Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is entered into and
dated as of August 16, 2006, among Millennium Biotechnologies Group, Inc., a
Delaware corporation (the "Company"), and each of the purchasers identified on
the signature pages hereto or which may become a party hereto by execution of a
supplement to this Agreement in accordance with the terms of this Agreement
(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"), and Rule 506 promulgated thereunder, 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 pursuant
to the terms set forth herein.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser,
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 set forth in this Section 1.1:
"Actual Minimum" means, 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 or conversion in full of all Warrants, Additional Investment Right
Warrants, Additional Shares and Shares, ignoring any limits on the number of
shares of Common Stock that may be owned by a Purchaser at any one time and (i)
assuming that (a) any previously unconverted Shares and Additional Shares are
held until the fifth anniversary of the issuance thereof and all dividends
thereon are paid in shares of Common Stock, and (b) the Closing Price at all
times on and after the date of determination equals 100% of the actual Closing
Price on the Trading Day immediately prior to the date of determination, and
(ii) giving effect to the Conversion Price (as defined in the Certificate of
Designations) as in effect on such date, without regard to potential changes in
the Closing Price that may occur thereafter.
"Additional Investment Rights" means, collectively, the Additional
Investment Rights issued and sold under this Agreement, in the form of Exhibit
A.
"Additional Investment Right Warrants" has the meaning set forth in the
Additional Investment Rights.
"Additional Shares" means the shares of Series E Senior Convertible
Preferred Stock, par value $1.00 per share, which are being issued to the
Purchasers upon exercise of the Additional Investment Rights.
"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.
"Aisling Closing" means the closing of the transactions contemplated by
the Aisling Letter of Intent.
"Aisling Letter of Intent" means the letter of intent dated April 15, 2006
among Aisling Capital II LLP, the Company and Millennium Biotechnologies Inc.
for the sale of assets in exchange for shares of common stock of a newly formed
company.
"Bankruptcy Event" means any of the following events: (a) the Company or
any Subsidiary commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Subsidiary thereof; (b) there is commenced against the Company or
any Subsidiary any such case or proceeding that is not dismissed within 60 days
after commencement; (c) the Company or any Subsidiary is adjudicated insolvent
or bankrupt or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company or any Subsidiary suffers any appointment
of any custodian or the like for it or any substantial part of its property that
is not discharged or stayed within 60 days; (e) the Company or any Subsidiary
makes a general assignment for the benefit of creditors; (f) the Company or any
Subsidiary fails to pay, or states that it is unable to pay or is unable to pay,
its debts generally as they become due; (g) the Company or any Subsidiary calls
a meeting of its creditors for the purpose of arranging a composition,
adjustment or restructuring of its debts; or (h) the Company or any Subsidiary,
by any act or failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other action for
the purpose of effecting any of the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
"Certificate of Designations" means each of the Series E Certificate of
Designations and Series F Certificate of Designations.
"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 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; (iii) a recapitalization, reorganization or other transaction involving
the Company or any Subsidiary that constitutes or results in a transfer of more
than one-third of the voting rights or equity interests in the Company; (iv)
consummation of a "Rule 13e-3 transaction" as defined in Rule 13e-3 under the
Exchange Act with respect to the Company, or (v) 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. Notwithstanding the foregoing, neither
(x) any asset sale consummated substantially in accordance with the Aisling
Letter of Intent nor (y) the transaction contemplated by this Agreement shall
not be a Change of Control.
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"Charter Amendment" shall mean an amendment of the Certificate of
Incorporation of the Company, duly approved by the stockholders of the Company,
which amendment increases the authorized number of shares of common stock of the
Company, $.001 par value, to 400,000,000 shares which amendment becomes
effective within 60 days after the Closing.
"Closing" means the closing of the purchase and sale of the Securities
pursuant to Section 2.2.
"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 bid 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, the cost of which shall be paid by the Company.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value $0.001 per
share.
"Common Stock Equivalents" means, collectively, Options and Convertible
Securities.
"Company Counsel" means Xxxxxxxxx Xxxxx Xxxx & Xxxxx PLLC, counsel to the
Company.
"Convertible Securities" means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Stock.
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"Effective Date" means the date that the Underlying Shares Registration
Statement is first declared effective by the Commission.
"Eligible Market" means any of the New York Stock Exchange, the American
Stock Exchange, the NASDAQ National Market, the NASDAQ Small Cap Market or the
OTC Bulletin Board.
"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, (B) the issuance of Common
Stock 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 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 in respect of the issuance of Common
Stock upon exercise of any such options, or (C) the issuance of Common Stock
upon exercise of the Warrants and Additional Warrants, the conversion of the
Shares and Additional Shares and the payment of dividends on the Shares and
Additional Shares in the form of Common Stock.
"Event Equity Value" means 115% of the arithmetic average of the Closing
Prices for the five Trading Days preceding either (a) the date of delivery of
the notice requiring payment of the Event Equity Value, or (b) the date on which
such required payment (together with any other payments, expenses and liquidated
damages then due and payable under the Transaction Documents) is paid in full,
whichever is greater.
"GAAP" means United States generally accepted accounting principles, as
recognized by the American Institute of Certified Public Accountants or the
Financial Accounting Standards Board, consistently applied and maintained on a
consistent basis for the Company and its Subsidiaries throughout the period
indicated and consistent with the prior financial practice of the Company;
provided, however, that any accounting principle or practice required to be
changed by the American Institute of Certified Public Accountants or the
Financial Accounting Standards Board (or other appropriate board or committee of
either) in order to continue as a generally accepted accounting principle or
practice may be so changed.
"Lead Investor" means Iroquois Master Fund, Ltd., or its successor in
interest.
"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
of legal action and reasonable attorneys' fees.
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"Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities (including all Additional
Investment Right Warrants that can be issued under the Transaction Documents).
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or any court or other federal, state, local or other governmental authority or
other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Purchaser Counsel" means Malhotra & Associates LLP, counsel to Iroquois
Master Fund, Ltd.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated on or around the Closing Date, among the Company and the Purchasers, in
the form of Exhibit C.
"Required Effectiveness Date" means the date on which an Underlying Shares
Registration Statement is required to become effective pursuant to the
Registration Rights Agreement.
"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, the Additional Shares, the Warrants, the
Additional Investment Rights, the Additional Investment Right Warrants and the
Underlying Shares issued or issuable (as applicable) to the applicable Purchaser
pursuant to the Transaction Documents.
"Senior Debt" means any indebtedness of the Company from the date hereof
that is senior to any indebtedness set forth on Schedule 3.1(ee) in right of
payment, whether with respect to interest or upon liquidation or dissolution, or
otherwise.
