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EXHIBIT 10.1
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SECURITIES PURCHASE AGREEMENT
Among
ENDOCARE, INC.
and
THE PURCHASERS LISTED ON SCHEDULE I
Dated as of July 29, 1999
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TABLE OF CONTENTS
PAGE
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ARTICLE I. PURCHASE AND SALE.................................................................2
1.1 Purchase and Sale....................................................................2
1.2 Closings.............................................................................2
ARTICLE II. REPRESENTATIONS AND WARRANTIES...................................................4
2.1 Representations, Warranties and Agreements of the Company............................4
2.2 Representations and Warranties of the Purchasers....................................14
ARTICLE III. OTHER AGREEMENTS...............................................................15
3.1 Transfer Restrictions...............................................................15
3.2 Stop Transfer Instruction...........................................................17
3.3 Furnishing of Information...........................................................17
3.4 Blue Sky Laws.......................................................................17
3.5 Integration.........................................................................18
3.6 Listing and Reservation of Debenture Shares.........................................18
3.7 Notice of Breaches..................................................................19
3.8 Form D..............................................................................19
3.9 Use of Proceeds.....................................................................19
3.10 Transactions with Affiliates......................................................19
3.11 Transfer Agent Instructions.......................................................20
3.12 Press Release; Filing of Form 8-K.................................................21
3.13 Ordinary Course Brokerage and Trading.............................................21
3.14 No Shorting.......................................................................21
3.15 Best Efforts......................................................................21
3.16 Corporate Existence...............................................................21
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3.17 No Violation of Applicable Law....................................................21
3.18 Subsequent Registrations..........................................................22
ARTICLE IV. CONDITIONS......................................................................22
4.1 First Closing Conditions............................................................22
4.2 Second Closing......................................................................25
ARTICLE V. INDEMNIFICATION..................................................................29
5.1 Indemnification.....................................................................29
ARTICLE VI. MISCELLANEOUS...................................................................30
6.1 Entire Agreement....................................................................30
6.2 Notices.............................................................................30
6.3 Amendments; Waivers.................................................................32
6.4 Headings............................................................................32
6.5 Successors and Assigns..............................................................32
6.6 No Third-Party Beneficiaries........................................................32
6.7 Governing Law.......................................................................32
6.8 Survival............................................................................33
6.9 Counterparts........................................................................33
6.10 Publicity.........................................................................33
6.11 Severability......................................................................34
6.12 Remedies..........................................................................34
6.13 Independent Nature of Purchasers Obligations and Rights...........................34
6.14 Payment Set Aside.................................................................34
6.15 Further Assurances................................................................35
6.16 Fees and Expenses.................................................................35
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as
of July 29, 1999 among Endocare, Inc., a Delaware corporation (the "Company"),
and the various purchasers identified and listed on Schedule I hereto (each
referred to herein as a "Purchaser" and, collectively, the "Purchasers.")
WHEREAS, the Company and the Purchasers are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D as promulgated by the
United States Securities and Exchange Commission (the "Commission") under
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, an aggregate of $3,000,000
principal amount of the Company's 7% convertible debentures due 2002 (the
"Debentures," each of which a "Debenture"), in the form of Exhibit A annexed
hereto, convertible into shares of the Company's common stock, par value $0.001
per share (the "Common Stock"); and
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form of Exhibit B attached hereto (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter, the Company and the Purchasers hereby
agree as follows:
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ARTICLE I.
PURCHASE AND SALE
1.1 Purchase and Sale.
a. On the First Closing Date (as defined below), subject to the
terms and conditions set forth herein, the Company shall issue and sell to each
Purchaser and each Purchaser, severally and not jointly, shall purchase from the
Company the principal amount of Debentures as set forth on Schedule I. The
aggregate principal amount of Debentures purchased by the Purchasers shall be
$3,000,000.
b. On the Second Closing Date (as defined below), subject to the
terms and conditions set forth herein, the Company shall issue and sell to the
Purchasers an additional $3,000,000 principal amount of the Debentures.
1.2 Closings.
a. The First Closing. The closing of the purchase and sale of the
initial $3,000,000 aggregate principal amount of Debentures (the "First
Closing") shall take place at the offices of Akin, Gump, Strauss, Xxxxx & Xxxx,
L.L.P., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or by transmission by
facsimile and overnight courier, immediately following the execution hereof or
such later date or different location as the parties shall agree, but not prior
to the date that the conditions set forth in Section 4.1 have been satisfied or
waived by the appropriate party (the "First Closing Date"). At the First
Closing:
(i) Each Purchaser shall deliver, as directed by the
Company, its portion of the purchase price as set forth next to its name on
Schedule I in United States dollars in immediately available funds to an account
or accounts designated in writing by the Company;
(ii) The Company shall deliver to each Purchaser a
Debenture, in the form of Exhibit A hereto, representing the principal amount
purchased by such Purchaser as set forth on Schedule I hereto;
(iii) The parties shall execute and deliver each of the
documents referred to in Section 4.1 hereof.
b. Second Closing Date. Subject to the terms and conditions set
forth in Section 4.2 and elsewhere in this Agreement, the Purchasers shall have
the right (the "Purchasers Call Option") at any time within a three-year period
commencing on the First Closing Date to deliver a written notice to the Company
(a "Purchasers Call Option Notice") requiring the Company to issue and sell up
to an additional $3,000,000 principal amount of a three (3) year Debenture at a
conversion price of $6.75 per share. The closing of the purchase and sale of the
additional Debentures (such closing or the closing under the Company Put Option
Notice (defined below), the "Second Closing") under the Purchasers Call Option
Notice shall take place in the same manner as the First Closing, within two (2)
business days of the date after delivery of the Purchasers Call Option Notice
(such date or the date of the Second Closing under the Company Put Option
Notice, the "Second Closing Date"); provided that in no case shall the Second
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Closing take place unless and until the conditions listed in Section 4.2 have
been satisfied or waived by the appropriate party. Upon the occurrence of any
Change of Control, the Company shall take appropriate action to ensure that the
Purchasers shall have the right to exercise the Purchasers Call Option after the
Change of Control. At the Second Closing:
(i) Each Purchaser shall deliver, as directed by the
Company, its portion of the purchase price as set forth next to its name on a
schedule similar to Schedule I (the "Second Closing Schedule"), to be attached
to the Purchasers Call Option Notice, in United States dollars in immediately
available funds to an account or accounts designated in writing by the Company;
(ii) The Company shall deliver to each Purchaser a
Debenture, substantially in the form of Exhibit A hereto (which shall mature
three (3) years from the date it is issued and in which the conversion price
shall be $6.75 per share), provided however, that such Debenture shall not
include the conversion price adjustment provision contained in Section 4.5(e) of
Exhibit A, representing the principal amount purchased by such Purchaser as set
forth on the Second Closing Schedule;
(iii) The parties shall execute and deliver each of the
documents referred to in Section 4.2 hereof.
c. Company Put Option. Subject to the terms and conditions in
Section 4.2 and elsewhere in this Agreement, after the Redemption Date of the
Optional Conversion of the Debentures (as defined in Article VI of the
Debentures), the Company shall have the one time right (the "Company Put
Option") at any time subsequent to the First Closing to deliver a written notice
to the Purchasers (a "Company Put Option Notice") requiring the Purchasers to
exercise in full the Purchasers Call Option, provided that for at least twenty
(20) out of thirty (30) consecutive Trading Days (as defined in the Debentures)
prior to the exercise of the Company Put Option the Per Share Market Value (as
defined in the Debentures) was more than $9 dollars (such price, as may be
adjusted, the "Put Trigger Price," and the occurrence of twenty (20) Trading
Days at such price, a "Put Trigger"). The Company must exercise its Company Put
Option by delivering the Company Put Option Notice to each Holder within ten
(10) Business Days of the occurrence of a Put Trigger (such deadline, the "Put
Notice Date"). If the Company does not deliver the Company Put Option Notice by
the Put Notice Date, then the Company shall not have the right to effect a
Company Put Option until a Put Trigger occurs again after such Put Notice Date.
