SECURITIES PURCHASE AGREEMENT
SECURITIES
PURCHASE AGREEMENT
(the
"Agreement"),
dated
as of May 15, 2006, by and among Interpharm Holdings, Inc., a Delaware
corporation, with headquarters located at 00
Xxxxx
Xxxxxx, Xxxxxxxxx, XX 00000 (the "Company"),
and
the investors listed on the Schedule of Buyers attached hereto (individually,
a
"Buyer"
and
collectively, the "Buyers").
WHEREAS:
A. The
Company and each Buyer is executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Section 4(2) of
the
Securities Act of 1933, as amended (the "1933
Act"),
and
Rule 506 of Regulation D ("Regulation D")
as
promulgated by the United States Securities and Exchange Commission (the
"SEC")
under
the 1933 Act.
B. The
Company has authorized a new series of convertible preferred stock of the
Company designated as Series B-1 Convertible Preferred Stock, the terms of
which
are set forth in the certificate of designation for such series of preferred
stock (the "Certificate
of Designations")
in the
form attached hereto as Exhibit
A
(together with any convertible preferred shares issued in replacement thereof
in
accordance with the terms thereof, the "Preferred
Shares"),
which
Preferred Shares shall be convertible into the Company's common stock, par
value
$0.01 per share (the "Common
Stock"),
in
accordance with the terms of the Certificate of Designations.
C. Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, at the Initial Closing (as defined in
Section 1(b) below), (i) that aggregate number of Preferred Shares (the
"Initial
Preferred Shares")
set
forth opposite such Buyer's name in column (3) on the Schedule of Buyers (which
aggregate number for all Buyers shall be 10,000) (as converted into Common
Stock, collectively, the "Conversion
Shares")
and
(ii) Warrants (the "Initial Warrants")
in
substantially the form attached hereto as Exhibit
B,
to
acquire that number of shares of Common Stock (as exercised, collectively,
the
"Warrant
Shares")
set
forth opposite such Buyer's name in column (4) on the Schedule of
Buyers.
D. In
addition, the Company wishes to sell, upon the terms and conditions stated
in
this Agreement, at one or more Additional Closings (as defined in Section 1(c)
below), (i) additional Preferred Shares (the "Additional
Preferred Shares"
and,
collectively with the Initial Preferred Shares, the "Preferred
Shares")
as
shall be set forth opposite the name of Buyers that execute this Agreement
and
become party hereto, in column (3) on the Schedule of Buyers (which aggregate
number for all Buyers may be up to 5,000) and (ii) Warrants (the "Additional
Warrants"
and,
collectively with the Initial Warrants, the "Warrants")
to
acquire that number of shares of Common Stock set forth opposite such Buyer's
name in column (4) on the Schedule of Buyers.
E. The
Preferred Shares shall be entitled to dividends, which, at the option of the
Company and subject to certain conditions, may be paid in shares of Common
Stock
(the "Dividend
Shares")
or in
cash.
F. Contemporaneously
with the execution and delivery of this Agreement and on any Additional Closing
Date (as defined in Section 1(c) below), the parties hereto are executing and
delivering a Registration Rights Agreement, substantially in the form attached
hereto as Exhibit
C
(the
"Registration
Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
with respect to the Registrable Securities (as defined in the Registration
Rights Agreement), under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
G. The
Preferred Shares, the Conversion Shares, the Dividend Shares, the Warrants
and
the Warrant Shares are collectively referred to herein as the "Securities".
NOW,
THEREFORE,
the
Company and each Buyer hereby agree as follows:
1. PURCHASE
AND SALE OF PREFERRED STOCK AND WARRANTS.
(a) Preferred
Shares and Warrants.
(i) Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6(a)
and
7(a) below, the Company shall issue and sell to each Buyer, and each Buyer
severally, but not jointly, agrees to purchase from the Company on the Initial
Closing Date (as defined below), the number of Initial Preferred Shares as
is
set forth opposite such Buyer's name in column (3) on the Schedule of
Buyers, along
with Initial Warrants to acquire that number of Warrant Shares as is set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers.
(ii) Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6(b)
and
7(b) below, the Company shall issue and sell to each Buyer that executes a
copy
of this Agreement at any time prior to ninety (90) days after the date of this
Agreement, and each such Buyer severally, but not jointly, agrees to purchase
from the Company on the Additional Closing Date, the number of Additional
Preferred Shares as shall be set forth opposite such Buyer's name in column
(3)
on the Schedule of Buyers (which amended Schedule of Buyers to be promptly
provided to all Buyers), along
with Additional Warrants to acquire that number of Warrant Shares as is set
forth opposite such Buyer's name in column (4) on the Schedule of
Buyers.
(b) Initial
Closing.
The
closing (the "Initial Closing")
of the
purchase of the Preferred Shares and the Warrants by the Buyers shall occur
at
the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000. The date and time of the Initial Closing (the "Initial
Closing Date")
shall
be 10:00 a.m., New York City Time, on the date after the notification of
satisfaction (or waiver) of the conditions to the Initial Closing set forth
in
Sections 6(a) and 7(a) below (or such other date as is mutually agreed to by
the
Company and each Buyer).
-2-
(c) Additional
Closing.
The
Company may issue, by no later than July 15, 2006, at one or more Additional
Closings a number of Additional Preferred Shares that does not exceed in the
aggregate the lesser of (x) 5,000 Preferred Shares and (y) a number of Preferred
Shares that when added to the number of Initial Preferred Shares does not exceed
15,000 Preferred Shares, on terms no more favorable in any respect than those
set forth in the Transaction Documents (as defined below). The closing (each,
an
"Additional
Closing")
of the
purchase of any Additional Preferred Shares and the related Additional Warrants
by the Buyers shall occur at the offices of the Company. The date and time
of
each Additional Closing (each, an "Additional
Closing Date"
and,
together with the Initial Closing Date, the "Closing
Date")
shall
be 10:00 am, New York City Time, on the date that is two (2) Business Days,
after the notification of satisfaction (or waiver) of the conditions to the
Additional Closing set forth in Sections 6(b) and 7(b) below (or such other
date
as is mutually agreed to by the Company and each Buyer). As used herein
"Business
Day"
means
any day other than Saturday, Sunday or other day on which commercial banks
in
The City of New York are authorized or required by law to remain closed.
(d) Purchase
Price.
(i) The
aggregate purchase price for the Initial Preferred Shares and the Initial
Warrants to be purchased by each Buyer at the Initial Closing (the "Initial Purchase
Price")
shall
be the amount set forth opposite such Buyer's name in column (5) on the Schedule
of Buyers. Each Buyer shall pay $1,000 for each Initial Preferred Share and
related Initial Warrants to be purchased by such Buyer at the Initial
Closing.
(ii) The
aggregate purchase price for the Additional Preferred Shares and the Additional
Warrants to be purchased by a Buyer at the Additional Closing (the "Additional
Purchase Price"
and,
together with the Initial Purchase Price, the "Purchase
Price")
shall
be the amount supplementally set forth opposite such Buyer's name in column
(5)
on the Schedule of Buyers. Each Buyer shall pay $1,000 for each Additional
Preferred Share and related Additional Warrants to be purchased by such Buyer
at
the Additional Closing.
(e) Form
of Payment.
On each
Closing Date, (A) each Buyer shall pay its portion of the Purchase Price to
the
Company for the Preferred Shares and the Warrants to be issued and sold to
such
Buyer at such Closing, by wire transfer of immediately available funds in
accordance with the Company's written wire instructions and (B) the Company
shall deliver to each Buyer certificates for the Preferred Shares (in
such denominations
as is
set forth opposite such Buyer's name in column (3) on the Schedule
of
Buyers),
along with certificates
for the
Warrants (exercisable for the number of shares of Common Stock as is set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers), each duly
executed on behalf of the Company and registered in the name of such Buyer
or
its designee.
2. BUYER'S
REPRESENTATIONS AND WARRANTIES.
Each
Buyer represents and warrants with respect to only itself that:
(a) Organization;
Authority.
Such
Buyer is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with the requisite power and
authority to enter into and to consummate the transactions contemplated by
the
Transaction Documents (as defined below) to which it is a party and otherwise
to
carry out its obligations hereunder and thereunder.
-3-
(b) No
Public Sale or Distribution.
Such
Buyer (i) is acquiring the Preferred Shares and the Warrants, (ii) upon
conversion of the Preferred Shares will acquire the Conversion Shares, and
(iii) upon exercise of the Warrants will acquire the Warrant Shares, in
each case, for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold any of
the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. Such Buyer is
acquiring the Securities hereunder in the ordinary course of its business.
Such
Buyer does not presently have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.
(c) Accredited
Investor Status.
Such
Buyer is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D.
(d) Reliance
on Exemptions.
Such
Buyer understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in
part
upon the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the
Securities.
(e) Information.
Such
Buyer 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 Securities which have been requested by such Buyer
and have conducted their own due diligence with respect to the Company. Such
Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of, and receive answers from, the Company regarding the terms and
conditions of the offering of the Securities and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to such Buyer or to which such Buyer had access. Neither
such inquiries nor any other due diligence investigations conducted by such
Buyer or its advisors, if any, or its representatives shall modify, amend or
affect such Buyer's right to rely on the Company's representations and
warranties contained herein. Such Buyer understands that its investment in
the
Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the
Securities.
(f) No
Governmental Review.
Such
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
-4-
(g) Transfer
or Resale.
Such
Buyer understands that except as provided in the Registration Rights Agreement:
(i) the Securities have not been and are not being registered under the 1933
Act
or any state securities laws, and may not be offered for sale, sold, assigned
or
transferred unless (A) subsequently registered thereunder, (B) other than in
connection with transfers to affiliates, such Buyer shall have delivered to
the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurance that such Securities can
be
sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated
under the 1933 Act, as amended (or a successor rule thereto) (collectively,
"Rule
144");
(ii)
any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person (as defined in Section 3(s)) through whom the sale is made)
may
be deemed to be an underwriter (as that term is defined in the 0000 Xxx) may
require compliance with some other exemption under the 1933 Act or the rules
and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
Person is under any obligation to register the Securities under the 1933 Act
or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. The Securities may be pledged in connection with a bona
fide margin account or other loan or financing arrangement secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or
any
other Transaction Document (as defined in Section 3(b)), including, without
limitation, this Section 2(g).