"Series E Certificate of Designations" means a certificate of designations
of the Series E Senior Preferred Stock, in the form of Exhibit B-1.
"Series E Senior Preferred Stock" means the Series E Senior Convertible
Preferred Stock, par value $1.00 per share, of the Company, which is convertible
into shares of Common Stock.
"Series F Certificate of Designations" means a certificate of designations
of the Series F Preferred Stock, in the form of Exhibit B-2.
"Series F Preferred Stock" means the Series F Convertible Preferred Stock,
par value $1.00 per share, of the Company, which is convertible into share of
Common Stock.
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"Shares" means an aggregate of up to 62,000 shares of Series E Senior
Preferred Stock, which are being purchased by the Purchasers pursuant to this
Agreement and an aggregate of 100 shares of Series F Preferred Stock, which are
be issued to the Lead Investor.
"Subsidiary" means any subsidiary of the Company that is required to be
listed on Schedule 3.1(a).
"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 trading ceases to
occur on an Eligible Market, any Business Day.
"Trading Market" means OTC Bulletin Board 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.
"Transaction Documents" means this Agreement, the Registration Rights
Agreement, the Certificate of Designations, the Shares, the Additional Shares,
the Warrants, the Additional Investment Rights, the Additional Investment Right
Warrants, the Supplemental Purchase Agreement 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.
"Triggering Event" means any of the following events: (a) immediately
prior to any Bankruptcy Event; (b) the Common Stock is not listed or quoted, or
is suspended from trading, on an Eligible Market for a period of five Trading
Days (which need not be consecutive Trading Days); (c) the Company fails for any
reason to deliver a certificate evidencing any Securities to a Purchaser within
five Trading Days after delivery of such certificate is required pursuant to any
Transaction Document or the exercise or conversion rights of the Purchasers
pursuant to the Transaction Documents are otherwise suspended for any reason,
provided, such failure shall only be deemed a Triggering Event as only to such
Purchaser to whom a certificate is not delivered within such five Trading Days
period; (d) at any time after 60 days of the Closing, the Company fails to have
available a sufficient number of authorized but unissued and otherwise
unreserved shares of Common Stock available to issue Underlying Shares upon any
exercise of the Warrants or any conversion of convertible Securities; (e) at any
time after the Required Effectiveness Date, any Common Stock issuable pursuant
to the Transaction Documents is not listed on an Eligible Market for a period of
three Trading Days (which need not be consecutive Trading Days); (f) the Company
effects or publicly announces its intention to effect any exchange,
recapitalization or other transaction that effectively requires or rewards
physical delivery of certificates evidencing the Common Stock; (g) any other
Event (as defined in the Registration Rights Agreement) occurs and remains
uncured for 60 days; (h) the Company fails to make any cash payment required
under the Transaction Documents and such failure is not cured within five days
after notice of such default is first given to the Company by a Purchaser; (i)
the Company issues any equity, debt or other securities of the Company which are
senior to or pari passu with the Series E Senior Preferred Stock in right of
payment, or with respect to dividends, liquidations or dissolution, without the
consent of the Lead Investor; (j) the Company fails to obtain shareholder
approval for the Charter Amendment within 60 days following the Closing; or (k)
the Company breaches any representation, warranty or covenant or defaults in the
timely performance of any other obligation or covenant under the Transaction
Documents (other than the occurrence of an Event covered under clause (g) above)
and such breach or default continues uncured for a period of 20 days after the
date on which notice of such breach or default is first given to the Company by
a Purchaser (it being understood that no prior notice need be given in the case
of a breach or default that cannot reasonably be cured within 20 days).
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"Underlying Shares" means the shares of Common Stock issuable upon
conversion of the Shares and Additional Shares and upon exercise of the Warrants
and Additional Investment Right Warrants and in satisfaction of any other
obligation of the Company to issue shares of Common Stock pursuant to the
Transaction Documents.
"Underlying Shares Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement and
covering the resale of the Underlying Shares by the Purchasers.
"Warrant" means a Common Stock purchase warrant, in the form of Exhibit D.
ARTICLE II
PURCHASE AND SALE
2.1 Closing.
(a) Subject to the terms and conditions set forth in this Agreement
and subject to any Supplemental Purchase 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 the number of Units set forth opposite
such Purchaser's name of Schedule A hereto at a purchase price of $200.00 per
Unit. Each "Unit" shall consist of (a) one share of Series E Senior Preferred
Stock; (b) Warrants to purchase 800 shares of Common Stock; and (c) an
Additional Investment Right to acquire (i) one share of Series E Senior
Preferred Stock and (ii) an Additional Investment Right Warrant to acquire 800
shares of Common Stock. The Closing shall take place at the offices of Purchaser
Counsel or at such other location or time as the parties may agree.
(b) Subject to the terms and conditions set forth in this Agreement,
at the Closing, the Company shall issue and sell to the Lead Investor, and the
Lead Investor shall purchase from the Company 100 shares of the Series F
Preferred Stock at a purchase price of $1.00 per share.
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 evidencing that number of
Series E Senior Preferred Stock set forth opposite such Purchaser's name
on Schedule A hereto under the heading "Series E Preferred Stock",
registered in the name of such Purchaser;
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(ii) with respect to the Lead Investor, one or more stock
certificates evidencing all of the Series F Preferred Stock, registered in
the name of the Lead Investor;
(iii) an Additional Investment Right, registered in the name
of such Purchaser, pursuant to which such Purchaser shall have the right
to (x) acquire Additional Shares in the amount set forth opposite such
Purchaser's name on Schedule A hereto under the heading "Additional
Shares", and (y) acquire Additional Investment Right Warrants which shall
be exercisable into that number of shares of Common Stock set forth
opposite such Purchaser's name on Schedule A hereto under the heading
"Additional Investment Right-Warrant Shares";
(iv) a Warrant, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire that
number of shares of Common Stock set forth opposite such Purchaser's name
on Schedule A hereto under the heading "Warrant Shares";
(v) evidence that each Certificate of Designations has been
filed and become effective on or prior to the Closing Date with the
Secretary of State of Delaware, in form and substance mutually agreed to
by the parties;
(vi) the legal opinion of Company Counsel, in the form of
Exhibit F, executed by such counsel and delivered to the Purchasers;
(vii) the Registration Rights Agreement duly executed by the
Company;
(viii) duly executed Transfer Agent Instructions acknowledged
by the Company's transfer agent;
(ix) evidence that the Aisling Closing has occurred and copies
of the executed transaction documents; and
(x) any other documents reasonably requested by a Purchaser or
counsel to any Purchaser in connection with the Closing.