An example of how the Company Put Option operates is as follows: Thirty (30)
consecutive Trading Days occur. On twenty (20) Trading Days during the thirty
(30) day period, the Per Share Market Value of the Common Stock is greater than
the Put Trigger Price. The Put Notice Date is ten (10) Business Days after the
end of the thirty (30) day trading period. If the Company delivers the Company
Put Option Notice by the Put Notice Date, it has properly exercised its Company
Put Option. If the Company fails to deliver the Put Option Notice by the Put
Notice Date, then there must again occur a thirty (30) day trading period in
which there are twenty (20) days where the Per Share Market Value is in excess
of the Put Trigger Price before the Company may again exercise its Company Put
Option. The Second Closing under this Company Put Option Notice shall take place
on such date indicated in the Company Put Option Notice but no earlier than ten
(10) business days after the Purchasers' receipt of the Company Put Option
Notice; provided that in no case shall the Second Closing take place unless and
until
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the conditions listed in Section 4.2 have been satisfied or waived by the
appropriate party. Five (5) business days after receipt of the Company Put
Option Notice, the Purchasers shall deliver to the Company a Second Closing
Schedule, indicating the principal amount of Debentures that each Purchaser
shall purchase for an aggregate total of $3,000,000. At the Second Closing under
the Company Put Option Notice:
(i) Each Purchaser shall deliver, as directed by the
Company, its portion of the purchase price as set forth next to its name on the
Second Closing Schedule, in United States dollars in immediately available funds
to an account or accounts designated in writing by the Company;
(ii) The Company shall deliver to each Purchaser a
Debenture, in the form of Exhibit A hereto, representing the principal amount
purchased by such Purchaser as set forth on the Second Closing Schedule;
(iii) The parties shall execute and deliver each of the
documents referred to in Section 4.2 hereof.
d. Liquidated Damages. In addition to any other rights available
to the Purchasers, if the Company fails to deliver to each Purchaser the
Debentures required to be delivered at the Second Closing, the Company shall pay
each such Purchaser, upon the Purchaser's demand, as liquidated damages by cash
or wire transfer in immediately available funds to the account of such
Purchaser, or as otherwise directed by such Purchaser, the difference between
the Per Share Market Price (as defined in the Debentures) on the Second Closing
Date and the Conversion Price (as defined in the Debentures) multiplied by the
number of shares of Common Stock into which the Debentures that should have been
delivered at the Second Closing could have been converted.
e. Adjustment of Put Trigger Price. The Put Trigger Price shall
be adjusted from time to time in the same manner and for the same reasons that
Conversion Price is subject to adjustment pursuant to Section 4.5(a), (b) and
(c) of the Debenture, including without limitation, for stock splits, reverse
stock splits, stock dividends and the like. The adjustment shall automatically
be effected on the record date established for purposes of determining the event
that causes the adjustment to the Put Trigger Price. Notice of adjustment to the
Put Trigger Price need not be given when such adjustment occurs, but must be
stated in the Notice of Company Put Option Notice.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties as of the date
hereof to each of the Purchasers:
a. Organization and Qualification. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with
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the requisite corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Except as set forth
on Schedule 2.1(a), the Company has no subsidiaries (collectively, the
"Subsidiaries"). A "Subsidiary" for purposes of this Agreement means any entity
in which the Company, directly or indirectly, owns the majority of such entity's
capital stock or holds an equivalent equity or similar interest, but does not
include an entity in which the Company holds a warrant or similar right to
acquire controlling equity in the entity and does not otherwise have a
controlling equity interest in the entity. Each of the Subsidiaries is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization (as applicable),
with the full corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Each of the Company
and the Subsidiaries is duly qualified as a foreign corporation to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of any of this
Agreement or the Transaction Documents (as defined in Section 2.1(b)) or any of
the transactions contemplated hereby or thereby, (y) have or result in a
material adverse effect on the results of operations, assets, prospects, or
financial condition of the Company and its Subsidiaries, taken as a whole or (z)
impair the Company's ability to perform fully on a timely basis its obligations
under any Transaction Document (any of (x), (y) or (z), being a "Material
Adverse Effect"). The Company has furnished to each of the Purchasers true and
correct copies of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the "Certificate of Incorporation"), and the
Company's Bylaws, as in effect on the date hereof (the "Bylaws").
b. Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement, the Debenture and the Registration Rights
Agreement (collectively, the "Transaction Documents"), and otherwise to carry
out its obligations hereunder and thereunder. The execution and delivery of each
of this Agreement and the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action and no further action is
required by the Company, its Board of Directors or its stockholders. Each of
this Agreement and the Transaction Documents has 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, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application and
except that rights to indemnification and contribution may be limited by Federal
or state securities laws or public policy relating thereto. Neither the Company
nor any Subsidiary is in any material violation of any of the provisions of its
respective certificate of incorporation, bylaws or other charter documents such
that any right of a holder of the Debentures would be affected.
c. Capitalization. As of the date hereof, the authorized capital
stock of the Company is as set forth in Schedule 2.1(c). All of such outstanding
shares of capital stock have been, or upon issuance will be, validly authorized
and issued, fully paid and nonassessable and
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were issued in accordance with the registration or qualification provisions of
the Securities Act, or pursuant to valid exemptions therefrom. Except as
disclosed in Schedule 2.1(c), (i) no shares of the Company's capital stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company, nor is any holder of the
Common Stock entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company by virtue of any Transaction
Document, (ii) there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, or giving any Person
(as defined below) any right to subscribe for or acquire, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iii) there are no outstanding debt
securities, (iv) there are no agreements or arrangements under which the Company
or any of its Subsidiaries is obligated to register the sale of any of their
securities under the Securities Act (except the Registration Rights Agreement),
(v) there are no outstanding securities of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries, (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the shares of Common Stock as described in this Agreement, (vii) the
Company does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement and (viii) except as specifically
disclosed in the SEC Documents (as defined in Section 2.1(k) hereof), no Person
(as defined below) or group of related Persons beneficially owns (as determined
pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (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 Common Stock. "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 other entity of any kind.
d. Authorization and Validity; Issuance of Shares. The shares of
Common Stock issuable upon conversion of the Debentures (the "Debenture Shares")
are and will at all times hereafter continue to be duly authorized and reserved
for issuance and the Debenture Shares will be validly issued, fully paid and
non-assessable, free and clear of all liens, encumbrances and Company rights of
first refusal, other than liens and encumbrances created by the Purchasers
(collectively, "Liens") and will not be subject to any preemptive or similar
rights. The issuance by the Company of the Debentures and the Debenture Shares
is exempt from registration under the Securities Act, assuming the accuracy of
the Purchasers' representations and warranties herein.
e. No Conflicts. The execution, delivery and performance of this
Agreement and each of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including the issuance of the Debenture Shares) do not and will not (i)
conflict with or violate any provision of the Certificate of
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Incorporation, Bylaws or other organizational documents of the Company or any of
the Subsidiaries, (ii) subject to obtaining the consents referred to in Section
2.1(f), conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument (evidencing a Company
or Subsidiary debt or otherwise) to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or any Subsidiary is subject
(including Federal and state securities laws and regulations and the rules and
regulations of the principal market or exchange on which the Common Stock is
traded or listed) applicable to the Company or any of its Subsidiaries, or by
which any material property or asset of the Company or any Subsidiary is bound
or affected.
f. Consents and Approvals. Except as specifically set forth on
Schedule 2.1(f), neither the Company nor any Subsidiary is 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, regulatory or self regulatory agency, or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement or the Transaction Documents, other than (i) the filing of a
registration statement with the Commission, which shall be filed in accordance
with and in the time periods set forth in the Registration Rights Agreement,
(ii) the application(s) or any letter(s) acceptable to the Nasdaq SmallCap
Market ("Nasdaq") for the listing of the Debenture Shares with Nasdaq (and with
any other national securities exchange or market on which the Common Stock is
then listed), and (iii) any filings, notices or registrations under applicable
state securities laws (together with the consents, waivers, authorizations,
orders, notices and filings referred to on Schedule 2.1(f), the "Required
Approvals").
g. Litigation; Proceedings. Except as specifically set forth on
Schedule 2.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of this Agreement or the Transaction Documents or (ii) could reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect.
