EXHIBIT 10.68
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is
dated as of March 31, 2003 by and between Viragen, Inc., a Delaware corporation
(the "Company") and Talisman Management Limited (the "Purchaser").
Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings ascribed to them in Article 9.
WHEREAS, the parties desire that, upon the terms and subject
to the conditions contained herein, the Company shall have the right to issue
and sell to Purchaser from time to time as provided herein, and Purchaser shall
be obligated to purchase up to $12,000,000 worth of shares of Common Stock
subject to the terms herein; and
WHEREAS, such investments will be made by the Purchaser as
statutory underwriter of a registered indirect primary offering of such Common
Stock by the Company.
NOW, THEREFORE, in consideration of the foregoing premises,
and the promises and covenants herein contained, the receipt and sufficiency of
which are hereby acknowledged by the parties hereto, the parties, intending to
be legally bound, hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF COMMON STOCK
Section 1.1. Purchase and Sale of Stock. Upon the terms
and subject to the conditions of this Agreement, the Company may sell and issue
to the Purchaser and the Purchaser shall be obligated to purchase from the
Company, up to an aggregate of $12,000,000 worth of shares of Common Stock (the
"Commitment Amount") and the Warrant.
Section 1.2. Purchase Price and Initial Closing. In
consideration of and in express reliance upon the representations, warranties,
covenants, terms and conditions of this Agreement, the Company agrees to issue
and sell to the Purchaser and the Purchaser agrees to purchase from the Company
that number of the Draw Down Shares to be issued in connection with each Draw
Down. The execution and delivery of this Agreement and the other agreements
referred to herein and the payment of the fees set forth in Article I of the
Escrow Agreement, attached as Exhibit B hereto, (the "Initial Closing") shall
take place at the offices of Xxxxxxx Xxxxxxxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxx, Xxx Xxxx 00000 (i) at 10:00 a.m. local time on March 31, 2003,
or (ii) at such other time and place or on such date as the Purchaser and the
Company may agree upon (the "Initial Closing Date"). Each party shall deliver
all
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documents, instruments and writings required to be delivered by such party
pursuant to this Agreement at or prior to the Initial Closing.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representation and Warranties of the
Company. The Company hereby makes the following representations and warranties
to the Purchaser, in each case except as set forth in the SEC Documents or in
the Disclosure Letter prepared by the Company and delivered concurrently
herewith or as contemplated by this Agreement:
(a) Organization, Good Standing and Power. The
Company is a corporation duly incorporated, validly existing and in
good standing under the laws of Delaware and has all requisite
corporate authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted, except
where the failure to be so incorporated or in good standing or to have
such corporate authority would not have a Material Adverse Effect. The
Company does not have any subsidiaries and does not own or control
more than fifty percent (50%) of any other business entity. The
Company is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary, other than those jurisdictions in which the failure so to
qualify would not have a Material Adverse Effect.
(b) Authorization, Enforcement. (i) The Company
has the requisite corporate power and corporate authority to enter
into and perform its obligations under the Transaction Documents and
to issue the Draw Down Shares, (ii) the execution and delivery 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 corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders
is required, and (iii) the Transaction Documents have been duly
executed and delivered by the Company and shall constitute valid and
binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable
principles of general application.
(c) Capitalization. The authorized capital
stock of the Company is as set forth on the Disclosure Letter. All of
the outstanding shares of the Common Stock have been duly and validly
authorized and are fully paid and non-assessable. No shares of Common
Stock are entitled to preemptive rights or registration rights and
there are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of
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capital stock of the Company. Furthermore, there are no contracts,
commitments, understandings, or arrangements by which the Company is
bound to issue additional shares of the capital stock of the Company
or options, securities or rights convertible into shares of Common
Stock. The Company is not a party to any agreement granting
registration rights to any person with respect to any of its equity or
debt securities. The Company is not a party to, and it has no
knowledge of, any agreement restricting the voting or transfer of any
shares of the capital stock of the Company. The offer and sale of all
capital stock, convertible securities, rights, warrants, or options of
the Company issued prior to the Initial Closing complied in all
material respects with all applicable federal and state securities
laws, and no stockholder has a right of rescission or damages with
respect thereto which would have a Material Adverse Effect. The
Company has made available to the Purchaser true and correct copies of
the Company's certificate of incorporation as in effect on the date
hereof (the "Charter"), and the Company's bylaws as in effect on the
date hereof (the "Bylaws"). The Company has not received any notice
from the Principal Market questioning or threatening the continued
inclusion of the Common Stock on such market.
(d) Issuance of Shares. The Warrant Shares to
be issued upon exercise of the Warrant have been duly authorized by
all necessary corporate action and, when paid for and issued in
accordance with the terms hereof and the Warrant shall be validly
issued and outstanding, fully paid and non-assessable, and the
Purchaser shall be entitled to all rights accorded to a holder of
Common Stock, when the Warrant is exercised in accordance with its
terms.
(e) No Conflicts. The execution, delivery and
performance of this Agreement by the Company and the consummation by
the Company of the transactions contemplated herein do not and will
not (i) violate any provision of the Company's Charter or Bylaws, (ii)
conflict with, or constitute a default (or an event which 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 of, any agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to
which the Company is a party, (iii) create or impose a lien, charge or
encumbrance on any property of the Company under any agreement or any
commitment to which the Company is a party or by which the Company is
bound or by which any of its respective properties or assets are
bound, or (iv) result in a violation of any federal, state or local
statute, rule, regulation, order, judgment or decree (including any
federal or state securities laws and regulations) applicable to the
Company or any of its subsidiaries or by which any property or asset
of the Company or any of its subsidiaries are bound, except, in all
cases, for such conflicts, defaults, termination, amendments,
accelerations, cancellations and violations as would not, individually
or in the aggregate, have a Material Adverse Effect. No consent,
authorization or order of, or make any filing or registration with,
any court or governmental agency is required by the Company in order
for it to execute, deliver or perform any of its obligations under
this Agreement, or issue and sell the Shares in accordance with the
terms hereof (other than any filings which may be required to be made
by the Company with the SEC, the Nasdaq Stock Market, Inc. or state
securities administrators in connection with the Initial Closing and
any registration statement which
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may be filed pursuant hereto and such consents, authorizations, orders
or filings which, if not obtained or made, would not be reasonably
likely to have a Material Adverse Effect); provided, however, that for
purpose of the representations made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations
and agreements of the Purchaser herein.
(f) SEC Documents, Financial Statements. The
Common Stock is registered pursuant to Section 12(g) of the Exchange
Act, and the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act, including
material filed pursuant to Section 13(a) or 15(d) of the Exchange Act.