(b) At the Closing, each Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) (A) the purchase price set forth opposite such Purchaser's
name on Schedule A hereto under the heading "Purchase Price", in United
States dollars and in immediately available funds, by wire transfer to
Olympus Securities, LLC, as Escrow Agent pursuant to the Escrow Agreement
attached hereto as Exhibit H, which funds are to be distributed in
accordance with such Escrow Agreement, and (B) in the case of a Purchaser
made a party hereto by virtue of a Supplemental Purchase Agreement in
accordance with Section 4.18 hereof, evidence of satisfaction of existing
indebtedness of the Company in an amount equal to such Purchaser's
purchase price as may be reasonably requested by the Company; and
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(ii) the Registration Rights Agreement duly executed by such
Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to each of the Purchasers:
(a) Subsidiaries. The Company does not directly or indirectly
control or own any interest in any other corporation, partnership, joint venture
or other business association or entity (a "Subsidiary"), 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 incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Except as set forth in Schedule 3.1(b) 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 conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, could not, individually or in the aggregate, (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 Transaction Document; provided, in no event shall the entry into
definitive agreements in accordance with or the consummation of the transactions
contemplated by the Aisling Letter of Intent be deemed to constitute a Material
Adverse Effect (any of (i), (ii) or (iii), a "Material Adverse Effect").
(c) Authorization; Enforcement. Subject to the Charter Amendment and
the approval of the transactions contemplated in the Aisling Letter of Intent,
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. Subject to
the approval of the transactions contemplated in the Aisling Letter of Intent
and the election of members of the Board of Directors as contemplated in Section
4.11 hereof, the execution and delivery of each of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated
hereunder and thereunder 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 stockholders. Each Transaction Document
has been (or upon delivery will have been) duly executed by the Company and when
delivered in accordance with the terms hereof, will constitute, the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.
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(d) No Conflicts. Except as set forth in Schedule 3.1(d), 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) assuming the accuracy of
Purchasers' representations and warranties and compliance by the Purchasers' of
their respective covenants as set forth in this Agreement, 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. Subject to the Aisling Closing, the
Securities have been duly authorized. The Shares, Additional Investment Rights
and Warrants, when issued in accordance with the terms of this Agreement, and
the Underlying Shares, Additional Shares or other securities issuable upon
conversion of the Shares and Additional Shares and upon exercise of the
Warrants, Additional Investment Rights and Additional Investment Right Warrants,
when so issued in accordance with the terms of the Shares, Additional Shares,
Additional Investment Rights, Additional Investment Right Warrants or the
Warrants, as the case may be, will be, validly issued. The Shares, Additional
Investment Rights and Warrants, when issued in accordance with this Agreement,
and the Underlying Shares, Additional Shares or other securities issuable upon
conversion of the Shares and Additional Shares and upon exercise of the
Warrants, Additional Investment Rights and Additional Investment Right Warrants,
when so issued in accordance with the terms of the Shares, Additional Shares,
Additional Investment Rights, Additional Investment Right Warrants or the
Warrants, as the case may be, will be, fully paid and nonassessable and free of
preemptive or similar rights. The Shares, Additional Investment Rights and
Warrants, when issued in accordance with the terms of this Agreement, and the
Underlying Shares, Additional Shares or other securities issuable upon
conversion of the Shares and Additional Shares and upon exercise of the
Warrants, Additional Investment Rights and Additional Investment Right Warrants,
when so issued in accordance with the terms of the Shares, Additional Shares,
Additional Investment Rights, Additional Investment Right Warrants or the
Warrants, as the case may be, will be, issued in compliance with applicable
securities laws, rules and regulations. Subject to the Charter Amendment, the
Company has reserved from its duly authorized capital stock the maximum number
of shares of Common Stock to be issued to the applicable Purchasers upon
conversion or exercise of the Securities or issuable pursuant to the other
Transaction Documents.
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(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. No securities of the Company are entitled
to preemptive or similar rights, and no Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by the Transaction Documents. Except as a result
of the purchase and sale of the Securities and except as disclosed in Schedule
3.1(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 exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
Except as set forth in Schedule 3.1(f), the issue and sale of the Securities
will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the 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 Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively referred
to herein as the "SEC Reports" and, together with the Schedules to this
Agreement, the "Disclosure Materials") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with 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.
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(h) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed on
Schedule 3.1(h) and 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 material liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has not
materially 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 stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock, and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any
request for confidential treatment of information.
(i) Absence of Litigation. Except as set forth in Schedule 3.1(i),
there is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) (collectively,
an "Action") which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, if there were an unfavorable decision, individually or in the aggregate,
have or result in a Material Adverse Effect. Within the past five years, neither
the Company nor any Subsidiary, nor any director or officer thereof, is or has
been the subject of any Action involving a claim of violation of or liability
under federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or any
current or former director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.
(j) Compliance. Except as set forth in Schedule 3.1(j), neither the
Company nor any Subsidiary (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or result in a Material Adverse Effect.
12
(k) Title to Assets. Subject to the Aisling Letter of Intent, 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 as described in Schedule 3.1(l), 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. The
Purchasers shall have no obligation with respect to any fees or with respect to
any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement. The Company shall indemnify and hold harmless the Purchasers,
their employees, officers, directors, agents, and partners, and their respective
Affiliates, from and against all claims, losses, damages, costs (including the
costs of preparation and attorney's fees) and expenses suffered in respect of
any such claimed or existing fees, as such fees and expenses are incurred.
(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 stockholder approval provisions under the rules and regulations of any
Trading Market. Assuming the accuracy of the Purchasers representations and
warranties set forth in Section 3.2, no registration under the Securities Act is
required for the offer and sale of the Securities by the Company to the
Purchasers as contemplated hereby. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the Trading Market
and with the exception of the Charter Amendment and the transactions contemplate
in the Aisling Letter of Intent and the election of the Board of Directors as
contemplated in Section 4.11 hereof, no shareholder approval is required for the
Company to fulfill its obligations under the Transaction Documents. 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.
13
(n) Listing and Maintenance Requirements. The Company has not, in
the two years preceding the date hereof, received notice (written or oral) from
any Eligible 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(o), 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
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation with the exception of Section 203 of the Delaware General
Corporation Law, that is or could become applicable to 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 the Company's issuance of the Securities and the Purchasers'
ownership of the Securities.
(q) Disclosure. The Company confirms that following the issuance of
the press release required under Section 4.7 herein, that none of the Purchasers
or their agents or counsel will possess any information that constitutes or
might constitute material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure 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 and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. 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,
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 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.
(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 to the Company in connection with this
Agreement and the transactions contemplated hereby is merely incidental to such
Purchaser's 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 Company and its
representatives. The Company further acknowledges that no Purchaser has made any
promises or commitments other than as set forth in this Agreement, including any
promises or commitments for any additional investment by any such Purchaser in
the Company.