h. No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
other 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 and which is required to
be included as an exhibit to any SEC Document or will be required to be included
as an exhibit to the Company's next filing under either the Securities Act or
Exchange Act (ii) is in violation of any order of any court, arbitrator or
governmental body applicable to it, (iii) is in violation of any statute, rule
or regulation of any governmental authority to which it is subject, (iv) is in
default under or in violation of its Certificate of Incorporation, Bylaws or
other organizational documents, respectively, or (v) is in default under or in
violation of any of the listing requirements of Nasdaq as in effect on the date
hereof and is not aware of any facts which
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would reasonably lead to delisting or suspension of the Common Stock by Nasdaq
in the foreseeable future. The business of the Company and its Subsidiaries is
not being conducted, and shall not be conducted, in violation of any law,
ordinance, rule or regulation of any governmental entity, except where such
violations have not resulted or would not reasonably result, individually or in
the aggregate, in a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is in breach of any agreement where such breach, individually or in
the aggregate, would have a Material Adverse Effect
i. Disclosure; Absence of Certain Changes. None of this
Agreement, the Schedules to this Agreement, the Transaction Documents, the SEC
Documents or any other written or formally presented information, report,
financial statement, exhibit, schedule or document furnished by or on behalf of
the Company in connection with the negotiation of the transactions contemplated
hereby contained, contains, or will contain at the time it was or is so
furnished any untrue statement of a material fact or omitted, omits or will omit
at such time to state any material fact necessary in order to make the
statements made herein and therein, in light of the circumstances under which
they were made, not misleading. Except as disclosed on Schedule 2.1(i) or in SEC
Documents filed on XXXXX at least five business days prior to the date hereof,
since December 31, 1998, there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, liabilities or results of operations or, insofar as can reasonably be
foreseen, prospects of the Company or the Subsidiaries. The Company has not
taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or any of its
Subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings. No event, liability, development
or circumstance has occurred or exists, or is contemplated to occur, with
respect to the Company or its Subsidiaries or their respective businesses,
properties, operations or financial condition or, insofar as can reasonably be
foreseen, prospects, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement (including by way of
incorporation by reference) filed with the Commission, on the date this
representation is made or deemed to be made, relating to an issuance and sale by
the Company of its Common Stock and which has not been publicly disclosed.
j. Private Offering. The Company and all Persons acting on its
behalf have not made, directly or indirectly, and will not make, offers or sales
of any securities or solicited any offers to buy any security under
circumstances that would require registration of the Debentures or the Debenture
Shares or the issuance of such securities under the Securities Act. The offer,
sale and issuance of the Debentures and the Debenture Shares to the Purchasers
will not be integrated with any other offer, sale and issuance of the Company's
securities (past, current, or future) under the Securities Act or any
regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated or for purposes of any
stockholder approval provision applicable to the Company or its securities.
Subject to the accuracy and completeness of the representations and warranties
of the respective Purchasers contained in Section 2.2 hereof, the offer, sale
and issuance by the Company to the Purchasers of the Debentures and the
Debenture Shares is exempt from the registration requirements of the Securities
Act.
k. SEC Documents; Financial Statements. The Common Stock of the
Company
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is registered pursuant to Section 12(b) of the Exchange Act. The Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the Commission pursuant to the reporting requirements of the
Exchange Act, including pursuant to Section 13, 14 or 15(d) thereof (the
foregoing materials and all exhibits included therein and financial statements
and schedules thereto and documents (other than exhibits to such documents)
incorporated by reference therein being collectively referred to herein as the
"SEC Documents"), on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC Documents prior to the expiration of
any such extension. As of their respective dates, the SEC Documents 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 Documents, 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. All 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 and which are required to be
filed as exhibits to the SEC Documents have been filed as exhibits to the SEC
Documents as required and neither the Company nor any Subsidiary is in breach of
any such agreement, except for a breach or breaches which would not have a
Material Adverse Effect. As of their respective dates, the financial statements
of the Company included in the SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved, 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 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. No other information provided by or on behalf of the Company
to the Purchasers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2.1(i) of this Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading. Neither the
Company nor any of its Subsidiaries or any of their officers, directors,
employees or agents have provided the Purchasers with any material, nonpublic
information. The Company acknowledges that the Purchasers will be trading in the
securities of the Company in reliance on the foregoing representation and
warranty.
l. Investment Company. The Company is not, and is not controlled
by or under common control with an affiliate (an "Affiliate") of an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
m. Broker's Fees. No fees or commissions or similar payments with
respect to the transactions contemplated by this Agreement or the Transaction
Documents have been paid or will be payable by the Company to any broker,
financial advisor, finder, investment banker, or bank, other than as set forth
in Schedule 2.1(m). 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 2.1(m) that may be due in connection
with the transactions contemplated by this Agreement and the Transaction
Documents.
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n. Form S-3 Eligibility. The Company is, and at the Closing Date
will be, eligible to register securities (including the Debenture Shares) for
resale with the Commission under Form S-3 (or any successor form) promulgated
under the Securities Act.
o. Listing and Maintenance Requirements Compliance. The principal
markets on which the Common Stock is currently traded is Nasdaq. Except as
disclosed on Schedule 2.1(o), the Company has not in the three years preceding
the date hereof received notice (written or oral) from Nasdaq (or any stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted)) to the effect that the Company is not
in compliance with the listing or maintenance requirements of such market or
exchange. The Company is not aware of any facts that would reasonably lead to
delisting or suspension of the Common Stock by Nasdaq. After giving effect to
the transactions contemplated by this Agreement and the Transaction Documents,
the Company is and will be in compliance with all such maintenance requirements.
p. Intellectual Property Rights. To the Company's best knowledge,
the Company and each of its Subsidiaries own or possess adequate rights or
licenses to use all trademarks, trademark applications, trade names and service
marks, whether or not registered, and all patents, patent applications,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and intellectual property rights (collectively, "Intellectual Property
Rights") which are necessary for use in connection with their respective
businesses as now conducted and as described in the SEC Documents. To the
Company's best knowledge, except as set forth on Schedule 2.1(p), none of the
Company's Intellectual Property Rights have expired or terminated, or are
expected to expire or terminate within two years from the date of this
Agreement. To the Company's best knowledge, neither the Company nor any of its
Subsidiaries has infringed or is infringing on any of the Intellectual Property
Rights of any Person and, except as set forth on Schedule 2.1(p), there is no
claim, action or proceeding which has been made or brought against, or to the
Company's knowledge, is being made, brought or threatened against, the Company
or its Subsidiaries regarding the infringement of any of the Intellectual
Property Rights, and the Company and its Subsidiaries are unaware of any facts
or circumstances which might give rise to any of the foregoing, except where any
of the foregoing would not have a Material Adverse Effect. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
q. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. Neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that relations with
their employees are good. Except as set forth on Schedule 2.1(q), since December
31, 1998 no executive officer (as defined in Rule 501(f) under the Securities
Act) has notified the Company that such officer intends to leave the Company or
otherwise terminate such officer's employment with the Company.
r. Registration Rights; Rights of Participation. Except as
described on Schedule 2.1(r) hereto, (i) 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 which has not been satisfied and (ii)
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no Person, including, but not limited to, current or former stockholders of the
Company, underwriters, brokers or agents, has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by this Agreement or any Transaction Document.
s. Title. Except as disclosed on Schedule 2.1(s), the Company and
each of its Subsidiaries have good and marketable title in fee simple to all
real property and personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
Liens, except for Liens that do not materially affect the value of such property
and do not 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, to the Company's best knowledge, enforceable leases with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and the
Subsidiaries.
t. Permits. The Company and each of its Subsidiaries possess all
certificates, authorizations, licenses, easements, consents, approvals, orders
and permits necessary to own, lease and operate their respective properties and
to conduct their respective businesses as currently conducted except where the
failure to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("Material Permits"), and there is no proceeding
pending, or, to the knowledge of the Company, threatened relating to the
revocation, modification, suspension or cancellation of any Material Permit.
Neither the Company nor any of the Subsidiaries is in conflict with or default
or violation of any Material Permit.
u. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverages as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business, at a cost that
would not materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the Company and its Subsidiaries,
taken as a whole.
v. Internal Accounting Controls. The Company and each of 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 United States 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.
w. Tax Status; Firpta. Except as set forth on Schedule 2.1(w),
the Company and each of its Subsidiaries has made or filed all federal and state
income and all other tax returns,
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reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith (which are set forth on Schedule 2.1(w) hereof), and has set aside on
it books provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim. The Company is not a "United States real property holding
corporation" within the meaning of Section 847(c)(2) of the Internal Revenue
Code of 1986, as amended.
x. Transactions With Affiliates. Except as set forth on Schedule
2.1(c) or Schedule 2.1(x) or the Company's Proxy Statement for the 1999 Annual
Meeting of the Stockholders filed with the Commission, none of the officers,
directors, or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (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 corporation, partnership, trust or entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
y. Application to Takeover Protection. The Company and its Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the Certificate of Incorporation, Bylaws
or the laws of the state of incorporation which is or could become applicable to
the Purchasers or the Transaction Documents as a result of the transactions
contemplated by this Agreement or the Transaction Documents. None of the
transactions contemplated by this Agreement or the Transaction Documents,
including the conversion of the Debentures, will trigger any poison pill
provisions of any of the Company's stockholders' rights or similar agreements.