The Company has not provided to the Purchaser any information which,
according to applicable law, rule or regulation, should have been
disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this
Agreement. As of their respective filing dates, the SEC Documents
complied in all material respects with the applicable requirements of
the Exchange Act or the Securities Act, as applicable, and the rules
and regulations of the SEC promulgated thereunder applicable to such
documents, and, as of their respective filing dates after giving
effect to the information disclosed and incorporated by reference
therein, none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all
material respects with applicable accounting requirements under GAAP
and the published rules and regulations of the SEC. Such financial
statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim financial statements, except
as may be permitted by the SEC on Form 10-Q under the Exchange Act),
and fairly present in all material respects the consolidated financial
position of the Company and its subsidiaries as of the dates thereof
and the consolidated results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments).
(g) Subsidiaries. The SEC Documents set forth
each subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of the
Company's ownership of the outstanding stock or other interests of
such subsidiary. For the purposes of this Agreement, "subsidiary"
shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interests having
ordinary voting power (absolutely or contingently) for the election of
directors or other persons performing similar functions are at the
time owned directly or indirectly by the Company and/or any of its
other subsidiaries. All of the issued and outstanding shares of
capital stock of each subsidiary have been duly authorized and validly
issued, and are fully paid and non-assessable. Neither the Company nor
any subsidiary is subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any shares of the capital
stock of any subsidiary or any
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convertible securities, rights, warrants or options of the type
described in the preceding sentence.
(h) No Material Adverse Effect. Since September
30, 2002, no change, event, circumstance, development or effect that
would have a Material Adverse Effect has occurred with respect to the
Company.
(i) No Undisclosed Liabilities. Since September
30, 2002, neither the Company nor any of its subsidiaries has incurred
any liabilities, obligations, claims or losses (whether liquidated or
unliquidated, secured or unsecured, absolute, accrued, contingent or
otherwise) that would be required to be disclosed on a balance sheet
of the Company or any subsidiary (including the notes thereto) in
conformity with GAAP or which would be required to be disclosed in the
SEC Documents, other than those incurred in the ordinary course of the
Company's or its subsidiaries' respective businesses since such date
and which, individually or in the aggregate, do not or would not have
a Material Adverse Effect.
(j) No Undisclosed Events or Circumstances.
Since September 30, 2002, no event or circumstance has occurred or
exists with respect to the Company or its businesses, properties,
operations or financial condition, that, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the
date hereof by the Company but which has not been so publicly
announced or disclosed in the SEC Documents and which individually or
in the aggregate, do not or would not have a Material Adverse Effect.
(k) Indebtedness. The SEC Documents or the
Disclosure Letter sets forth as of the date hereof all outstanding
secured and unsecured Indebtedness of the Company or any subsidiary,
or for which the Company or any subsidiary has commitments. For the
purposes of this Agreement, "Indebtedness" shall mean (A) any
liabilities for borrowed money or amounts owed in excess of $500,000
(other than trade accounts payable incurred in the ordinary course of
business), (B) all guaranties, endorsements and contingent obligations
in respect of Indebtedness of others, whether or not the same are or
should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary
course of business; and (C) the present value of any lease payments in
excess of $500,000 due under leases required to be capitalized in
accordance with GAAP. Neither the Company nor any subsidiary is in
default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and
the subsidiaries has good and marketable title to all of its real and
personal property reflected in the SEC Documents, free of any
mortgages, pledges, charges, liens, security interests or other
encumbrances, except for those that do not have a Material Adverse
Effect. All said leases with respect to real property leased by the
Company and each of its subsidiaries as set forth in the SEC Documents
are valid and subsisting and in full force and effect.
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(m) Actions Pending. As of the date hereof,
there is no action, suit, claim, investigation or proceeding pending
or, to the knowledge of the Company, threatened against the Company or
any subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken
pursuant hereto or thereto. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the
Company, threatened, against or involving the Company, any subsidiary
or any of their respective properties or assets, except as would not
have a Material Adverse Effect. Except as would not have a Material
Adverse Effect, there are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any subsidiary.
(n) Compliance with Law. The Company and each
of its subsidiaries has complied with and is not in violation of any
applicable provision of any statute, law or regulation with respect to
the conduct of its business except for failures to comply or
violations that would not have a Material Adverse Effect and have all
franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals necessary for the conduct of
their respective businesses as now being conducted by them except for
franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, the failure to possess which,
individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(o) Taxes. The Company and each subsidiary has
filed all material Tax Returns which it is required to file under
applicable laws and the Company or a subsidiary has paid all material
Taxes due and owing by it or any subsidiary (whether or not such
material Taxes are required to be shown on a Tax Return) and has
withheld and paid over to the appropriate taxing authorities all
material Taxes which it is required to withhold from amounts paid or
owing to any employee, stockholder, creditor or other third parties;
and since December 31, 2001, the charges, accruals and reserves for
material Taxes with respect to the Company (including any provisions
for deferred income taxes) reflected on the books of the Company are
in the aggregate adequate to cover any material Tax liabilities of the
Company if its current tax year were treated as ending on the date
hereof.
No material written claim has been made by a taxing
authority in a jurisdiction where the Company does not file tax
returns that the Company or any subsidiary is or may be subject to
taxation by that jurisdiction. Except as would not have a Material
Adverse Effect, (i) to the best of the Company's knowledge there are
no foreign, federal, state or local tax audits or administrative or
judicial proceedings pending or being conducted with respect to the
Company or any subsidiary; (ii) no information related to Tax matters
has been requested by any foreign, federal, state or local taxing
authority; and, (iii) except as disclosed above, no written notice
indicating an intent to open an audit or other review has been
received by the Company or any subsidiary from any foreign, federal,
state or local taxing authority.
For purposes of this Section 2.1(o):
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"Tax" or "Taxes" means federal, state, county,
local, foreign, or other income, gross receipts, ad
valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental,
communications, real or personal property, capital
stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated
and other taxes of any kind whatsoever (including,
without limitation, deficiencies, penalties,
additions to tax, and interest attributable thereto)
whether disputed or not.
"Tax Return" means any return, information report or
filing with respect to Taxes, including any
schedules attached thereto and including any
amendment thereof.
(p) Certain Fees. No brokers, finders or
financial advisory fees or commissions will be payable by the Company
or any subsidiary with respect to the transactions contemplated by
this Agreement.
(q) Operation of Business. The Company and each
of the subsidiaries owns or possesses all patents, trademarks, service
marks, trade names, copyrights, licenses and authorizations as set
forth in the SEC Documents or on the Disclosure Letter hereto, and all
rights with respect to the foregoing, which are necessary for the
conduct of its business as now conducted and, to the Company's
knowledge, without any conflict with the rights of others.
(r) Insurance. The Company maintains insurance
in such amounts and covering such risks as is adequate in all material
respects for the conduct of its business and the value of its
properties and as is customary for companies engaging in similar
businesses and similar industries.
(s) Books and Records. The financial records of
the Company and its subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and
the subsidiaries, the location and collection of their assets, and the
nature of all transactions giving rise to the obligations or accounts
receivable of the Company or any subsidiary.