(h) Legends.
Such
Buyer understands that the certificates or other instruments representing the
Preferred Shares and the Warrants and, until such time as the resale of the
Conversion Shares and the Warrant Shares have been registered under the 1933
Act
as contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares and the Warrant Shares, except as set forth
below, shall bear any legend as required by the "blue sky" laws of any state
and
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
[NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE
BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR
(II) UNLESS SOLD PURSUANT TO RULE 144(K) UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED PURSUANT TO AN AVAILABLE EXEMPTION
FROM REGISTRATION UNDER THE 1933 ACT IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
-5-
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which
it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection
with
a sale, assignment or other transfer, such holder provides the Company with
an
opinion of counsel, in a generally acceptable form, to the effect that such
sale, assignment or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act, or (iii) such holder provides
the Company with reasonable assurance that the Securities can be sold, assigned
or transferred pursuant to Rule 144(k).
(i) Validity;
Enforcement.
This
Agreement and the Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of such Buyer and shall constitute
the legal, valid and binding obligations of such Buyer enforceable against
such
Buyer in accordance with their respective terms, except as such enforceability
may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.
(j) No
Conflicts.
The
execution, delivery and performance by such Buyer of this Agreement and the
Registration Rights Agreement and the consummation by such Buyer of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the organizational documents of such Buyer or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a violation of
any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clauses (ii)
and (iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.
(k) Residency.
Such
Buyer is a resident of that jurisdiction specified below its address on the
Schedule of Buyers.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to each of the Buyers :
(a) Organization
and Qualification.
The
Company and its "Subsidiaries"
(which
for purposes of this Agreement means any entity in which the Company, directly
or indirectly, owns a majority of the voting capital stock or holds an equity
or
similar interest entitling the Company to elect a majority of the directors,
managers or persons holding similar positions) are entities duly organized
and
validly existing and in good standing under the laws of the jurisdiction in
which they are formed, and have the requisite power and authorization to own
their properties and to carry on their business as now being conducted. Each
of
the Company and its Subsidiaries is duly qualified as a foreign entity to do
business and is in good standing in every jurisdiction in which its ownership
of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect. As used in this
Agreement, "Material
Adverse Effect"
means
any material adverse effect on the business, properties, assets, operations,
results of operations, condition (financial or otherwise) or prospects of the
Company, its Subsidiaries, individually or taken as a whole, or on the
transactions contemplated hereby or in the other Transaction Documents (as
defined below) or by the agreements and instruments to be entered into in
connection herewith or therewith, or on the authority or ability of the Company
to perform its obligations under the Transaction Documents. The Company has
no
Subsidiaries, except as set forth on Schedule
3(a).
The
Company does not own any capital stock of or any equity interest in any entity
which is not a Subsidiary, except as set forth on Schedule
3(a).
-6-
(b) Authorization;
Enforcement; Validity.
Subject
to the receipt of the Capital Increase (as defined below), the Company has
the
requisite power and authority to enter into and perform its obligations under
this Agreement, the Certificate of Designations, the Warrants, the Registration
Rights Agreement, the Voting Agreements (as defined below), the Irrevocable
Transfer Agent Instructions (as defined in Section 5(b)), and each of the other
agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents")
and to
issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Securities, and the
reservation for issuance in accordance with the terms of the Transaction
Documents of (i) the Conversion Shares issuable upon conversion of the Preferred
Shares, (ii) the Dividend Shares, and (iii) the Warrant Shares issuable upon
exercise of the Warrants, have been duly authorized by the Company's board
of
directors and (other than the filing with the SEC of one or more Registration
Statements in accordance with the requirements of the Registration Rights
Agreement and any other filings as may be required by any state securities
agencies) no further filing, consent, or authorization is required by the
Company, its board of directors or its stockholders in connection therewith.
This Agreement and the other Transaction Documents of even date herewith have
been duly executed and delivered by the Company, and constitute the legal,
valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies and except as rights to indemnification and to contribution may be
limited by federal or state securities law. The Certificate of Designations
in
the form attached hereto as Exhibit
A
has been
filed with the Secretary of State of the State of Delaware and is in full force
and effect, enforceable against the Company in accordance with its terms and
has
not have been amended.
-7-
(c) Issuance
of Securities.
The
issuance of the Preferred Shares and the Warrants have been duly authorized
and
upon issuance thereof in accordance with the terms of the Transaction Documents,
the Preferred Shares and the Warrants shall be free from all taxes, liens and
charges with respect to the issue thereof, and the Preferred Shares shall be
entitled to the rights and preferences set forth in the Certificate of
Designations. As of the Closing, the Company shall have reserved from its duly
authorized Common Stock not less than 2,000,000 of the shares of its authorized
Common Stock which shall not have theretofore been issued or reserved for
issuance for other purposes. From and after receipt of the Capital Increase,
the
Company shall have reserved not less than 12,000,0000 of the shares of its
authorized Common Stock for the conversion of Preferred Shares, the issuance
of
Dividend Shares and the issuance of shares of Common Stock upon exercise of
all
of the Warrants; provided,
however,
if the
Company issues more than 10,000 Preferred Shares upon the Initial Closing and
the Additional Closing, the Company shall have reserved not less than 16,000,000
of the shares of its authorized Common Stock for the conversion of the Preferred
Shares, the issuance of the Dividend Shares and the issuance of shares of Common
Stock upon exercise of all of the Warrants. Upon issuance in accordance with
the
Certificate of Designations or exercise in accordance with the Warrants, as
the
case may be, the Conversion Shares, the Dividend Shares and the Warrant Shares,
respectively, will be validly issued, fully paid and nonassessable and free
from
all preemptive or similar rights, taxes, liens and charges with respect to
the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. Based on the representations and warranties of the
Buyers in this Agreement, the offer and issuance by the Company of the
Securities is exempt from registration under the 1933 Act.
(d) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby
and
thereby (including, without limitation, the issuance of the Preferred Shares,
the Warrants, and reservation for issuance of the Conversion Shares, the
Dividend Shares and the Warrant Shares) will not (i) result in a violation
of
the Certificate of Incorporation (as defined in Section 3(r)) of the Company
or
any of its Subsidiaries, or Bylaws (as defined in Section 3(r)) or the
Certificate of Designations of the Company or any of its Subsidiaries or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights
of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is
a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and the rules and regulations of the American Stock Exchange (the "Principal
Market")
applicable to the Company or any of its Subsidiaries or by which any property
or
asset of the Company or any of its Subsidiaries is bound or affected except,
in
the case of clause (ii) or (iii) above, to the extent such violations that
would
not reasonably be expected to have a Material Adverse Effect and except that
the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby
and
thereby shall not be deemed to be, or to result in a violation of the
Certificate of Incorporation of the Company or a conflict with, or a default
by
the Company under, any agreement, indenture or instrument to which the Company
is a party declaration by virtue of the fact that the Company must pay dividends
on its Series A-1 Preferred Stock in preference to dividends on other classes
of
its capital stock.
-8-
(e) Consents.
Except
as set forth on Schedule
3(e),
the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other Person in order for it to
execute, deliver or perform any of its obligations under or contemplated by
the
Transaction Documents, in each case in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the Closing Date, and the Company and its
Subsidiaries are unaware of any facts or circumstances which might prevent
the
Company from obtaining or effecting any of the registration, application or
filings pursuant to the preceding sentence. The Company is not in violation
of
the requirements of the Principal Market and has no knowledge of any facts
which
would reasonably lead to delisting or suspension of the Common Stock in the
foreseeable future.
(f) Acknowledgment
Regarding Buyer's Purchase of Securities.
The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company, (ii) an "affiliate" of the Company or any of its
Subsidiaries (as defined in Rule 144) or (iii) to the knowledge of the Company,
a "beneficial owner" of more than 10% of the shares of Common Stock (as such
percentage shall be calculated pursuant to Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (the "1934
Act")).
The
Company further acknowledges that no Buyer is acting as a financial advisor
to,
or fiduciary of, the Company or any of its Subsidiaries (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by a Buyer or any of
its
representatives or agents in connection with the Transaction Documents and
the
transactions contemplated hereby and thereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to each
Buyer
that the Company's decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its
representatives.
(g) No
General Solicitation; Placement Agent's Fees.
Neither
the Company, nor any of its Subsidiaries or affiliates, nor any Person acting
on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer
or
sale of the Securities. The Company shall be responsible for the payment of
any
placement agent's fees, financial advisory fees, or brokers' commissions (other
than for persons engaged by any Buyer or its investment advisor for which such
Buyer shall be solely responsible and which such Buyer agrees to promptly pay)
relating to or arising out of the transactions contemplated hereby. The Company
shall pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, attorney's fees and out-of-pocket expenses)
arising in connection with any such claim. The Company acknowledges that it
has
engaged First Albany Capital as placement agent (the "Agent")
in
connection with the sale of the Securities. Other than the Agent, neither the
Company nor any of its Subsidiaries has engaged any placement agent or other
agent in connection with the sale of the Securities.
(h) No
Integrated Offering.
None of
the Company, its Subsidiaries, any of their affiliates, and any Person acting
on
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would require registration of any of the Securities under the 1933 Act or cause
this offering of the Securities to be integrated with prior offerings by the
Company in a manner that would require registration under, or cause a violation
of, the 1933 Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated. None of the Company, its Subsidiaries, their affiliates and any
Person acting on their behalf will take any action or steps referred to in
the
preceding sentence that would require registration of any of the Securities
under the 1933 Act or cause the offering of the Securities to be integrated
with
other offerings.
-9-
(i) Dilutive
Effect.