14
(s) Patents and Trademarks. Subject to the Aisling Letter of Intent,
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. Except as set forth in Schedule 3.1(t), 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. Subject to the Aisling Closing, 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.
(v) Transactions With Affiliates and Employees. Except as set forth
in SEC Reports filed at least ten days prior to the date hereof or Schedule
3.1(v), 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.
15
(w) Form SB-2 Eligibility. The Company is eligible to register the
resale of its Common Stock for resale by the Purchasers under Form SB-2
promulgated under the Securities Act.
(x) Solvency. Based on the financial condition of the Company as of
the Closing Date, and giving effect to the transactions contemplated herein, (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) Filings, Consents and Approvals. With the exception of the
Charter Amendment and the transactions contemplated in the Aisling Letter of
Intent, the Company is not required to obtain any consent, waiver, authorization
or order of, give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company
of the Transaction Documents, other than the filing of the Certificates of
Designation with the Secretary of State of the State of Delaware and the filing
with the Commission of the Registration Statement, and other filings required
pursuant to the Securities Act and or the Exchange Act, the application(s) to
each Trading Market for the listing of the Underlying Shares for trading thereon
in the time and manner required thereby, and applicable Blue Sky filings
(collectively, the "Required Approvals").
(aa) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(bb) No Violation. The issuance and sale of the Securities
contemplated hereby does not conflict with or violate any rules or regulations
of the Trading Market.
16
(cc) 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.
(dd) Seniority. The Series E Senior Preferred Stock are senior to
any of the Company's Series A Preferred Stock, Series B Convertible Preferred
Stock, Series C Cumulative Preferred Stock, Series D Preferred Stock, Series F
Preferred Stock and to all other equity interests in the Company in right of
payment, whether with respect to dividend or upon liquidation or dissolution, or
otherwise.
(ee) Indebtedness. Except as set forth on Schedule 3.1(ee) and trade
payables arising in the ordinary course of business not more than sixty (60)
days past due, the Company does not have any indebtedness.
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:
(a) Organization; Authority. If Purchaser is an entity, such
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization. Such Purchaser has the
requisite power and authority (corporate, limited liability company, partnership
or otherwise) to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution, delivery and performance by such Purchaser of
this Agreement have been duly authorized by all necessary action on the part of
such Purchaser. This Agreement has been duly executed by such Purchaser and,
when delivered by such Purchaser in accordance with terms hereof, will
constitutes the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms.
(b) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Such Purchaser is not a
registered broker-dealer under Section 15 of the Exchange 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.
(d) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
17
(e) Investment Intent. Such Purchaser is acquiring the Securities
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof, without prejudice, however, to such Purchaser's
right, subject to the provisions of this Agreement and the Registration Rights
Agreement, at all times to sell or otherwise dispose of all or any part of such
Securities pursuant to an effective registration statement under the Securities
Act or under an exemption from such registration and in compliance with
applicable federal and state securities laws. Nothing contained herein shall be
deemed a representation or warranty by such Purchaser to hold Securities for any
period of time. Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business.
(f) Information on the Company. Each Purchaser has been furnished
with or has had access to the Disclosure Materials. In addition, the Purchaser
has received in writing from the Company such other information concerning its
operations, financial condition and other matters as the Purchaser has requested
in writing and considered all factors the Purchaser deems material in deciding
on the advisability of investing in the Securities.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The 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) promulgated under the
Securities Act. As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of
a Purchaser under this Agreement.
(b) The Purchasers agree to the imprinting, except as otherwise
permitted by Section 4.1(c), the following legend on any certificate evidencing
Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [EXERCISABLE] [CONVERTIBLE]] HAVE [NOT] BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE
FOREGOING, THESE SECURITIES AND THE SECURITIES ISSUABLE UPON [EXERCISE]
[CONVERSION] OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
SECURITIES.
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(c) Certificates evidencing Securities shall not be required to
contain the legend set forth in Section 4.1(b) 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, 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 Section 4.1(b). 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.
(d) 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.
(e) In addition to any other rights available to a Purchaser, if the
Company fails to deliver to such Purchaser a certificate representing Common
Stock by the third Trading Day after the date on which delivery of such
certificate is required by any Transaction Document, and if after such third
Trading Day such Purchaser purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by such
Purchaser of the shares that the Purchaser anticipated receiving from the
Company (a "Buy-In"), then, in the Purchaser's sole discretion, the Company
shall, within three Trading Days after such Purchaser's request either (i) pay
cash to such Purchaser in an amount equal to such Purchaser'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 such Purchaser a certificate or
certificates representing such Common Stock and pay cash to such Purchaser 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.
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4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities will result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Securities
pursuant to the Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction, regardless of
the effect of any such dilution or any claim that the Company may have against
any Purchaser.
4.3 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.
4.4 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the 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.
4.5 Reservation and Listing of Securities.
(a) Subject to the Charter Amendment, 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.
20
(b) The Company shall (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 shares of Common Stock issued or
issuable under the Transaction Documents, (ii) take all steps necessary to cause
such shares of Common Stock to be approved for listing on each Trading Market as
soon as possible thereafter, (iii) provide to the Purchasers evidence of such
listing, and (iv) maintain the listing of such Common Stock on each such Trading
Market or another Eligible Market.
(c) In the case of a breach by the Company of Section 4.5(a), in
addition to the other remedies available to the Purchasers, the Purchasers shall
have the right to require the Company to either: (i) use its best efforts to
obtain the required shareholder approval necessary to permit the issuance of
such shares of Common Stock as soon as is possible, but in any event not later
than the 60th day after such notice, or (ii) within five Trading Days after
delivery of a written notice, pay cash to such Purchaser, an amount equal to the
number of shares of Common Stock not issuable by the Company times 115% of the
average Closing Price over the five Trading Days immediately prior to the date
of such notice or, if greater, the five Trading Days immediately prior to the
date of payment (the "Cash Amount") which cash amount shall be in satisfaction
of the Company's obligation to deliver such shares. If the exercising or
converting Purchaser elects the first option under the preceding sentence and
the Company fails to obtain the required shareholder approval on or prior to the
60th day after such notice, then within three Trading Days after such 60th day,
the Company shall pay the Cash Amount to such Purchaser, as liquidated damages
and not as penalty.
4.6 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 exercisable or exchangeable for
Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent Placement").
