Exhibit 1.2
-----------
COMMON STOCK PURCHASE AGREEMENT
DATED AS OF FEBRUARY 6, 2001
BY AND BETWEEN
COLUMBIA LABORATORIES, INC.
AND
ACQUA WELLINGTON
NORTH AMERICAN EQUITIES FUND, LTD.
TABLE OF CONTENTS
Page
----
ARTICLE I Definitions..............................................................................1
Section 1.1 Definitions............................................................................1
ARTICLE II Purchase and Sale of Common Stock........................................................3
Section 2.1 Purchase and Sale of Stock.............................................................3
Section 2.2 The Shares.............................................................................4
Section 2.3 Purchase Price and Closing.............................................................4
ARTICLE III Representations and Warranties...........................................................4
Section 3.1 Representations and Warranties of the Company..........................................4
Section 3.2 Representations and Warranties of the Purchaser.......................................10
ARTICLE IV Covenants...............................................................................11
Section 4.1 Securities Compliance.................................................................11
Section 4.2 Registration and Listing..............................................................11
Section 4.3 Registration Statement................................................................12
Section 4.4 Compliance with Laws..................................................................12
Section 4.5 Keeping of Records and Books of Account...............................................12
Section 4.6 Reporting Requirements................................................................12
Section 4.7 Non-public Information................................................................12
Section 4.8 Effective Registration Statement......................................................12
Section 4.9 No Stop Orders........................................................................13
Section 4.10 Amendments to the Registration Statement..............................................13
Section 4.11 Prospectus Delivery...................................................................13
Section 4.12 Other Financing.......................................................................14
Section 4.13 Notices...............................................................................14
ARTICLE V Conditions to Closing, Draw Downs and Call Options......................................14
Section 5.1 Conditions Precedent to the Issuance of a Draw Down Notice............................14
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to Close......................15
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to Accept a Draw
Down Notice and Purchase the Shares................................................16
ARTICLE VI Draw Down Terms; Call Option............................................................18
Section 6.1 Draw Down Terms.......................................................................18
Section 6.2 Purchaser's Call Option...............................................................20
-i-
ARTICLE VII Termination.............................................................................21
Section 7.1 Termination by Mutual Consent.........................................................21
Section 7.2 Other Termination.....................................................................21
Section 7.3 Effect of Termination.................................................................21
ARTICLE VIII Indemnification.........................................................................21
Section 8.1 General Indemnity.....................................................................21
Section 8.2 Indemnification Procedures............................................................23
ARTICLE IX Miscellaneous...........................................................................24
Section 9.1 Fees and Expenses.....................................................................24
Section 9.2 Specific Enforcement, Consent to Jurisdiction.........................................24
Section 9.3 Entire Agreement; Amendment...........................................................25
Section 9.4 Notices...............................................................................25
Section 9.5 Waivers...............................................................................26
Section 9.6 Headings..............................................................................26
Section 9.7 Successors and Assigns................................................................26
Section 9.8 Governing Law.........................................................................26
Section 9.9 Survival..............................................................................26
Section 9.10 Counterparts..........................................................................26
Section 9.11 Publicity.............................................................................26
Section 9.12 Severability..........................................................................27
Section 9.13 Further Assurances....................................................................27
-ii-
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
February 6, 2001 by and between Columbia Laboratories, Inc., a Delaware
corporation (the "Company"), and Acqua Wellington North American Equities Fund,
Ltd., a limited liability company organized under the laws of the Commonwealth
of The Bahamas (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.1 Definitions.
(a) "Alternate Market" shall mean the Nasdaq National Market,
the Nasdaq Small Cap Market, the New York Stock Exchange or the OTC Bulletin
Board, whichever is at the time the principal trading exchange or market for the
Common Stock.
(b) "Bylaws" shall have the meaning assigned to such term in
Section 3.1(c) hereof.
(c) "Call Option" shall have the meaning assigned to such term
in Section 6.2(a) hereof.
(d) "Call Option Amount" means the actual amount of proceeds
received by the Company upon the exercise of a Call Option by the Purchaser.
(e) "Charter" shall have the meaning assigned to such term in
Section 3.1(c) hereof.
(f) "Closing" shall have the meaning assigned to such term in
Section 2.3 hereof.
(g) "Closing Date" shall have the meaning assigned to such
term in Section 2.3 hereof.
(h) "Commission" shall mean the Securities and Exchange
Commission.
(i) "Commission Documents" shall mean all reports, schedules,
forms, statements and other documents required to be filed by the Company with
the Commission pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act,
and including all filings made by the Company after the date hereof pursuant to
the Exchange Act.
(j) "Commission Filings" means the Registration Statement and
any other filings made by the Company pursuant to the Securities Act, including
all filings made by the Company after the date hereof pursuant to the Securities
Act.
(k) "Common Stock" shall have the meaning assigned to such
term in Section 2.1 hereof.
(l) "Draw Down" means the exercise by the Company of its right
to request the purchase of shares of Common Stock by the Purchaser.
(m) "Draw Down Amount" means the actual amount of a Draw Down
up to $6,000,000 in any Draw Down Pricing Period or such other amount mutually
agreed upon by the Purchaser and the Company.
(n) "Draw Down Discount Percentage" means (i) 93% if the
Threshold Price is equal to or greater than $3.00 but less than $6.00, (ii)
93.5% if the Threshold Price is equal to or greater than $6.00 but less than
$10.00, (iii) 94% if the Threshold Price is equal to or greater than $10.00 but
less than $13.00, (iv) 94.5% if the Threshold Price is equal to or greater than
$13.00 but less than $16.00, and (v) 95% if the Threshold Price is equal to or
greater than $16.00.
(o) "Draw Down Exercise Date" shall mean the date of issuance
of a Draw Down Notice by the Company.
(p) "Draw Down Notice" shall have the meaning assigned to such
term in Section 6.1(i) hereof.