The
Company understands and acknowledges that the number of Conversion Shares
issuable upon conversion of the Preferred Shares, and, the Warrant Shares
issuable upon exercise of the Warrants, will increase in certain circumstances.
The Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Preferred Shares in accordance with this Agreement and
the Certificate of Designations and its obligation to issue the Warrant Shares
upon exercise of the Warrants in accordance with this Agreement and the Warrants
is, in each case, absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other stockholders
of
the Company.
(j) Application
of Takeover Protections; Rights Agreement.
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, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
or the laws of the jurisdiction of its incorporation which is or could become
applicable to any Buyer as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company's issuance of the
Securities and any Buyer's ownership of the Securities. The Company has not
adopted a stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control
of
the Company. For the avoidance of any doubt, the provisions in the Certificates
of Designations, Rights and Preferences of the Series A-1 Preferred Stock and
the Series K Preferred Stock regarding the convertibility of shares of such
series of preferred stock shall not be deemed to be a plan or arrangement
relating to a change in control of the Company.
(k) SEC
Documents; Financial Statements.
During
the two (2) years prior to the date hereof, the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it
with
the SEC pursuant to the reporting requirements of the 1934 Act (all of the
foregoing filed prior to the date hereof and all exhibits included therein
and
financial statements, notes and schedules thereto and documents incorporated
by
reference therein being hereinafter referred to as the "SEC
Documents").
The
Company has delivered to the Buyers or their respective representatives true,
correct and complete copies of each of the SEC Documents not available on the
XXXXX system that have been requested by each Buyer. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they
were filed with the SEC, contained any untrue statement of a material fact
or
omitted to state a material fact required to be stated therein or necessary
in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. As of their respective dates, the
financial statements of the Company included in the SEC Documents complied
as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as in effect
as
of the time of filing. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments). No other
information provided on or behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) 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 not misleading, in the light of the circumstance under
which they are or were made.
-10-
(l) Absence
of Certain Changes.
Since
the date of the Company's most recent audited financial statements contained
in
a Form 10-K filed by the Company, there has been no material adverse change
and
no material adverse development in the business, assets, properties, operations,
condition (financial or otherwise), results of operations or prospects of the
Company. Except as disclosed in Schedule
3(l),
since
the date of the Company's most recent audited financials statements contained
in
a Form 10-K filed by the Company, neither the Company nor any of its
Subsidiaries has (i) except for dividends on its Series A-1 Preferred Stock,
declared or paid any dividends, (ii) sold any assets, individually or in the
aggregate, in excess of $100,000 outside of the ordinary course of business
or
(iii) had capital expenditures (A) in excess $500,000 individually or $6,000,000
in the aggregate during the period from July 1, 2005 to March 31, 2006 and
(B)
after February 9, 2006, in excess of the amounts permitted to be made by
Interpharm, Inc. under its Credit and Security Agreement dated as of February
9,
2006 with Xxxxx Fargo Bank, National Association ("Xxxxx
Fargo").
Neither the Company nor any of its Subsidiaries has taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company and its Subsidiaries,
individually and on a consolidated basis, are not as of the date hereof, and
after giving effect to the transactions contemplated hereby to occur at the
Closing, will not be Insolvent (as defined below). For purposes of this Section
3(l), "Insolvent"
means,
with respect to any Person (as defined in Section 3(s)) (i) the present fair
saleable value of such Person's assets is less than the amount required to
pay
such Person's total Indebtedness (as defined in Section 3(s)), (ii) such Person
is unable to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured, (iii)
such
Person intends to incur or believes that it will incur debts that would be
beyond its ability to pay as such debts mature or (iv) such Person has
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be
conducted.
(m) No
Undisclosed Events, Liabilities, Developments or Circumstances.
No
event, liability, development or circumstance has occurred or exists, or is
contemplated to occur with respect to the Company, its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form S-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
-11-
(n) Conduct
of Business; Regulatory Permits.
Neither
the Company nor its Subsidiaries is in violation of any term of or in default
under its Certificate of Incorporation, the Certificate of Designations, any
other certificate of designation, preferences or rights of any other outstanding
series of preferred stock of the Company or Bylaws or their organizational
charter or certificate of incorporation or bylaws, respectively. Neither the
Company nor any of its Subsidiaries is in violation of any judgment, decree
or
order or any statute, ordinance, rule or regulation applicable to the Company
or
its Subsidiaries, and neither the Company nor any of its Subsidiaries will
conduct its business in violation of any of the foregoing, except in all cases
for possible violations which would not, individually or in the aggregate,
have
a Material Adverse Effect. Without limiting the generality of the foregoing,
the
Company is not in violation of any of the rules, regulations or requirements
of
the Principal Market and has no knowledge of any facts or circumstances that
would reasonably lead to delisting or suspension of the Common Stock by the
Principal Market in the foreseeable future. During the two (2) years prior
to
the date hereof, (i) the Common Stock has been designated for quotation on
the
Principal Market, (ii) trading in the Common Stock has not been suspended by
the
SEC or the Principal Market and (iii) the Company has received no communication,
written or oral, from the SEC or the Principal Market regarding the suspension
or delisting of the Common Stock from the Principal Market. The Company and
its
Subsidiaries possess all certificates, authorizations and permits issued by
the
appropriate regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate,
a
Material Adverse Effect, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification
of
any such certificate, authorization or permit.
(o) 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
or any of its Subsidiaries (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign
or
domestic government official or employee.
(p) Xxxxxxxx-Xxxxx
Act.
The
Company is in compliance with any and all applicable requirements of the
Xxxxxxxx-Xxxxx Act of 2002 that are effective as of the date hereof, and any
and
all applicable rules and regulations promulgated by the SEC thereunder that
are
effective as of the date hereof.
-12-
(q)
Transactions With Affiliates.
Except
as set forth in the SEC Documents filed at least two (2) days prior to the
date
hereof and other than the grant of stock options disclosed on Schedule
3(q),
none of
the officers, directors or employees of the Company or any of its Subsidiaries
is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for ordinary course services as employees, officers
or
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 such
officer, director or employee or, to the knowledge of the Company or any of
its
Subsidiaries, any corporation, partnership, trust or other entity in which
any
such officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner.
(r) Equity
Capitalization.
As of
the date hereof, the authorized capital stock of the Company consists of (i)
70,000,000 shares of Common Stock, of which as of the date hereof, 32,463,607
are issued and outstanding and no shares are reserved for issuance pursuant
to
securities (other than the Preferred Shares and the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock, although there
are 12,756,870 options to purchase shares of Common Stock and (ii) 10,000,000
shares of preferred stock, par value $0.01 per share, 6,608,233 of which, as
of
the date hereof, are issued and outstanding. The authorized shares of preferred
stock are classified as follows: 29,233 are designated as Series A Preferred
Stock, 7,611 of which, as of the date hereof, are issued and outstanding;
5,000,000 shares are designated as Series A-1 Preferred Stock, 4,855,389 of
which, as of the date hereof, are issued and outstanding; 12,704 are designated
as Series B Preferred Stock, 1,458 of which, as of the date hereof, are issued
and outstanding; 350,000 are designated as Series C Preferred Stock, 279,208
of
which, as of the date hereof, are issued and outstanding; 105,000 are designated
as Series J Preferred Stock, none of which, as of the date hereof, are issued
and outstanding; and 3,000,000 shares are designated as Series K Preferred
Stock, 1,464,567 of which, as of the date hereof, are issued and outstanding.
All of such outstanding shares have been, or upon issuance will be, validly
issued and are fully paid and nonassessable. Except as disclosed in Schedule
3(r):
(i)
none of the Company's share capital is subject to preemptive rights or any
other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (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 exercisable or exchangeable for,
any
share capital 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 share capital 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, or exercisable or exchangeable for,
any
share capital of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness (as defined
in Section 3(s)) of the Company or any of its Subsidiaries or by which the
Company or any of its Subsidiaries is or may become bound; (iv) there are no
financing statements securing obligations in any material amounts, either singly
or in the aggregate, filed in connection with the Company or any of its
Subsidiaries; (v) 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 1933 Act (except pursuant to the Registration Rights
Agreement); (vi) there are no outstanding securities or instruments 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; (vii)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities; (viii)
the
Company does not have any stock appreciation rights or "phantom stock" plans
or
agreements or any similar plan or agreement; and (ix) the Company and its
Subsidiaries have no liabilities or obligations required to be disclosed in
the
SEC Documents but not so disclosed in the SEC Documents, other than those
incurred in the ordinary course of the Company's or its Subsidiaries' respective
businesses and which, individually or in the aggregate, do not or would not
have
a Material Adverse Effect. The Company has furnished to the Buyer true, correct
and complete 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 amended and as in effect on the date hereof (the
"Bylaws"),
and
the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof
in
respect thereto.
-13-
(s) Indebtedness
and Other Contracts.
Other
than as set forth on Schedule
3(s),
neither
the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
(as
defined below), (ii) is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument could reasonably be expected to result in
a
Material Adverse Effect, (iii) is in violation of any term of or in default
under any contract, agreement or instrument relating to any Indebtedness, except
where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company's officers, has or is expected to have a Material
Adverse Effect. Schedule
3(s)
provides
a detailed description of the material terms of any such outstanding
Indebtedness. For purposes of this Agreement: (x) "Indebtedness"
of any
Person means, without duplication (A) all indebtedness for borrowed money,
(B)
all obligations issued, undertaken or assumed as the deferred purchase price
of
property or services (including, without limitation, "capital leases" in
accordance with generally accepted accounting principles) (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and
other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, provided
that
for such purpose only the outstanding principal and accrued interest under
a
note, bond, debenture or similar instrument shall be seemed to be an obligation
even if the face of amount of such note, bond, debenture or similar instrument
shall be greater, (E) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in either
case with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale
of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable
for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses
(A)
through (G) above; (y) "Contingent
Obligation"
means,
as to any Person, any direct or indirect liability, contingent or otherwise,
of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) "Person"
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
-14-
(t) Absence
of Litigation.