(t) Material Agreements. Neither the Company
nor any subsidiary is a party to any Material Agreement. Except as
would not have a Material Adverse Effect, the Company and each of its
subsidiaries has performed all the obligations required to be
performed by them to date under the Material Agreements, have received
no notice of default and, to the best of the Company's knowledge are
not in default under any Material Agreement now in effect, the result
of which would cause a Material Adverse Effect. No written or oral
contract, instrument, agreement, commitment, obligation, plan or
arrangement of the Company or of any subsidiary limits the payment of
dividends on the Common Stock.
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(u) Transactions with Affiliates. There are no
material loans, leases, agreements, contracts, royalty agreements,
management contracts or arrangements or other continuing transactions
exceeding $100,000 between (A) the Company or any subsidiary on the
one hand, and (B) on the other hand, any officer, employee, consultant
or director of the Company, or any of its subsidiaries, or any person
owning 5% or more of the capital stock of the Company or any
subsidiary or any member of the immediate family of such officer,
employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant,
director or stockholder, or a member of the immediate family of such
officer, employee, consultant, director or stockholder.
(v) Securities Laws. The Company has complied
in all material respects with all applicable federal and state
securities laws in connection with the offer, issuance and sale of the
Shares hereunder. Neither the Company nor anyone acting on its behalf,
directly or indirectly, has sold, offered to sell or solicited offers
to buy the Shares or similar securities to, or solicited offers with
respect thereto from, or entered into any preliminary conversations or
negotiations relating thereto with, any person (other than the
Purchaser), so as to bring the issuance and sale of the Shares under
the registration provisions of the Securities Act and applicable state
securities laws. Neither the Company nor any of its Affiliates, nor
any person acting on its or their behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or
sale of the Shares (except to the extent that the filing of the
Registration Statement with the SEC may be so construed).
(w) Employees. Neither the Company nor any
subsidiary has any collective bargaining arrangements or agreements
covering any of its employees. Neither the Company nor any subsidiary
is in breach of any employment contract, agreement regarding
proprietary information, noncompetition agreement, nonsolicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant to which the Company is a party, relating to the
right of any officer, employee or consultant to be employed or engaged
by the Company or such subsidiary, except for any such breach which
would not reasonably be expected to have a Material Adverse Effect.
Since September 30, 2002, no officer, consultant or key employee of
the Company or any subsidiary whose termination, either individually
or in the aggregate, would reasonably be expected to have a Material
Adverse Effect, has terminated or, to the knowledge of the Company,
has any present intention of terminating his or her employment or
engagement with the Company or any subsidiary.
(x) Absence of Certain Developments. Except as
would not have a Material Adverse Effect, since September 30, 2002,
neither the Company nor any subsidiary has:
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(i) issued any stock, bonds or other
corporate securities or any rights, options or warrants with
respect thereto (other than pursuant to equity incentive
plans or arrangements adopted by the Company);
(ii) borrowed any material amount or
incurred or become subject to any material liabilities
(absolute or contingent) except liabilities incurred in the
ordinary course of business;
(iii) discharged or satisfied any lien
or encumbrance or paid any material obligation or liability
(absolute or contingent), other than liabilities paid in the
ordinary course of business;
(iv) declared or made any payment or
distribution of cash or other property to stockholders with
respect to its stock, or purchased or redeemed, or made any
agreements so to purchase or redeem, any shares of its
capital stock;
(v) suffered any material losses
(except for anticipated losses consistent with prior
quarters) or waived any rights of material value, whether or
not in the ordinary course of business, or suffered the loss
of any material amount of prospective business;
(vi) made any material changes in
employee compensation except in the ordinary course of
business and consistent with past practices;
(vii) made capital expenditures or
commitments therefor that aggregate in excess of $500,000;
(viii) entered into any other Material
Agreements, whether or not in the ordinary course of
business;
(ix) suffered any material damage,
destruction or casualty loss, whether or not covered by
insurance; or
(x) experienced any material problems
with labor or management in connection with the terms and
conditions of their employment.
(aa) Acknowledgment Regarding the Purchaser's
Purchase of Shares. Company acknowledges and agrees that the Purchaser
is acting solely in the capacity of arm's length purchaser with
respect to this Agreement and the transactions contemplated hereunder.
The Company further acknowledges that the Purchaser is not acting as a
financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions
contemplated hereunder.
Section 2.2. Representations and Warranties of the
Purchaser. The Purchaser hereby makes the following representations and
warranties to the Company:
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(a) Organization and Standing of the Purchaser.
The Purchaser is a corporation duly incorporated, validly existing and
in good standing under the laws of the British Virgin Islands.
(b) Authorization and Power. The Purchaser has
the requisite power and authority and financial resources to enter
into and perform the Transaction Documents and to purchase the Shares
being sold to it hereunder. The execution, delivery and performance of
the Transaction Documents by the Purchaser and the consummation by it
of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action. The Transaction
Documents have been duly executed and delivered by the Purchaser, and
constitute valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership
or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of
general application
(c) No Conflicts. The execution, delivery and
performance of this Agreement by the Purchaser and the consummation by
the Purchaser of the transactions contemplated herein do not and will
not (i) violate any provision of the Purchaser's charter or bylaws,
(ii) conflict with, or constitute a default (or an event which 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 of, any agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to
which the Purchaser is a party, (iii) create or impose a lien, charge
or encumbrance on any property of the Purchaser under any agreement or
any commitment to which the Purchaser is a party or by which the
Purchaser is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state
or local statute, rule, regulation, order, judgment or decree
(including any federal or state securities laws and regulations)
applicable to the Purchaser or any of its subsidiaries or by which any
property or asset of the Purchaser or any of its subsidiaries are
bound, except, in all cases, for such conflicts, defaults,
termination, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Purchaser
Material Adverse Effect on the Purchaser. No consent, authorization or
order of, or make any filing or registration with, any court or
governmental agency is required by the Purchaser in order for it to
execute, deliver or perform any of its obligations under this
Agreement, or purchase the Shares in accordance with the terms hereof.
(d) Financial Risks. The Purchaser acknowledges
that it is able to bear the financial risks associated with an
investment in the Shares and the Warrants and that it has been given
full access to such records of the Company and the subsidiaries and to
the officers of the Company and the subsidiaries as it has deemed
necessary or appropriate to conduct its due diligence investigation.
The Purchaser is capable of evaluating the risks and merits of an
investment in the Shares and the Warrants by virtue of its experience
as an investor and its knowledge, experience, and sophistication in
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financial and business matters and the Purchaser is capable of bearing
the entire loss of its investment in the Shares and the Warrants.
(e) Accredited Investor. The Purchaser is an
"accredited investor" as defined in Regulation D promulgated under the
Securities Act.
(f) General. The Purchaser understands that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the
Purchaser set forth herein in order to determine the suitability of
the Purchaser to acquire the Shares.
(g) Actions Pending. As of the date hereof,
there is no action, suit, claim, investigation or proceeding pending
or, to the knowledge of the Purchaser, threatened against the
Purchaser which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken
pursuant thereto. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Purchaser, threatened,
against or involving the Purchaser, or any of their respective
properties or assets, except as would not have a Purchaser Material
Adverse Effect. Except as would not have a Purchaser Material Adverse
Effect, there are no outstanding orders, judgments, injunctions,
awards or decrees of any court, arbitrator or governmental or
regulatory body against the Purchaser.