(q) "Draw Down Pricing Period" shall mean a period of twenty
(20) consecutive Trading Days commencing on the first Trading Day designated as
the start date of such draw down pricing period in the Draw Down Notice, or such
other period mutually agreed upon by the Purchaser and the Company.
(r) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission promulgated
thereunder.
(s) "Investment Period " shall have the meaning assigned to
such term in Section 7.1 hereof.
(t) "Material Adverse Effect" shall mean any effect on the
business, results of operations, prospects, assets or financial condition of the
Company that is material and adverse to the Company and its Subsidiaries and
affiliates, taken as a whole and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement in any
material respect.
(u) "Material Change in Ownership" shall mean that, as of any
particular measurement date, Xxxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxxxxxx shall
beneficially own in the aggregate less than 5% of the outstanding Common Stock
of the Company, except that for purposes of making any such calculation, Common
-2-
Stock issued to the Purchaser pursuant to this Agreement shall not be included
in such calculation.
(v) "Prospectus" shall mean the prospectus in the form
included in the Registration Statement, as supplemented by any Prospectus
Supplement
(w) "Prospectus Supplement" shall mean any prospectus
supplement to the Registration Statement filed with the Commission pursuant to
Rule 424(b).
(x) "Registration Statement" shall mean the registration
statement on Form S-3, Commission File Number 333-38230 under the Securities
Act, filed with the Commission for the registration of the Shares, as such
Registration Statement may be amended from time to time.
(y) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated thereunder.
(z) "Settlement Date" shall have the meaning assigned to such
term in Section 6.1(d) hereof.
(aa) "Shares" shall mean the shares of Common Stock of the
Company that may be purchased hereunder.
(bb) "Subsidiary" shall mean any corporation or other entity
of which at least a majority of the securities or other ownership interest
having ordinary voting power (absolutely or contingently) for the election of
directors or other persons performing similar functions are at the time owned
directly or indirectly by the Company and/or any of its other Subsidiaries.
(cc) "Threshold Price" is the lowest price the Company may set
in the Draw Down Notice to sell Shares during a Draw Down Pricing Period (not
taking into account the Draw Down Discount Percentage during such Draw Down
Pricing Period).
(dd) "Trading Day" shall mean a day on which the Common Stock
is traded on the American Stock Exchange or an Alternate Market.
(ee) "VWAP" shall mean the daily volume weighted average price
(based on a Trading Day from 9:30 a.m. to 4:00 p.m., eastern time) of the Common
Stock of the Company on the American Stock Exchange or an Alternate Market as
reported by Bloomberg Financial LP using the AQR function.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
SECTION 2.1 Purchase and Sale of Stock. Subject to the terms
and conditions of this Agreement, the Company shall issue and sell to the
Purchaser and the Purchaser shall purchase from the Company up to $20,000,000 of
its Common Stock, $.01 par value per share (the "Common Stock"), based on Draw
-3-
Downs, in accordance with Section 6.1 hereof, of up to $6,000,000 in any Draw
Down Pricing Period and Call Options, in accordance with Section 6.2 hereof, of
up to the Draw Down Amount for the applicable Draw Down Pricing Period that the
Company may grant to the Purchaser in the Company's sole discretion.
SECTION 2.2 The Shares. The Company has authorized and has
reserved and covenants to continue to reserve, subject to Section 4.4(b) hereof,
free of preemptive rights and other similar contractual rights of stockholders,
a sufficient number of its authorized but unissued shares of its Common Stock to
cover the Shares to be issued in connection with all Draw Downs and Call
Options.
SECTION 2.3 Purchase and Closing. The Company agrees to issue
and sell to the Purchaser and, in consideration of and in express reliance upon
the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchaser, agrees to purchase that number of the Shares to be
issued in connection with each Draw Down and each Call Option exercised by the
Purchaser. The closing of the execution and delivery of this Agreement shall
occur upon delivery by facsimile of executed signature pages of this Agreement
and all other document, instruments and writings required to be delivered
pursuant to this Agreement to the offices of Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx
LLP, The Chrysler Building, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000 (the
"Closing") at 10:00 a.m., eastern time, on (i) February 6, 2001, or (ii) such
other time and place or on such date as the Purchaser and the Company may agree
upon (the "Closing Date"). Each party shall deliver all documents, instruments
and writings required to be delivered by such party pursuant to this Agreement
at or prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. The
Company hereby makes the following representations and warranties to the
Purchaser:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and has the requisite corporate power to own, lease and operate
its properties and assets and to conduct its business as it is now being
conducted. The Company and each Subsidiary is duly qualified to do business and
is in good standing as a foreign corporation in every jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction in which the failure to be
so qualified and in good standing will not have a Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and to issue and sell the Shares in accordance with the terms
hereof. The execution, delivery and performance of this Agreement by the Company
and the consummation by it of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action, and, except as
-4-
contemplated by Section 4.4(b), no further consent or authorization of the
Company or its Board of Directors or stockholders is required. This Agreement
has been duly executed and delivered by the Company. This Agreement constitutes,
or shall constitute when executed and delivered, a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor's rights and remedies or by other equitable principles of general
application.
(c) Capitalization. The authorized capital stock of the
Company and the shares thereof issued and outstanding as of the date hereof are
set forth on Schedule 3.1(c) attached hereto. All of the outstanding shares of
the Common Stock have been duly and validly authorized, and are fully paid and
non-assessable. Except as set forth in this Agreement including Schedule 3.1(c)
or as disclosed in the Commission Documents, as of the date hereof no shares of
Common Stock are entitled to preemptive rights or registration rights and there
are no outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement including Schedule 3.1(c) or as disclosed
in the Commission Documents, as of the date hereof there are no contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the Company or
options, securities or rights convertible into shares of capital stock of the
Company. Except for customary transfer restrictions contained in agreements
entered into by the Company in order to sell restricted securities, as set forth
in Schedule 3.1(c) or as disclosed in the Commission Documents, as of the date
hereof, the Company is not a party to any agreement granting registration rights
to any person with respect to any of its equity or debt securities. The Company
is not a party to, and it has no knowledge of, any agreement restricting the
voting or transfer of any shares of the capital stock of the Company. The offer
and sale of all capital stock, convertible securities, rights, warrants, or
options of the Company issued prior to the Closing complied with all applicable
federal and state securities laws, and no stockholder has a right of rescission
or damages with respect thereto which would have a Material Adverse Effect. The
Company has furnished or made available to the Purchaser true and correct copies
of the Company's Certificate of Incorporation as in effect on the date hereof
(the "Charter"), and the Company's Bylaws as in effect on the date hereof (the
"Bylaws").