Except
as set forth on Schedule
3(t),
there
is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries, the Common Stock
or
any of the Company's Subsidiaries or any of the Company's or its Subsidiaries'
officers or directors.
(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 been refused any insurance coverage sought or applied
for and neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not have a Material
Adverse Effect.
(v) Employee
Relations.
(i)
Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. To our knowledge, the Company and
its Subsidiaries believe that their relations with their employees are good.
No
executive officer (as defined in Rule 501(f) under the 0000 Xxx) of the Company
or any of its Subsidiaries has notified the Company or any such Subsidiary
that
such officer intends to leave the Company or any such Subsidiary or otherwise
terminate such officer's employment with the Company or any such Subsidiary.
No
executive officer of the Company or any of its Subsidiaries is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does
not
subject the Company or any of its Subsidiaries to any liability with respect
to
any of the foregoing matters.
(ii) The
Company and its Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting labor, employment and employment
practices and benefits, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or
in
the aggregate, reasonably be expected to result in a Material Adverse
Effect.
-15-
(w) Title.
Except
as set forth on Schedule 3(w), the Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all 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,
encumbrances and defects except such as 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 any of its Subsidiaries. Any real property
and
facilities held under lease by the Company or any of its Subsidiaries are held
by them under valid, subsisting and 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 its Subsidiaries.
(x) Intellectual
Property Rights.
The
Company and its Subsidiaries own or possess adequate rights or licenses to
use
all trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights ("Intellectual
Property Rights")
necessary to conduct their respective businesses as now conducted except where
the failure to so own or possess would not reasonably be expected to result
in a
Material Adverse Effect. Except as set forth on Schedule
3(x),
none of
the Company's or its Subsidiaries' material Intellectual Property Rights have
expired, terminated or been abandoned, or are expected to expire, terminate
or
be abandoned, within three years from the date of this Agreement. The Company
does not have any knowledge of any infringement by the Company or any of its
Subsidiaries of Intellectual Property Rights of others. There is no claim,
action or proceeding which has been made or brought, or to the knowledge of
the
Company, being threatened, against the Company or any of its Subsidiaries
regarding its Intellectual Property Rights. The Company is unaware of any facts
or circumstances which might give rise to any of the foregoing infringements
or
claims, actions or proceedings. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their Intellectual Property Rights.
(y) Environmental
Laws.
The
Company and its Subsidiaries (i) are in compliance with any and all
Environmental Laws (as hereinafter defined), (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 permit, license or approval where, in each
of
the foregoing clauses (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term "Environmental
Laws"
means
all federal, state, local or foreign laws relating to pollution or protection
of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "Hazardous
Materials") into
the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.
-16-
(z) Subsidiary
Rights.
The
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
(aa) Tax
Status.
The
Company and each of its Subsidiaries (i) has made or filed all foreign, federal
and state income and all other tax returns, reports and declarations required
by
any jurisdiction to which it is subject, (ii) 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 and (iii) has set aside on its books provision
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.
(bb) Internal
Accounting and Disclosure Controls.
Other
than as disclosed in Schedule
3(bb),
the
Company and each of its Subsidiaries maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management's
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities
at
reasonable intervals and appropriate action is taken with respect to any
difference. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-14 under the 0000 Xxx) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures designed in to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is accumulated and communicated
to
the Company's management, including its principal executive officer or officers
and its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure. Other than as disclosed in Schedule
3(bb),
during
the twelve months prior to the date hereof neither the Company nor any of its
Subsidiaries have received any notice or correspondence from any accountant
relating to any potential material weakness in any part of the system of
internal accounting controls of the Company or any of its
Subsidiaries.
(cc) Off
Balance Sheet Arrangements.
There
is no transaction, arrangement, or other relationship between the Company and
an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its 1934 Act filings and is not so disclosed or
that
otherwise would be reasonably likely to have a Material Adverse
Effect.
-17-
(dd) Investment
Company Status.
The
Company is not, and upon consummation of the sale of the Securities will not
be,
an "investment company," a company controlled by an "investment company" or
an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as such terms are defined in the Investment Company Act
of
1940, as amended.
(ee) Transfer
Taxes.
On the
Closing Date, all stock transfer or other taxes (other than income or similar
taxes) which are required to be paid in connection with the sale and transfer
of
the Securities to be sold to each Buyer hereunder will be, or will have been,
fully paid or provided for by the Company, and all laws imposing such taxes
will
be or will have been complied with.
(ff) Registration
Eligibility.
The
Company shall be eligible to register the Conversion Shares, the Dividend Shares
and the Warrant Shares for resale by the Buyers using Form S-3 promulgated
under
the 1933 Act by no later than November 22, 2006.
(gg) Manipulation
of Price.
The
Company has not, and to its knowledge no one acting on its behalf has, (i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
(hh) U.S.
Real Property Holding Corporation.
The
Company is not, nor has ever been, a U.S. real property holding corporation
within the meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company shall so certify upon Buyer's request.
(ii) ERISA.
The
Company and each Person required to be aggregated with the Company and its
Subsidiaries under Sections 414(b),(c), (m) or (o) of the Internal Revenue
Code
of 1986 (each such Person, an "ERISA
Affiliate")
is in
compliance with ERISA, except for such failures to comply that, in the
aggregate, would reasonably be expected to have an Material Adverse Effect
and
no contributions required to be made by the Company or any ERISA Affiliate
to
any pension plan are overdue. No liability to the Pension Benefit Guaranty
Corporation ("PBGC")
has
been or is expected to be incurred by the Company or any ERISA Affiliate with
respect to any pension plan that, individually or in the aggregate would
reasonably be expected to have a Material Adverse Effect. No circumstance exists
that constitutes grounds under Section 4042 of ERISA entitling the PBGC to
institute proceedings to terminate, or appoint a trustee to administer, any
pension plan or trust created thereunder, nor has the PBGC instituted any such
proceeding. Neither the Company nor any ERISA Affiliate has incurred or
presently expects to incur any withdrawal liability under Title IV of ERISA
with
respect to any multiemployer plan except for such withdrawal liability that,
in
the aggregate of all such liabilities, would not reasonably be expected to
have
a Material Adverse Effect. There have been no "reportable events" (as such
term
is defined in section 4043 of ERISA) with respect to any multiemployer plan
that
could result in the termination of such multiemployer plan and give rise to
a
liability of the Company or any ERISA Affiliate in respect thereof except for
such "reportable events" that in the aggregate, would not reasonably be expected
to have a Material Adverse Effect.
-18-
(jj) FDA.
As to
each product subject to the jurisdiction of the U.S. Food and Drug
Administration ("FDA")
under
the Federal Food, Drug and Cosmetic Act, as amended, and the regulations
thereunder ("FDCA")
that
is manufactured, packaged, labeled, tested, distributed, sold, and/or marketed
by the Company or any of its Subsidiaries (each such product, a "Pharmaceutical
Product"),
such
Pharmaceutical Product is being manufactured, packaged, labeled, tested,
distributed, sold and/or marketed by the Company in compliance with all
applicable requirements under FDCA and similar laws, rules and regulations
relating to registration, investigational use, premarket clearance, licensure,
or application approval, good manufacturing practices, good laboratory
practices, good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the failure
to
be in compliance would not have a Material Adverse Effect. There is no pending,
completed or, to the Company's knowledge, threatened, action (including any
lawsuit, arbitration, or legal or administrative or regulatory proceeding,
charge, complaint, or investigation) against the Company or any of its
Subsidiaries, and none of the Company or any of its Subsidiaries has received
any notice, warning letter or other communication from the FDA or any other
governmental entity, which (i) contests the premarket clearance, licensure,
registration, or approval of, the uses of, the distribution of, the
manufacturing or packaging of, the testing of, the sale of, or the labeling
and
promotion of any Pharmaceutical Product, (ii) withdraws its approval of,
requests the recall, suspension, or seizure of, or withdraws or orders the
withdrawal of advertising or sales promotional materials relating to, any
Pharmaceutical Product, (iii) imposes a clinical hold on any clinical
investigation by the Company or any of its Subsidiaries, (iv) enjoins production
at any facility of the Company or any of its Subsidiaries, (v) enters or
proposes to enter into a consent decree of permanent injunction with the Company
or any of its Subsidiaries, or (vi) otherwise alleges any violation of any
laws,
rules or regulations by the Company or any of its Subsidiaries, and which,
either individually or in the aggregate, would have a Material Adverse Effect.
The
properties, business and operations of the Company have been and are being
conducted in all material respects in accordance with all applicable laws,
rules
and regulations of the FDA. The Company has not been informed by the FDA
that the FDA will prohibit the marketing, sale, license or use in the United
States of any product proposed to be developed, produced or marketed by the
Company nor has the FDA expressed any concern as to approving or clearing for
marketing any product being developed or proposed to be developed by the
Company.
(kk) Disclosure.
All
disclosure provided to the Buyers regarding the Company and its Subsidiaries,
their business and the transactions contemplated hereby, including the Schedules
to this Agreement, furnished by or on behalf of the Company is true and correct
and does not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in
the
light of the circumstances under which they were made, not misleading. Each
press release issued by the Company or its Subsidiaries during the twelve (12)
months preceding the date of this Agreement did not at the time of release
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company, but which has not been so publicly announced or
disclosed.
-19-
4. COVENANTS.
(a) Reasonable
Best Efforts.
Each
party shall use its reasonable best efforts timely to satisfy each of the
conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.
(b) Form
D
and Blue Sky.
The
Company agrees to file a Form D with respect to the Securities as required
under
Regulation D and to provide a copy thereof to each Buyer promptly after such
filing. The Company shall, on or before the Closing Date, take such action
as
the Company shall reasonably determine is necessary in order to obtain an
exemption for or to qualify the Securities for sale to the Buyers at the Closing
pursuant to this Agreement under applicable securities or "Blue Sky" laws of
the
states of the United States (or to obtain an exemption from such qualification),
and shall provide evidence of any such action so taken to the Buyers on or
prior
to the Closing Date. The Company shall make all filings and reports relating
to
the offer and sale of the Securities required under applicable securities or
"Blue Sky" laws of the states of the United States following the Closing Date.