(h) Investment Intent. The Purchaser is
acquiring the Shares and the Warrants as principal for its own account
for investment purposes only and not with a view to or for
distributing or reselling such securities or any part thereof, without
prejudice, however, to the Purchaser's right, subject to the
provisions of this Agreement, at all times to sell or otherwise
dispose of all or any part of the Shares and the Warrants pursuant to
an effective registration statement under the Securities Act or under
an exemption from such registration and in compliance with applicable
federal and state securities laws. Nothing contained herein shall be
deemed a representation or warranty by such Purchaser to hold the
Shares or Warrants for any period of time.
ARTICLE 3
COVENANTS
The Company covenants with the Purchaser as follows:
Section 3.1. The Shares. As of the date of each
applicable Draw Down Notice, the Company will have authorized and reserved,
free of preemptive rights and other similar contractual rights of stockholders,
a sufficient number of its authorized but unissued shares of its Common Stock
to cover the Draw Down Shares to be issued in connection with such Draw Down
requested under this Agreement. The Draw Down Shares to be issued under this
Agreement, when paid for and issued in accordance with the terms hereof, shall
be duly and validly issued and
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outstanding, fully paid and non-assessable, and the Purchaser shall be entitled
to all rights accorded to a holder of Common Stock. Anything in this Agreement
to the contrary notwithstanding, (i) at no time will the Company request a Draw
Down which would result in the issuance of an aggregate number of shares of
Common Stock pursuant to this Agreement which exceeds 19.9% of the number of
shares of Common Stock issued and outstanding on the date hereof without first
obtaining stockholder approval of such excess issuance, or such other amount as
would require stockholder approval under rules of the Principal Market or
otherwise without first obtaining stockholder approval of such excess issuance,
and (ii) the Company may not make a Draw Down to the extent that such Draw Down
exceeds 4.999% of the then outstanding shares of Common Stock.
Section 3.2. Securities Compliance. If applicable, the
Company shall notify the Principal Market, in accordance with its rules and
regulations, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Shares and the Warrants to the Purchaser.
Section 3.3. Registration and Listing. The Company will
use its commercially reasonable best efforts to cause its Common Stock to
continue to be registered under Section 12(g) of the Exchange Act, will comply
in all respects with its reporting and filing obligations under the Exchange
Act, will comply with all requirements related to any registration statement
filed pursuant to this Agreement, and will not voluntarily take any action or
file any document (whether or not permitted by the Securities Act or the
Exchange Act or the rules promulgated thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted herein. The
Company will use its commercially reasonable best efforts to continue the
listing or trading of its Common Stock on the Principal Market and will comply
in all respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the Principal Market and shall provide the
Purchaser's counsel with copies of any correspondence to or from such Principal
Market which questions or threatens delisting of the Common Stock, within three
(3) Trading Days of the Company's receipt thereof.
Section 3.4. Escrow Arrangement. The Company and the
Purchaser shall enter into an escrow arrangement with Xxxxxxx Xxxxxxxxx LLP
(the "Escrow Agent") in the form of Exhibit B hereto respecting payment against
delivery of the Draw Down Shares.
Section 3.5. Registration Rights Agreement. The Company
and the Purchaser shall enter into the Registration Rights Agreement in the
Form of Exhibit A hereto. Before the Purchaser shall be obligated to accept a
Draw Down request from the Company, the Company shall have caused a sufficient
number of shares of Common Stock to be registered to cover the Draw Down Shares
to be issued in connection with such Draw Down.
Section 3.6. Accuracy of Registration Statement.On each
Settlement Date, the Registration Statement and the prospectus therein shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
12
make the statements therein not misleading in light of the circumstances under
which they were made; and on such Settlement Date the Registration Statement
and the prospectus therein will not include any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, the Company makes no representations or
warranties as to the information contained in or omitted from the Registration
Statement and the prospectus therein in reliance upon and in conformity with
the information furnished in writing to the Company by the Purchaser
specifically for inclusion in the Registration Statement and the prospectus
therein.
Section 3.7. Compliance with Laws. The Company shall
comply, and cause each subsidiary to comply, with all applicable laws, rules,
regulations and orders, noncompliance with which would reasonably be expected
to have a Material Adverse Effect.
Section 3.8. Keeping of Records and Books of Account.
The Company shall keep and cause each subsidiary to keep adequate records and
books of account, in which entries that are complete in all material respects
will be made in accordance with GAAP consistently applied, reflecting all
financial transactions of the Company and its subsidiaries, and in which, for
each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.
Section 3.9. Notice of Certain Events Affecting
Registration; Suspension of Right to Request a Draw Down. THE COMPANY WILL
PROMPTLY NOTIFY THE PURCHASER IN WRITING UPON THE OCCURRENCE OF ANY OF THE
FOLLOWING EVENTS IN RESPECT OF THE REGISTRATION STATEMENT OR RELATED PROSPECTUS
IN RESPECT OF THE SHARES: (i) receipt of any request for additional information
from the SEC or any other federal or state governmental authority during the
period of effectiveness of the Registration Statement the response to which
would require any amendments or supplements to the Registration Statement or
related prospectus; (ii) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Shares for sale in
any jurisdiction in which the Purchaser is entitled to sell the Shares
hereunder or the receipt of notice with respect to the initiation of any
proceeding for such purpose; (iv) becoming aware that any statement made in the
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference is untrue in any material
respect or requires the making of any changes in the Registration Statement,
related prospectus or documents so that, in the case of the Registration
Statement, 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 not misleading, and that in the case of the related
prospectus, 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; and (v) the Company's determination that the filing of a
post-effective amendment to or withdrawal of the Registration Statement is
required. The Company shall not deliver to the Purchaser any Draw Down Notice
during the continuation of any of the foregoing events. The Company shall
promptly make available to the Purchaser any such supplements or amendments to
the related prospectus, at which time, provided that the registration statement
and any supplements and
13
amendments thereto are then effective, the Company may recommence the delivery
of Draw Down Notices.
Section 3.10. Consolidation; Merger. The Company shall
not, at any time prior to the termination of this Agreement, effect any merger
or consolidation of the Company with or into, or a transfer of all or
substantially all of the assets of the Company to, another entity (a
"Consolidation Event") unless the resulting successor or acquiring entity (if
not the Company) assumes by written instrument or by operation of law the
obligation to deliver to the Purchaser such shares of Common Stock and/or
securities as the Purchaser is entitled to receive pursuant to this Agreement.
Section 3.11. Non-Public Information. The Company
covenants and agrees that neither it nor any other Person acting on its behalf
will provide the Purchaser or its agents or counsel with any information that
the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing representations
in effecting transactions in securities of the Company.