(d) Issuance of Shares. The Shares to be issued under this
Agreement have been duly authorized by all necessary corporate action and, when
paid for and issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding, fully paid and non-assessable, and the Purchaser
shall be entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated herein do not (i) violate any provision of the
Company's Charter or Bylaws, (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to which the
-5-
Company is a party, (iii) create or impose a lien, charge or encumbrance on any
property of the Company under any agreement or any commitment to which the
Company is a party or by which the Company is bound or by which any of its
respective properties or assets are bound, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or any of its Subsidiaries or by which any property or asset of
the Company or any of its Subsidiaries are bound or affected, except, in all
cases (other than violations pursuant to clauses (i) and (iv) (to the extent of
federal securities law)), for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The Company is
not required under federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement, or issue and sell the Shares in
accordance with the terms hereof (other than any filings which may be required
to be made by the Company with the Commission, or the American Stock Exchange
and, any registration statement which may be filed pursuant hereto); provided
that, for purpose of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Purchaser herein.
(f) Commission Documents, Financial Statements. The Common
Stock of the Company is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and since March 31, 2000, the Company has timely filed all
Commission Documents. The Company has made available to the Purchaser true and
complete copies of the Commission Documents filed with the Commission since
March 31, 2000 and prior to the Closing Date. The Company has not provided to
the Purchaser any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company but which has not
been so disclosed, other than with respect to the transactions contemplated by
this Agreement. The Form 10-K for the year ended December 31, 1999 complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and the said Form 10-K
as of the date filed did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the Commission Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission or other applicable rules and regulations with respect thereto.
Such financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements), and fairly present in all material respects the financial
position of the Company and its Subsidiaries as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
(g) Subsidiaries. The Commission Documents or Schedule 3.1(g)
attached hereto set forth each Subsidiary of the Company as of the date hereof,
showing the jurisdiction of its
-6-
incorporation or organization and showing the percentage of each person's
ownership of the outstanding stock or other interests of such Subsidiary. Except
as set forth in the Commission Documents or the Commission Filings, none of such
Subsidiaries is a "significant subsidiary" as defined in Regulation S-X.
(h) No Material Adverse Effect. Except as disclosed in the
Commission Documents, since September 30, 2000, the Company has not experienced
or suffered any Material Adverse Effect.
(i) No Undisclosed Liabilities. Except as disclosed in the
Commission Documents, the Company has no liabilities, obligations, claims or
losses (whether liquidated or unliquidated, secured or unsecured, absolute,
accrued, contingent or otherwise) that would be required to be disclosed on a
balance sheet of the Company or any Subsidiary (including the notes thereto) in
conformity with GAAP, other than those incurred in the ordinary course of the
Company's or its Subsidiaries respective businesses since September 30, 2000 and
other than those which, individually or in the aggregate, do not or would not be
reasonably expected to have a Material Adverse Effect.
(j) No Undisclosed Events or Circumstances. Except as
disclosed in the Commission Documents, no event or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
businesses, properties, prospects, operations or financial condition, 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 and which, individually or in the aggregate, do or would be reasonably
expected to have a Material Adverse Effect.
(k) Intentionally Omitted.
(l) Title to Assets. Each of the Company and its Subsidiaries
has good and marketable title to all of its real and personal property reflected
in the Commission Documents, free of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those indicated in the
Commission Documents or the Commission Filings or such that could not reasonably
be expected to cause a Material Adverse Effect. All said leases of the Company
and each of its Subsidiaries are valid and subsisting and in full force and
effect in all material respects.
(m) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company which questions the validity of this Agreement or
the transactions contemplated hereby or any action taken or to be taken pursuant
hereto. Except as disclosed in the Commission Documents, there is no action,
suit, claim, investigation or proceeding pending or, to the knowledge of the
Company, threatened, against or involving the Company or any Subsidiary, or any
of their respective properties or assets which, if adversely determined, is
reasonably likely to result in a Material Adverse Effect.
(n) Compliance with Law. The business of the Company has been
and is presently being conducted in accordance with all applicable federal,
state and local governmental laws,
-7-
rules, regulations and ordinances, except such that do not cause a Material
Adverse Effect. Each of the Company and its Subsidiaries has all franchises,
permits, licenses, consents and other governmental or regulatory authorizations
and approvals necessary for the conduct of its business as now being conducted
unless the failure to possess such franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(o) Certain Fees. No brokers, finders or financial advisory
fees or commissions will be payable by the Company with respect to the
transactions contemplated by this Agreement.
(p) Disclosure. To the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company in
connection with the transactions contemplated by this Agreement contain any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements made herein or therein, in the light of the
circumstances under which they were made herein or therein, not misleading.
(q) Operation of Business. The Company or its Subsidiaries
owns or has a valid right to use all patents, trademarks, service marks, trade
names, copyrights, licenses and authorizations as set forth in the Commission
Documents or the Commission Filings and all rights with respect to the
foregoing, which are necessary for the conduct of its business as now conducted
without any conflict with the rights of others, except to the extent set forth
in the Commission Documents or the Commission Filings or except as would not
reasonably be expected to have a Material Adverse Effect.
(r) Intentionally Omitted.
(s) Material Agreements. Except as set forth in the Commission
Documents and this Agreement, the Company is not a party to any written or oral
contract, instrument, agreement, commitment, obligation, plan or arrangement, a
copy of which would be required to be filed with the Commission as an exhibit to
a registration statement on Form S-1 or applicable form (collectively, "Material
Agreements") if the Company was registering securities under the Securities Act.