(c) Reporting
Status.
Until
the date on which the Buyers shall have sold all the Conversion Shares, Dividend
Shares and Warrant Shares, (the "Reporting
Period"),
the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would no longer require or otherwise permit such
termination, and the Company shall take all actions necessary to maintain its
eligibility to register the Conversion Shares and Warrant Shares for resale
by
the Buyers on Form S-3, it being understood that the Company is not presently
qualified to use Form S-3 for resales.
(d) Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Securities as set forth
on
Schedule
4(d),
and not
for, except as specifically set forth on Schedule
4(d),
(A)
repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries or (B) redemption or repurchase of any of its or its Subsidiaries'
equity securities.
(e) Financial
Information.
The
Company agrees to send the following to each Investor (as defined in the
Registration Rights Agreement) during the Reporting Period (i) unless the
following are filed with the SEC through XXXXX and are available to the public
through the XXXXX system, within three (3) Business Days (as defined below)
after the filing thereof with the SEC, a copy of its Annual Reports and
Quarterly Reports on Form 10-K, 10-KSB, 10-Q or 10-QSB, any interim reports
or
any consolidated balance sheets, income statements, stockholders' equity
statements and/or cash flow statements for any period other than annual, any
Current Reports on Form 8-K and any registration statements (other than on
Form
S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as
the
release thereof, facsimile copies of all press releases issued by the Company
or
any of its Subsidiaries, and (iii) copies of any notices and other information
made available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.
-20-
(f) Listing.
The
Company shall promptly secure the listing of all of the Registrable Securities
(as defined in the Registration Rights Agreement) upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock
is
then listed (subject to official notice of issuance) and shall maintain such
listing of all Registrable Securities from time to time issuable under the
terms
of the Transaction Documents. The Company shall maintain the Common Stock's
authorization for quotation on the Principal Market. Neither the Company nor
any
of its Subsidiaries shall take any action which would be reasonably expected
to
result in the delisting or suspension of the Common Stock on the Principal
Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(f).
(g) Fees.
The
Company shall reimburse Xxxxxx-Xxxxxxxxx Capital Focus III, L.P. ("TD")
or its
designee(s) (in addition to any other expense amounts paid to any Buyer prior
to
the date of this Agreement) for all reasonable costs and expenses of counsel
to
TD incurred in connection with the transactions contemplated by the Transaction
Documents and due diligence in connection therewith), which amount (provided
that an invoice for such counsel's services and professional time charges shall
be submitted to the Company at the Closing or upon termination of this
Agreement) shall be withheld by TD from its Purchase Price at the Closing or
paid by the Company upon termination of this Agreement. The Company shall be
responsible for the payment of any placement agent's fees, financial advisory
fees, or broker's commissions (other than for Persons engaged by any Buyer)
relating to or arising out of the transactions contemplated hereby, including,
without limitation, any fees payable to the Agent. The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, reasonable attorney's fees and out-of-pocket expenses)
arising in connection with any claim relating to any such payment.
(h) Pledge
of Securities.
The
Company acknowledges and agrees that the Securities may be pledged by an
Investor (as defined in the Registration Rights Agreement) in connection with
a
bona fide margin agreement or other loan or financing arrangement that is
secured by the Securities. The pledge of Securities shall not be deemed to
be a
transfer, sale or assignment of the Securities hereunder, and no Investor
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document. The Company hereby agrees
to
execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by an Investor.
(i) Disclosure
of Transactions and Other Material Information.
On or
before 8:30 a.m., New York Time, on the
fourth Business Day following the date of this Agreement, the Company shall
file
a Current Report on Form 8-K describing the terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934
Act
and attaching the material Transaction Documents (including, without limitation,
this Agreement (and all schedules to this Agreement), the form of Certificate
of
Designations, the form of Warrant, the form of Voting Agreement and the
Registration Rights Agreement) (including all attachments, the "Initial
8-K Filing").
On or
before 8:30 a.m., New York time, on the
fourth Business Day following the Closing Date, the Company shall file a Current
Report on Form 8-K describing the Closing and disclosing any previously
undisclosed material nonpublic information in the form required by the 1934
Act
and attaching any material transaction documents not previously filed as
exhibits to such filing (including all attachments, the "Final
8-K Filing",
and
collectively with the Initial 8-K Filing, the "8-K
Filings").
Neither the Company, its Subsidiaries nor any Buyer shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided,
however,
that
the Company shall be entitled, without the prior approval of any Buyer, to
make
any press release or other public disclosure with respect to such transactions
(i) in substantial conformity with the 8-K Filings and contemporaneously
therewith and (ii) as is required by applicable law and regulations (provided
that in the case of clause (i) each Buyer shall be consulted by the Company
in
connection with any such press release or other public disclosure prior to
its
release). Other than in the exhibits to the 8-K Filings, without the prior
written consent of any applicable Buyer, neither the Company nor any of its
Subsidiaries shall disclose the name of any Buyer in any filing, announcement,
release or otherwise.
-21-
(j) Additional
Registration Statements.
Except
for Registration Statements on Form S-8 covering Common Stock issued or issuable
upon exercise of options, until the Effective Date (as defined in the
Registration Rights Agreement), the Company shall not file a registration
statement under the 1933 Act relating to securities that are not the
Securities.
(k) Additional
Preferred Shares; Variable Securities; Dilutive Issuances.
So long
as any Buyer beneficially owns any Securities, the Company will not, without
the
prior written consent of Buyers holding a majority of the Preferred Shares,
issue any Preferred Shares (other than to the Buyers as contemplated hereby)
and
the Company shall not issue any other securities that would cause a breach
or
default under the Certificate of Designations or the Warrants. For so long
as
any Preferred Shares or Warrants remain outstanding, the Company shall not,
in
any manner, issue or sell any rights, warrants or options to subscribe for
or
purchase Common Stock or directly or indirectly convertible into or exchangeable
or exercisable for Common Stock at a conversion, exchange or exercise price
which varies or may vary after issuance with the market price of the Common
Stock, including by way of one or more reset(s) to any fixed price unless the
conversion, exchange or exercise price of any such security cannot be less
than
the then applicable Conversion Price with respect to the Common Stock into
which
any Preferred Shares are convertible or the then applicable Exercise Price
(as
defined in the Warrants) with respect to the Common Stock into which any Warrant
is exercisable. For so long as any Preferred Shares or Warrants remain
outstanding, the Company shall not, in any manner, enter into or affect any
dilutive issuance if the effect of such dilutive issuance is to cause the
Company to be required to issue upon conversion of any Preferred Shares or
exercise of any Warrant any shares of Common Stock in excess of that number
of
shares of Common Stock which the Company may issue upon conversion of the
Preferred Shares and exercise of the Warrants without breaching the Company's
obligations under the rules or regulations of the Principal Market.
(l) Corporate
Existence.
So long
as any Buyer beneficially owns any Securities, the Company shall not be party
to
any Fundamental Transaction (as defined in the Certificate of Designations)
unless the Company is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Certificate of Designations and the
Warrants.
-22-
(m) Reservation
of Shares.
The
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, not less than (i) prior to the Capital
Increase, 2,000,000 of the shares of its authorized Common Stock for the
conversion of Preferred Shares, the issuance of Dividend Shares and the issuance
of shares of Common Stock upon exercise of all of the Warrants and (ii) from
and
after receipt of the Capital Increase, 12,000,0000 of the shares of its
authorized Common Stock for the conversion of Preferred Shares, the issuance
of
Dividend Shares and the issuance of shares of Common Stock upon exercise of
all
of the Warrants; provided,
however,
if the
Company issues more than 10,000 Preferred Shares upon the Initial Closing and
the Additional Closing, the Company shall have reserved not less than 16,000,000
of the shares of its authorized Common Stock for the conversion of the Preferred
Shares, the issuance of the Dividend Shares and the issuance of shares of Common
Stock upon exercise of all of the Warrants.
(n) Conduct
of Business.
The
business of the Company and its Subsidiaries shall not be conducted in violation
of any law, ordinance or regulation of any governmental entity, except where
such violations would not result, either individually or in the aggregate,
in a
Material Adverse Effect.
(o) Additional
Issuances of Securities.
(i) For
purposes of this Section 4(o), the following definitions shall
apply.
(1) "Convertible
Securities"
means
any stock or securities (other than Options) convertible into or exercisable
or
exchangeable for shares of Common
Stock.
(2) "Options"
means
any rights, warrants or options to subscribe for or purchase shares of
Common
Stock or
Convertible Securities.
(3) "Common
Stock Equivalents"
means,
collectively, Options and Convertible Securities.
(ii) Other
than as set forth in Section 1(c), from the date hereof until the date that
is
thirty (30) Trading Days (as defined in the Certificate of Designations) after
the Effective Date (the "Trigger
Date"),
the
Company will not, directly or indirectly, offer, sell, grant any option to
purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition of) any of its or its Subsidiaries'
equity or equity equivalent securities, including without limitation any debt,
preferred stock or other instrument or security that is, at any time during
its
life and under any circumstances, convertible into or exchangeable or
exercisable for shares of Common Stock or Common Stock Equivalents (any such
offer, sale, grant, disposition or announcement being referred to as a
"Subsequent
Placement").
(iii)
From the
date hereof until no Securities are outstanding, the Company will not, directly
or indirectly, effect any Subsequent Placement unless (x) such Subsequent
Placement is not structured in any manner to avoid the application of this
Section 4(o)(iii) and (y) the Company shall have first complied with this
Section 4(o)(iii).