The Purchaser covenants with the Company as follows:
Section 3.12. Prospectus Delivery Requirements. The
Purchaser agrees that it will, whenever required by federal securities laws,
deliver the Prospectus included in the Registration Statement to any purchaser
of Draw Down Shares from the Purchaser in such manner as is required under the
federal securities laws.
ARTICLE 4
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
Section 4.1. Conditions Precedent to the Obligation of
the Company and to Sell the Shares. The obligation hereunder of the Company to
proceed to close this Agreement and to issue and sell the Shares to the
Purchaser is subject to the satisfaction or waiver, at or before the Initial
Closing, and as of each Settlement Date of each of the conditions set forth
below. These conditions are for the Company's sole benefit and may be waived by
the Company in writing at any time in its sole discretion.
(a) Accuracy of the Purchaser's Representations
and Warranties. The representations and warranties of the Purchaser
shall be true and correct in all material respects as of the date when
made and as of the Initial Closing and as of each Settlement Date as
though made at that time (except for representations and warranties
that speak as of a particular date, which shall be true and correct in
all material respects as of such dates).
14
(b) Performance by the Purchaser. The Purchaser
shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Purchaser
at or prior to the Initial Closing and as of each Settlement Date.
(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 which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
(d) No Proceedings or Litigation. No material
action, suit or proceeding before any arbitrator or any governmental
authority shall have been commenced against the Purchaser or the
Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary, seeking to restrain,
prevent or change the transactions contemplated by this Agreement, or
seeking damages in connection with such transactions.
Section 4.2. Conditions Precedent to the Obligation of
the Purchaser to Close. The obligation hereunder of the Purchaser to perform
its obligations under this Agreement and to purchase the Shares is subject to
the satisfaction or waiver, at or before the Initial Closing, of each of the
conditions set forth below. These conditions are for the Purchaser's sole
benefit and may be waived by the Purchaser in writing at any time in its sole
discretion.
(a) Accuracy of the Company's Representations
and Warranties. Each of the representations and warranties of the
Company shall be true and correct in all material respects as of the
date when made and as of the Initial Closing as though made at that
time (except for representations and warranties that speak as of a
particular date, which shall be true and correct in all material
respects as of such date).
(b) Performance by the Company. The Company
shall have performed, satisfied and complied in all material respects
with all material covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Initial 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 which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
(d) No Proceedings or Litigation. No material
action, suit or proceeding before any arbitrator or any governmental
authority shall have been commenced, against the Purchaser or the
Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain,
prevent or change the transactions contemplated by this Agreement, or
seeking damages in connection with such transactions.
15
(e) Opinion of Counsel, Etc. At the Initial
Closing, the Purchaser shall have received an opinion of counsel to
the Company, dated as of the Initial Closing Date, in the form of
Exhibit C hereto.
(f) Warrants. On the Initial Closing Date, the
Company shall issue to the Purchaser a warrant to purchase up to
12,000,000 shares of Common Stock (the "Warrants"). The Warrants shall
be exercisable for the period of 5 years beginning immediately upon
issuance. The exercise price of the Warrants shall be $0.10, subject
to adjustment therein. The Warrants shall be in the form of Exhibit E
hereto.
Section 4.3. Conditions Precedent to the Obligation of
the Purchaser to Accept a Draw Down and Purchase the Shares. The obligation
hereunder of the Purchaser to accept a Draw Down request and to acquire and pay
for the Shares is subject to the satisfaction at or before each Settlement
Date, of each of the conditions set forth below.
(a) Satisfaction of Conditions to Initial
Closing. The Company shall have satisfied at the Initial Closing, or
the Purchaser shall have waived at the Initial Closing, the conditions
set forth in Section 4.2 hereof
(b) Effective Registration Statement. The
Registration Statement registering the Shares to be delivered in
connection with the applicable Draw Down shall have been declared
effective by the SEC and shall remain effective during the applicable
Draw Down Pricing Period and on the applicable Settlement Date.
(c) No Suspension. Trading in the Common Stock
shall not have been suspended by the SEC or the Principal Market
(except for any suspension of trading of limited duration agreed to by
the Company, which suspension shall be terminated prior to the
delivery of each Draw Down Notice), and, at any time prior to such
Draw Down Notice, trading in securities generally as reported on the
Principal Market shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are
reported on the Principal Market unless the general suspension or
limitation shall have been terminated prior to the delivery of such
Draw Down Notice.
(d) Material Adverse Effect. No Material
Adverse Effect and no Consolidation Event where the successor entity
has not agreed to deliver to the Purchaser such shares of stock and/or
securities as the Purchaser is entitled to receive pursuant to this
Agreement, such occurrences to be determined in accordance with
Section 8.9 herein.
(e) Opinion of Counsel. The Purchaser shall
have received a "bring-down" letter from the Company's counsel,
confirming that there is no change from the counsel's previously
delivered opinion, or else specifying with particularity the reason
for any change and an opinion as to the additional items specified in
Exhibit C hereto.
16
ARTICLE 5
DRAW DOWN TERMS
Section 5.1. Draw Down Terms. Subject to the
satisfaction of the conditions set forth in this Agreement, the parties agree
as follows:
(a) The Company may, in its sole discretion,
issue and exercise draw downs against the Commitment Amount (each a
"Draw Down") during the Commitment Period, which Draw Downs the
Purchaser shall be obligated to accept, subject to the terms and
conditions herein.
(b) Only one Draw Down shall be allowed in each
Draw Down Pricing Period and the Company may not exercise a Draw Down
until the applicable Trading Cushion has elapsed since the end of the
previous Draw Down Pricing Period. The number of shares of Common
Stock purchased by the Purchaser with respect to each Draw Down shall
be determined as set forth in Section 5.1(e) herein and settled on or
before the 3rd Trading Day immediately after the Draw Down Pricing
Period (each such settlement period and each such settlement date
referred to as a "Settlement Period" and a "Settlement Date",
respectively).
(c) In connection with each Draw Down Pricing
Period, the Company may set the Threshold Price in the Draw Down
Notice.
(d) The minimum Investment Amount for any Draw
Down shall be $50,000 and the maximum Investment Amount as to each
Draw Down shall be equal to the lesser of (i) $400,000 and (ii) 2.5%
of the average of the VWAPs for the 60 Trading Days immediately prior
to the applicable Commencement Date (defined below) multiplied by the
total aggregate trading volume in respect of the Common Stock for such
period. Notwithstanding anything herein to the contrary, in the event
the minimum Investment Amount is greater than the maximum Investment
Amount, as to such Draw Down only, such minimum Investment Amount
shall equal the maximum Investment Amount, but in no event shall the
minimum Investment Amount be less than $25,000, such that if the
maximum Investment Amount is less than $25,000, then the Company shall
be precluded from exercising a Draw Down at such time.