The Company has in all material respects performed all the obligations required
to be performed by it to date under the foregoing agreements, has received no
notice of default and, to the best of the Company's knowledge is not in default
under any Material Agreement now in effect, the result of which could reasonably
be expected to cause a Material Adverse Effect.
(t) Intentionally Omitted.
(u) Securities Act of 1933. The Company has complied in all
material respects with all applicable federal and state securities laws in
connection with the offer, issuance and sale of the Shares hereunder.
(i) Each Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Securities Act, complied when so filed
in all material respects with the
-8-
provisions of the Securities Act. The Commission has not issued any order
preventing or suspending the use of any Prospectus.
(ii) The Company meets the requirements for the use of
Form S-3 under the Securities Act. The Registration Statement in the form in
which it became effective and also in such form as it may be when any
post-effective amendment thereto became effective and the Prospectus and any
supplement or amendment thereto when filed with the Commission under Rule 424(b)
under the Securities Act, complied in all material respects with the provisions
of the Securities Act and did not at any such times contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
Prospectus, in the light of the circumstances under which they made) not
misleading, except that this representation and warranty does not apply to
statements in or omissions from the Registration Statement or the Prospectus
made in reliance upon and in conformity with information relating to the
Purchaser furnished to the Company in writing by or on behalf of the Purchaser
expressly for use therein.
(iii) The Company has not distributed and, prior to the
completion of the sale of the Shares to the Purchaser, will not distribute any
offering material in connection with the offering and sale of the Shares other
than the Registration Statement, the Prospectus or other materials, if any,
permitted by the Securities Act.
(v) Employees. As of the date hereof, the Company has no
collective bargaining arrangements or agreements covering any of its employees.
As of the date hereof, since March 31, 2000, no officer, consultant or key
employee of the Company whose termination, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company.
(w) Use of Proceeds. The proceeds from the sale of the Shares
will be used by the Company and its Subsidiaries for general corporate purposes.
(x) Public Utility Holding Company Act and Investment Company
Act Status. The Company is not a "holding company" or a "public utility company"
as such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(y) ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan (as defined below) by the
Company which is or would have a Material Adverse Effect. The execution and
delivery of this Agreement and the issue and sale of the Shares will not involve
any transaction which is subject to the prohibitions of Section 406 of ERISA or
in connection with which a tax could be imposed pursuant to Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code"), provided that, if any of
the Purchaser, or any person or entity that owns a beneficial interest in any of
the Purchaser, is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a "party in
interest" (within the meaning of Section 3(14) of ERISA), the requirements of
-9-
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this
Section 3.1(y), the term "Plan" shall mean an "employee pension benefit plan"
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
by any trade or business, whether or not incorporated, which, together with the
Company, is under common control, as described in Section 414(b) or (c) of the
Code.
(z) Acknowledgment Regarding Purchaser's Purchase of Shares.
The Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Purchaser's purchase of the
Shares.
SECTION 3.2 Representations and Warranties of the Purchaser.
The Purchaser hereby makes the following representations and warranties to the
Company:
(a) Organization and Standing of the Purchaser. The Purchaser
is a limited liability company duly organized, validly existing and in good
standing under the laws of the Commonwealth of the Bahamas.
(b) Authorization and Power. The Purchaser has the requisite
corporate power and authority to enter into and perform this Agreement and to
purchase the Shares in accordance with the terms hereof. The execution, delivery
and performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or stockholders is required. This Agreement has been duly
executed and delivered by the Purchaser. This Agreement constitutes, or shall
constitute when executed and delivered, a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of
this Agreement and the consummation by the Purchaser of the transactions
contemplated hereby and thereby or relating hereto do not and will not (i)
result in a violation of such Purchaser's charter documents or bylaws 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 material agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Purchaser is a party, (iii) create or
impose a lien, charge or encumbrance on any property of the Purchaser under any
agreement or any commitment to which the Purchaser is party or by which the
Purchaser is or by which any of its properties or assets are bound or (iv)
result in a violation of any law, rule, or regulation, or any order, judgment or
decree of any court or governmental agency applicable to the Purchaser or its
-10-
properties, except for such conflicts, defaults and violations as would not,
individually or in the aggregate, prohibit or otherwise interfere with the
ability of the Purchaser to enter into and perform its obligations under this
Agreement in any material respect. The Purchaser is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or to purchase the Shares in accordance
with the terms hereof, provided that for purposes of the representation made in
this sentence, the Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
(d) Information. The Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Shares which have been requested by the Purchaser. The Purchaser and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. The Purchaser 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 Shares. Purchaser understands that it (and not the
Company) shall be responsible for its own tax liabilities that may arise as a
result of this investment or the transactions contemplated by this Agreement.
(e) Selling Restrictions. The Purchaser has the right to sell
the Shares during the Investment Period. The Purchaser covenants, however, that
prior to and during the Investment Period, neither the Purchaser nor any of its
affiliates nor any entity managed by the Purchaser will ever sell the Shares of
the Company other than what the Purchaser has accumulated under the terms of
this Agreement or in any accounts directly or indirectly managed by the
Purchaser or any affiliate of the Purchaser or any entity managed by the
Purchaser.
(f) Purchaser Information. All information contained in the
written materials furnished by the Purchaser to the Company for use in the
Registration Statement, the Prospectus or the Prospectus Supplement is true and
correct in all material respects.
ARTICLE IV
COVENANTS
The Company covenants with the Purchaser as follows, which covenants
are for the benefit of the Purchaser and its permitted assignees, that during
the term of this Agreement:
SECTION 4.1 Securities Compliance. The Company shall notify
the Commission and the American Stock Exchange or an Alternate Market, if
applicable, in accordance with their rules and regulations, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Shares to the Purchaser or
subsequent holders.
