within five Trading Days after such
request (or, if later, on the effective date of the Fundamental Transaction),
equal to the Black-Scholes value of the remaining unexercised portion of this
Additional Investment Right on the date of such request.
6
(d) Subsequent Equity Sales.
(i) If, at any time while this Additional Investment Right is
outstanding, the Company or any Subsidiary issues additional shares of Common
Stock or rights, warrants, options or other securities or debt convertible,
exercisable or exchangeable for shares of Common Stock or otherwise entitling
any Person to acquire shares of Common Stock (collectively, "Common Stock
Equivalents") at an effective net price to the Company per share of Common Stock
(the "Effective Price") less than the Exercise Price (as adjusted hereunder to
such date), then the Exercise Price shall be reduced to equal the Effective
Price. If, at any time while this Additional Investment Right is outstanding,
the Company or any Subsidiary issues Common Stock or Common Stock Equivalents at
an Effective Price greater than the Exercise Price (as adjusted hereunder to
such date) but less than the average Closing Price over the five Trading Days
prior to such issuance (the "Adjustment Price"), then the Exercise Price shall
be reduced to equal the product of (A) the Exercise Price in effect immediately
prior to such issuance of Common Stock or Common Stock Equivalents times (B) a
fraction, the numerator of which is the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issuance, plus (2) the number
of shares of Common Stock which the aggregate Effective Price of the Common
Stock issued (or deemed to be issued) would purchase at the Adjustment Price,
and the denominator of which is the aggregate number of shares of Common Stock
outstanding or deemed to be outstanding immediately after such issuance. For
purposes of this paragraph, in connection with any issuance of any Common Stock
Equivalents, (A) the maximum number of shares of Common Stock potentially
issuable at any time upon conversion, exercise or exchange of such Common Stock
Equivalents (the "Deemed Number") shall be deemed to be outstanding upon
issuance of such Common Stock Equivalents, (B) the Effective Price applicable to
such Common Stock shall equal the minimum dollar value of consideration payable
to the Company to purchase such Common Stock Equivalents and to convert,
exercise or exchange them into Common Stock (net of any discounts, fees,
commissions and other expenses), divided by the Deemed Number, and (C) no
further adjustment shall be made to the Exercise Price upon the actual issuance
of Common Stock upon conversion, exercise or exchange of such Common Stock
Equivalents.
(ii) If, at any time while this Additional Investment Right is
outstanding, the Company or any Subsidiary issues Common Stock Equivalents with
an Effective Price or a number of underlying shares that floats or resets or
otherwise varies or is subject to adjustment based (directly or indirectly) on
market prices of the Common Stock (a "Floating Price Security"), then for
purposes of applying the preceding paragraph in connection with any subsequent
exercise, the Effective Price will be determined separately on each Exercise
Date and will be deemed to equal the lowest Effective Price at which any holder
of such Floating Price Security is entitled to acquire Common Stock on such
Exercise Date (regardless of whether any such holder actually acquires any
shares on such date).
(iii) Notwithstanding the foregoing, no adjustment will be made
under this paragraph (d) in respect to any Excluded Stock.
7
(e) Number of Additional Investment Right Shares. Simultaneously with
any adjustment to the Exercise Price pursuant to paragraphs (a), (b) or (d) of
this Section, the number of Additional Investment Right Shares that may be
purchased upon exercise of this Additional Investment Right shall be increased
or decreased proportionately, so that after such adjustment the aggregate
Exercise Price payable hereunder for the increased or decreased number of
Additional Investment Right Shares shall be the same as the aggregate Exercise
Price in effect immediately prior to such adjustment.
(f) Calculations. All calculations under this Section 9 shall be made
to the nearest cent or the nearest 1/100th of a share, as applicable. The number
of shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.
(g) Notice of Adjustments. Upon the occurrence of each adjustment
pursuant to this Section 9, the Company at its expense will promptly compute
such adjustment in accordance with the terms of this Additional Investment Right
and prepare a certificate setting forth such adjustment, including a statement
of the adjusted Exercise Price and adjusted number or type of Additional
Investment Right Shares or other securities issuable upon exercise of this
Additional Investment Right (as applicable), describing the transactions giving
rise to such adjustments and showing in detail the facts upon which such
adjustment is based. Upon written request, the Company will promptly deliver a
copy of each such certificate to the Holder and to the Company's Transfer Agent.
(h) Notice of Corporate Events. If the Company (i) declares a dividend
or any other distribution of cash, securities or other property in respect of
its Common Stock, including without limitation any granting of rights or
warrants to subscribe for or purchase any capital stock of the Company or any
Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating
or solicits stockholder approval for any Fundamental Transaction or (iii)
authorizes the voluntary dissolution, liquidation or winding up of the affairs
of the Company, then the Company shall deliver to the Holder a notice describing
the material terms and conditions of such transaction, at least 20 calendar days
prior to the applicable record or effective date on which a Person would need to
hold Common Stock in order to participate in or vote with respect to such
transaction, and the Company will take all steps reasonably necessary in order
to insure that the Holder is given the practical opportunity to exercise this
Additional Investment Right prior to such time so as to participate in or vote
with respect to such transaction; provided, however, that the failure to deliver
such notice or any defect therein shall not affect the validity of the corporate
action required to be described in such notice.
10. Payment of Exercise Price. The Holder shall pay the Exercise Price in
immediately available funds.
11. Limitation on Exercise. (a) Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon any exercise of this Additional Investment Right (or otherwise
in respect hereof) shall be limited to the extent necessary to insure that,
following such exercise (or other issuance), the total number
8
of shares of Common Stock then beneficially owned by such Holder and its
Affiliates and any other Persons whose beneficial ownership of Common Stock
would be aggregated with the Holder's for purposes of Section 13(d) of the
Exchange Act, does not exceed 4.999% (the "Threshold Percentage") or 9.999% (the
"Maximum Percentage") of the total number of issued and outstanding shares of
Common Stock (including for such purpose the shares of Common Stock issuable
upon such exercise). For such purposes, beneficial ownership shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. Each delivery of an Exercise Notice
hereunder will constitute a representation by the Holder that it has evaluated
the limitations set forth in this paragraph and determined that issuance of the
full number of shares of Common Stock requested in such Exercise Notice is
permitted under this paragraph. The Company's obligation to issue shares of
Common Stock in excess of the limitations referred to in this Section shall be
suspended (and shall not terminate or expire notwithstanding any contrary
provisions hereof) until such time, if any, as such shares of Common Stock may
be issued in compliance with such limitation. By written notice to the Company,
the Holder shall have the right (x) at any time and from time to time to reduce
its Maximum Percentage immediately upon notice to the Company in the event and
only to the extent that Section 16 of the Exchange Act or the rules promulgated
thereunder (or any successor statute or rules) is changed to reduce the
beneficial ownership percentage threshold thereunder to a percentage less than
9.999% and (y) at any time and from time to time, to waive the provisions of
this Section insofar as they relate to the Threshold Percentage or to increase
or decrease its Threshold Percentage (but not in excess of the Maximum
Percentage) unless the Holder shall have, by written instrument delivered to the
Company, irrevocably waived its rights to so increase or decrease its Threshold
Percentage, but (i) any such waiver, increase or decrease will not be effective
until the 61st day after such notice is delivered to the Company, and (ii) any
such waiver or increase or decrease will apply only to the Holder and not to any
other holder of Additional Investment Rights.