(e) The number of Shares of Common Stock to be
issued on each Settlement Date shall be a number of shares equal to
the sum of the quotients (for each Trading Day within the Draw Down
Pricing Period) of (x) 1/10th of the Investment Amount, and (y) the
Purchase Price on each Trading Day within the Draw Down Pricing
Period, subject to the following adjustments:
(i) if the VWAP on a given Trading Day
is less than the Threshold Price, then that portion of the
Investment Amount to be paid on the immediately pending
Settlement Date shall be reduced by 1/10th of the Investment
17
Amount and such Trading Day shall be withdrawn from the Draw
Down Pricing Period; and
(ii) if during any Trading Day during
the Draw Down Pricing Period trading of the Common Stock on
the Principal Market is suspended for more than 3 hours, in
the aggregate, or if any Trading Day during the Draw Down
Pricing Period is shortened because of a public holiday, then
that portion of the Investment Amount to be paid on the
immediately pending Settlement Date shall be reduced by
1/10th of the Investment Amount for each such suspension and
such Trading Days shall be withdrawn from the Draw Down
Pricing Period; and
(iii) if during any Trading Day during
the Draw Down Pricing Period sales of Draw Down Shares
pursuant to the Registration Statement are suspended by the
Company in accordance with Sections 3(d) or 5(e) of the
Registration Rights Agreement for more than three (3) hours,
in the aggregate, then that portion of the Investment Amount
to be paid on the immediately pending Settlement Date shall
be reduced by 1/10th of the Investment Amount and such
Trading Days shall be withdrawn from the Draw Down Pricing
Period.
(f) The Company must inform the Purchaser by
delivering a draw down notice, in the form of Exhibit D hereto (the
"Draw Down Notice"), via facsimile transmission in accordance with
Section 8.5 as to the amount of the Draw Down (the "Investment
Amount") the Company wishes to exercise. The Draw Down Notice shall
also inform the Purchaser the first day of the Draw Down Pricing
Period (the "Commencement Date"); provided; however, if the
Commencement Date shall be the date on which the Draw Down Notice is
delivered, the Draw Down Notice must delivered to the Purchaser at
least 1 hour before trading commences on such Trading Day date. At no
time shall the Purchaser be required to purchase more than the maximum
Investment Amount for a given Draw Down Pricing Period.
(g) On or before each Settlement Date, the
Shares purchased by the Purchaser shall be delivered to The Depository
Trust Company ("DTC") on the Purchaser's behalf. Upon the Company
electronically delivering whole shares of Common Stock to the
Purchaser or its designees via DTC through its Deposit Withdrawal
Agent Commission ("DWAC") system prior to 1:00 p.m. ET, the Purchaser
shall wire transfer immediately available funds equal to the
Investment Amount, as may be adjusted pursuant to Section 5.1(e), to
the Company's designated account on such day. Upon the Company
electronically delivering whole shares of Common Stock to the
Purchaser or its designee's DTC account via DWAC after 1:00 p.m. ET,
the Purchaser shall wire transfer next day available funds to the
Company's designated account on such day. In the event that either
party elects to use the Escrow Agent, the Shares shall be credited by
the Company to the DTC account designated by the Purchaser via DWAC
upon receipt by the Escrow Agent of payment for the Draw Down Shares
into the Escrow Agent's master escrow account and notice to the
Company thereof, all as further set forth in the Escrow
18
Agreement. The Escrow Agent shall be directed to pay the purchase
price to the Company.
(h) The Company understands that a delay in the
delivery of the Draw Down Shares into the Purchaser's DTC account
beyond 5 Trading Days after the dates set forth herein or in the
Escrow Agreement, as may be applicable, could result in economic loss
to the Purchaser. Notwithstanding anything herein to the contrary, as
compensation to the Purchaser for such loss, the Company agrees to pay
late payments to the Purchaser for late delivery after 5 Trading Days
from such dates in accordance with the following schedule (where "No.
Trading Days Late" is defined as the number of Trading Days beyond 5
Trading Days from the dates set forth herein or in the Escrow
Agreement, as applicable, on which such Draw Down Shares are to be
delivered into the Purchaser's DTC account via the DWAC system):
No. Trading Days Xxxx Xxxx Payment for Each
$5,000 of Draw Down Shares
Being Purchased
1 $50
2 $100
3 $150
4 $200
5 $250
6 $300
7 $350
8 $400
9 $450
10 $500
More than 10 $500 + $100 for each Trading Day
Late beyond 10 Trading Days
The Company shall pay any payments incurred under this
Section 5.1(h) in immediately available funds upon demand. Nothing herein shall
limit the Purchaser's right to pursue injunctive relief and/or actual damages
for the Company's failure to issue and deliver the Draw Down Shares to the
Company.
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ARTICLE 6
TERMINATION
Section 6.1. Term. The term of this Agreement shall
begin on the date hereof and shall end 36 months from the Effective Date or as
otherwise set forth in Section 6.2.
Section 6.2. Other Termination.
(a) This Agreement shall terminate upon one (1)
Trading Day's notice if (i) an event resulting in a Material Adverse
Effect has occurred and has not been cured for a period of ninety (90)
days after giving notice thereof, (ii) the Common Stock is de-listed
from the Principal Market unless such de-listing is in connection with
a subsequent listing on another Principal Market, or (iii) the Company
files for protection from creditors under any applicable law.
(b) The Company may terminate this Agreement
upon 5 Trading Day's notice if the Purchaser shall fail to fund a
properly noticed Draw Down within 5 Trading Days of the end of the
applicable Settlement Period.
Section 6.3. Effect of Termination. In the event of
termination of this Agreement pursuant to Section 6.2 herein, written notice
thereof shall forthwith be given to the other party and the transactions
contemplated by this Agreement shall be terminated without further action by
either party. If this Agreement is terminated as provided in Section 6.1 or 6.2
herein, this Agreement shall become void and of no further force and effect,
except for Sections 8.1, 8.2 and 8.9, and Article 7 herein, which shall survive
the termination of this Agreement. Nothing in this Section 6.3 shall be deemed
to release the Company or the Purchaser from any liability for any breach under
this Agreement, or to impair the rights of the Company or the Purchaser to
compel specific performance by the other party of its obligations under this
Agreement.
ARTICLE 7
INDEMNIFICATION
Section 7.1. General Indemnity.
(a) The Company agrees to indemnify and hold
harmless the Purchaser (and its directors, officers, affiliates,
agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys' fees, charges and
disbursements) ("Damages") incurred by the Purchaser as a result of
any breach of the representations, warranties or covenants made by the
Company herein.
(b) The Purchaser agrees to indemnify and hold
harmless the Company and its directors, officers, affiliates, agents,
successors and assigns from and against any and all Damages) incurred
by the Company as result of any breach of the representations,
warranties or covenants made by the Purchaser herein. Notwithstanding
anything to the contrary herein, the Purchaser shall be liable under
this Section 7.1(b) for only that
20
amount as does not exceed the gross proceeds to the Purchaser as a
result of the sale of the Shares.
(c) An indemnifying party shall not be liable
under this Article 7 to the extent that it is finally judicially
determined that such Damages resulted or arose from the breach by the
Indemnified Party of any representation or warranty of the Indemnified
Party contained in this Agreement or the willful misconduct or gross
negligence of the Indemnified Party.