Notwithstanding the foregoing, this Section 4.6(a) shall not apply to (i) a
Subsequent Placement pursuant to this Agreement, including, without limitation,
pursuant to a Supplemental Purchase Agreement in accordance with the terms of
this Agreement; (ii) the issuance of Excluded Stock; (iii) a Subsequent
Placement in an amount not to exceed $750,000 for the purpose of funding the
working capital needs of the Company, provided, (A) the Effective Price (as
defined in the Certificate of Designations) of any such Subsequent Placement is
not less than $0.25, (B) the terms are in substantially the same form as the
convertible notes of the Company which are outstanding as of the date of this
Agreement, (C) such Subsequent Placement is consummated within the later of 15
days from the date of this Agreement or the Aisling Closing, and (D) at least
50% of such Subsequent Placement is converted into the Units in accordance with
Section 4.18 (it being understood by the parties that the remaining balance of
such Subsequent Placement is to be satisfied from the proceeds of the Closing);
(iv) Subsequent Placements as set forth in Schedule 3.1(l); (v) Subsequent
Placements set forth in Schedule 3.1(f); and (vi) a Subsequent Placement
consented to by the Lead Investor.
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(b) From the Effective Date until the later of (1) the date on which
no Series E Senior Preferred Stock or Additional Share remains outstanding and
(2) the two year anniversary of the Effective Date, the Company will not,
directly or indirectly, effect any Subsequent Placement unless the Company shall
have first complied with this Section 4.6(b).
(i) The Company shall deliver to each Purchaser an irrevocable
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
amount of the Series E Senior Preferred Stock 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 5 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 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 5 Trading Days from the
expiration of the period set forth in Section 4.6(b)(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 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.
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(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 4.6(b)(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 4.6(b)(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 4.6(b)(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 4.6(b)(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 4.6(b)(iv) above if the
Purchasers have so elected, upon the terms and conditions specified in the
Offer. Notwithstanding anything to the contrary contained in this
Agreement, if the Company does not consummate the closing of the issuance,
sale or exchange of all or less than all of the Refused Securities within
5 Trading Days of the expiration of the Offer Period, 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
4.6(b)(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 Sections 4.6(b)(iii) or 4.6(b)(v) above
may not be issued, sold or exchanged until they are again offered to the
Purchasers under the procedures specified in this Agreement.
(c) The restrictions contained in Section 4.6(b) shall not apply to
the issuance of Excluded Stock, the Additional Shares or the Additional
Investment Right Warrants or a Subsequent Placement in connection with a bona
fide acquisition of substantially all of the assets or equity interest of
another Person, by way of merger, consolidation, recapitalization,
reorganization or otherwise, the primary purpose of which is not to raise
capital.
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4.7 Securities Laws Disclosure; Publicity. On or before 8:30 a.m., New
York City time on August 17, 2006, the Company shall issue a press release
acceptable to the Purchasers disclosing all material terms of the transactions
contemplated hereby. On the Closing Date or the first Business Day thereafter,
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 the Additional Investment Rights and the form of
Warrants, in the form required by the Exchange Act. Thereafter, the Company
shall timely file any filings and notices required by the Commission or
applicable law with respect to the transactions contemplated hereby and, if any
disclosure therein differs materially from that which is contained in the 8-K
Filing, provide copies thereof to the Purchasers promptly after filing. The
Company shall, at least two Trading Days prior to the filing or dissemination of
any disclosure required by this paragraph, 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 require the Company
to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material nonpublic information. 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 prior to the Closing Date
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 were made, not misleading.
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4.8 Conversion and Exercise Procedures. The form of Exercise Notice
included in the Warrants and Additional Investment Rights Warrants and the form
of Conversion Notice included in the Certificate of Designations set forth the
totality of the procedures required by the Purchasers in order to exercise the
Warrants, Additional Investment Right Warrants or convert the Shares and
Additional Shares, as applicable. No additional legal opinion or other
information or instructions shall be necessary to enable the Purchasers to
exercise their Warrants or Additional Investment Right Warrants or convert the
Shares and Additional Shares. The Company shall honor exercises of the Warrants
or Additional Investment Right Warrants and conversions of the Shares and
Additional Shares and shall deliver Underlying Shares in accordance with the
terms, conditions and time periods set forth in the Transaction Documents.
4.9 Use of Proceeds. Except as set forth on Schedule 4.9, the Company
shall use the net proceeds from the sale of the Securities hereunder for working
capital purposes and not 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 prior practices), to redeem any Company
equity or equity-equivalent securities or to settle any outstanding litigation.
4.10 Reimbursement. In consideration of each Purchaser's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Purchaser and each other holder of the Securities and all of their stockholders,
partners, members, officers, directors, employees and direct or indirect
investors and any of the foregoing Persons' agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims and Losses
in connection therewith (irrespective of whether any such Indemnitee is a party
to the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach by the Company of any
covenant, agreement or obligation contained in the Transaction Documents or any
other certificate, instrument or document contemplated hereby or thereby or (c)
any cause of action, suit or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf
of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, or (iii) the
status of such Purchaser or holder of the Securities as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Except as otherwise set forth herein, the
mechanics and procedures with respect to the rights and obligations under this
Section 4.10 shall be the same as those set forth in Section 5(c) of the
Registration Rights Agreement.
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4.11 Election of Directors. For so long as the Series F Preferred Stock is
outstanding, the holders of the Series F Preferred Stock shall have the right to
elect 3 members of the 5 member Board of Directors of the Company in accordance
with the terms of the Series F Certificate of Designations. Such 3 members of
the Board of Directors elected by the Series F Preferred Stock are referred to
herein as the "Series F Directors".
4.12 Default Interest. If the Company fails to make any cash payment
required by any Transaction Document in full when due, then the Company shall
pay interest thereon at a rate of 18% per annum (or such lesser maximum rate
that is permitted to be paid under applicable law) from the date such payment
was due until such amount, plus all such interest thereon, is paid in full.
4.13 Rights of Shareholders. So long as a Purchaser holds any Securities,
each time the Company delivers a notice or other communication to holders of the
Common Stock it will contemporaneously deliver a copy of such notice or
communication to such Purchaser. The Company acknowledges and agrees that, for
so long as a Purchaser holds any Securities (whether or not such Purchaser holds
shares of Common Stock), (a) the officers and directors of the Company will owe
the same duties (fiduciary and otherwise) to such Purchaser as are owed to a
holder of Common Stock and (b) such Purchaser will be entitled to all rights and
remedies with respect to such duties as are available to a holder of Common
Stock under the corporate law of the Company's jurisdiction of incorporation.
4.14 MFN Provision. With the exception of the Excluded Stock, the
Additional Shares and the Additional Investment Right Warrants, if any time
following the Closing Date, the Company or any Subsidiary of the Company offers
to issue or issues to any Person any security of the Company or any Subsidiary
of the Company, then the Company shall offer to each Purchaser the right to
exchange all or a portion of the Series E Senior Preferred Stock then held by
such Purchaser valued at the then Stated Value (as defined in the Certificate of
Designations), plus accumulated and unpaid dividends, of such Series E Senior
Preferred Stock for such security. Such offer shall made at the same time and in
the same manner as if such offer is being made to any other potential purchaser
of such security. Each Purchaser shall have 5 Trading Days to review the offer
and determine whether it wants to exchange all or any portion of the Series E
Senior Preferred Stock.