z. Environmental Laws. Except as set forth on Schedule 2.1(z),
the Company and its Subsidiaries (i) are in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permits, licenses or
other approvals except where the failure of any of the foregoing would not
result in a Material Adverse Effect.
aa. Foreign Corrupt Practices. Neither the Company, nor any of
its Subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any of its Subsidiaries has, in the course of
its actions for, or on behalf of, the Company used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses
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relating to political activity; made any direct or indirect unlawful payment to
any foreign or domestic government official or employee form corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
bb. Solicitation Materials. The Company has not (i) distributed
any offering materials in connection with the offering and sale of the
Debentures, other than the SEC Documents, the Schedules to this Agreement, any
amendments and supplements thereto and the materials listed on Schedule 2.1(bb),
or (ii) solicited any offer to buy or sell the Debentures by means of any form
of general solicitation or advertising. Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf, has engaged or will
engage in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with the offer
or sale of the Debentures.
cc. Acknowledgement of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Debenture Shares upon conversion of the Debentures. The Company
further acknowledges that its obligation to issue Debenture Shares upon
conversion of the Debentures in accordance with this Agreement is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.
dd. Acknowledgement Regarding Purchasers' Purchase of Debentures.
The Company acknowledges and agrees that the Purchasers are acting solely in the
capacity of arm's length purchasers 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 statement made by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Purchasers' purchase of the securities. The Company further
represents to each Purchaser that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
ee. Solvency. The Company (both before and after giving effect to
the transactions contemplated by this Agreement) is solvent (i.e., its assets
have a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not have the ability to, nor does it intend to
take any action that would impair its ability to, pay its debts from time to
time incurred in connection therewith as such debts mature. The Company did not
receive a qualified opinion from its auditors with respect to its most recent
fiscal year end and does not anticipate or know of any basis upon which its
auditors might issue a qualified opinion in respect of its current fiscal year.
ff. Seniority; Exclusivity. No class of equity securities of the
Company will be senior to the Debentures in right of payment, whether upon
liquidation, dissolution or otherwise. So long as any Debentures issued
hereunder remains outstanding, the Company shall not
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exchange, redeem or covert any of the Company's capital stock for indebtedness,
including convertible debt, of the Company. Except as expressly permitted in
this Agreement, the Company shall not issue and sell any Debentures, other than
to the Purchasers pursuant to this Agreement, without the prior written consent
of each of the Purchasers.
gg. Other Agreements. The Company has not, directly or
indirectly, made any agreements with any Purchasers relating to the terms and
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
a. Organization; Authority. Such Purchaser is a corporation or a
limited duration company or a limited liability company or limited partnership
duly formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with the requisite power and
authority, corporate or otherwise, to enter into and to consummate the
transactions contemplated hereby and by the Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The purchase by such
Purchaser of the Debentures hereunder has been duly authorized by all necessary
action on the part of such Purchaser. Each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by such
Purchaser and constitutes the valid and legally binding obligation of such
Purchaser, enforceable against such Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity.
b. Investment Intent. Such Purchaser is acquiring the Debentures
for its own account and not with a present view to or for distributing or
reselling the Debentures the Debenture Shares or any part thereof or interest
therein in violation of the Securities Act; provided, however, that by making
the representations herein, such Purchaser does not agree to hold any of the
Debentures or the Debenture Shares for any minimum or other specific term and
reserves the right to dispose of the Debentures at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act.
c. Purchaser Status. At the time such Purchaser was offered the
Debentures, and at the Closing Date, (i) it was and will be an "accredited
investor" as defined in Rule 501 under the Securities Act and (ii) such
Purchaser, either alone or together with its representatives, had and will have
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 Debentures.
d. Reliance. Such Purchaser understands and acknowledges that (i)
the Debentures are being offered and sold to such Purchaser without registration
under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act under Section 4(2) of the
Securities Act or Regulation D promulgated thereunder and (ii) the availability
of such exemption depends in part on, and the Company will rely upon the
accuracy and truthfulness of, the representations set forth in this Section 2.2
and such Purchaser hereby consents to such reliance.
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e. Information. Such Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Debentures which have been requested by such Purchaser or its advisors. Such
Purchaser and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due diligence
investigation conducted by Purchaser or any of its advisors or representatives
shall modify, amend or affect Purchaser's right to rely on the Company's
representations and warranties contained in Section 2.1 above or representations
and warranties of the Company contained in any other transaction document. Such
Purchaser understands that its investment in the Debentures involves a
significant degree of risk. Such Purchaser has read and understands the "Risk
Factors" disclosed in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
f. Governmental Review. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Debentures.
g. Residency. Such Purchaser is a resident of the jurisdiction
set forth immediately below such Purchaser's name on Schedule II hereto.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III.
OTHER AGREEMENTS
3.1 Transfer Restrictions.
a. If any Purchaser should decide to dispose of the Debentures or
the Debenture Shares held by it, such Purchaser understands and agrees that it
may do so only pursuant to an effective registration statement under the
Securities Act, to the Company or pursuant to an available exemption from the
registration requirements of the Securities Act or Rule 144 promulgated under
the Securities Act ("Rule 144"). The Company shall announce any material
non-public information that it legally is required to announce on or prior to
the Effectiveness Date (as defined in the Registration Rights Agreement) of the
registration statement filed pursuant to the Registration Rights Agreement and
shall not enter into any subsequent non-disclosure agreements that would prevent
it from announcing any such information that otherwise legally is required to be
announced on or prior to the Effectiveness Date, unless confidential treatment
for such information is granted by the Commission. In connection with any
transfer of any Debentures or Debenture Shares other than pursuant to an
effective registration statement, Rule 144 or to the Company, the Company may
require the transferor thereof to provide to the Company a written opinion of
counsel experienced in the area of United States securities laws selected by the
transferor, the form and substance of which opinion shall be customary for
opinions of counsel in comparable transactions, to the effect that such transfer
does not require registration of such transferred securities under the
Securities Act; provided, however, that if the Debentures or Debenture Shares
may be sold pursuant to Rule 144(k), no
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written opinion of counsel shall be required from the Purchaser if such
Purchaser provides reasonable assurances that such security can be sold pursuant
to Rule 144(k). Notwithstanding the foregoing, the Company hereby consents to
and agrees to register any transfer by any Purchaser to an Affiliate of such
Purchaser, provided that the transferee certifies to the Company that it is an
"accredited investor" as defined in Rule 501(a) under the Securities Act. 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 and the
Transaction Documents. If a Purchaser provides the Company with an opinion of
counsel, the form and substance of which opinion shall be customary for opinions
of counsel in comparable transactions, to the effect that a public sale,
assignment or transfer of the Debentures and the Debenture Shares may be made
without registration under the Securities Act or the Purchaser provides the
Company with reasonable assurances that the Debentures and the Debenture Shares
can be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold,
the Company shall permit the transfer, and, in the case of the Debenture Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Purchaser and without any
restrictive legend. Notwithstanding the foregoing or anything else contained
herein to the contrary, the securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.
b. Each Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Debentures and
the Debenture Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION 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.
Neither the Debentures nor the Debenture Shares shall contain the
legend set forth above (or any other legend) if in the written opinion of
counsel to the Company experienced in the area of United States securities laws
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission) because such Debentures or Debenture Shares may be sold pursuant
to Rule 144 or otherwise. The Company agrees that it will provide each
Purchaser, upon request, with a certificate or certificates representing
Debentures or Debenture Shares, free from such legend at such time as such
legend is no longer required hereunder. If such certificate or certificates had
previously been issued with such a legend or any other legend, the Company
shall, upon request, receive such certificate or certificates free of any
legend.
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3.2 Stop Transfer Instruction. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company which
enlarge the restrictions on transfer set forth in Section 3.1.
3.3 Furnishing of Information. As long as any Purchaser owns the
Debentures or the Debenture Shares, the Company will cause the Common Stock to
continue at all times to be registered under Section 12(g) of the Exchange Act,
will 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 Section 13, 14 or 15(d) of the Exchange Act and
promptly furnish, but in no event later than five (5) business days after the
filing thereof with the Commission, the Purchasers with true and complete copies
of all such filings, and will not take any action or file any document (whether
or not permitted by the Exchange Act or the rules thereunder) to terminate or
suspend such reporting and filing obligations. As long as any Purchaser owns the
Debentures or the Debenture Shares, if the Company is not required to file
reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare
and furnish to the Purchasers and make publicly available in accordance with
Rule 144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby, in the time
period that such filings would have been required to have been made under the
Exchange Act. The Company further covenants that it will take such further
action as any holder of the Debentures or the Debenture Shares may reasonably
request, all to the extent required from time to time to enable such Person to
sell the Debentures or the Debenture Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in Section 3.1(b). Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer as
to whether it has complied with such requirements.