(b) Notwithstanding anything to the contrary contained herein, the
maximum number of shares of Common Stock that the Company may issue pursuant to
the Transaction Documents at an effective purchase price less than the Closing
Price on the Trading Day immediately preceding the Closing Date equals 19.99% of
the outstanding shares of Common Stock of the Company immediately preceding
Closing Date (the "Issuable Maximum"), unless the Company obtains shareholder
approval in accordance with the rules and regulations of such Trading Market.
If, at the time any Holder requests an exercise of any of the Additional
Investment Rights, the Actual Minimum (excluding any shares issued or issuable
at an effective purchase price in excess of the Closing Price on the Trading Day
immediately preceding the Closing Date) exceeds the Issuable Maximum (and if the
Company has not previously obtained the required shareholder approval), then the
Company shall issue to the Holder requesting such exercise a number of shares of
Common Stock not exceeding such Holder's pro-rata portion of the Issuable
Maximum (based on such Holder's share (vis-a-vis other Holders) of the aggregate
purchase price paid under the Purchase Agreement and taking into account any
Additional Investment Rights Shares previously issued to such Holder). For the
purposes hereof, "Actual Minimum" shall mean, as of any date, the maximum
aggregate number of shares of Common Stock then issued or potentially issuable
in the future pursuant to the Transaction Documents, including any Additional
Investment Right Shares issuable upon exercise in full of all Additional
Investment Rights, ignoring any limits on the number of shares of Common Stock
that may be owned by a Holder at any one time.
9
12. Fractional Shares. The Company shall not be required to issue or cause
to be issued fractional Additional Investment Right Shares on the exercise of
this Additional Investment Right. If any fraction of an Additional Investment
Right Share would, except for the provisions of this Section, be issuable upon
exercise of this Additional Investment Right, the number of Additional
Investment Right Shares to be issued will be rounded up to the nearest whole
share or right to purchase the nearest whole share, as the case may be.
13. Notices. Any and all notices or other communications or deliveries
hereunder (including without limitation any Exercise Notice) shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 6:30 p.m. (New York City time) on any Trading Day, (iii) the Trading
Day following the date of mailing, if sent by a nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices or communications shall be as
set forth in the Purchase Agreement.
14. Additional Investment Right Agent. The Company shall serve as
additional investment right agent under this Additional Investment Right. Upon
30 days' notice to the Holder, the Company may appoint a new additional
investment right agent. Any corporation into which the Company or any new
additional investment right agent may be merged or any corporation resulting
from any consolidation to which the Company or any new additional investment
right agent shall be a party or any corporation to which the Company or any new
additional investment right agent transfers substantially all of its corporate
trust or shareholders services business shall be a successor additional
investment right agent under this Additional Investment Right without any
further act. Any such successor additional investment right agent shall promptly
cause notice of its succession as additional investment right agent to be mailed
(by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Additional Investment Right Register.
15. Miscellaneous.
(a) Subject to the restrictions on transfer set forth on the first
page hereof, this Additional Investment Right may be assigned by the Holder.
This Additional Investment Right may not be assigned by the Company except to a
successor in the event of a Fundamental Transaction. This Additional Investment
Right shall be binding on and inure to the benefit of the parties hereto and
their respective successors and assigns. Subject to the preceding sentence,
nothing in this Additional Investment Right shall be construed to give to any
Person other than the Company and the Holder any legal or equitable right,
remedy or cause of action under this Additional Investment Right. This
Additional Investment Right may be amended only in writing signed by the Company
and the Holder and their successors and assigns.
(b) The Company will not, by amendment of its governing documents or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of
10
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Additional Investment Right, but will
at all times in good faith assist in the carrying out of all such terms and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any Additional Investment Right Shares above the amount payable therefor on such
exercise, (ii) will take all such action as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Additional Investment Right Shares on the exercise of this
Additional Investment Right and (iii) will not close its shareholder books or
records in any manner which interferes with the timely exercise of this
Additional Investment Right.
(C) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
ADDITIONAL INVESTMENT RIGHT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH PARTY AGREES THAT ALL LEGAL
PROCEEDINGS CONCERNING THE INTERPRETATIONS, ENFORCEMENT AND DEFENSE OF THE
TRANSACTIONS CONTEMPLATED BY ANY OF THE TRANSACTION DOCUMENTS (WHETHER BROUGHT
AGAINST A PARTY HERETO OR ITS RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS,
SHAREHOLDERS, EMPLOYEES OR AGENTS) SHALL BE COMMENCED EXCLUSIVELY IN THE STATE
AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN. EACH
PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN
FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH
ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT
TO THE ENFORCEMENT OF ANY OF THIS ADDITIONAL INVESTMENT RIGHT), AND HEREBY
IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING,
ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH
COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS
BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF
VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF
DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS
ADDITIONAL INVESTMENT RIGHT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS ADDITIONAL INVESTMENT RIGHT
OR ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. IF EITHER PARTY SHALL COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY
PROVISIONS OF THIS ADDITIONAL INVESTMENT RIGHT OR ANY TRANSACTION DOCUMENT, THEN
THE PREVAILING PARTY IN SUCH ACTION OR PROCEEDING SHALL BE REIMBURSED BY THE
OTHER PARTY FOR ITS REASONABLE ATTORNEYS FEES AND OTHER REASONABLE COSTS AND
EXPENSES INCURRED WITH THE INVESTIGATION, PREPARATION AND PROSECUTION OF SUCH
ACTION OR PROCEEDING.
11
(d) The headings herein are for convenience only, do not constitute a
part of this Additional Investment Right and shall not be deemed to limit or
affect any of the provisions hereof.
(e) In case any one or more of the provisions of this Additional
Investment Right shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Additional
Investment Right shall not in any way be affected or impaired thereby and the
parties will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Additional
Investment Right.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
12
IN WITNESS WHEREOF, the Company has caused this Additional Investment
Right to be duly executed by its authorized officer as of the date first
indicated above.
SIGA Technologies, Inc.