-23-
(1) The
Company shall deliver to each Buyer a written notice (the "Offer
Notice")
of any
proposed or intended issuance or sale or exchange (the "Offer")
of the
securities being offered (the "Offered
Securities")
in a
Subsequent Placement, which Offer Notice shall (x) describe the price and
other terms upon which they are to be issued, sold or exchanged, and the number
or amount of the Offered Securities to be issued, sold or exchanged,
(y) identify the persons or entities (if known) to which or with which the
Offered Securities are to be offered, issued, sold or exchanged and (z) offer
to
issue and sell to or exchange with such Buyers a pro rata portion of 100% of
the
Offered Securities allocated among such Buyers (a) based on such Buyer's pro
rata portion of the aggregate number of Preferred Shares purchased hereunder
(the "Basic
Amount"),
and
(b) with respect to each Buyer that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic Amounts
of other Buyers as such Buyer shall indicate it will purchase or acquire should
the other Buyers subscribe for less than their Basic Amounts (the "Undersubscription
Amount").
(2) To
accept
an Offer, in whole or in part, such Buyer must deliver a written notice to
the
Company prior to the end of the seventh (7th)
Business Day after such Buyer's receipt of the Offer Notice (the "Offer
Period"),
setting forth the portion of such Buyer's Basic Amount that such Buyer elects
to
purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the "Notice
of Acceptance").
If
the Basic Amounts subscribed for by all Buyers are less than the total of all
of
the Basic Amounts, then each Buyer who has set forth an Undersubscription Amount
in its Notice of Acceptance shall be entitled to purchase, in addition to the
Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
for; provided,
however,
that if
the Undersubscription Amounts subscribed for exceed the difference between
the
total of all the Basic Amounts and the Basic Amounts subscribed for (the
"Available
Undersubscription Amount"),
each
Buyer who has subscribed for any Undersubscription Amount shall be entitled
to
purchase only that portion of the Available Undersubscription Amount as the
Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers that
have subscribed for Undersubscription Amounts, subject to rounding by the
Company to the extent its deems reasonably necessary. Notwithstanding the
foregoing, if the Company desires to modify or amend the terms and conditions
of
the Offer prior to the expiration of the Offer Period, the Company may deliver
to the Buyers a new Offer Notice and the Offer Period shall expire on the
seventh (7th)
Business Day after such Buyer's receipt of such new Offer Notice.
(3) The
Company shall have forty-five (45) Business Days from the expiration of the
Offer Period above (i) to offer, issue, sell or exchange all or any part of
such
Offered Securities as to which a Notice of Acceptance has not been given by
the
Buyers (the "Refused
Securities")
pursuant to a definitive agreement(s) (the "Subsequent
Placement Agreement"),
but
only to the offerees described in the Offer Notice (if so described therein)
and
only upon terms and conditions (including, without limitation, unit prices
and
interest rates) that are not more favorable to the acquiring person or persons
or less favorable to the Company than those set forth in the Offer Notice and
(ii) to publicly announce the execution of such Subsequent Placement Agreement
and file a Current Report on Form 8-K with respect thereto. Thereafter, within
four Business Days of the occurrence of such event, the Company shall publicly
announce either (x) the consummation of the transactions contemplated by such
Subsequent Placement Agreement or (y) the termination of such Subsequent
Placement Agreement, and file a Current Report on Form 8-K and any documents
contemplated therein to be filed as exhibits thereto with respect to such
event.
-24-
(4) In
the
event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section
4(o)(iii)(3) above), then each Buyer may, at its sole option and in its sole
discretion, reduce the number or amount of the Offered Securities specified
in
its Notice of Acceptance to an amount that shall be not less than the number
or
amount of the Offered Securities that such Buyer elected to purchase pursuant
to
Section 4(o)(iii)(2) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to Section 4(o)(iii)(3) above prior to such
reduction) and (ii) the denominator of which shall be the original amount of
the
Offered Securities. In the event that any Buyer so elects to reduce the number
or amount of Offered Securities specified in its Notice of Acceptance, the
Company may not issue, sell or exchange more than the reduced number or amount
of the Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(o)(iii)(1)
above.
(5) Upon
the
closing of the issuance, sale or exchange of all or less than all of the Refused
Securities, the Buyers shall acquire from the Company, and the Company shall
issue to the Buyers, the number or amount of Offered Securities specified in
the
Notices of Acceptance, as reduced pursuant to Section 4(o)(iii)(4) above if
the
Buyers have so elected, upon the terms and conditions specified in the Offer.
The purchase by the Buyers of any Offered Securities is subject in all cases
to
the preparation, execution and delivery by the Company and the Buyers of a
purchase agreement relating to such Offered Securities reasonably satisfactory
in form and substance to the Buyers and their respective counsel.
(6) Any
Offered Securities not acquired by the Buyers or other persons in accordance
with Section 4(o)(iii)(3) above may not be issued, sold or exchanged until
they
are again offered to the Buyers under the procedures specified in this
Agreement.
(7) The
Company and the Buyers agree that if any Buyer elects to participate in the
Offer, (x) neither the Subsequent Placement Agreement with respect to such
Offer
nor any other transaction documents related thereto (collectively, the
"Subsequent
Placement Documents")
shall
include any term or provisions whereby any Buyer shall be required to agree
to
any restrictions in trading as to any securities of the Company owned by such
Buyer prior to such Subsequent Placement, and (y) any registration rights set
forth in such Subsequent Placement Documents shall be similar in all material
respects to the registration rights contained in the Registration Rights
Agreement.
(8) Notwithstanding
anything to the contrary in this Section 4(o) and unless otherwise agreed to
by
the Buyers, the Company shall either confirm in writing to the Buyers that
the
transaction with respect to the Subsequent Placement has been abandoned or
shall
publicly disclose its intention to issue the Offered Securities, in either
case
in such a manner such that the Buyers will not be in possession of material
non-public information, by the tenth (10th)
Business Day following delivery of the Offer Notice. If by the tenth
(10th)
Business Day following delivery of the Offer Notice no public disclosure
regarding a transaction with respect to the Offered Securities has been made,
and no notice regarding the abandonment of such transaction has been received
by
the Buyers, such transaction shall be deemed to have been abandoned and the
Buyers shall not be deemed to be in possession of any material, non-public
information with respect to the Company. Should the Company decide to pursue
such transaction with respect to the Offered Securities, the Company shall
provide each Buyer with another Offer Notice and each Buyer will again have
the
right of participation set forth in this Section 4(o)(iii). The Company shall
not be permitted to deliver more than one such Offer Notice to the Buyers in
any
60 day period.
-25-
(iv) The
restrictions contained in subsections (ii) and (iii) of this Section 4(o) shall
not apply in connection with the issuance of any Excluded Securities (as defined
below). "Excluded
Securities"
means
any Common Stock issued or issuable by the Company: (A) in connection with
any
employee benefit plan, which has been approved by the Board of Directors of
the
Company, pursuant to which the Company's securities may be issued to any
employee, officer, consultant or director for services provided to the Company;
(B) upon issuance of the Preferred Shares or Dividend Shares or upon conversion
of the Preferred Shares or upon exercise of the Warrants; (C) pursuant to a
bona
fide underwritten public offering at a price per share of Common Stock not
less
than the Conversion Price in effect at the time of such offering, with a
nationally recognized underwriter and which generates gross proceeds to the
Company of at least $15,000,000 (other than an "at-the-market offering" as
defined in Rule 415(a)(4) under the 1933 Act and "equity lines"); (D) issued
upon exercise of Options (as defined in the Certificate of Designations) or
Convertible Securities (as defined in the Certificate of Designations) which
are
outstanding on the date immediately preceding the date of this Agreement,
provided that such issuance of Common Stock upon exercise of such Options or
Convertible Securities is made pursuant to the terms of such Options or
Convertible Securities in effect on the date immediately preceding date of
this
Agreement and such Options or Convertible Securities are not amended after
the
date immediately preceding the date of this Agreement; and (E)
issued in connection with any share split, share dividend, recapitalization
or
similar transaction by the Company which would trigger an adjustment of the
Conversion Price under the terms of the Certificate of Designation.
(p) Stockholder
Approval.
The
Company shall provide each stockholder entitled to vote at a special or annual
meeting of stockholders of the Company (the "Stockholder
Meeting"),
which
initially shall be promptly called and held not later than December 1, 2006
(the
"Stockholder
Meeting Deadline"),
a
proxy statement, substantially in the form which has been previously reviewed
by
the Buyers and a counsel of their choice at the expense of the Company,
soliciting each such stockholder's affirmative vote at the Stockholder Meeting
for approval of resolutions (the "Resolutions")
providing for an increase in the number of authorized shares of Common Stock
to
not less than 150,000,000 shares of Common Stock (the "Capital
Increase")
(such
affirmative
approval being referred to herein as the "Stockholder
Approval"
and the
date such approval is obtained, the "Stockholder
Approval Date"),
and
the Company shall use its reasonable best efforts to solicit its stockholders'
approval of the Resolutions and to cause the Board to recommend to the
stockholders that they approve the Resolutions. The Company shall be obligated
to seek to obtain the Stockholder Approval by the Stockholder Meeting Deadline.
If, despite the Company's reasonable best efforts, the Stockholder Approval
is
not obtained on or prior to the Stockholder Meeting Deadline, the Company shall
cause an additional Stockholder Meeting to be held every three (3) months
thereafter until such Stockholder Approval is obtained.
-26-
(q) Indemnification
of Board Nominee.
The
Company shall provide any Person nominated by TD to sit on the Company's Board
of Directors (the "TD
Nominee")
with
indemnification protection to the same extent as is provided to the members
of
the Company's Board of Directors as of the date hereof or at any time in the
future. To the extent required to accomplish the foregoing, the Company shall
obtain an amendment of its Directors' and Officers' insurance policy to add
the
TD Nominee as a covered person under such policy.
5. REGISTER;
TRANSFER AGENT INSTRUCTIONS.
(a) Register.
The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Preferred Shares and the Warrants in which
the
Company shall record the name and address of the Person in whose name the
Preferred Shares and the
Warrants have been issued (including the name and address of each transferee),
the number of Preferred Shares held by such Person, the number of Conversion
Shares issuable upon conversion of the Preferred Shares and Warrant Shares
issuable upon exercise of the Warrants held by such Person. The Company shall
keep the register open and available at all times during business hours for
inspection of any Buyer or its legal representatives.