3.4 Blue Sky Laws. In accordance with the Registration Rights Agreement,
the Company shall (i) qualify the Debenture Shares under the securities or "blue
sky" laws of such jurisdictions as the Purchasers may request (or to obtain an
exemption from such qualification), (ii) shall provide evidence of any such
action so taken to each Purchaser on or prior to the Closing Date and (iii)
shall continue such qualification at all times through the resale of all
Debenture Shares, but in any event not past the fourth anniversary of the
Closing Date.
3.5 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Debentures or the Debenture Shares in a manner that would require the
registration under the Securities Act of the sale of the Debentures or the
Debenture Shares to any Purchaser or cause the offering of such securities to be
integrated with any other offering of securities by the Company for the purpose
of any stockholder approval provision applicable to the Company or its
securities.
3.6 Listing and Reservation of Debenture Shares.
a. The Company shall (i) not later than the time the Company
filed the
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registration statement on Form S-3 to register the Debenture Shares for resale,
prepare and file with Nasdaq (as well as any other national securities exchange
or market on which the Common Stock is then listed) additional shares listing
applications or letters acceptable to Nasdaq covering and listing a number of
shares of Common Stock which is at least equal to the maximum number of
Debenture Shares then issuable, assuming that the payment of all interest
payments on the Debentures for a period of one year and all future dividends on
such shares then outstanding were made in shares of Common Stock, (ii) take all
steps necessary to cause the Debenture Shares to be approved for listing on
Nasdaq (as well as on any other national securities exchange or market on which
the Common Stock is then listed) as soon as possible thereafter, (iii) maintain,
so long as any other shares of Common Stock shall be so listed, such listing of
all such Debenture Shares, and (iv) provide to the Purchasers evidence of such
listing. Neither the Company nor any of its Subsidiaries shall take any action
that may result in the delisting or suspension of the Common Stock on Nasdaq.
The Company shall promptly provide to each Purchaser copies of any notices it
receives from Nasdaq regarding the continued eligibility of the Common Stock for
listing on such automated quotation system, so long as such notice does not
include material, nonpublic information. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section
3.6(a).
b. The Company at all times shall reserve a sufficient number of
shares of its authorized but unissued Common Stock to provide for the full
conversion of the outstanding Debentures (including the payment of all interest
thereon for a one year period). Shares of Common Stock reserved for issuance
upon conversion of the Debentures shall be allocated pro rata to each of the
Purchasers in accordance with the amount of Debentures issued and delivered to
such Purchaser at the Closing. If at any time the number of shares of Common
Stock authorized and reserved for issuance is insufficient to cover the number
of Debenture Shares issued and issuable upon conversion of the Debentures (based
on the Conversion Price (as defined in the Debenture) in effect from time to
time without regard to any limitation on conversions or exercises and the number
of shares of Common Stock issuable upon the payment of interest on the principal
amount of the Debentures then outstanding for a one year period, the Company
will promptly take all corporate action necessary to authorize and reserve such
number of shares of Common Stock of such shares, including, without limitation,
calling a special meeting of stockholders to authorize additional shares to meet
the Company's obligations under this Section 3.6(b), in the case of an
insufficient number of authorized shares, and using its best efforts to obtain
stockholder approval of an increase in such authorized number of shares. In
addition, if on the actual date of an adjustment of the Conversion Price
pursuant to Section 4.5 of the Debenture, the registration statements are
insufficient to register such number of shares of Common Stock, the Company
shall immediately, but in no more than five (5) business days thereafter, file a
registration statement sufficient to register such additional shares of Common
Stock. All calculations of the above amount shall be made without regard to any
limitation on conversions of Debentures.
3.7 Notice of Breaches.
a. The Company and each Purchaser shall give prompt written
notice to the other of any breach by it of any representation, warranty or other
agreement contained in this Agreement or in the Transaction Documents, as well
as any events or occurrences arising after the date hereof and prior to the
Closing Date, which would reasonably be likely to cause any
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representation or warranty or other agreement of such party, as the case may be,
contained herein to be incorrect or breached as of the Closing Date provided
such notice will not constitute material non-public information. However, no
disclosure by either party pursuant to this Section 3.7 shall be deemed to cure
any breach of any representation, warranty or other agreement contained herein
or in the Transaction Documents.
b. Notwithstanding the generality of Section 3.7(a), the Company
shall promptly notify, provided such notification will not constitute material
non-public information, each Purchaser of any notice or claim (written or oral)
that it receives from any lender of the Company or any Subsidiary to the effect
that the consummation of the transactions contemplated hereby and by the
Registration Rights Agreement violates or would violate any written agreement or
understanding between such lender and the Company or any Subsidiary, and the
Company shall promptly furnish by facsimile to the Purchasers a copy of any
written statement in support of or relating to such claim or notice.
c. The default by any Purchaser of any of its obligations,
representations or warranties under this Agreement or the Transaction Documents
shall not be imputed to, and shall have no effect upon, any other Purchaser or
affect the Company's obligations under this Agreement or any Transaction
Document to any non-defaulting Purchaser.
3.8 Form D. The Company agrees to file a Form D with respect to the
Debentures as required by Rule 506 under Regulation D and to provide a copy
thereof to each Purchaser promptly after such filing.
3.9 Use of Proceeds. The Company shall use the proceeds from the sale of
the Debentures for working capital.
3.10 Transactions with Affiliates. So long as any Debentures are
outstanding, the Company shall not, and shall cause each of its Subsidiaries not
to, enter into, amend, modify or supplement, or permit any Subsidiary to enter
into, amend, modify or supplement, any agreement, transaction, commitment or
arrangement with any of its or any Subsidiary's officers, directors or persons
who were officers or directors at any time during the previous two years,
stockholders who beneficially own 5% or more of the Common Stock, or Affiliates
or any individual related by blood, marriage or adoption to any such individual
or with any entity in which any such entity or individual owns a 5% or more
beneficial interest (each a "Related Party"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b) any
agreement, transaction, commitment or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable from a
Person other than such Related Party, or (c) any agreement, transaction,
commitment or arrangement which is approved by a majority of the disinterested
directors of the Company. For purposes hereof, any director who is also an
officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" for purposes of this section only means,
with respect to any person or entity, another person or entity that, directly or
indirectly, (i) has a 5% or more equity interest in that person or entity, (ii)
has 5% or more common ownership with that person or entity, (iii) controls that
person or entity, or (iv) shares common control with that person or entity.
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"Control" or "Controls" for purposes of this section means that a person or
entity has the power, direct or indirect, to conduct or govern the policies of
another person or entity.
3.11 Transfer Agent Instructions. At each Closing the Company shall
issue irrevocable instructions to its transfer agent (and shall issue to any
subsequent transfer agent as required), to issue certificates, registered in the
name of each such Purchaser or its respective nominee(s), for the Debenture
Shares in such amounts as specified from time to time by each Purchaser to the
Company in a form acceptable to such Purchasers (the "Irrevocable Transfer Agent
Instructions"). So long as required pursuant to Section 3.1(b), all such
certificates shall bear the restrictive legend specified in Section 3.1(b) of
this Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 3.11, and
stop transfer instructions to give effect to Section 3.1 hereof (in the case of
the Debenture Shares, prior to registration of the Debenture Shares under the
Securities Act) will be given by the Company to its transfer agent and that the
Debentures and the Debenture Shares shall otherwise be freely transferable on
the books and records of the Company as and to the extent provided in this
Agreement and the Transaction Documents. If a Purchaser provides the Company
with an opinion of counsel, the form and substance of which opinion shall be
customary for opinions of counsel in comparable transactions, to the effect that
a public sale, assignment or transfer of the Debentures and the Debenture Shares
may be made without registration under the Securities Act pursuant to Rule 144
without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer, and, in the case of the Debenture Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Purchaser and without any restrictive legend.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Purchasers by violating the intent and purpose of
the transactions contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 3.11 will
be inadequate and agrees, in the event of a beach or threatened breach by the
Company of the provisions of this Section 3.11, that the Purchasers, shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
3.12 Press Release; Filing of Form 8-K. Subject to the provisions of
Section 6.10 hereof, on or before the fifth (5th) business day following the
Closing Date, the Company shall (i) file a press release in form and substance
acceptable to the Purchasers and (ii) file a Form 8-K with the Commission
describing the terms of the transaction contemplated by this Agreement and the
Transaction Documents in the form required by the Exchange Act.