SECTION 4.2 Registration and Listing. The Company will take
all action necessary to cause its Common Stock to continue to be registered
under Sections 12(b) or 12(g) of the Exchange Act, will comply in all respects
with its reporting and
-11-
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company will take all action
necessary to continue the listing or trading of its Common Stock and the listing
of the Shares purchased by Purchaser hereunder on the American Stock Exchange or
an Alternate Market and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
American Stock Exchange or an Alternate Market.
SECTION 4.3 Registration Statement. Before the Company shall
issue a Draw Down Notice, the Company shall have caused a sufficient number of
shares of Common Stock to be authorized and registered to cover the Shares to be
issued in connection with this Agreement.
SECTION 4.4 Exchange Act Rules. The Company will not be
obligated to issue and the Purchaser will not be obligated to purchase any
shares of the Common Stock which would result in the issuance under this
Agreement of more than nineteen and nine-tenths percent (19.9%) of the issued
and outstanding shares of the Common Stock on the date hereof, unless such
issuance has been duly approved by the shareholders of the Company.
SECTION 4.5 Keeping of Records and Books of Account. The
Company shall keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied, reflecting
all financial transactions of the Company and its Subsidiaries, and in which,
for each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.
SECTION 4.6 Reporting Requirements. Upon request, the Company
shall furnish or make available the following to the Purchaser so long as such
Purchaser shall be obligated hereunder to purchase Shares:
(a) Quarterly Reports filed with the Commission on Form 10-Q
as soon as available, and in any event within forty-five (45) days after the end
of each of the first three fiscal quarters of the Company; and
(b) Annual Reports filed with the Commission on Form 10-K as
soon as available, and in any event within ninety (90) days after the end of
each fiscal year of the Company.
SECTION 4.7 Non-public Information. Neither the Company nor
any of its officers or agents shall disclose any material non-public information
about the Company to the Purchaser and neither the Purchaser nor any of its
affiliates, officers or agents will solicit any material non-public information
from the Company.
SECTION 4.8 Effective Registration Statement. The Company will
keep the Registration Statement continuously effective during the Investment
Period.
-12-
SECTION 4.9 No Stop Orders. The Company will advise the
Purchaser promptly and, if requested by the Purchaser, will confirm such advice
in writing: (i) of its receipt of notice of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prospectus or
for additional information; (ii) of its receipt of notice of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such purpose;
and (iii) of its becoming aware of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Securities Act or the regulations thereunder to be stated therein or
necessary in order to make the statements therein not misleading, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Securities Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make all reasonable efforts to obtain
the withdrawal of such order at the earliest possible time.
SECTION 4.10 Amendments to the Registration Statement. The
Company will not (i) file any amendment to the Registration Statement or make
any amendment or supplement to the Prospectus which relates to the Purchaser,
this Agreement and the transactions contemplated hereby of which the Purchaser
shall not previously have been advised or to which the Purchaser shall
reasonably object after being so advised or (ii) so long as, in the reasonable
opinion of counsel for the Purchaser, a Prospectus is required to be delivered
in connection with any purchase of Shares by the Purchaser, file any
information, documents or reports pursuant to the Exchange Act without
delivering a copy of such information, documents or reports to the Purchaser
(unless such information, documents or reports are available through XXXXX),
promptly following such filing.
SECTION 4.11 Prospectus Delivery. The Company shall file with
the Commission a Prospectus Supplement on the first Trading Day immediately
following the end of each Draw Down Pricing Period, and will deliver to the
Purchaser, without charge, in such quantities as reasonably requested by the
Purchaser, copies of each form of Prospectus and Prospectus Supplement on each
Settlement Date. The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the
Securities Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares may be sold by the Purchaser, in connection with the offering
and sale of the Shares and for such period of time thereafter as the Prospectus
is required by the Securities Act to be delivered in connection with sales of
the Shares. If during such period of time any event shall occur that in the
judgment of the Company or in the opinion of counsel for the Purchaser is
required to be set forth in the Prospectus (as then amended or supplemented) or
should be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus to comply with the Securities
Act or any other law, the Company will forthwith prepare and, subject to the
provisions of Section 4.10 above, file with the Commission an appropriate
supplement or
-13-
amendment thereto, and will expeditiously furnish to the Purchaser a reasonable
number of copies thereof.
SECTION 4.12 Other Financing. If the Company enters into any
other financing agreement, the primary purpose of which would be to obtain
equity financing for the Company (an "Other Financing"), during the Investment
Period, the Company shall promptly notify the Purchaser of such Other Financing.
If the Company enters into an Other Financing during a Draw Down Pricing Period,
the Purchaser shall have the options set forth in Section 6.1(k) hereof. If the
Company enters into an Other Financing between Draw Down Pricing Periods, the
Purchaser shall have the option, which option shall be exercised no later than
five (5) Trading Days after receipt by the Purchaser of the notice of the Other
Financing, to purchase up to the Draw Down Amount that would be applicable under
this Agreement based on the price per share to be paid for the Common Stock in
the Other Financing on the same, absolute terms and conditions contemplated in
the Other Financing. If the Purchaser does not exercise its purchase option in
writing before 8:00 p.m. (eastern time) on the fifth (5th) Trading Day after
receipt of such notice, the Company shall not be obligated to sell shares of the
Common Stock to the Purchaser under the terms of the preceding sentence and the
Company shall have the right to close the Other Financing on the scheduled
closing date with a third party, provided that all of the terms and conditions
of such closing are similar in all material respects to those provided to the
Purchaser. As used herein, "Other Financing" shall not include the Company (i)
entering into a loan, credit or lease facility with a bank or financing
institution (including any equity component thereof), (ii) establishing an
employee stock option plan or agreement (iii) issuing shares of Common Stock in
connection with the Company's current option plans (as the same may be amended
from time to time), stock purchase plans, rights plans, currently outstanding
warrants or options, or increase the number of shares available under any such
plans (the primary purpose of which is not to raise equity), and (iv) issuing
shares of Common Stock or options or warrants exercisable therefor and/or
preferred stock in connection with the formation and maintenance of strategic
partnerships, alliances or joint ventures, the acquisition of products, licenses
or other assets or as consideration for services rendered to the Company (each a
"Permitted Transaction").