(b) Transfer
Agent Instructions.
Provided that the Preferred Shares are converted into Common Stock in accordance
with the terms of the Certificate of Designations and/or the Warrants are
properly exercised in accordance with their terms, the Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates or credit shares to the applicable balance accounts
at The Depository Trust Company ("DTC"),
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares, and the Warrant Shares in
such
amounts as specified from time to time by each Buyer to the Company upon
conversion of the Preferred Shares or exercise of the Warrants in the form
of
Exhibit
D
attached
hereto (the "Irrevocable
Transfer Agent Instructions").
The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer instructions
to
give effect to Section 2(f) hereof, will be given by the Company to its transfer
agent with respect to the Securities, and that the Securities shall otherwise
be
freely transferable on the books and records of the Company, as applicable,
and
to the extent provided in this Agreement and the other Transaction Documents.
If
a Buyer effects a sale, assignment or transfer of the Securities in accordance
with Section 2(f), the Company shall permit the transfer and shall promptly
instruct its transfer agent to issue one or more certificates or credit shares
to the applicable balance accounts at DTC in such name and in such denominations
as specified by such Buyer to effect such sale, transfer or assignment. In
the
event that such sale, assignment or transfer involves Conversion Shares and
Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or pursuant to Rule 144, the transfer agent shall issue
such Securities to the Buyer, assignee or transferee, as the case may be,
without any restrictive legend. The Company acknowledges that a breach by it
of
its obligations hereunder will cause irreparable harm to a Buyer. Accordingly,
the Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5(b) will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this Section 5(b),
that
a Buyer 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.
-27-
6. CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL.
(a) Initial
Closing.
The
obligation of the Company hereunder to issue and sell the Initial Preferred
Shares and
the
related Initial Warrants to each Buyer at the Initial Closing is subject to
the
satisfaction, at or before the Initial Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
(i) Such
Buyer shall have executed each of the Transaction Documents to which it is
a
party and delivered the same to the Company.
(ii) Such
Buyer and each other Buyer shall have delivered to the Company the Initial
Purchase Price (less, in the case of TD, the amount withheld pursuant to Section
4(g)) for the Initial Preferred Shares and the related Initial
Warrants being
purchased by such Buyer at the Initial Closing by wire transfer of immediately
available funds pursuant to the wire instructions provided by the
Company.
(iii) The
representations and warranties of such Buyer shall be true and correct in all
material respects as of the date when made and as of the Initial Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the Initial Closing Date.
(b) Additional
Closing.
The
obligation of the Company hereunder to issue and sell the Additional Preferred
Shares and
the
related Additional Warrants to each Buyer at the Additional Closing is subject
to the satisfaction, at or before the Additional Closing Date, of each of the
following conditions, provided that these conditions are for the Company's
sole
benefit and may be waived by the Company at any time in its sole discretion
by
providing each Buyer with prior written notice thereof:
(i) Such
Buyer shall have executed each of the Transaction Documents to which it is
a
party and delivered the same to the Company.
(ii) Such
Buyer and each other Buyer shall have delivered to the Company the Additional
Purchase Price for the Additional Preferred Shares and the related Additional
Warrants being
purchased by such Buyer at the Additional Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by the
Company.
(iii) The
representations and warranties of such Buyer shall be true and correct in all
material respects as of the date when made and as of the Additional Closing
Date
as though made at that time (except for representations and warranties that
speak as of a specific date), and such Buyer shall have performed, satisfied
and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the Additional Closing Date.
-28-
7. CONDITIONS
TO EACH BUYER'S OBLIGATION TO PURCHASE.
(a) Initial
Closing.
The
obligation of each Buyer hereunder to purchase the Initial Preferred
Shares and
the
related Initial Warrants at the Initial Closing is subject to the satisfaction,
at or before the Initial Closing Date, of each of the following conditions,
provided that these conditions are for each Buyer's sole benefit and may be
waived by such Buyer at any time in its sole discretion by providing the Company
with prior written notice thereof:
(i) The
Company shall have duly executed and delivered to such Buyer (A) each of
the Transaction Documents and (B) the Initial Preferred Shares (in such numbers
as is set forth across from such Buyer's name in column (3) of the Schedule
of
Buyers and
the
related Initial Warrants (in such numbers as is set forth across from such
Buyer's name in column (4) of the Schedule of Buyers) being purchased by such
Buyer at the Initial Closing pursuant to this Agreement.
(ii) Such
Buyer shall have received the opinion of Guzov Ofsink, LLC, the Company's
outside counsel, dated as of the Initial Closing Date, in substantially the
form
of Exhibit
E
attached
hereto.
(iii) The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit
D
attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(iv) The
Company shall have delivered to such Buyer a long-form certificate evidencing
the formation and good standing of the Company and each of its Subsidiaries
in
each such entity's jurisdiction of formation issued by the Secretary of State
(or equivalent) of such jurisdiction of formation as of a date within ten (10)
days of the Initial Closing Date.
(v) The
Company shall have delivered to such Buyer a certificate evidencing the
Company's qualification as a foreign corporation and good standing issued by
the
Secretary of State (or comparable office) of each jurisdiction in which the
Company conducts business and is required to so qualify, as of a date within
10
days of the Initial Closing Date.
(vi) The
Company shall have delivered to such Buyer a certified copy of the Certificate
of Incorporation as certified by the Secretary of State of the State of Delaware
within ten (10) days of the Initial Closing Date.
(vii) The
Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the Initial Closing Date, as to (i)
the
resolutions consistent with Section 3(b) as adopted by the Company's board
of
directors in a form reasonably acceptable to such Buyer, (ii) the Certificate
of
Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
form attached hereto as Exhibit
F.
-29-
(viii) The
representations and warranties of the Company shall be true and correct as
of
the date when made and as of the Initial Closing Date as though made at that
time (except for representations and warranties that speak as of a specific
date) and the Company shall have performed, satisfied and complied in all
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Initial Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated
as of
the Initial Closing Date, to the foregoing effect and as to such other matters
as may be reasonably requested by such Buyer in the form attached hereto as
Exhibit
G.
(ix) The
Company shall have delivered to such Buyer 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 Initial Closing Date.
(x) The
Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Initial Closing Date,
by the SEC or the Principal Market from trading on the Principal Market nor
shall suspension by the SEC or the Principal Market have been threatened, as
of
the Closing Date, either (A) in writing by the SEC or the Principal Market
or
(B) by falling below the minimum maintenance requirements of the Principal
Market.
(xi) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities.
(xii) The
Certificate of Designations in the form attached hereto as Exhibit
A
shall
have been filed with the Secretary of State of the State of Delaware and shall
be in full force and effect, enforceable against the Company in accordance
with
its terms and shall not have been amended.
(xiii) The
Company shall have delivered to such Buyer duly executed Voting Agreements,
in
the form attached hereto as Exhibit
H
(the
"Voting
Agreements").
(xiv) The
conversion of all shares of the Company's Series A Preferred Stock, Series
A-1
Preferred Stock, Series B Preferred Stock and Series K Preferred Stock shall
have occurred pursuant to documentation previously reviewed by, and reasonably
acceptable to, such Buyer and evidence thereof from the transfer agent for
the
Common Stock shall have been provided.
(xv) No
event
or events shall have occurred since the date hereof that, taken individually
or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect.
(xvi) The
Closing Sale Price (as defined in the Certificate of Designations) of the Common
Stock immediately preceding execution of this Agreement shall not exceed $1.75.
(xvii) The
Company shall have delivered to such Buyer a copy of the Amendment to the Credit
Agreement between the Company and Xxxxx Fargo in which Xxxxx Fargo shall agree
to exempt at least $3,000,000 of the proceeds to the Company from the sale
of
the Preferred Shares and the Warrants from the scope of the liens on the
Company's assets held by Xxxxx Fargo (the "Initial
Exemption").
-30-
(xviii) No
more
and no less than 10,000 Initial Preferred Shares shall be issued at the Initial
Closing.
(xix) The
Company shall have delivered to such Buyer such other documents relating to
the
transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request.
(b) Additional
Closing.
The
obligation of each Buyer hereunder to purchase the Additional Preferred
Shares and
the
related Additional Warrants at each Additional Closing is subject to the
satisfaction, at or before the applicable Additional Closing Date, of each
of
the following conditions, provided that these conditions are for each Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion
by providing the Company with prior written notice thereof:
(i) The
Company shall have duly executed and delivered to such Buyer (A) each of
the Transaction Documents and (B) the Additional Preferred Shares (in such
numbers as is set forth across from such Buyer's name in column (3) of the
Schedule of Buyers and
the
related Warrants (in such numbers as is set forth across from such Buyer's
name
in column (4) of the Schedule of Buyers) being purchased by such Buyer at the
applicable Additional Closing pursuant to this Agreement.
(ii) Such
Buyer shall have received the opinion of Guzov Ofsink, LLC, the Company's
outside counsel, dated as of the Additional Closing Date, in substantially
the
form of Exhibit
E
attached
hereto.
(iii) The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit
D
attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(iv) The
Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company and each of its Subsidiaries in
each
such entity's jurisdiction of formation issued by the Secretary of State (or
equivalent) of such jurisdiction of formation as of a date within ten (10)
days
of the applicable Additional Closing Date.
(v) The
Company shall have delivered to such Buyer a certificate evidencing the
Company's qualification as a foreign corporation and good standing issued by
the
Secretary of State (or comparable office) of each jurisdiction in which the
Company conducts business and is required to so qualify, as of a date within
10
days of the applicable Additional Closing Date.
-31-
(vi) The
Company shall have delivered to such Buyer a certified copy of the Certificate
of Incorporation as certified by the Secretary of State of the State of Delaware
within ten (10) days of the applicable Additional Closing Date.