3.13 Ordinary Course Brokerage and Trading. Subject to compliance with
all applicable securities laws, Nasdaq regulations, no Purchaser shall be
prohibited from engaging in its ordinary course brokerage and trading activities
in respect of the Company's Common Stock; provided that the personnel engaged in
such activities have not been involved with the transactions contemplated hereby
and have not been provided with confidential information with respect to the
Company.
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3.14 Trading Restrictions.Each Purchaser represents and agrees: (i) that
it has not and will not maintain a short position within twenty (20) days of the
First Closing, (ii) that all short positions taken in the Company's Common
Stock, by such Purchaser, will be covered within thirty (30) Trading Days, (iii)
that if such Purchaser exercises the Purchasers Call Option, then within twenty
(20) days of the Second Closing Date, such Purchaser will not short the
Company's Common Stock at a price below the applicable Conversion Price (as set
forth in the Debenture) and (iv) upon notice from the Company that the Company,
in its good faith belief, is planning to consummate a transaction pursuant to
which there will be a reset event pursuant to Section 4.5(e) of the Debenture,
the Purchasers shall not hold a short position below the applicable Conversion
Price for the lesser of twenty (20) days and the closing of such transaction.
3.15 Best Efforts. Each of the parties hereto shall use its best efforts
to satisfy each of the conditions to be satisfied by it as provided in Article
IV of this Agreement.
3.16 Corporate Existence. Until such time as all of the Purchasers
provide the Company with written notice that they do not beneficially own any
Debentures, the Company shall maintain its corporate existence and shall not
sell all or substantially all of the Company's assets, except in the event of a
merger or consolidation or sale of all or substantially all of the Company's
assets, where the surviving or successor entity in such transaction (i) assumes
the Company's obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded corporation
whose common stock is listed for trading on the Nasdaq or any subsequent Market
(as defined in the Debentures).
3.17 No Violation of Applicable Law. Notwithstanding any provision of
this Agreement to the contrary, if the redemption of Debentures or Debenture
Shares otherwise required under this Agreement or the Registration Rights
Agreement would be prohibited by the relevant provisions of the General
Corporation Law of the State of Delaware, such redemption shall be effected as
soon as it is permitted under such law; provided, however, that from the fifth
(5th) day after such redemption notice until such redemption price is paid in
full, interest on any such unpaid amount shall accrue and be payable at the rate
of 15% per annum in accordance with the Debentures.
3.18 Subsequent Registrations. Other than Debenture Shares and other
Registrable Securities (as defined in the Registration Rights Agreement) to be
registered in accordance with the Registration Rights Agreement, the Company
shall not, for a period of not less than 90 Trading Days after the date that the
Registration Statement is declared effective by the Commission, without the
prior written consent of Purchasers holding two-thirds of the principal amount
of the Debentures, (i) except for securities issuable in connection with the
transactions identified on Schedule 3.18 hereto, issue or sell any of its or any
of its Affiliates' equity or equity-equivalent securities unless such issuance
or sale is equal to or at a premium to the Per Share Market Price (as defined in
the Registration Rights Agreement) on the date such issuance or sale, (ii)
except in connection with the transactions identified on Schedule 3.18 hereto,
register for resale any securities of the Company or (iii) except in connection
with the transactions identified on Schedule 3.18 hereto, have a registration
statement declared effective covering an issuance by the Company of any of its
securities. Any days that any Purchaser is unable to sell
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Debenture Shares under an Registration Statement shall be added to such 90
Trading Day period for the purposes of (i), (ii) and (iii) above.
ARTICLE IV.
CONDITIONS
4.1 First Closing Conditions.
a. Conditions Precedent to the Obligation of the Company to Sell
the Debentures. The obligation of the Company to sell the Debentures is subject
to the satisfaction or waiver (with prior written notice to each Purchaser) by
the Company, at or before the First Closing Date of each of the following
conditions:
(i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser in this
Agreement shall be true and correct in all material respects as of the date when
made and as of the First Closing;
(ii) Performance by the Purchasers. Each Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Purchaser at or before the First Closing; and
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Transaction Documents.
b. Conditions Precedent to the Obligation of the Purchasers to
Purchase the Debentures at the First Closing. The obligation of each Purchaser
hereunder to acquire and pay for the Debentures at the First Closing is subject
to the satisfaction or waiver by such Purchaser, at or before the First Closing
Date, of each of the following conditions:
(i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company set forth in this
Agreement and in the Registration Rights Agreement shall be true and correct in
all respects as of the date when made and as of the First Closing Date;
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or before the First Closing Date;
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement and the Transaction Documents;
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(iv) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by the Commission, on
Nasdaq (except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company);
(v) Listing of Common Stock. The Common Stock shall have
been at all times since the date of this Agreement and on the Closing Date
listed for trading on the Nasdaq;
(vi) Required Approvals. All Required Approvals, other
than those relating solely to Closing Dates other than the First Closing Date,
shall have been obtained and copies thereof delivered to the Purchasers other
than those relating solely to Closing Dates other than the First Closing Date;
(vii) Shares of Common Stock. The Company shall have duly
reserved the number of Debenture Shares required by this Agreement and the
Transaction Documents to be reserved upon the conversion of the Debentures
acquired by the Purchaser on the First Closing Date;
(viii) Adverse Changes. Since the date of the financial
statements included in the Company's Quarterly Report on Form 10-Q or Annual
Report on Form 10-K, whichever is more recent, last filed prior to the date of
this Agreement, no event which had a Material Adverse Effect shall have occurred
which is not disclosed on any Schedule hereto (for purposes hereof, changes in
the market price of the Common Stock may be considered in determining whether
there has occurred an event which has had a Material Adverse Effect);
(ix) Litigation. No litigation shall have been instituted
or threatened against the Company which could reasonably be expected to,
individually or in the aggregate, have had a Material Adverse Effect;
(x) Change of Control. No Change of Control shall have
occurred between the date hereof and the First Closing Date. "Change of Control"
means the occurrence of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act), other than the Purchasers or any of their
Affiliates, of in excess of 50% of the voting securities of the Company, (ii) a
replacement of more than one-half of the members of the Company's Board of
Directors that is not approved by those individuals who are members of the Board
of Directors on the date hereof in one or a series of related transactions,
(iii) the merger of the Company with or into another entity, (iv) the
consolidation or sale of all or substantially all of the assets of the Company
in one or a series of related transactions, (v) Xx. Xxxx X. Xxxxx ceasing to
serve as the Chief Executive Officer, President and Chairman of the Board of the
Company, or (vi) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii), (iii), (iv) or (v); and
(xi) Transfer Agent Instructions. The Irrevocable Transfer
Agent Instructions, in a form acceptable to the Purchasers, shall have been
delivered to and
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acknowledged in writing by the Company's transfer agent with a copy forwarded to
each Purchaser.
c. Documents and Certificates. At the First Closing, the Company
shall have delivered to the Purchasers, the following in form and substance
reasonably satisfactory to the Purchasers:
(i) Opinion. An opinion of the Company's legal counsel in
the form attached hereto as Exhibit C dated as of the First Closing Date;
(ii) Debenture. A Debenture(s) representing the principal
amount of Debentures purchased by such Purchaser as set forth next to such
Purchaser's name on Schedule I, registered in the name of such Purchaser, each
in form satisfactory to the Purchaser;
(iii) Registration Rights. The Company shall have executed
and delivered the Registration Rights Agreement;
(iv) Officer's Certificate. An Officer's Certificate dated
the First Closing Date and signed by an executive officer of the Company
confirming the accuracy of the Company's representations, warranties and
covenants as of such First Closing Date and confirming the compliance by the
Company with the conditions precedent set forth in this Section 4.1 as of the
First Closing Date;
(v) Secretary's Certificate. A Secretary's Certificate
dated the First Closing Date and signed by the Secretary or Assistant Secretary
of the Company certifying (A) that attached thereto is a true and complete copy
of the Certificate of Incorporation of the Company, as in effect on the First
Closing Date, (B) that attached thereto is a true and complete copy of the
by-laws of the Company, as in effect on the First Closing Date and (C) that
attached thereto is a true and complete copy of the Resolutions duly adopted by
the Board of Directors of the Company authorizing the execution, delivery and
performance of this Agreement and of the Transaction Documents, and that such
Resolutions have not been modified, rescinded or revoked;
(vi) Certificate of Incorporation. The Company shall have
delivered to each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing of the Company and each Subsidiary, in such
corporation's state of incorporation issued by the Secretary of State of such
state of incorporation as of a date within ten days of the First Closing Date;
(vii) Transfer Agent Letter. The Company shall have
delivered to each Purchaser a letter from the Company's transfer agent
certifying the number of shares of Common Stock outstanding as of a date within
five days of the First Closing Date;
(viii) Lockup Agreement. Xx. Xxxx X. Xxxxx shall deliver
to the Purchasers a letter in the form of Exhibit D hereto pursuant to which he
agrees not to offer or sell shares of Common Stock he beneficially owns during
the twelve (12) month period following the First Closing, unless the Purchasers
are able to freely offer for sale or to sell any Debenture
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Shares pursuant to an effective registration statement under the Securities Act
and the market price of the Common Stock is more than $8.00 per share.