SECTION 4.13 Notices. The Company shall immediately notify the
Purchaser that (i) a Material Adverse Effect or Material Change in Ownership has
occurred or (ii) the Company has entered into an Other Financing (as defined in
Section 4.12 hereof).
ARTICLE V
CONDITIONS TO CLOSING, DRAW DOWNS AND CALL OPTIONS
SECTION 5.1 Conditions Precedent to the Issuance of a Draw
Down Notice. The issuance by the Company of a Draw Down Notice, and its
obligation thereby to sell the Shares to the Purchaser, is subject to the
satisfaction or waiver, at or before each Draw Down Exercise Date and Settlement
Date, as applicable, of each of the conditions set forth below. These conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion.
-14-
(a) Accuracy of the Purchaser's Representations and
Warranties. The representations and warranties of the Purchaser in this
Agreement shall be true and correct in all material respects as of the date when
made and as of each Draw Down Exercise Date and Settlement Date, as applicable,
as though made at that time, except for representations and warranties that are
expressly made as of a particular date.
(b) Registration Statement. The Company shall have Shares
registered under the Registration Statement which are valued on the Draw Down
Exercise Date and Settlement Date, as applicable, in an amount equal to or in
excess of the dollar amount value of the Shares issuable pursuant to such Draw
Down Notice or Call Option. The Registration Statement registering the offer and
sale of the Shares shall have been declared effective by the Commission on or
prior to each Draw Down Exercise Date and Settlement Date, as applicable,, and
there shall be no stop order suspending the effectiveness of the Registration
Statement.
(c) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to each Draw Down Exercise Date
and Settlement Date, as applicable.
(d) No Injunction. No statute, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Suspension, Etc. Trading in the Common Stock shall not
have been suspended by the Commission or the American Stock Exchange or an
Alternate Market (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to such
Draw Down Exercise Date and Settlement Date, as applicable).
(f) No Proceedings or Litigation. No action, suit or
proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been
threatened, against the Company, or any of the officers, directors or affiliates
of the Company seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.
SECTION 5.2 Conditions Precedent to the Obligation of the
Purchaser to Close. The obligation hereunder of the Purchaser to enter this
Agreement is subject to the satisfaction or waiver, at or before the Closing, of
each of the conditions set forth below. These conditions are for the Purchaser's
sole benefit and may be waived by the Purchaser at any time in its sole
discretion.
(a) Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing
Date, as though made at that time, except for representations and warranties
that speak as of a particular date.
-15-
(b) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing.
(c) Effective Registration Statement. The Registration
Statement registering the offer and sale of the Shares shall have been declared
effective by the Commission on or prior to the Closing Date and there shall be
no stop order suspending the effectiveness of the Registration Statement.
(d) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(e) No Proceedings or Litigation. No action, suit or
proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been
threatened, against the Company, or any of the officers, directors or affiliates
of the Company seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.
(f) Opinion of Counsel, Etc. At the Closing, the Purchaser
shall have received an opinion of counsel to the Company, dated the Closing
Date, in the form of Exhibit A hereto, a secretary's certificate, dated the
Closing Date, in the form of Exhibit B hereto, and such other certificates and
documents as the Purchaser or its counsel shall reasonably require incident to
the Closing.
SECTION 5.3 Conditions Precedent to the Obligation of the
Purchaser to Accept a Draw Down Notice and Purchase the Shares. The obligation
hereunder of the Purchaser to accept a Draw Down Notice and to acquire and pay
for the Shares on any Settlement Date is subject to the satisfaction or waiver,
at or before each Draw Down Exercise Date and each Settlement Date, as
applicable, of each of the conditions set forth below. The conditions are for
the Purchaser's sole benefit and may be waived by the Purchaser at any time in
its sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Draw
Down Exercise Date and Settlement Date, as applicable, as though made at that
time, except for representations and warranties that speak as of a particular
date.
(b) Registration Statement. The Company shall have Shares
registered under the Registration Statement which are valued on the Draw Down
Exercise Date in an amount equal to or in excess of the dollar amount value of
the Shares issuable pursuant to such Draw Down Notice or Call Option. The
Registration Statement registering the offer and sale of the Shares shall have
been declared effective by the Commission and shall have been supplemented, as
-16-
required, to disclose the sale of the Shares prior to each Draw Down Exercise
Date or each Settlement Date, as applicable, and there shall be no stop order
suspending the effectiveness of the Registration Statement.
(c) No Suspension, Etc. Trading in the Common Stock shall not
have been suspended by the Commission or the American Stock Exchange or an
Alternate Market (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to each
Draw Down Exercise Date), and, on or as of the Draw Down Exercise Date or
applicable Settlement Date or during the applicable Draw Down Pricing Period,
trading in securities generally as reported by the American Stock Exchange or an
Alternate Market shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported by the
American Stock Exchange or an Alternate Market, nor shall a banking moratorium
have been declared either by the United States or New York State authorities,
nor shall there have occurred any material outbreak or escalation of hostilities
or other national or international calamity or crisis of such magnitude in its
effect on, or any material adverse change in any financial market which, in each
case, in the judgment of the Purchaser, makes it impracticable or inadvisable to
purchase the Shares. The Common Stock shall be listed on the American Stock
Exchange or an Alternate Market.
(d) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Draw Down Exercise Date and
the Settlement Date and shall have delivered the Compliance Certificate
substantially in the form attached hereto as Exhibit C.
(e) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(f) No Proceedings or Litigation. No action, suit or
proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been
threatened, against the Company, or any of the officers, directors or affiliates
of the Company seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.
(g) No Material Adverse Effect; No Material Change in
Ownership. No Material Adverse Effect or Material Change in Ownership shall have
occurred.
(h) No Termination. The Purchaser has not terminated this
Agreement pursuant to Section 7.2 hereof.