(vii) The
Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the applicable Additional Closing
Date,
as to (i) the resolutions consistent with Section 3(b) as adopted by the
Company's board of directors in a form reasonably acceptable to such Buyer,
(ii)
the Certificate of Incorporation and (iii) the Bylaws, each as in effect at
the
applicable Additional Closing Date, in the form attached hereto as Exhibit
F.
(viii) The
representations and warranties of the Company shall be true and correct as
of
the date when made and as of the applicable Additional Closing Date as though
made at that time (except for representations and warranties that speak as
of a
specific date) and the Company shall have performed, satisfied and complied
in
all respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the applicable Additional Closing Date. Such Buyer shall have
received a certificate, executed by the Chief Executive Officer of the Company,
dated as of the applicable Additional Closing Date, to the foregoing effect
and
as to such other matters as may be reasonably requested by such Buyer in the
form attached hereto as Exhibit
G.
(ix) The
Company shall have delivered to such Buyer 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 applicable Additional Closing Date.
(x) The
Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Additional Closing
Date, by the SEC or the Principal Market from trading on the Principal Market
nor shall suspension by the SEC or the Principal Market have been threatened,
as
of the Closing Date, either (A) in writing by the SEC or the Principal Market
or
(B) by falling below the minimum maintenance requirements of the Principal
Market.
(xi) The
Company shall have delivered to such Buyer a copy of the Amendment to the Credit
Agreement between the Company and Xxxxx Fargo in which Xxxxx Fargo shall agree
to exempt in addition to the Initial Exemption $1,000,000 of the proceeds to
the
Company from the sale of the Preferred Shares and the Warrants from the scope
of
the liens on the Company's assets held by Xxxxx Fargo; provided, however, that
such a separate Amendment to the Credit Agreement shall not be required if
the
Amendment to Credit Agreement delivered pursuant to Section 7(a)(xvii) shall
have exempted an aggregate of $4,000,000 of the proceeds to the Company from
sales of Preferred Shares and Warrants made at the Initial Closing and the
Additional Closing collectively from the scope of the liens on the Company’s
assets held by Xxxxx Fargo.
(xii) The
Certificate of Designations shall be in full force and effect, enforceable
against the Company in accordance with its terms and shall not have been
amended.
-32-
(xiii) No
event
or events shall have occurred since the date hereof that, taken individually
or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect.
(xiv) The
Company shall have delivered to such Buyer such other documents relating to
the
transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request.
8. TERMINATION.
In
the
event that the Initial Closing shall not have occurred with respect to a Buyer
on or before five (5) Business Days from the date hereof due to the Company's
or
such Buyer's failure to satisfy the conditions set forth in Sections 6 and
7
above (and the nonbreaching party's failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on
such
date without liability of any party to any other party; provided, however,
if
this Agreement is terminated pursuant to this Section 8, the Company shall
remain obligated to reimburse the non-breaching Buyers for the expenses
described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing
Law; Jurisdiction; Jury Trial.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, 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 brought in an
inconvenient forum or that the venue of 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 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 WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
(b) Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
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;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if
the
signature were an original, not a facsimile signature.
-33-
(c) Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement; Amendments.
This
Agreement and the other Transaction Documents supersede all other prior oral
or
written agreements between the Buyers, the Company, their affiliates and Persons
acting on their behalf with respect to the matters discussed herein, and this
Agreement, the other Transaction Documents and the instruments referenced herein
and therein contain the entire understanding of the parties with respect to
the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of
this Agreement may be amended other than by an instrument in writing signed
by
the Company and the holders of at least a majority of the Preferred Shares
issued and issuable hereunder, and any amendment to this Agreement made in
conformity with the provisions of this Section 9(e) shall be binding on all
Buyers and holders of Securities, as applicable. No provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the Preferred Shares then
outstanding. No consideration shall be offered or paid to any Person to amend
or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration also is offered to all of the parties
to
the Transaction Documents, holders of Preferred Shares or holders of the
Warrants, as the case may be. The Company has not, directly or indirectly,
made
any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth
in
the Transaction Documents. Without limiting the foregoing, the Company confirms
that, except as set forth in this Agreement, no Buyer has made any commitment
or
promise or has any other obligation to provide any financing to the Company
or
otherwise.
(f) 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),
provided that notice of conversion of Preferred Shares or of exercise of
Warrants may not be given by facsimile; or (iii) one Business Day after deposit
with an overnight courier service, in each case properly addressed to the party
to receive the same. The addresses and facsimile numbers for such communications
shall be:
-34-
If
to the
Company:
Interpharm
Holdings, Inc.
00
Xxxxx
Xxxxxx
Xxxxxxxxx,
Xxx Xxxx 00000
Telephone:
(000)
000-0000
Facsimile:
(000)
000-0000
Attention:
Xxxxxx
Xxxxxxx
With
a
copy (for informational purposes only) to:
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Telephone:
(000)
000-0000, Extension 102
Facsimile:
(000)
000-0000
Attention:
Xxxxxx
X.
Xxxxxx, Esq.
If
to the
Transfer Agent:
North
American Transfer Agent
000
Xxxx
Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx,
Xxx Xxxx 00000
Telephone:
(000)
000-0000
Facsimile:
(000)
000-0000
Attention:
Xxxxxxx
Xxxxxxxxx
If
to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
with copies to such Buyer's representatives as set forth on the Schedule of
Buyers,
with
a
copy (for informational purposes only) to:
Xxxxxxx
Xxxx & Xxxxx LLP
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxxxxx
X. Xxxxx, Esq.
or
to
such other address and/or facsimile number and/or to the attention of such
other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by an
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including any purchasers of the
Preferred Shares or the Warrants. The Company shall not assign this Agreement
or
any rights or obligations hereunder without the prior written consent of the
holders of at least a majority of the aggregate number of Registrable Securities
issued and issuable hereunder, including by way of a Fundamental Transaction
(unless the Company is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Certificate of Designations and the
Warrants). A Buyer may assign some or all of its rights hereunder in connection
with transfer of any of its Securities without the consent of the Company,
in
which event such assignee shall be deemed to be a Buyer hereunder with respect
to such assigned rights.
-35-
(h) 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.
(i) Survival.
Unless
this Agreement is terminated under Section 8, the representations and warranties
of the Company and the Buyers contained in Sections 2 and 3 and the agreements
and covenants set forth in Sections 4, 5 and 9 shall survive the Closing. Each
Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.
(j) 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 any 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.
(k) Indemnification.
In
consideration of each Buyer's execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of
the
Company's other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each other holder
of
the Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons' agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees")
from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnified
Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to
(a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents, (b) any breach of any covenant, agreement
or obligation of the Company contained in the Transaction Documents or (c)
any
cause of action, suit or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf
of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status
of
such Buyer or holder of the Securities as an investor in the Company pursuant
to
the transactions contemplated by 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. Except as otherwise set forth herein, the mechanics and procedures with
respect to the rights and obligations under this Section 9(k) shall be the
same
as those set forth in Section 6 of the Registration Rights
Agreement.
-36-
(l) No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
(m) Remedies.
Each
Buyer and each holder of the Securities shall have all rights and remedies
set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract
and
all of the rights which such holders have under any law. Any Person having
any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or all
of
its obligations under the Transaction Documents, any remedy at law may prove
to
be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek temporary and permanent injunctive relief in any
such
case without the necessity of proving actual damages and without posting a
bond
or other security.
(n) Payment
Set Aside.
To the
extent that the Company makes a payment or payments to the Buyers hereunder
or
pursuant to any of the other Transaction Documents or the Buyers 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 to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under any
law
(including, without limitation, any bankruptcy law, foreign, 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.
(o) Independent
Nature of Buyers' Obligations and Rights.
The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under
any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall
be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers
are
in any way acting in concert or as a group with respect to such obligations
or
the transactions contemplated by the Transaction Documents and the Company
acknowledges that the Buyers are not acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each Buyer shall be entitled to independently protect
and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not
be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.
-37-
[Signature
Page Follows]
-38-
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
|
COMPANY:
INTERPHARM
HOLDINGS, INC.
|
||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
|
BUYERS:
XXXXXX-XXXXXXXXX
CAPITAL FOCUS III, L.P.
|
||
| |
|
|
| By: Xxxxxx-Xxxxxxxxx Partners III, L.L.C., its general partner | ||
| By: | ||
|
Name: Xxxx X. Xxxxxxxxxx |
||
| Title: Principal | ||
SCHEDULE
OF BUYERS
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
|||||
|
Buyer
|
Address
and Facsimile Number
|
Aggregate
Number of Preferred Shares
|
Aggregate
Number of Warrants
|
Purchase
Price
|
Legal
Representative's
Address
and Facsimile Number
|
|||||
|
Xxxxxx-Xxxxxxxxx
Capital Focus III, L.P.
|
c/o
Xxxxxx-Xxxxxxxxx Partners III, L.L.C.
Two
Greenwich Plaza, 4th Fl.
Xxxxxxxxx,
XX 00000
Attn:
Xxxx X. Xxxxxxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Residence:
cc:
Xxxxxx Xxxxxx
Two
Greenwich Plaza, 4th Fl.
Xxxxxxxxx,
XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
and
Xxxxxxx
X. Xxxxxx
0
Xxxxxx Xxxx Xxxx
Xxxxx
Xxxxxx Xxxxx, XX 00000
|
10,000
|
2,296,889
|
$10,000,000
|
Xxxxxxx
Xxxx & Xxxxx LLP
000
Xxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxxx Xxxxx, Esq.
Facsimile:
(000) 000-0000
Telephone:
(000) 000-0000
|
EXHIBITS
| Exhibit A | Form of Certificate of Designations | |
| Exhibit B | Form of Warrants | |
| Exhibit C | Form of Registration Rights Agreement | |
| Exhibit D | Form of Irrevocable Transfer Agent Instructions | |
| Exhibit E | Form of Outside Company Counsel Opinion | |
| Exhibit F | Form of Secretary's Certificate | |
| Exhibit G | Form of Officer's Certificate | |
| Exhibit H | Form of Voting Agreement |