By:______________________________
Name:____________________________
Title:___________________________
13
FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise the right to purchase shares of
Common Stock under the foregoing Additional Investment Right)
To: SIGA Technologies, Inc.
The undersigned is the Holder of Additional Investment Right No. _______ (the
"Additional Investment Right") issued by SIGA Technologies, Inc., a Delaware
corporation (the "Company"). Capitalized terms used herein and not otherwise
defined have the respective meanings set forth in the Additional Investment
Right.
1. The Additional Investment Right is currently exercisable to purchase a
total of ______________ Additional Investment Right Shares.
2. The undersigned Holder hereby exercises its right to purchase
_________________ Additional Investment Right Shares pursuant to the
Additional Investment Right.
3. The Holder intends that payment of the Exercise Price shall be made in
immediately available funds, and shall pay the sum of $____________ to the
Company in accordance with the terms of the Additional Investment Right.
4. Pursuant to this exercise, the Company shall deliver to the holder
_______________ Additional Investment Right Shares.
5. Following this exercise, the Additional Investment Right shall be
exercisable to purchase a total of ______________ Additional Investment
Right Shares.
Dated:___________, ____ Name of Holder:
(Print)______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Additional Investment
Right)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Additional Investment Right]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Additional Investment Right to purchase ____________ shares of Common Stock of
SIGA Technologies, Inc. to which the within Additional Investment Right relates
and appoints ________________ attorney to transfer said right on the books of
SIGA Technologies, Inc. with full power of substitution in the premises.
Dated:_____________, ____
________________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of the
Additional Investment Right)
_______________________________________________
Address of Transferee
_______________________________________________
_______________________________________________
In the presence of:
_____________________________
Execution Version
EXHIBIT B
NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
SIGA TECHNOLOGIES, INC.
WARRANT
-------
Warrant No. [ ] Dated: November ___, 2005
SIGA Technologies, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, [Name of Holder] or its registered assigns
(the "Holder"), is entitled to purchase from the Company up to a total of [ ](1)
shares of common stock, $0.0001 par value per share (the "Common Stock"), of the
Company (each such share, a "Warrant Share" and all such shares, the "Warrant
Shares") at an exercise price equal to $[ ](2) per share (as adjusted from time
to time as provided in Section 9, the "Exercise Price"), at any time and from
time to time from and after the date hereof (the "Initial Exercise Date") and
through and including the seventh anniversary of the date hereof (the
"Expiration Date"), and subject to the following terms and conditions. This
Warrant (this "Warrant") is one of a series of similar warrants issued pursuant
to that certain Securities Purchase Agreement, dated as of the date hereof, by
and among the Company and the Purchasers identified therein (the "Purchase
Agreement"). All such warrants are referred to herein, collectively, as the
"Warrants."
1. Definitions. In addition to the terms defined elsewhere in this
Warrant, capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Purchase Agreement.
-------------------
(1) Equal to 50% (aggregate) warrant coverage
(2) 110% of the Closing Price on the Closing Date.
2. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.
3. Registration of Transfers. The Company shall register the transfer of
any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed,
to the Transfer Agent or to the Company at its address specified herein. Upon
any such registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New Warrant"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations of a holder
of a Warrant.
4. Exercise and Duration of Warrants. Subject to Section 11:
(a) This Warrant shall be exercisable by the registered Holder at any
time and from time to time on or after the date hereof to and including the
Expiration Date. At 6:30 P.M., New York City time on the Expiration Date, the
portion of this Warrant not exercised prior thereto shall be and become void and
of no value; provided that, if the average of the Closing Prices for the five
Trading Days immediately prior to (but not including) the Expiration Date
exceeds the Exercise Price on the Expiration Date, then this Warrant shall be
deemed to have been exercised in full (to the extent not previously exercised)
on a "cashless exercise" basis at 6:30 P.M. New York City time on the Expiration
Date if a "cashless exercise" may occur at such time pursuant to Section 10
below. Notwithstanding anything to the contrary herein, the Expiration Date
shall be extended for each day following the Effective Date that the
Registration Statement is not effective.
(b) A Holder may exercise this Warrant by delivering to the Company (i)
an exercise notice, in the form attached hereto (the "Exercise Notice"),
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares as to which this Warrant is being exercised
(which may take the form of a "cashless exercise" if so indicated in the
Exercise Notice and if a "cashless exercise" may occur at such time pursuant to
this Section 10 below), and the date such items are delivered to the Company (as
determined in accordance with the notice provisions hereof) is an "Exercise
Date." The Holder shall not be required to deliver the original Warrant in order
to effect an exercise hereunder. Upon the execution and delivery of the Exercise
Notice, the Company shall issue a New Warrant to the Holder evidencing the right
to purchase the remaining number of Warrant Shares.
5. Delivery of Warrant Shares.
(a) Upon exercise of this Warrant, the Company shall promptly (but in
no event later than three Trading Days after the Exercise Date) issue or cause
to be issued and cause to be delivered to or upon the written order of the
Holder and in such name or names as the
2
Holder may designate, a certificate for the Warrant Shares issuable upon such
exercise, free of restrictive legends unless a registration statement covering
the resale of the Warrant Shares and naming the Holder as a selling stockholder
thereunder is not then effective and the Warrant Shares are not freely
transferable without volume restrictions pursuant to Rule 144 under the
Securities Act. The Holder, or any Person so designated by the Holder to receive
Warrant Shares, shall be deemed to have become holder of record of such Warrant
Shares as of the Exercise Date. The Company shall, upon request of the Holder,
use its best efforts to deliver Warrant Shares hereunder electronically through
the Depository Trust Corporation or another established clearing corporation
performing similar functions.
(b) This Warrant is exercisable, either in its entirety or, from time
to time, for a portion of the number of Warrant Shares. Upon surrender of this
Warrant following one or more partial exercises, the Company shall issue or
cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares.
(c) In addition to any other rights available to a Holder, if the
Company fails to deliver to the Holder a certificate representing Warrant Shares
by the third Trading Day after the date on which delivery of such certificate is
required by this Warrant, and if after such third Trading Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant Shares that the
Holder anticipated receiving from the Company (a "Buy-In"), then the Company
shall, within three Trading Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Stock and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the Closing
Price on the date of the event giving rise to the Company's obligation to
deliver such certificate.
(d) The Company's obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of Warrant Shares. Nothing
herein shall limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.
6. Charges, Taxes and Expenses. Issuance and delivery of certificates for
shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any
3
issue or transfer tax, withholding tax, transfer agent fee or other incidental
tax or expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant Shares
or Warrants in a name other than that of the Holder or an Affiliate thereof. The
Holder shall be responsible for all other tax liability that may arise as a
result of holding or transferring this Warrant or receiving Warrant Shares upon
exercise hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable bond or indemnity, if requested. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Company may
prescribe.
8. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of persons other than the Holder (taking into
account the adjustments and restrictions of Section 9). The Company covenants
that all Warrant Shares so issuable and deliverable shall, upon issuance and the
payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued and fully paid and nonassessable. The
Company will take all such actions as may be necessary to assure that such
shares of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any securities exchange
or automated quotation system upon which the Common Stock may be listed.
9. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.
(a) Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, or (iii) combines outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Exercise Price shall
be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution,
and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall
become effective immediately after the effective date of such subdivision or
combination.
4
(b) Pro Rata Distributions. If the Company, at any time while this
Warrant is outstanding, distributes to all holders of Common Stock (i) evidences
of its indebtedness, (ii) any security (other than a distribution of Common
Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe
for or purchase any security, or (iv) any other asset (in each case,
"Distributed Property"), then in each such case the Exercise Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution shall be adjusted (effective on such
record date) to equal the product of such Exercise Price times a fraction of
which the denominator shall be the average of the Closing Prices for the five
Trading Days immediately prior to (but not including) such record date and of
which the numerator shall be the average of the Closing Prices for the five
Trading Days immediately after (but not including) such record date. As an
alternative to the foregoing adjustment to the Exercise Price, at the request of
the Holder delivered no later than three days prior to such distribution, the
Company will deliver to such Holder on the effective date of such distribution,
the Distributed Property that such Holder would have been entitled to receive in
respect of the Warrant Shares for which this Warrant could have been exercised
immediately prior to such record date. If such Distributed Property is not
delivered to a Holder pursuant to the preceding sentence, then upon expiration
of or any exercise of the Warrant that occurs after such record date, such
Holder shall remain entitled to receive, in addition to the Warrant Shares
otherwise issuable upon such exercise (if applicable), such Distributed
Property.
(c) Fundamental Transactions. If, at any time while this Warrant is
outstanding, (i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions,
(iii) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (iv)
the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (other than as a result of a
subdivision or combination of shares of Common Stock covered by Section 9(a)
above) (in any such case, a "Fundamental Transaction"), then the Holder shall
have the right thereafter to receive, upon exercise of this Warrant, the same
amount and kind of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of the number of
Warrant Shares then issuable upon exercise in full of this Warrant (the
"Alternate Consideration"). The aggregate Exercise Price for this Warrant will
not be affected by any such Fundamental Transaction, but the Company shall
apportion such aggregate Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. In the event of a Fundamental Transaction, the Company or the
successor or purchasing Person, as the case may be, shall execute with the
Holder a written agreement providing that:
5
(x) this Warrant shall thereafter entitle the Holder to purchase the
Alternate Consideration in accordance with this section 9(c),
(y) in the case of any such successor or purchasing Person, upon
such consolidation, merger, statutory exchange, combination, sale or
conveyance such successor or purchasing Person shall be jointly and
severally liable with the Company for the performance of all of the
Company's obligations under this Warrant and the Purchase Agreement, and
(z) if registration or qualification is required under the Exchange
Act or applicable state law for the public resale by the Holder of shares
of stock and other securities so issuable upon exercise of this Warrant,
all rights applicable to registration of the Common Stock issuable upon
exercise of this Warrant shall apply to the Alternate Consideration.
If, in the case of any Fundamental Transaction, the Alternate
Consideration includes shares of stock, other securities, other property
or assets of a Person other than the Company or any such successor or
purchasing Person, as the case may be, in such Fundamental Transaction,
then such written agreement shall also be executed by such other Person
and shall contain such additional provisions to protect the interests of
the Holder as the Board of Directors of the Company shall reasonably
consider necessary by reason of the foregoing. At the Holder's request,
any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder's right to purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise
thereof. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor
or surviving entity to comply with the provisions of this paragraph (c)
and insuring that the Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a
Fundamental Transaction. If any Fundamental Transaction constitutes or
results in a Change of Control, the Company (or any such successor or
surviving entity) will purchase the Warrant from the Holder for a purchase
price, payable in cash within five Trading Days after such request (or, if
later, on the effective date of the Fundamental Transaction), equal to the
Black-Scholes value of the remaining unexercised portion of this Warrant
on the date of such request.
(d) Subsequent Equity Sales.
(i) If, at any time while this Warrant is outstanding, the Company
or any Subsidiary issues additional shares of Common Stock or rights,
warrants, options or other securities or debt convertible, exercisable or
exchangeable for shares of Common Stock or otherwise entitling any Person
to acquire shares of Common Stock (collectively, "Common Stock
Equivalents") at an effective net price to the Company per share of Common
Stock (the "Effective Price") less than the Exercise Price (as adjusted
hereunder to such date), then the Exercise Price shall be reduced to equal
the Effective Price. If, at any time while this Warrant is outstanding,
the Company or any Subsidiary issues Common Stock or Common Stock
Equivalents at an Effective Price greater than
6
the Exercise Price (as adjusted hereunder to such date) but less than the
average Closing Price over the five Trading Days prior to such issuance
(the "Adjustment Price"), then the Exercise Price shall be reduced to
equal the product of (A) the Exercise Price in effect immediately prior to
such issuance of Common Stock or Common Stock Equivalents times (B) a
fraction, the numerator of which is the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issuance, plus (2) the
number of shares of Common Stock which the aggregate Effective Price of
the Common Stock issued (or deemed to be issued) would purchase at the
Adjustment Price, and the denominator of which is the aggregate number of
shares of Common Stock outstanding or deemed to be outstanding immediately
after such issuance. For purposes of this paragraph, in connection with
any issuance of any Common Stock Equivalents, (A) the maximum number of
shares of Common Stock potentially issuable at any time upon conversion,
exercise or exchange of such Common Stock Equivalents (the "Deemed
Number") shall be deemed to be outstanding upon issuance of such Common
Stock Equivalents, (B) the Effective Price applicable to such Common Stock
shall equal the minimum dollar value of consideration payable to the
Company to purchase such Common Stock Equivalents and to convert, exercise
or exchange them into Common Stock (net of any discounts, fees,
commissions and other expenses), divided by the Deemed Number, and (C) no
further adjustment shall be made to the Exercise Price upon the actual
issuance of Common Stock upon conversion, exercise or exchange of such
Common Stock Equivalents. The Effective Price of Common Stock or Common
Stock Equivalents issued in any transaction in which more than one type of
securities are issued shall give effect to the allocation by the Company
of the aggregate amount paid for such securities issued in such
transaction.