-17-
ARTICLE VI
DRAW DOWN TERMS; CALL OPTION
SECTION 6.1 Draw Down Terms. Subject to the satisfaction of
the conditions set forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue a Draw
Down Notice with respect to a Draw Down during each Draw Down Pricing Period of
up to (i) $1,000,000 if the Threshold Price is equal to or greater than $3.00
and less than $4.00, and (ii) an additional $250,000 for every $1.00 increase in
the Threshold Price above $3.00 up to a maximum Draw Down Amount of $6,000,000;
provided, however, that the Company may, in its sole discretion, issue a Draw
Down Notice with respect to any Draw Down Amount at any Threshold Price or any
Draw Down Discount Percentage pursuant to terms mutually agreed upon by the
Purchaser and the Company, which Draw Down the Purchaser will be obligated to
accept. Prior to issuing any Draw Down Notice, the Company shall have Shares
registered under the Registration Statement which are valued in a dollar amount
equal to or in excess of the Draw Down Amount.
(b) The number of Shares to be issued in connection with each
Draw Down shall be equal to the sum of the quotients (for each Trading Day of
the Draw Down Pricing Period for which the VWAP equals or exceeds the Threshold
Price) of (x) 1/20th (or such other fraction the denominator of which equals the
number of Trading Days during the Draw Down Pricing Period) of the Draw Down
Amount divided by (y) the applicable Draw Down Discount Percentage multiplied by
the VWAP of the Common Stock for such Trading Day.
(c) Only one Draw Down shall be allowed in each Draw Down
Pricing Period.
(d) The number of Shares purchased by the Purchaser with
respect to each Draw Down shall be determined on a daily basis during each Draw
Down Pricing Period and settled on the second Trading Day following the end of
each Draw Down Pricing Period (the "Settlement Date").
(e) There shall be a minimum of five (5) Trading Days between
Draw Downs, unless otherwise mutually agreed upon between the Purchaser and the
Company.
(f) There shall be a maximum of twenty (20) monthly Draw Downs
during the term of this Agreement.
(g) Each Draw Down will expire on the end of the last Trading
Day of each Draw Down Pricing Period.
(h) If the VWAP on a given Trading Day is less than the
Threshold Price, then the total amount of the Draw Down for the relevant Draw
Down Pricing Period will be reduced by 1/20th (or such other fraction the
denominator of which equals the number of Trading Days during the Draw Down
Pricing Period and such Trading Day shall not be considered in determining the
number of Shares to be issued pursuant to clause (b) above). At no time shall
the Threshold Price be set below $3.00, unless mutually agreed
-18-
upon by the Company and the Purchaser. If trading in the Common Stock is
suspended for any reason for more than three (3) hours in any Trading Day, at
the Purchaser's option, the price of the Common Stock shall be deemed to be
below the Threshold Price for that Trading Day and the Draw Down for the
relevant Draw Down Pricing Period shall be reduced by 1/20th (or such other
fraction the denominator of which equals the number of Trading Days during the
Draw Down Pricing Period). Notwithstanding anything in the foregoing to the
contrary, for each Trading Day during the Draw Down Pricing Period that the VWAP
is less than the Threshold Price or is deemed to be below the Threshold Price
pursuant to the immediately preceding sentence, the Purchaser may elect in its
sole discretion to purchase Shares at a price equal to the Threshold Price
multiplied by the Draw Down Discount Percentage at the end of such Draw Down
Pricing Period. The Purchaser will inform the Company via facsimile transmission
no later than 8:00 p.m. (eastern time) on the last Trading Day of such Draw Down
Pricing Period as to the number of Shares, if any, the Purchaser chooses to
purchase under such circumstances set forth in this Section 6.1(h).
(i) The Company must inform the Purchaser via facsimile
transmission before 9:30 a.m. (eastern time) on the first Trading Day of the
Draw Down Pricing Period in substantially in the form attached hereto as Exhibit
D (the "Draw Down Notice") of the Draw Down Amount the Company wishes to
exercise. In addition to the Draw Down Amount, the Company shall set the
Threshold Price with each Draw Down Notice and shall designate the first Trading
Day of the Draw Down Pricing Period. Notwithstanding anything in the foregoing
to the contrary, if the Company wishes the Draw Down Exercise Date to be the
first day of the Draw Down Pricing Period, the Draw Down Notice must be
delivered to the Purchaser and receipt of such Draw Down Notice confirmed by the
Purchaser prior to 9:30 a.m. (eastern time) on the date of such Draw Down
Exercise Date.
(j) On each Settlement Date, the Company shall deliver the
Shares purchased by the Purchaser to the Purchaser or to The Depositary Trust
Company ("DTC") on the Purchaser's behalf via the Deposit Withdrawal Agent
Commission system ("DWAC"), and upon receipt of the Shares, the Purchaser shall
cause payment therefor to be made to the account designated by the Company by
wire transfer of immediately available funds provided that the Shares are
received no later than 1:00 p.m., eastern time, or next day available funds if
the Shares are received thereafter.
(k) If during any Draw Down Pricing Period the Company shall
enter into an Other Financing (other than shares of Common Stock issued under
this Agreement or pursuant to a Permitted Transaction), the Purchaser may in its
sole discretion (i) purchase the Draw Down Amount of shares of Common Stock
and/or exercise Call Options granted during such Draw Down Pricing Period on the
terms at which the Company issued shares of Common Stock in the Other Financing
during such Draw Down Pricing Period, net of any third party's discount and
fees, (ii) purchase the Draw Down Amount of shares of Common Stock and/or
exercise Call Options granted during such Draw Down Pricing Period at the
applicable Draw Down Discount Percentage times the VWAP for such Draw Down
Pricing Period, or (iii) elect not to purchase any Shares during such Draw Down
Pricing Period. The Purchaser shall notify the Company of its election on the
Trading Day preceding the Settlement Date.