Section 7.2. Indemnification Procedure. Any party
entitled to indemnification under this Article 7 (an "Indemnified Party") will
give prompt written notice to the indemnifying party of any matters giving rise
to a claim for indemnification, describing the claim in reasonable detail;
provided, that the failure of any party entitled to indemnification hereunder
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under this Article 7 except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any
action, proceeding or claim is brought against an Indemnified Party in respect
of which indemnification is sought hereunder, the indemnifying party shall be
entitled to assume the defense thereof with counsel reasonably satisfactory to
the Indemnified Party. In the event that the indemnifying party advises an
Indemnified Party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, the Indemnified Party of its election to defend,
settle or compromise, at its sole cost and expense, any action, proceeding or
claim (or discontinues its defense at any time after it commences such
defense), then the Indemnified Party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and
until the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the Indemnified Party's costs
(including reasonable attorneys' fees, charges and disbursements) and expenses
arising out of the defense, settlement or compromise of any such action, claim
or proceeding shall be Damages subject to indemnification hereunder. The
Indemnified Party shall cooperate fully with the indemnifying party in
connection with any settlement negotiations or defense of any such action or
claim by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party, which relates to
such action or claim. The indemnifying party shall keep the Indemnified Party
apprised as to the status of the defense or any settlement negotiations with
respect thereto. If the indemnifying party elects to defend any such action or
claim, then the Indemnified Party shall be entitled to participate in such
defense with counsel of its choice at its sole cost and expense. The
indemnifying party shall not be liable for any settlement of any action, claim
or proceeding effected without its prior written consent. Notwithstanding
anything in this Article 7 to the contrary, the indemnifying party shall not,
without the Indemnified Party's prior written consent, settle or compromise any
claim or consent to entry of any judgment in respect thereof which imposes any
future obligation on the Indemnified Party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim. The
indemnification required by this Article 7 shall be made by periodic payments
of the amount thereof during the course of investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred,
within ten (10) Trading Days of written notice thereof to the indemnifying
party so long as the Indemnified Party irrevocably agrees to refund such
moneys, with interest, if it is ultimately determined by a
21
court of competent jurisdiction that such party was not entitled to
indemnification. The indemnity agreements contained herein shall be in addition
to (a) any cause of action or similar rights of the Indemnified Party against
the indemnifying party or others, and (b) any liabilities to which the
indemnifying party may be subject.
ARTICLE 8
MISCELLANEOUS
Section 8.1. Fees and Expenses. Each of the parties to
this Agreement shall pay its own fees and expenses related to the transactions
contemplated by this Agreement; except that, the Company shall pay, on the date
of the first Settlement Date, a non-accountable expense allowance of $35,000
for the Purchaser's, administrative, legal and due diligence costs and expenses
and any other additional fees as set forth in the Escrow Agreement. The Company
shall pay all stamp or other similar taxes and duties levied in connection with
issuance of the Shares pursuant hereto.
Section 8.2. Tax Withholding. Notwithstanding any other
provision in this Agreement, the Company shall have the right to withhold from
any amounts payable by the Company any Taxes required by law to be withheld.
Section 8.3. Specific Enforcement. The Company and the
Purchaser acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity.
Section 8.4. Entire Agreement; Amendment. The
Transaction Documents contain the entire understanding of the parties with
respect to the matters covered in the Transaction Documents. No provision of
this Agreement may be waived or amended other than by a written instrument
signed by the party against whom enforcement of any such amendment or waiver is
sought and no condition to closing any Draw Down in favor of the Purchaser may
be waived by the Purchaser.
Section 8.5. Notices. Any notice, demand, request,
waiver or other communication required or permitted to be given hereunder shall
be in writing and shall be effective (a) upon hand delivery or facsimile at the
address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such communications
shall be as set forth on the signature pages hereto. Any party hereto may from
22
time to time change its address for notices by giving written notice of such
changed address to the other party hereto in accordance herewith.
Section 8.6. Waivers. No waiver by either party 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 other provisions, condition or requirement hereof, nor shall any delay
or omission of any party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
Section 8.7. Headings. The article, section and
subsection headings in this Agreement are for convenience only and shall not
constitute a part of this Agreement for any other purpose and shall not be
deemed to limit or affect any of the provisions hereof.
Section 8.8. Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties and their
successors and assigns. The parties hereto may not amend this Agreement or any
rights or obligations hereunder without the prior written consent of the
Company and the Purchaser. This Agreement may not be assigned by either party
without the prior written consent of the other party.
Section 8.9. No Third Party Beneficiaries.This Agreement
is intended for the benefit of the parties hereto and their respective
permitted successors and assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
Section 8.10. Governing Law. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York, without giving effect to the choice of law provisions. The Company
and the Purchaser agree to exclusively submit themselves to the in personam
jurisdiction of the state and federal courts situated within the Southern
District of the State of New York with regard to any controversy arising out of
or relating to this Agreement. Any party shall have the right to seek
injunctive relief from any court of competent jurisdiction in any case where
such relief is available.
Section 8.11. Counterparts. This Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument and shall become effective when
counterparts have been signed by each party and delivered to the other parties
hereto, it being understood that all parties need not sign the same
counterpart. Execution may be made by delivery by facsimile.
Section 8.12. Publicity. Neither the Company nor the
Purchaser shall issue any press release or otherwise make any public statement
or announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement, without the prior written consent of
the other party. Within 1 Trading Day after the Initial Closing, the Company
may issue a press release or otherwise make a public statement or announcement
with respect to this Agreement or the transactions contemplated hereby or the
existence of this Agreement; provided, however, that prior to issuing any such
press release, making any such
23
public statement or announcement, the Company obtains the prior consent of the
Purchaser, which consent shall not be unreasonably withheld or delayed.
Section 8.13. Severability. The provisions of this
Agreement are severable and, in the event that The Board of Arbitration or any
court or officials of any regulatory agency of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible, so long as such construction does
not materially adversely affect the economic rights of either party hereto.
Section 8.14. Further Assurances. From and after the date
of this Agreement, upon the request of the Purchaser or the Company, each of
the Company and the Purchaser shall execute and deliver such instruments,
documents and other writings as may be reasonably necessary or desirable to
confirm and carry out and to effectuate fully the intent and purposes of this
Agreement.
ARTICLE 9
DEFINITIONS
Section 9.1. Certain Definitions.
(a) "Affiliate" shall mean any person who is an
"affiliate" of the applicable party within the meaning of Rule 405
promulgated under the Securities Act.
(b) "Commencement Date" shall have the meaning
assigned to such term in Section 5.1(f) hereof.
(c) "Commitment Amount" shall have the meaning
assigned to such term in Section 1.1 hereof.
(d) "Commitment Period" shall mean the period
of 24 consecutive months commencing immediately after the Effective
Date.
(e) "Common Stock" shall mean the Company's
common stock, $0.01 par value per share.
(f) "Consolidation Event" shall mean a sale of
all or substantially all of the Company's assets or a merger pursuant
to which the holders of the voting securities of the Company prior to
the merger do not own a majority of the voting securities of the
surviving entity.