4.15 Shareholders Rights Plan. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Underlying Shares under the Transaction Documents or under any other agreement
between the Company and the Purchasers.
4.16 Seniority. For so long as the Series E Senior Preferred Stock are
outstanding, the Company will not, and will not permit any Subsidiary to,
without the written consent or affirmative vote of the Lead Investor, directly
or indirectly, (x) issue any debt, equity or other securities of the Company or
its Subsidaries that are senior to or pari passu with the Series E Senior
Preferred Stock in right of payment, whether with respect to dividend or upon
liquidation or dissolution, or otherwise; (y) incur any indebtedness of the
Company that is or will be senior to or pari passu with the Series E Senior
Preferred Stock in right of payment, whether with respect to dividend or upon
liquidation or dissolution, or otherwise, except for trade payables arising in
the ordinary course of business and not more than 60 days past due; and (z)
enter into, create, incur, assume or suffer to exist any indebtedness for
borrowed money of any kind, on or with respect to any of its property or assets
now owned or hereafter acquired or any interest therein or any income or profits
therefrom, that is senior to or pari passu with the Series E Senior Preferred
Stock in right of payment, whether with respect to dividend or upon liquidation
or dissolution, or otherwise.
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4.17 Rule 10b5-1Plans; Reverse Stock Splits 4.18. For so long as any
Series E Senior Preferred Stock or Warrants remain outstanding, the Company
shall use its best efforts to not, directly or indirectly, permit any officer or
director of the Company or any of its Subsidiaries to sell any Common Stock
pursuant to a contract, instruction or plan in accordance with Rule 10b5-1 of
the 1934 Act. For so long as any Preferred Stock or Warrants remain outstanding,
the Company shall not effect a reverse stock split of one or more classes of the
Company's Common Stock without the consent of the Lead Investor.
4.18 Conversion of Existing Debt. The Company shall use its best efforts
convert not less than $2,926,000 of its indebtedness into Units at a purchase
price equal to $200.00 per Unit. The Company shall not issue any fractional
Units by reason of this Section 4.18; and instead, thereof, the Company shall be
permitted to repay in cash a portion of such debt as may be necessary to avoid
the issuance of fractional Units. Each such debtholder who elects to convert
such debt into Units shall execute a Supplemental Purchase Agreement in the form
attached hereto as Exhibit G. Upon execution of the Supplemental Purchase
Agreement, such debtholder shall be deemed to be a Purchaser under this
Agreement and the Securities to be issued to such debtholder in conversion of
such debt and such debtholder, as a Purchaser, subject to all of the terms and
conditions of the Transaction Documents.
4.19 Lead Investor Provisions.
(a) Protective Provisions. So long as the Lead Investor is the
holder of at least 3,000 shares of the Series E Senior Preferred Stock, the
Company shall not, without the written consent of the Lead Investor:
(i) authorize, designate or issue any class of stock or any
debt of the Company ranking senior to or pari passu with the Series E
Senior Preferred Stock as to the payment of dividends and as to
distribution of assets upon liquidation or dissolution of the Company
("Senior Stock");
(ii) amend the Certificate of Incorporation, including the
Certificate of Designations, so as to amend, alter or repeal the powers,
preferences or special rights of the Series E Senior Preferred Stock in a
manner that adversely affects the rights, preferences or privileges of the
holders of Series E Senior Preferred Stock;
27
(iii) amend the Certificate of Incorporation to authorize any
additional shares of Series E Senior Preferred Stock or Senior Stock;
(iv) amend, alter or repeal any provision of the Certificate
of Designations, other than the Charter Amendment;
(v) amend, alter or repeal the Bylaws of the Company in any
way that is inconsistent with the Certificate of Designations;
(vi) take any action to change the number of directors of the
Company from five;
(vii) apply any of its assets to the redemption, retirement,
purchase or acquisition, directly or indirectly (including through a
Corporation Subsidiary), of any shares of capital stock of the Company
(including securities convertible into or exchangeable for such capital
stock, but excluding the redemption of the shares of its Series B
Convertible Preferred Stock, par value $1.00 per share, in accordance with
Article IV.C.2(5) of the Company's Amended and Restated Certificate of
Incorporation as in effect on the date hereof, but in no event greater
than $150,000);
(viii) acquire all or substantially all of the assets or stock
of any class of any other corporation, or any equity interest in any
partnership, limited liability company, joint venture, association, joint
stock company or trust;
(ix) sell, transfer or assign any assets to any Subsidiary
(including any Corporation Subsidiary);
(x) enter into or permit any Corporation Subsidiary to enter
into any Fundamental Transaction (as such term is defined in the
Certificate of Designations);
(xi) authorize, designate or issue any Floating Price Security
(as such term is defined in the Certificate of Designations) or permit any
Corporation Subsidiary to authorize, designate or issue any Floating Price
Security; or
(xii) incur any indebtedness for borrowed money or permit any
Corporation Subsidiary to incur any indebtedness for borrowed money (other
than indebtedness of Corporation Subsidiaries owed to the Company or other
intercompany indebtedness), in excess of, at any time, $250,000.
For purposes of this Section 4.19, the term "Corporation Subsidiary" shall mean
any corporation, partnership, trust, limited liability company or other
non-corporate business enterprise in which the Company (or another Corporation
Subsidiary) holds stock or other ownership interests representing (1) more than
50% of the voting power of all outstanding stock or ownership interests of such
entity or (2) the right to receive more than 50% of the net assets of such
entity available for distribution to the holders of outstanding stock or
ownership interests upon a liquidation or dissolution of such entity.