4.2 Second Closing.
a. Conditions Precedent to the Obligation of the Company to Sell
the Debentures. The obligation of the Company to sell the Debentures is subject
to the satisfaction or waiver (with prior written notice to each Purchaser) by
the Company, at or before the Second Closing Date of each of the following
conditions:
(i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser in this
Agreement shall be true and correct in all material respects as of the date when
made and as of the Second Closing;
(ii) Performance by the Purchasers. Each Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Purchaser at or before the Second Closing;
and
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Transaction Documents.
b. Conditions Precedent to the Obligation of the Purchasers to
Purchase. The obligation of each Purchaser hereunder to acquire and pay for the
Debentures at the Second Closing is subject to the satisfaction or waiver (with
prior written notice to the Company and each other Purchaser) by such Purchaser,
at or before the Second Closing Date, of each of the following conditions:
(i) First Closing. The First Closing shall have occurred;
(ii) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company set forth in this
Agreement and the Registration Rights Agreement shall be true and correct in all
respects as of the date when made and as of the Second Closing Date as though
made at that time, except for changes made to the Schedules to update them since
the First Closing and except for other exceptions to the representations and
warranties necessary to update then since the First Closing (in either case with
information about matters that do not have a Material Adverse Effect);
(iii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Transaction
Documents to be performed, satisfied or complied with by the Company at or
before to the Second Closing;
(iv) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any
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court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement and the
Transaction Documents;
(v) Registration Statements for Debentures. (A) The
Registration Statement with respect to the Debenture Shares with respect to the
Debenture(s) sold at the First Closing shall have been declared effective under
the Securities Act by the Commission; (B) a Registration Statement with respect
to the Debenture Shares with respect to the Debenture(s) sold at the Second
Closing shall have been declared effective under the Securities Act for the
entire thirty (30) day period referred to in Section 1.2(c); and (C) on the
Second Closing Date such Registration Statements shall be effective, not subject
to any stop order and not be subject to any suspension of the Registration
Rights Agreement, and shall have been effective and shall not have been subject
to any stop order for the thirty (30) business days prior to the Second Closing
Date and no stop order shall be pending or threatened at the Second Closing
Date. The Company shall register the Debenture Shares with respect to the
Debenture(s) sold at the Second Closing along with the Debenture Shares with
respect to the Debenture(s) sold at the First Closing. Notwithstanding the
foregoing, if the Commission prohibits the simultaneous registration of the
Debenture Shares with respect to the Debenture(s) sold at the Second Closing,
then a Registration Statement with respect to the Debenture(s) to be sold at the
Second Closing need not be effective as a prerequisite to the Second Closing,
but a Registration Statement for such shares must be filed within fifteen (15)
business days of the Second Closing Date.
(vi) Adverse Changes. Since the date of the financial
statements included in the Company's Quarterly Report on Form 10-Q or Annual
Report on Form 10-K, whichever is more recent, last filed prior to the date of
this Agreement, no event which had a Material Adverse Effect shall have occurred
which is not disclosed on any Schedule hereto or otherwise in writing to each of
the Purchasers;
(vii) Litigation. No litigation shall have been instituted
or threatened against the Company which could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect;
(viii) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by the Commission, on
Nasdaq during the sixty (60) days prior to the Second Closing (except for any
suspension of trading of limited duration solely to permit dissemination of
material information regarding the Company);
(ix) Listing of Common Stock. The Debenture Shares shall
on the Second Closing Date be, listed for trading on Nasdaq, or other exchange
acceptable to Purchasers;
(x) Required Approvals. All Required Approvals shall have
been obtained and copies thereof delivered to the Purchasers.
(xi) Shares of Common Stock. The Company shall have duly
reserved the number of Debenture Shares required by this Agreement to be
reserved for issuance upon the conversion of the Debentures purchased on the
First Closing Date and on the Second Closing Date.
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(xii) Performance of Conversion/Exercise Obligations. The
Company shall have delivered Debenture Shares upon any demand for conversion of
any of the Debentures and otherwise performed its obligations in accordance with
the terms, conditions and timing requirements of the Transaction Documents.
(xiii) Change of Control. Subject to Section 4.2(c), no
Change of Control in the Company shall have occurred;
(xiv) Transfer Agent Instructions. The Irrevocable
Transfer Agent Instructions, in a form acceptable to the Purchasers, shall have
been delivered to and acknowledged by the Company's transfer agent with a copy
forwarded to each Purchaser;
(xv) Minimum Per Share Market Value. On the date of the
Company Put Option Notice, the Per Share Market Value was more than nine dollars
($9); and
(xvi) Optional Conversion. The Company shall have
exercised the Optional Conversion (as defined the Debenture).
c. Elected Change of Control. Within ten (10) days after a
Purchaser receives actual notice, with an election form, of a Change of Control
(as defined in the Debenture) Purchasers holding a majority of the then
outstanding principal amount of the Debenture, at their option, shall elect in
writing to either (i) waive the condition set forth in Section 4.2(b)(xiii) with
respect to such Change of Control and thereby permit a Second Closing to proceed
(whether pursuant to a Purchasers Call Option or Company Put Option) or (ii) not
waive the condition set forth in Section 4.2(b)(xiii) in which event such
Purchaser shall forfeit its right to the Purchasers Call Option and the Company
will no longer have the Company Put Option. If such Purchasers do not timely
make an election, they shall have been deemed to have elected option (ii);
d. Documents and Certificates. On the Second Closing Date, the
Company shall have delivered to the Purchasers, the following in form and
substance reasonably satisfactory to the Purchasers:
(i) Opinion. An opinion of the Company's legal counsel, in
substantially the form attached hereto as Exhibit C dated as of the Second
Closing Date;
(ii) Debenture(s). A Debenture(s) representing the
Debenture(s) purchased by such Purchaser as set forth next to such Purchaser's
name on the Second Closing Schedule registered in the name of such Purchaser,
each in form satisfactory to the Purchaser;
(iii) Officer's Certificate. The Company shall deliver to
the Purchasers an Officer's Certificate dated the Second Closing Date and signed
by an executive officer of the Company confirming the accuracy of the Company's
representations, warranties and covenants as of such Second Closing Date and
confirming the compliance by the Company with the conditions precedent set forth
in this Section 4.2(c) as of the Second Closing Date;
(iv) Secretary's Certificate. A Secretary's Certificate
dated the Second Call Option Closing Date and signed by the Secretary or
Assistant Secretary of the Company certifying (A) that attached thereto is a
true and complete copy of the Certificate of Incorporation
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of the Company, as in effect on the Second Closing Date, (B) that attached
thereto is a true and complete copy of the bylaws of the Company, as in effect
on the Second Closing Date and (C) that attached thereto is a true and complete
copy of the resolutions duly adopted by the Board of Directors of the Company
authorizing the execution, delivery and performance of the Agreement and the
Transaction Documents and that such resolutions have not been modified,
rescinded or revoked;
(v) Certificate of Incorporation. The Company shall have
delivered to each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing of the Company and each Subsidiary, in such
corporation's state of incorporation issued by the Secretary of State of such
state of incorporation as of a date within ten days of the Second Closing Date;
(vi) Transfer Agent Letter. The Company shall have
delivered to each Purchaser a letter from the Company's transfer agent
certifying the number of shares of Common Stock outstanding as of a date within
five days of the Second Closing Date; and
(vii) Lockup Agreements. Xx. Xxxx X. Xxxxx shall deliver
to the Purchasers a letter in the form of Exhibit D hereto pursuant to which he
agrees not to offer or sell shares of Common Stock he beneficially owns under
the circumstances described in Section 4.1(c)(viii).