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(g) "Disclosure Letter" shall mean the separate
disclosure letter prepared by the Company and delivered concurrently
herewith.
(h) "Draw Down" shall have the meaning assigned
to such term in Section 5.1(a) hereof.
(i) "Draw Down Notice" shall have the meaning
assigned to such term in Section 5.1(f) hereof.
(j) "Draw Down Pricing Period" shall mean a
period of 10 consecutive Trading Days beginning on the date specified
in the Draw Down Notice; provided, however, the Draw Down Pricing
Period shall not begin before the day on which receipt of such notice
is delivered to Purchaser pursuant to Section 8.5 herein.
(k) "Draw Down Shares" shall mean the shares of
Common Stock issuable pursuant to a Draw Down.
(l) "DTC" shall have the meaning assigned to
such term in Section 5.1(g).
(m) "DWAC" shall have the meaning assigned to
such term in Section 5.1(g).
(n) "Effective Date" shall mean the date the
Registration Statement of the Company covering the Shares being
subscribed for hereby is declared effective by the SEC.
(o) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
(p) "GAAP" shall mean the United States
Generally Accepted Accounting Principles as those conventions, rules
and procedures are determined by the Financial Accounting Standards
Board and its predecessor agencies.
(q) "Initial Closing" shall have the meaning
assigned to such term in Section 1.2 hereof.
(r) "Initial Closing Date" shall have the
meaning assigned to such term in Section 1.2 hereof.
(s) "Investment Amount" shall have the meaning
assigned to such term in Section 5.1(f) hereof.
(t) "Material Adverse Effect" shall mean any
adverse effect on the business, operations, properties or financial
condition of the Company that is material and adverse to the Company
and its subsidiaries and affiliates, taken as a whole and/or any
condition, circumstance, or situation that would prohibit or otherwise
materially interfere
25
with the ability of the Company to perform any of its material
obligations under this Agreement or the Registration Rights Agreement.
(u) "Material Agreement" shall mean any written
or oral contract, instrument, agreement, commitment, obligation, plan
or arrangement, a copy of which is required to be filed with the SEC
pursuant to Item 601(b)(10) of Regulation S-K as an exhibit to any of
the SEC Documents.
(v) "Principal Market" shall mean initially the
American Stock Exchange, and shall include the Nasdaq National Market,
the Nasdaq SmallCap Market and the New York Stock Exchange if the
Company becomes listed and trades on such market or exchange after the
date hereof.
(w) "Purchase Price" shall mean, with respect
to Draw Down Shares purchased during each applicable Settlement
Period, 85% of the VWAP on the corresponding date during the Draw Down
Pricing Period.
(x) "Purchaser Material Adverse Effect" shall
mean any adverse effect on the business, operations, prospects or
financial condition of the Purchaser that is material and adverse to
the Purchaser and/or any condition, circumstance or situation that
would prohibit or otherwise materially interfere with the ability of
the Purchaser to perform any of its material obligations under this
Agreement or the Registration Rights Agreement.
(y) "Registration Statement" shall mean the
registration statement under the Securities Act, to be filed with the
Securities and Exchange Commission for the registration of the Shares
pursuant to the Registration Rights Agreement attached hereto as
Exhibit A (the "Registration Rights Agreement).
(z) "SEC" shall mean the Securities and
Exchange Commission.
(aa) "SEC Documents" shall mean all reports,
schedules, forms, statements and other documents required to be filed
by the Company with the SEC pursuant to the requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or
15(c) of the Exchange Act, in each case, together with all exhibits,
supplements, amendments and schedules thereto, and all documents
incorporated by reference therein.
(bb) "Securities Act" shall mean the Securities
Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
(cc) "Settlement" shall mean the delivery of the
Draw Down Shares into the Purchaser's DTC account via DTC's DWAC
system in exchange for payment therefor.
(dd) "Settlement Date" shall have the meaning
assigned to such term in Section 5.1(b).
26
(ee) "Settlement Period" shall have the meaning
assigned to such term in Section 5.1(b).
(ff) "Shares" shall mean, collectively, the Draw
Down Shares and the Warrant Shares.
(gg) "Threshold Price" shall mean the price per
Share designated by the Company as the lowest VWAP during any Draw
Down Pricing Period at which the Company shall sell its Common Stock
in accordance with this Agreement.
(hh) "Trading Cushion" (ii) shall mean the
mandatory 5 Trading Days between Draw Down Pricing Periods.
(jj) "Trading Day" shall mean any day on which
the Principal Market is open for business.
(kk) "Transaction Documents" shall mean this
Agreement, the Registration Rights Agreement and the Escrow Agreement.
(ll) "VWAP" shall mean, for any date, the price
determined by the first of the following clauses that applies: (a) if
the Common Stock is then listed or quoted on a Principal Market, the
daily volume weighted average price of the Common Stock for such date
(or the nearest preceding date) on the primary Principal Market on
which the Common Stock is then listed or quoted as reported by
Bloomberg Financial L.P. (based on a trading day from 9:30 a.m. ET to
4:02 p.m. Eastern Time) using the VAP function; (b) if the Common
Stock is not then listed or quoted on a Principal Market and if prices
for the Common Stock are then quoted on the OTC Bulletin Board, the
volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the OTC Bulletin Board; (c) if the
Common Stock is not then listed or quoted on the OTC Bulletin Board
and if prices for the Common Stock are then reported in the "Pink
Sheets" published by the National Quotation Bureau Incorporated (or a
similar organization or agency succeeding to its functions of
reporting prices), the most recent closing 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 the Purchasers.
(mm) "Warrants" shall mean the warrants issued
to the Purchaser pursuant to Section 4.2(f) hereof.
(nn) "Warrant Shares" shall mean the shares of
Common Stock issuable upon exercise of the Warrants.
[SIGNATURE PAGE FOLLOWS]
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[SIGNATURE PAGE TO COMMON STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officer as of this
31st day of March, 2003.
VIRAGEN, INC.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President and
Chief Financial Officer
Address for Notice:
000 XX 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
(which shall not constitute
notice) Xxxxx X. Xxxxxxxxx, Esq.
Xxxxxx & Xxxx, P.A.
000 X. Xxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxx Xxxxxxxxxx, XX 00000
(000) 000-0000
(000) 000-0000 (Direct)
(000) 000-0000 (Fax)
xxxxxxxxxx@xxxxxx.xxx
Secretary (Xxxxxxx) xxxxxx@xxxxxx.xxx
PURCHASER:
Address: TALISMAN MANAGEMENT LIMITED
XX Xxx 000
00-00 Xxxxx Xxxx, Xxxxxxx Xx: /s/ Xxxxxx X. Xxxxx
Isle of Man XX00 0XX ----------------------------------------
Attn: Xxxxxx Xxxxx or Name: Xxxxxx X. Xxxxx
Xxxxxxxx Xxxx Title: Director
Fax: 00 0000 000000
28