(ii) If, at any time while this Warrant is outstanding, the Company
or any Subsidiary issues Common Stock Equivalents with an Effective Price
or a number of underlying shares that floats or resets or otherwise varies
or is subject to adjustment based (directly or indirectly) on market
prices of the Common Stock (a "Floating Price Security"), then for
purposes of applying the preceding paragraph in connection with any
subsequent exercise, the Effective Price will be determined separately on
each Exercise Date and will be deemed to equal the lowest Effective Price
at which any holder of such Floating Price Security is entitled to acquire
Common Stock on such Exercise Date (regardless of whether any such holder
actually acquires any shares on such date).
(iii) Notwithstanding the foregoing, no adjustment will be made
under this paragraph in respect of any Excluded Stock.
(e) Number of Warrant Shares. Simultaneously with any adjustments to
the Exercise Price pursuant to paragraphs (a), (b) or (d) of this Section, the
number of Warrant Shares that may be purchased upon exercise of this Warrant
shall be increased or decreased proportionately, so that after such adjustment
the aggregate Exercise Price payable hereunder for the increased or decreased
number of Warrant Shares shall be the same as the aggregate Exercise Price in
effect immediately prior to such adjustment.
(f) Calculations. All calculations under this Section 9 shall be made
to the nearest cent or the nearest 1/100th of a share, as applicable. The number
of shares of Common
7
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(g) Notice of Adjustments. Upon the occurrence of each adjustment
pursuant to this Section 9, the Company at its expense will promptly compute
such adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment, including a statement of the adjusted
Exercise Price and adjusted number or type of Warrant Shares or other securities
issuable upon exercise of this Warrant (as applicable), describing the
transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based. Upon written request, the Company will
promptly deliver a copy of each such certificate to the Holder and to the
Company's Transfer Agent.
(h) Notice of Corporate Events. If the Company (i) declares a dividend
or any other distribution of cash, securities or other property in respect of
its Common Stock, including without limitation any granting of rights or
warrants to subscribe for or purchase any capital stock of the Company or any
Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating
or solicits stockholder approval for any Fundamental Transaction or (iii)
authorizes the voluntary dissolution, liquidation or winding up of the affairs
of the Company, then the Company shall deliver to the Holder a notice describing
the material terms and conditions of such transaction, at least 20 calendar days
prior to the applicable record or effective date on which a Person would need to
hold Common Stock in order to participate in or vote with respect to such
transaction, and the Company will take all steps reasonably necessary in order
to insure that the Holder is given the practical opportunity to exercise this
Warrant prior to such time so as to participate in or vote with respect to such
transaction; provided, however, that the failure to deliver such notice or any
defect therein shall not affect the validity of the corporate action required to
be described in such notice.
10. Payment of Exercise Price. The Holder shall pay the Exercise Price in
immediately available funds; provided, however, if at anytime after the Required
Effectiveness Date there is no effective Registration Statement registering, or
no current prospectus available for, the resale of the Warrant Shares by the
Holder, the Holder may satisfy its obligation to pay the Exercise Price through
a "cashless exercise," in which event the Company shall issue to the Holder the
number of Warrant Shares determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to
the Holder.
Y = the number of Warrant Shares with respect to
which this Warrant is being exercised.
A = the arithmetic average of the Closing Prices
for the five Trading Days immediately prior to
(but not including) the Exercise Date.
B = the Exercise Price.
8
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
commenced, on the date this Warrant was originally issued pursuant to the
Purchase Agreement.
11. Limitation on Exercise. (a) Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon any exercise of this Warrant (or otherwise in respect hereof)
shall be limited to the extent necessary to insure that, following such exercise
(or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons whose
beneficial ownership of Common Stock would be aggregated with the Holder's for
purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% (the
"Threshold Percentage") or 9.999% (the "Maximum Percentage") of the total number
of issued and outstanding shares of Common Stock (including for such purpose the
shares of Common Stock issuable upon such exercise). For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. Each delivery
of an Exercise Notice hereunder will constitute a representation by the Holder
that it has evaluated the limitations set forth in this paragraph and determined
that issuance of the full number of Warrant Shares requested in such Exercise
Notice is permitted under this paragraph. The Company's obligation to issue
shares of Common Stock in excess of the limitation referred to in this Section
shall be suspended (and shall not terminate or expire notwithstanding any
contrary provisions hereof) until such time, if any, as such shares of Common
Stock may be issued in compliance with such limitation. By written notice to the
Company, the Holder shall have the right (x) at any time and from time to time
to reduce its Maximum Percentage immediately upon notice to the Company in the
event and only to the extent that Section 16 of the Exchange Act or the rules
promulgated thereunder (or any successor statute or rules) is changed to reduce
the beneficial ownership percentage threshold thereunder to a percentage less
than 9.999% and (y) at any time and from time to time, to waive the provisions
of this Section insofar as they relate to the Threshold Percentage or to
increase or decrease its Threshold Percentage (but not in excess of the Maximum
Percentage) unless the Holder shall have, by written instrument delivered to the
Company, irrevocably waived its rights to so increase or decrease its Threshold
Percentage, but (i) any such waiver, increase or decrease will not be effective
until the 61st day after such notice is delivered to the Company, and (ii) any
such waiver or increase or decrease will apply only to the Holder and not to any
other holder of Warrants.
(b) Notwithstanding anything to the contrary contained herein the
maximum number of shares of Common Stock that the Company may issue pursuant to
the Transaction Documents at an effective purchase price less than the Closing
Price on the Trading Day immediately preceding the Closing Date equals 19.99% of
the outstanding shares of Common Stock immediately preceding the Closing Date
(the "Issuable Maximum"), unless the Company obtains shareholder approval in
accordance with the rules and regulations of such Trading Market. If, at the
time any Holder requests an exercise of any of the Warrants, the Actual Minimum
(excluding any shares issued or issuable at an effective purchase price in
excess of the Closing Price on the Trading Day immediately preceding the Closing
Date) exceeds the Issuable
9
Maximum (and if the Company has not previously obtained the required shareholder
approval), then the Company shall issue to the Holder requesting such exercise a
number of shares of Common Stock not exceeding such Holder's pro-rata portion of
the Issuable Maximum (based on such Holder's share (vis-a-vis other Holders) of
the aggregate purchase price paid under the Purchase Agreement and taking into
account any Warrant Shares previously issued to such Holder). For the purposes
hereof, "Actual Minimum" shall mean, as of any date, the maximum aggregate
number of shares of Common Stock then issued or potentially issuable in the
future pursuant to the Transaction Documents, including any Underlying Shares
issuable upon exercise in full of all Warrants, without giving effect to any
limits on the number of shares of Common Stock that may be owned by a Holder at
any one time.
12. Fractional Shares. The Company shall not be required to issue or cause
to be issued fractional Warrant Shares on the exercise of this Warrant. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable upon exercise of this Warrant, the number of Warrant Shares to be
issued will be rounded up to the nearest whole share.