(viii) Other Documents. The Company shall have delivered
to each Purchaser such other documents relating to the transactions contemplated
by the Transaction Documents as the Purchasers or its counsel may reasonably
request.
ARTICLE V.
INDEMNIFICATION
5.1 Indemnification. Except to the extent that matters which
could be covered by this Section 5 are covered by Section 5 of the Registration
Rights Agreement, in consideration of the Purchasers execution and delivery of
this Agreement and the Transaction Documents and acquiring the Debentures and
Debenture Shares thereunder and in addition to all of the Company's other
obligations under this Agreement and the Transaction Documents, the Company
shall defend, protect, indemnify and hold harmless each Purchaser, its past and
present Affiliates and their successors and assigns (in accordance with the
provisions of Section 6.5 hereof), each other holder of the Debenture Shares and
all of their stockholders, officers, directors, employees and direct or indirect
investors and any of the foregoing Person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnities")
from and against any and all actions, causes of action, suits, claims, losses,
proceedings, costs (as incurred), penalties, fees (including legal fees and
expenses), liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnity is a party to the action for which
indemnification hereunder is sought), and including interest, penalties and
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnitee as a result of, or
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arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement or in the
Transaction Documents, or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement or 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, other
than by the Company, against such Indemnitee and arising out of or resulting
from (i) any action or inaction by the Company in connection with the execution,
delivery, performance or enforcement of this Agreement or the Transaction
Documents, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Debentures or
(iii) solely the status of such Purchasers or holder of the Debentures or the
Debenture Shares as an investor in the Company. The indemnification obligations
of the Company under this paragraph shall be in addition to any liability which
the Company may otherwise have, shall extend upon the same terms and conditions
to any affiliate of the Purchasers and partners, directors, agents, employees
and controlling Persons (if any), as the case may be, of the Purchasers and any
such affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, the
Purchasers and any such affiliate and any such Person. The Company also agrees
that neither the Purchasers nor any such Affiliates, partners, directors,
agents, employees or controlling Persons shall have any liability to the Company
or any Person asserting claims on behalf of or in right of the Company in
connection with or as a result of the consummation of this Agreement or any of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of such Purchaser or entity in connection with the
transactions contemplated by this Agreement or the Transaction Documents. 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.
ARTICLE VI.
MISCELLANEOUS
6.1 Entire Agreement. This Agreement, together with the Exhibits and
Schedules hereto and the Transaction Documents 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.
6.2 Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party (if received by 8:00 p.m. EST where such
notice is received) or the first business day following such delivery (if
received after 8:00 p.m. EST where such notice is received); or (iii) one
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
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If to the Company:
Endocare, Inc.
7 Studebaker
Xxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx
With a copy to:
Xxxxxxx, Phleger & Xxxxxxxx LLP
00 Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
If to the Transfer Agent:
U.S. Stock Transfer Corporation
0000 Xxxxxxx Xxx.
Xxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx
If to Xxxxx Xxxxxxx Strategic Growth Fund, Ltd. to:
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx
If to Xxxxx Xxxxxxx Strategic Growth Fund, L.P. to:
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx
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With a copy, in the case of Notice to Xxxxx Xxxxxxx Strategic
Growth Fund, Ltd. or Xxxxx Xxxxxxx Strategic Growth Fund, L.P. to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxx
Each party shall provide written notice to the other party of any
change in address or facsimile number in accordance with the provisions hereof.
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6.3 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and each of the Purchasers or, in the case of a waiver, by the
Company (if a waiver of the Company' rights) or Purchasers holding a majority of
the then outstanding principal amount of Debentures or who will be purchasing
the majority of the principal amount of the Debentures (if a waiver of the
Purchasers' rights). 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 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 accruing
to it thereafter. Notwithstanding the foregoing, no such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Debentures outstanding without the consent of the Company and those Holders who
might be adversely affected by such an amendment. The Company shall not offer or
pay any consideration to a Purchaser for consenting to such an amendment or
waiver unless the same consideration is offered to each Purchaser and the same
consideration is paid to each Purchaser which consents to such amendment or
waiver.
6.4 Headings. 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.
6.5 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 each of the Purchasers. The Purchasers may
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Company, provided, that any assignees must make the
representations and warranties set forth in Section 2.2 and otherwise comply
with the terms of this Agreement otherwise applicable to its assignor. This
provision shall not limit a Purchaser's right to transfer securities in
accordance with all of the terms of this Agreement or the Transaction Documents.
6.6 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
6.7 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive 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, 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 to such party at the
address for such 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. EACH PARTY HEREBY
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IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
6.8 Survival. The representations and warranties of the Company and the
Purchasers contained in Sections 2.1 and 2.2, the agreements and covenants set
forth in Section 3, and the indemnification provisions set forth in Section 5,
shall survive the Closing and any conversion of the Debentures regardless of any
investigation made by or on behalf of the such Purchaser or by or on behalf of
the Company, except that, in the case of representations and warranties such
survival shall be limited to the period of four (4) years following the Closing
Date on which they were made or deemed to have been made (other than with
respect to any claim by a third party against the party to this Agreement who
seeks to assert a claim based on such representations and warranties). This
section shall have no effect on the survival of the indemnification provisions
of the Registration Rights Agreement.
6.9 Counterparts. 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) the same with the same force and effect as if such facsimile signature
page were an original thereof.
6.10 Publicity. The Company and the Purchasers shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of any of the Purchasers
without each such Purchaser's prior written consent. The Purchasers and their
affiliated companies shall, without further cost, have the right to use in its
advertising, marketing or other similar materials the Company's logo and
trademarks and all or parts of the Company's press releases that focus on the
Transaction forming the subject matter of this Agreement or which make reference
to the Transaction. The Purchasers understand that this grant by the Company
only waives objections that the Company might have to the use of such materials
by the Purchasers and in no way constitutes a representation by the Company that
references in such materials to the activities of third-parties have been
cleared or constitute a fair use.
6.11 Severability. In case any one or more of the provisions of this
Agreement shall 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 which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
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6.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
this Agreement or the Transaction Documents without the showing of economic loss
and without any bond or other security being required. Each of the Company and
the Purchasers (severally and not jointly) agree that monetary damages would not
be adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.
6.13 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or 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 with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
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.
6.14 Payment Set Aside. To the extent that the Company makes a payment
or payments to the Purchasers hereunder or pursuant to the Transaction Documents
or the Purchasers enforce or exercise their 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 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.
6.15 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.16 Fees and Expenses. Except as set forth in the Registration Rights
Agreement, 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; provided, however, that the Company shall pay the
Purchasers an aggregate fee of $15,000 at the First Closing. The Company shall
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pay all stamp and other taxes and duties levied in connection with the issuance
of the Debenture Shares pursuant hereto.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
ENDOCARE, INC.
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Chief Executive Officer
XXXXX XXXXXXX STRATEGIC
GROWTH FUND, LTD.
By: Xxxxx Xxxxxxx Asset Management LLC
By: Xxxxx Xxxxxxx, LLC
Its Member
By: /s/ Xxxx X. Xxxxxx
-----------------------------
Xxxx X. Xxxxxx
Its Member
XXXXX XXXXXXX STRATEGIC GROWTH
FUND, L.P.
By: Xxxxx Xxxxxxx Capital, LLC
Its General Partner
By: Xxxxx Xxxxxxx Partners, LLC
Its Member
By: /s/ Xxxx X. Xxxxxx
-----------------------------
Xxxx X. Xxxxxx
Its Member
40
SCHEDULE I
Principal Amount of Number of Shares
Name of Purchaser Debentures at Closing Date Underlying Debentures
----------------- -------------------------- ---------------------
Xxxxx Xxxxxxx Strategic $2,000,000 333,333.33
Growth Fund, Ltd.
Xxxxx Xxxxxxx Strategic $1,000,000 166,666.66
Growth Fund, L.P.
41
SCHEDULE II
Name of Purchaser Address
Xxxxx Xxxxxxx Strategic Growth Fund, Ltd. 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
Fax: (000) 000-0000
Residence: Grand Cayman, Cayman Islands
Xxxxx Xxxxxxx Strategic Growth Fund, L.P. 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
Fax: (000) 000-0000
Residence: New York, New York
42
Exhibit A
Form of Convertible Debenture
(attached)
43
Exhibit B
Form of Registration Rights Agreement
(attached)
2
44
Exhibit C
Company's Legal Opinion
(attached)
3
45
Exhibit D
Form of Lockup Letter
(attached)