28
(b) Optional Redemption Upon Change of Control. Upon a Change of
Control of the Company, each Purchaser shall have the right, at such Purchaser's
sole option, to require the Company to redeem all or a portion of the
Purchaser's Series E Senior Preferred Stock at a price per share of each Series
E Senior Preferred Stock equal to the greater of (A) 115% of the Stated Value
(as such term is defined in the Certificate of Designations) plus all accrued
but unpaid dividends thereon through the date of payment, and (B) the product of
(x) a fraction, the numerator of which is the Stated Value plus all accrued but
unpaid dividends thereon through the date of payment, and the denominator is the
Conversion Price (as such term is defined in the Certificate of Designations) in
effect at such time as such Purchaser delivers a Notice of Redemption Upon
Change of Control (as defined below) and (y) the Volume Weighted Average Price
of the Common Stock on the Trading Day immediately preceding such Change of
Control (the "Change of Control Redemption Price"). No sooner than thirty (30)
days nor later than ten (10) days prior to the consummation of a Change of
Control, but not prior to the public announcement of such Change of Control, the
Corporation shall deliver written notice thereof (a "Notice of Change of
Control") to each Purchaser who holds any Series E Senior Preferred Stock. At
any time during the period beginning after receipt of a Notice of Change of
Control (or, in the event a Notice of Change of Control is not delivered at
least ten (10) days prior to a Change of Control, at any time on or after the
date which is ten (10) days prior to a Change of Control) and ending on the date
of such Change of Control, any Purchaser may require the Company to redeem all
or a portion of the Purchaser's Series E Senior Preferred Stock then outstanding
by delivering written notice thereof via facsimile and overnight courier (a
"Notice of Redemption Upon Change of Control") to the Company, which Notice of
Redemption Upon Change of Control shall indicate (i) the number of Series E
Senior Preferred Stock that such Purchaser is submitting for redemption, and
(ii) the applicable Change of Control Redemption Price, as calculated pursuant
to this Section 4.19(b). Upon the Company's receipt of a Notice(s) of Redemption
Upon Change of Control from any Purchaser, the Company shall promptly, but in no
event later than two (2) Trading Days following such receipt, notify each
Purchaser by facsimile of the Company's receipt of such Notice(s) of Redemption
Upon Change of Control. The Company shall deliver the applicable Change of
Control Redemption Price simultaneously with the consummation of the Change of
Control.
The term "Volume Weighted Average Price" of the Common Stock shall mean the
dollar volume-weighted average price for the Common Stock on the Trading Market
as reported by Bloomberg Financial Markets ("Bloomberg") through its "Volume at
Price" function or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for the Common Stock as reported by Bloomberg, or if no dollar
volume-weighted average price is reported for the Common Stock by Bloomberg, the
average of the bid prices of each of the market makers for such security as
reported in the "pink sheets" by the Pink Sheet LLC (or its successor).
Notwithstanding anything to the contrary contained herein, so long as the Lead
Investor is the holder of at least 3,000 shares of the Series E Senior Preferred
Stock, the Purchasers' right to redeem the Series E Senior Preferred Stock
pursuant to this Section 4.19(b) may be waived by the written consent of the
Lead Investor. In the event the Lead Investor elects to waive the Purchasers'
right to redeem, the Company shall promptly deliver a copy of such waiver to
each of the Purchasers who holds any Series E Senior Preferred Stock.
29
(c) Nomination of Directors. Each of the Purchasers agree that the
holders of the Series F Preferred Stock shall have the right to (i) select the
initial three (3) Series F Directors and (ii) elect at all times thereafter, 3
out of the 5 members of the Board of Directors of the Company.
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;
(b) Performance. The Company and each other Purchaser 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 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) 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 one Trading Day
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 the date hereof listed for trading on an
Eligible Market;
(e) Conversion of Existing Debt. Not less than $2,926,000 of the
outstanding debt of the Company shall be converted into the Units in accordance
with Section 4.18 hereof;
(f) Election of Directors. Three directors as selected by the Lead
Investor shall have been elected as members of the Board of Directors of the
Company.
(g) Aisling Closing. The Closing hereunder shall occur simultaneous
with the Aisling Closing upon terms substantially the same as set forth in the
Aisling Letter of Intent, which terms shall be acceptable to the Lead Investor
in its discretion.
(h) Adverse Changes. Since the date of execution of this Agreement,
no event or series of events shall have occurred that reasonably could be
expected to have or result in a Material Adverse Effect.
30
(i) The aggregate amount of the gross proceeds to be received by the
Company from the sale of the Securities (other than sales made pursuant to a
Supplemental Purchase Agreement in accordance with Section 4.18 hereof) shall be
not less than $3,000,000, and immediately following the Closing, after giving
effect to the transactions contemplated in the Aisling Letter of Intent and in
this Agreement, the Company shall have cash in an amount not less than $500,000
for the purposes of working capital. Notwithstanding anything to the contrary
contained in the Transaction Documents, including, without limitation, Section
4.6 hereof, the Company shall be permitted to offer and sale such amount of
additional Units, upon the same terms as set forth in the Transaction Documents,
as may be required to satisfy the conditions set forth in this Section 5.1(i).
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;
(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; and
(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) The aggregate amount of the gross proceeds to be received by the
Company from the sale of the Securities (other than sales made pursuant to a
Supplemental Purchase Agreement in accordance with Section 4.18 hereof) shall be
not less than $3,000,000.
ARTICLE VI
MISCELLANEOUS
6.1 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 September 30, 2006 or such later date as agreed to by the Company
and the Lead Investor; provided that no such termination will affect the right
of any party to xxx for any breach by the other party (or parties).
6.2 Fees and Expenses. At the Closing, the Company shall pay to Lead
Investor an aggregate of $150,000 for their legal fees and expenses incurred in
connection with the preparation and negotiation of the Transaction Documents, of
which amount $20,000 has been previously paid by the Company. In lieu of the
foregoing remaining payment, the Lead Investor 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 transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the issuance of
any Securities.
31
6.3 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.
6.4 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 (i) the date of transmission, if
such notice or communication is delivered via facsimile or e-mail at the
facsimile number or e-mail address specified in this Section prior to 6:30 p.m.
(New York City time) on a Trading Day, (ii) the Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(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 and
communications shall be as follows:
If to the Company: Millennium Biotechnologies Group, Inc.
000 Xxxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Xxxxx Xxxx
Fax No.: 000-000-0000
E-Mail:
With a copy to:
Xxxxxxxxx Xxxxx Xxxx & Xxxxx PLLC
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx
000-000-0000
E-Mail:
If to the Purchasers: To the address set forth under such
Purchaser's name on the signature
pages attached hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
32
6.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed by the Company, 80% of the holders
of the Shares (or if prior to the Closing Date, by the Purchasers of 80% of the
Shares) and of Lead Investor, provided, if after the Closing Date, so long as
Lead Investor is the holder of not less than 3,000 shares of Series E Senior
Preferred Stock. 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.
6.6 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.
6.7 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 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" and satisfy the requirements of Section 3.2 of this
Agreement. 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.
6.8 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 Indemnitee is an intended third party
beneficiary of Section 4.10 and may enforce the provisions of such Section
directly against the Company.
6.9 Governing Law; Venue; Waiver Of Jury Trail. THE CORPORATE LAWS OF THE
STATE OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE
COMPANY AND ITS STOCKHOLDERS. 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.
EACH PARTY 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 THE TRANSACTION DOCUMENTS), 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 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 HEREBY WAIVES ALL
RIGHTS TO A TRIAL BY JURY.