13. Notices. Any and all notices or other communications or deliveries
hereunder (including without limitation any Exercise Notice) shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 6:30 p.m. (New York City time) on any Trading Day, (iii) the Trading
Day following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices or communications shall be as
set forth in the Purchase Agreement.
14. Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon 30 days' notice to the Holder, the Company may appoint a new
warrant agent. Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
15. Miscellaneous.
(a) Subject to the restrictions on transfer set forth on the first
page hereof, this Warrant may be assigned by the Holder. This Warrant may not be
assigned by the Company except to a successor in the event of a Fundamental
Transaction. This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. Subject to the
preceding sentence, nothing in this Warrant shall be construed to give to any
Person other than the Company and the Holder any legal or equitable right,
remedy or cause of
10
action under this Warrant. This Warrant may be amended only in writing signed by
the Company and the Holder and their successors and assigns.
(b) The Company will not, by amendment of its governing documents or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any Warrant Shares above the amount payable therefor on such exercise, (ii) will
take all such action as may be reasonably necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable Warrant
Shares on the exercise of this Warrant, and (iii) will not close its shareholder
books or records in any manner which interferes with the timely exercise of this
Warrant.
(C) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAW THEREOF. EACH PARTY AGREES THAT ALL LEGAL PROCEEDINGS
CONCERNING THE INTERPRETATIONS, ENFORCEMENT AND DEFENSE OF THE TRANSACTIONS
CONTEMPLATED BY ANY OF THE TRANSACTION DOCUMENTS (WHETHER BROUGHT AGAINST A
PARTY HERETO OR ITS RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, SHAREHOLDERS,
EMPLOYEES OR AGENTS) SHALL BE COMMENCED EXCLUSIVELY IN THE STATE AND FEDERAL
COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN. EACH PARTY HERETO
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THIS WARRANT), AND HEREBY IRREVOCABLY WAIVES, AND
AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION
OR PROCEEDING IS IMPROPER. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES PERSONAL
SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS WARRANT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT OR ANY
OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
IF EITHER PARTY SHALL COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY PROVISIONS
OF THIS WARRANT OR ANY TRANSACTION DOCUMENT, THEN THE PREVAILING PARTY IN SUCH
ACTION OR PROCEEDING SHALL BE REIMBURSED BY THE OTHER PARTY FOR ITS REASONABLE
ATTORNEYS
11
FEES AND OTHER REASONABLE COSTS AND EXPENSES INCURRED WITH THE INVESTIGATION,
PREPARATION AND PROSECUTION OF SUCH ACTION OR PROCEEDING.
(d) The headings herein are for convenience only, do not constitute a
part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
(f) Except as set forth in Section 9, as applicable, the holder of
this Warrant shall have no rights as a stockholder of the Company by virtue of
holding this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
12
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
SIGA TECHNOLOGIES, INC.
By:________________________________
Name:______________________________
Title:_____________________________
13
FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To: SIGA Technologies, Inc.
The undersigned is the Holder of Warrant No. _______ (the "Warrant") issued by
SIGA Technologies, Inc., a Delaware corporation (the "Company"). Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.
1. The Warrant is currently exercisable to purchase a total of ______________
Warrant Shares.
2. The undersigned Holder hereby exercises its right to purchase
_________________ Warrant Shares pursuant to the Warrant.
3. The Holder intends that payment of the Exercise Price shall be made as
(check one):
____ "Cash Exercise" under Section 10
____ "Cashless Exercise" under Section 10 (if
permitted)
4. If the holder has elected a Cash Exercise, the holder shall pay the sum of
$____________ to the Company in accordance with the terms of the Warrant.
5. Pursuant to this exercise, the Company shall deliver to the holder
_______________ Warrant Shares in accordance with the terms of the
Warrant.
6. The Holder hereby certifies to the Company (and acknowledges that the
Company and its counsel will rely upon this certification for purposes of
determining compliance with the registration provisions of the Securities
Act of 1933, as amended ("The Act")) that the Holder is an "accredited
investor" as that term is defined in Rule 501 under The Act.
7. Following this exercise, the Warrant shall be exercisable to purchase a
total of ______________ Warrant Shares.
Dated:___________, _____ Name of Holder:
(Print)______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of SIGA Technologies,
Inc. to which the within Warrant relates and appoints ________________ attorney
to transfer said right on the books of SIGA Technologies, Inc. with full power
of substitution in the premises.
Dated:_____________, _____
______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
______________________________________
Address of Transferee
______________________________________
______________________________________
In the presence of:
______________________________
Exhibit C
XXXXXX XXXXX XXXXXXXX & XXXXXXX LLP
November __, 2005
Purchasers set forth on Annex A
Ladies and Gentlemen:
We have acted as counsel to SIGA Technologies, Inc., a Delaware
corporation (the "Company"), in connection with the Securities Purchase
Agreement, dated as of the date hereof, by and among the Company and the
Purchasers named therein (the "Purchasers") (the "Purchase Agreement"). This
opinion is delivered pursuant to Section 2.2 (a)(iv) of the Purchase
Agreement. Capitalized terms used herein but not otherwise defined herein
have the meanings assigned to them in the Purchase Agreement.
In rendering this opinion, we have examined executed copies of the
following documents:
(A) the Purchase Agreement;
(B) the Warrant Agreement, dated the date hereof, by the Company in
favor of the Purchasers; and
(C) the Additional Investment Right Agreement, dated the date hereof,
by the Company in favor of the Purchasers.
We have also reviewed such other documents and made such other
investigations as we have deemed appropriate. As to various questions of
fact material to this opinion, we have relied upon the representations and
warranties of the Company contained in the Transaction Documents (as defined
below) and upon the statements, representations and certificates of officers
or representatives of the Company, public officials and others. We have not
independently verified the facts so relied on.
Based on the foregoing, and subject to the qualifications, limitations
and assumptions set forth herein, we are of the opinion that:
1. The Company is validly existing and in good standing under the laws of the
State of Delaware and has the corporate power to own its properties and to
conduct its business as now conducted (all as described in the Company's
Annual Report on Form 10-K for its fiscal ended December 31, 2004).
XXXXXX XXXXX XXXXXXXX & XXXXXXX LLP
Purchasers set forth on Annex A
November __, 2005
Page 2
2. The Company has the corporate power necessary to execute, deliver and
perform its obligations under the Purchase Agreement, the Additional
Investment Right Agreement, and the Warrant Agreement (collectively, the
"Transaction Documents").
3. The Transaction Documents have been duly authorized, executed and delivered
by the Company and constitute the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with their
terms.
4. The shares of common stock of the Company to be issued pursuant to the
Transaction Documents have been duly authorized and will be validly issued,
fully paid and nonassessable when such shares have been duly delivered
against payment therefore as contemplated by the Transaction Documents.
5. Assuming that each purchaser of Shares is an "accredited investor" within
the meaning of Rule 501(a) of Regulation D promulgated under the Act, that
there have been no sales of any securities of the Company during the past
six months, that no general solicitation or advertising (within the meaning
of Rule 502(c) of Regulation D) was used in connection with the sale of the
Shares by the Company to the purchasers thereof and that the
representations and warranties of the Investor contained in Sections 3.2 of
the Purchase Agreement are true and correct, no registration under the Act
is required in connection with the sale and issuance of the Shares to the
Investor.
6. The execution and delivery by the Company of the Transaction Documents and
the consummation by the Company of the transactions contemplated thereby do
not (a) result in a violation of the certificate of incorporation or
by-laws of the Company or (b) result in violation of any Relevant Law (as
defined herein).
7. To our knowledge without the searching of any docket, there is no claim,
action, suit, proceeding, arbitration, investigation or inquiry, pending
before any court or governmental or administrative body or agency, against
the Company.
8. The execution and delivery by the Company of the Transaction Documents to
which the Company is a party, and the consummation by the Company of the
transactions contemplated thereby, do not require approval from or any
filings with any governmental authority under any Relevant Law (as
hereinafter defined).
9. The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
The opinion set forth herein is subject to and limited by the following:
XXXXXX XXXXX XXXXXXXX & XXXXXXX LLP
Purchasers set forth on Annex A
November __, 2005
Page 3
a) With respect to the opinion expressed in paragraph 1, we have relied
solely on certificates of good standing and bring-down good standing
telegrams, copies of which have been furnished to you.
b) The opinion set forth in paragraph 3 is qualified (i) by the effects
of applicable laws relating to bankruptcy, insolvency, fraudulent
conveyance or transfer, and other similar laws relating to or
affecting the rights and remedies of creditors generally, (ii) with
respect to the remedies of specific performance and injunctive and
other forms of equitable relief, by the availability of equitable
defenses and the discretion of the court before which any enforcement
thereof may be brought and (iii) by general principles of equity,
including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing (regardless of whether
considered in a proceeding in equity or at law).
c) We express no opinion as to the validity, binding effect or
enforceability of (i) provisions that purport to establish evidentiary
standards, (ii) provisions relating to severability, indemnity,
contribution, set off, delay or omission of enforcement of rights or
remedies, (iii) provisions purporting to waive rights or defenses,
(iv) provisions that purport to restrict available remedies or
establish remedies, (v) provisions relating to consent to
jurisdiction, choice of forum or choice of law, or (vi) any provision
if and to the extent that such provision (x) is a liquidated damages
provision or (y) provides a remedy for breach that may be deemed to be
disproportionate to actual damages or may be deemed to be a penalty.
d) We have assumed that each party to the Transaction Documents (other
than the Company): (i) has the requisite power to execute, deliver and
perform their respective obligations under the Transaction Documents
to which it is a party; and (ii) has duly authorized, executed and
delivered each of the Transaction Documents to which it is a party;
and (iii) each of the Transaction Documents constitutes the valid and
binding obligation of such party, enforceable against such party in
accordance with its terms.
e) As used in this opinion letter, "to our knowledge," or "known to us"
or any phrase or similar import shall mean the current, actual
knowledge (without independent investigation or verification) of those
attorneys in our firm who are currently members or associates of, or
counsel to, our firm who have directly participated in this
engagement.
We express no opinion as to any laws other than the laws of the
State of New York, the General Corporation Law of the State of Delaware, and the
federal laws of the United States of America, that in each case, in our
experience, we recognize are normally applicable to transactions of the type
contemplated by the Transaction Documents and are not applicable as a
XXXXXX XXXXX XXXXXXXX & XXXXXXX LLP
Purchasers set forth on Annex A
November __, 2005
Page 4
result of the particular business, identity or ownership of any of the parties
(the "Relevant Laws"). Without limiting the foregoing, we express no opinion
with respect to federal or state securities laws or antitrust laws, except with
respect to the opinion expressed in paragraph 5.
The opinion expressed herein is based upon the Relevant Laws and
interpretations thereof in effect on the date hereof, and the facts and
circumstances in existence on the date hereof, and we assume no obligation to
revise or supplement this opinion letter should any such law or interpretation
be changed by legislative action, judicial decision or otherwise or should there
be any change in such facts or circumstances.
This opinion letter is being delivered to you in connection with the
transactions described in the Transaction Documents and may not be relied on or
otherwise used by any other Person or by you for any other purpose.
Very truly yours,
XXXXXX XXXXX XXXXXXXX & XXXXXXX LLP
Purchasers set forth on Annex A
November __, 2005
Page 5
ANNEX "A"
Cranshire Capital, L.P.
Iroquois Master Fund LTD.
Omicron Master Trust
Smithfield Fiduciary LLC
EXHIBIT D
---------
Plan of Distribution
--------------------
The selling stockholders may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market or trading
facility on which the shares are traded or in private transactions. These
sales may be at fixed or negotiated prices. The selling stockholders may use
any one or more of the following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share; and
o a combination of any such methods of sale.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling stockholders may also engage in short sales against the
box, puts and calls and other transactions in our securities or derivatives
of our securities and may sell or deliver shares in connection with these
trades.
Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser)
in amounts to be negotiated. The selling stockholders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved. Any profits on the resale of shares of common stock
by a broker-dealer acting as principal might be deemed to be underwriting
discounts or commissions under the Securities Act. Discounts, concessions,
commissions and similar selling expenses, if any, attributable to the sale of
shares will be borne by a selling stockholder. The selling stockholders may
agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the shares if liabilities are imposed on that person under the Securities
Act.
In connection with the sale of our common stock or interests therein,
the selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn engage in
short sales of the common stock in the course of hedging the positions they
assume. The selling stockholders may also sell shares of our common stock
short and deliver these securities to close out their short positions, or
loan or pledge the common stock to broker-dealers that in turn may sell these
securities. The selling stockholders may also enter into option or other
transactions with broker-dealers or other financial institutions or the
creation of one or more derivative securities which require the delivery to
such broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution
may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).
The selling stockholders may from time to time pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock
from time to time under this prospectus after we have filed an amendment to
this prospectus under Rule 424(b)(3) or other applicable provision of the
Securities Act of 1933 amending the list of selling stockholders to include
the pledgee, transferee or other successors in interest as selling
stockholders under this prospectus.
The selling stockholders also may transfer the shares of common stock
in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus and may sell the shares of common stock from time to time
under this prospectus after we have filed an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of
1933 amending the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this
prospectus.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares of common stock may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with
such sales. In such event, any commissions received by such broker-dealers
or agents and any profit on the resale of the shares of common stock
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
We are required to pay all fees and expenses incident to the
registration of the shares of common stock. We have agreed to indemnify the
selling stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.