33
6.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery, conversion and/or
exercise of the Securities, as applicable.
6.11 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 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.
6.12 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.
6.13 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.
6.14 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.
34
6.15 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.
6.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a 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 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.
6.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the "Maximum Rate"),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate of interest applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law. If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any Purchaser with
respect to indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser's election.
6.18 Independent Nature of Purchasers' Obligations and Rights as Among the
Purchasers. 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 and agrees
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 Malhotra & Associates LLP
represents only Iroquois Master Fund, Ltd. in connection with this Agreement and
the other Transaction Documents.
35
6.19 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
36
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
MILLENNIUM BIOTECHNOLOGIES GROUP, INC.
By: /s/ Xxxxx Xxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Financial Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASERS FOLLOWS
37
IROQUOIS MASTER FUND, LTD.
By: /s/ Xxxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Authorized Signatory
Address for Notice:
Iroquois Master Fund, Ltd.
c/o Iroquois Capital, L.P.
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: 000-000-0000
Telephone No.:000-000-0000
E-Mail:
Attn: Xxxxxx Xxxxxxxxx
With a copy to:
Malhotra & Associates LLP
00 Xxxx Xxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
E-Mail:
Attn: Xxxx Xxxxxxxx, Esq.
38
SMITHFIELD FIDUCIARY LLC:
By: /s/ Xxxx X. Chill
---------------------------------------
Name: Xxxx X. Chill
Title: Authorized Signatory
Address for Notice:
c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
E-Mail:
Attn: Xxx X. Xxxxxx/Xxxx X. Chill
39
LONGVIEW FUND, L.P.
By: /s/ Xxx Xxxxxxxxx
---------------------------------------
Name: Xxx Xxxxxxxxx
Title: Sr. Financial Analyst
Address for Notice:
000 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
E-Mail:
CRANSHIRE CAPITAL L.P.
By: /s/ Xxxxx Xxxxx
---------------------------------------
Name: Xxxxx Xxxxx
Title: President - Downsview
Capital, the General Partner
Address for Notice:
0000 Xxxxxx Xx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 0000000
E-Mail:
Attn:
XXXXXXXX INVESTMENT MASTER FUND LTD
By: /s/ Xxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Managing Memeber
Address for Notice:
000 Xxxxx Xxxxxx
00xx Xx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
E-Mail:
Attn: Xxxx Xxxxxxx
ALPHA CAPITAL ANSTALT
By: /s/ Xxxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Director
Address for Notice:
Facsimile No.:
Telephone No.:
E-Mail:
Attn:
TABLE OF CONTENTS
Page
Number
------
ARTICLE I DEFINITIONS.................................................. 1
1.1 Definitions.................................................. 1
ARTICLE II PURCHASE AND SALE........................................... 7
2.1 Closing...................................................... 7
2.2 Closing Deliveries........................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES............................. 9
3.1 Representations and Warranties of the Company................ 9
3.2 Representations and Warranties of the Purchasers............. 17
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES............................. 18
4.1 Transfer Restrictions........................................ 18
4.2 Acknowledgment of Dilution................................... 20
4.3 Furnishing of Information.................................... 20
4.4 Integration.................................................. 20
4.5 Reservation and Listing of Securities........................ 20
4.6 Subsequent Placements........................................ 21
4.7 Securities Laws Disclosure; Publicity........................ 24
4.8 Conversion and Exercise Procedures........................... 25
4.9 Use of Proceeds.............................................. 25
4.10 Reimbursement................................................ 25
4.11 Default Interest............................................. 26
4.12 Rights of Shareholders....................................... 26
4.13 MFN Provision................................................ 26
4.14 Shareholders Rights Plan..................................... 26
4.15 Seniority.................................................... 26
ARTICLE V CONDITIONS................................................... 30
5.1 Conditions Precedent to the Obligations of the Purchasers.... 30
5.2 Conditions Precedent to the Obligations of the Company....... 31
ARTICLE VI MISCELLANEOUS............................................... 31
6.1 Termination.................................................. 31
6.2 Fees and Expenses............................................ 31
6.3 Entire Agreement............................................. 32
6.4 Notices...................................................... 32
6.5 Amendments; Waivers.......................................... 33
6.6 Construction................................................. 33
6.7 Successors and Assigns....................................... 33
6.8 No Third-Party Beneficiaries................................. 33
6.9 Governing Law; Venue; Waiver Of Jury Trail................... 33
6.10 Survival..................................................... 34
6.11 Execution.................................................... 34
6.12 Severability................................................. 34
6.13 Rescission and Withdrawal Right.............................. 34
6.14 Replacement of Securities.................................... 34
6.15 Remedies..................................................... 35
6.16 Payment Set Aside............................................ 35
6.17 Usury........................................................ 35
6.19 Adjustments in Share Numbers and Prices...................... 36
Exhibits:
A Form of Additional Investment Rights
B-1 Form of Series E Certificate of Designations
B-2 Form of Series F Certificate of Designations
C Registration Rights Agreement
D Form of Warrant
E Transfer Agent Instructions
F Opinion of Company Counsel
G Supplemental Purchase Agreement
H Escrow Agreement
Schedules:
3.1(a) Subsidiaries
3.1(b) Organization and Qualification
3.1(d) No Conflicts
3.1(f) Capitalization
3.1(h) Material Changes
3.1(i) Litigations
3.1(j) Compliance
3.1(l) Certain Fees
3.1(o) Registration Rights
3.1(t) Insurance
3.1(v) Transactions With Affiliates and Employees
3.1(ee) Indebtedness
4.9 Use of Proceeds
Schedule A
PURCHASERS
-------------------------------------------------------------------------------------
ADDITIONAL
UNITS / INVESTMENT
SERIES E RIGHT-
PURCHASE PREFERRED WARRANT ADDITIONAL WARRANT
PURCHASERS PRICE STOCK SHARES SHARES SHARES
-------------------------------------------------------------------------------------
Iroquois Master Fund
Ltd $ 600,000 3,000 2,400,000 3,000 2,400,000
Smithfield Fiduciary
LLC $ 600,000 3,000 2,400,000 3,000 2,400,000
Longview Fund LP $ 500,000 2,500 2,000,000 2,500 2,000,000
Cranshire Capital LP $ 400,000 2,000 1,600,000 2,000 1,600,000
Xxxxxxxx Investment
Master Fund Ltd. $ 250,000 1,250 1,000,000 1,250 1,000,000
Alpha Capital Anstalt $ 250,000 1,250 1,000,000 1,250 1,000,000
---------- ------ ---------- ------ ----------
TOTAL $2,600,000 13,000 10,400,000 13,000 10,400,000
---------- ------ ---------- ------ ----------