The selling stockholders have advised us that they have not entered
into any agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor is
there an underwriter or coordinating broker acting in connection with a
proposed sale of shares of common stock by any selling stockholder. If we
are notified by any selling stockholder that any material arrangement has
been entered into with a broker-dealer for the sale of shares of common
stock, if required, we will file a supplement to
this prospectus. If the selling stockholders use this prospectus for any sale of
the shares of common stock, they will be subject to the prospectus delivery
requirements of the Securities Act.
The anti-manipulation rules of Regulation M under the Securities
Exchange Act of 1934 may apply to sales of our common stock and activities of
the selling stockholders.
Exhibit E
---------
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
American Stock Transfer & Trust Company
0000 00xx Xxxxxx
Xxxxxxxx, XX 00000
Ladies and Gentlemen:
Reference is made to the Securities Purchase Agreement (the "Purchase
Agreement"), dated as of November __, 2005, among SIGA Technologies, Inc., a
Delaware corporation (the "Company") and the purchasers named therein (the
"Holders") pursuant to which the Company is issuing the Company's common stock,
par value $0.0001 per share (the "Common Stock").
The Company has agreed with the Holders that it will instruct you to: (A)
issue the Common Stock free of all restrictive and other legends if, at the time
of such issue, (i) a registration statement covering the resale of such Common
Stock has been declared and is effective by the Commission under the Securities
Act, (ii) such Common Stock are eligible for sale under Rule 144(k) or (iii)
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the Staff of
the Commission); or (B) reissue the Common Stock (if such shares were originally
issued with a restrictive legend) free of all restrictive and other legends (i)
upon the effectiveness of a registration statement covering the resale of the
Common Stock or (ii) following any sale of such Common Stock pursuant to Rule
144 or (iii) such Common Stock 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).
In furtherance of this instruction, upon the effectiveness of the
Registration Statement (as defined in the Purchase Agreement) we have instructed
our counsel to deliver to you their opinion letter in the form attached hereto
as Exhibit I to the effect that the Registration Statement has been declared
effective by the Commission and that Common Stock are freely transferable by the
Holders and accordingly may be issued (or reissued, as applicable) and delivered
to the Holders free of all restrictive and other legends.
You need not require further letters from us or our counsel to effect any
future issuance or reissuance of shares of Common Stock to the Holders as
contemplated by the Purchase Agreement and this letter. This letter shall serve
as our standing irrevocable instructions with regard to this matter.
Please be advised that the Holders have relied upon this instruction
letter as an inducement to enter into the Purchase Agreement. Please execute
this letter in the space indicated to acknowledge your agreement to act in
accordance with these instructions.
Very truly yours,
SIGA TECHNOLOGIES, INC.
By: _____________________________________
Name: ___________________________________
Title:___________________________________
2
Exhibit I
XXXXXX XXXXX XXXXXXXX & XXXXXXX LLP
_________________, 2005
American Stock Transfer & Trust Company
0000 00xx Xxxxxx
Xxxxxxxx, XX 00000
Re: SIGA Technologies, Inc.
Dear Ladies and Gentlemen:
We are counsel to SIGA Technologies, Inc., a Delaware corporation (the
"Company"). We are writing to inform you that the Company's Registration
Statement on Form S-3, File No. 333-________ (the "Registration Statement"), was
declared effective by the Securities and Exchange Commission at _________ on
___________ 2005. The Registration Statement registers the resale of (a) certain
outstanding shares of the Company's common stock, .0001 per value per share (the
"Common Stock"), and (b) shares of Common Stock issuable upon the exercise of
certain outstanding warrants to purchase shares of Common Stock.
Upon (a) the sale by any stockholder listed in the first column of
Schedule I attached hereto of shares of Common Stock listed in the second column
of Schedule I in accordance with the section entitled "Plan of Distribution" in
the then current prospectus (the "Prospectus") forming a part of the
Registration Statement (a copy of the current Prospectus is enclosed with this
letter), (b) delivery of a copy of the Prospectus to the purchaser of such
shares, and (c) delivery to you of a certificate in the form attached to this
letter as Annex A certifying to the foregoing executed by such stockholder, you
may then issue one or more certificates representing the shares of Common Stock
so sold in accordance with the instructions of such stockholder without any
restrictive legend.
However, any certificates re-issued in the name of such stockholder
representing any unsold shares must have affixed thereto any legend that appears
on the certificate delivered to you for transfer.
Very truly yours,
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
cc: Xxxxxx Xxxxxxxx
SCHEDULE I
----------
Number of Shares of
Common Stock Offered
Pursuant to Registration
Name of Beneficial Owner Statement
------------------------ --------------------------
4
CERTIFICATE OF SELLING STOCKHOLDER
SIGA Technologies, Inc.
000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
-and-
American Stock Transfer and Trust Company
0000 00xx Xxxxxx
Xxxxxxxx, XX 00000
The undersigned does hereby certify that the undersigned is listed as a
selling securityholder under the Registration Statement on Form S-3
(Registration No. 333-______) (the "Registration Statement"), of SIGA
Technologies, Inc., a Delaware corporation (the "Company") and that Xxxxxx Xxxxx
Xxxxxxxx & Xxxxxxx LLP is entitled to rely upon this Certificate in rendering an
opinion to the transfer agent for the Company with respect to my sale of shares
(the "Shares") of the Company's common stock, .0001 per value per share ("Common
Stock"), covered by the Registration Statement.
The undersigned does hereby further certify that:
1. The undersigned has sold ____________________ Shares and is delivering
herewith to the Company one or more certificates representing such Shares.
2. The undersigned has delivered a copy of the prospectus dated _________,
2005 forming a part of the Registration Statement (the "Prospectus") to each
person to whom the undersigned sold such Shares.
3. The undersigned sold the Shares in compliance with the section entitled
"Plan of Distribution" in the Prospectus.
4. The undersigned shall notify the Company immediately of any occurrence
which would render the foregoing statements inaccurate.
5. If this Certificate is executed on behalf of an entity, the undersigned
is the duly appointed representative of such entity and, as such, has all
requisite power and authority to execute this Certificate of behalf of, and to
bind, such entity.
The Company and its agents and representatives (including, without
limitation, the Company's respective counsel) may rely on this representation
letter. The undersigned will indemnify all such persons and hold them harmless
from and against any and all loss, damage, claim, liability and expense
resulting from the breach of any representation herein.
5
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate as
of ___________________, 200___.
Name of Selling Stockholder:
_______________________________________
Signature:_____________________________
Title (if applicable):
Total Number of
Shares Sold:___________________________
6