-19-
(l) If on the Settlement Date, the Company fails to deliver
the Shares to be purchased by the Purchaser, and such failure continues for ten
(10) Trading Days, the Company shall pay, in cash or restricted shares of Common
Stock, at the option of the Purchaser, as liquidated damages and not as a
penalty to the Purchaser an amount equal to two percent (2%) of the Draw Down
Amount for the initial thirty (30) days and each additional thirty (30) day
period thereafter until such failure has been cured, which shall be pro rated
for such periods less than thirty (30) days (the "Periodic Amount"). Cash
payments to be made pursuant to this clause (1) shall be due and payable
immediately upon demand in immediately available cash funds. Certificates
evidencing the restricted shares of Common Stock shall be delivered immediately
upon demand. The parties agree that the Periodic Amount represents a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of damages that may be incurred by the Purchaser if the Company fails to
deliver the Shares on the Settlement Date. If the Purchaser elects to receive
shares of Common Stock instead of cash, the Purchaser shall have the right to
demand registration once within twelve (12) months of the date of issuance of
such shares of Common Stock and piggyback registration rights if the Company
files a separate registration statement.
SECTION 6.2 Purchaser's Call Option.
(a) During each Draw Down Pricing Period, the Company at its
sole discretion may grant to the Purchaser the right to exercise multiple call
options of up to the applicable Draw Down Amount (a "Call Option"). The amount
of the Call Option shall be set forth in the Draw Down Notice. For each Trading
Day during a Draw Down Pricing Period, the Purchaser may exercise a Call Option
by providing notice to the Company of the exercise of a Call Option (the "Call
Option Notice"), substantially in the form attached hereto as Exhibit E.
(b) The number of shares of Common Stock to be issued in
connection with each Call Option shall equal the quotient of (i) the Call Option
Amount and (ii) the product of the applicable Draw Down Discount Percentage and
the greater of (A) the VWAP for the Common Stock on the day the Purchaser issues
its Call Option Notice and (B) the Threshold Price.
(c) Each Call Option exercised shall be settled on the
applicable Settlement Date.
(d) The Threshold Price designated by the Company in its Draw
Down Notice shall apply to each Call Option unless otherwise agreed upon between
the parties.
(e) For each Call Option that the Purchaser exercises pursuant
to this Section 6.2, the Purchaser must issue via facsimile a Call Option Notice
to the Company no later than 8:00 p.m. (eastern time) on the day such Call
Option is exercised. If the Purchaser does not exercise a Call Option by 8:00
p.m. (eastern time) on the last Trading Day of the applicable Draw Down Pricing
Period, the Purchaser's Call Options with respect to that Draw Down Pricing
Period shall terminate.
-20-
ARTICLE VII
TERMINATION
SECTION 7.1 Termination by Mutual Consent. The term of this
Agreement shall be the earlier of (i) twenty-four (24) months from the date of
execution of this Agreement (the "Investment Period") and (ii) the date that all
of the shares of Common Stock registered under the Registration Statement have
been issued and sold, or (iii) the date the Purchaser has purchased in the
aggregate $20,000,000 pursuant to all Draw Downs issued and Call Options granted
and exercised. This Agreement may be terminated at any time by mutual consent of
the parties.
SECTION 7.2 Other Termination. The Company shall inform the
Purchaser, and the Purchaser shall have the right to terminate this Agreement
within the subsequent thirty (30) days (the "Event Period"), if (x) the Company
enters into an Other Financing without the prior consent of the Purchaser, which
consent will not be unreasonably delayed, conditioned or withheld, which
provides for (i) the issuance of Common Stock or securities convertible,
exercisable or exchangeable into Common Stock at a discount to the then current
market price of the Common Stock, including, without limitation, an equity line
of credit transaction, (ii) a mechanism for the reset of the purchase price of
the Common Stock to below the then current market price of the Common Stock, or
(iii) the issuance of Common Stock with warrants, which have an exercise price
such that together with the price of the Common Stock would result in the
issuance of shares of Common Stock at a per share price below the then current
market price of the Common Stock, or (y) an event resulting in a Material
Adverse Effect or Material Change in Ownership has occurred. The Purchaser may
terminate this Agreement upon one (1) day's notice during the Event Period.
SECTION 7.3 Effect of Termination. In the event of termination
by the Company or the Purchaser, written notice thereof shall forthwith be given
to the other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become
of no further force and effect, except as provided in Section 9.9 hereof.
Nothing in this Section 7.3 shall be deemed to release the Company or the
Purchaser from any liability for any breach under this Agreement, or to impair
the rights of the Company and the Purchaser to compel specific performance by
the other party of its obligations under this Agreement.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 General Indemnity.
(a) Indemnification by the Company. The Company will indemnify
and hold harmless the Purchaser, each of its directors, fund managers and
officers, and each person, if any, who controls the Purchaser within the meaning
of Section 15 of the Securities Act or Section 20(a) of the Exchange Act from
and against any losses, claims, damages, liabilities and expenses (including
reasonable costs of
-21-
defense and investigation and all reasonable attorneys' fees) to which the
Purchaser, each of its directors, fund managers and officers, and each person,
if any, who controls the Purchaser may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages, liabilities and expenses
(or actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement relating to Common
Stock being sold to the Purchaser (including any Prospectus Supplement filed in
connection with the transactions contemplated hereunder which are a part of it),
or any amendment or supplement to it, or (ii) the omission or alleged omission
to state in that Registration Statement or any document incorporated by
reference in the Registration Statement, a material fact required to be stated
therein or necessary to make the statements therein not misleading, provided
that the Company shall not be liable under this Section 8.1(a) to the extent
that a court of competent jurisdiction shall have determined by a final judgment
(with no appeals available) that such loss, claim, damage, liability or action
resulted directly from any such acts or failures to act, undertaken or omitted
to be taken by the Purchaser or such person through its bad faith or willful
misconduct; provided, however, that the foregoing indemnity shall not apply to
any loss, claim, damage, liability or expense to the extent, but only to the
extent, arising out of or based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by the Purchaser
expressly for use in the Registration Statement, any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto); and provided, further,
that with respect to the Prospectus, the foregoing indemnity shall not inure to
the benefit of the Purchaser or any such person from whom the person asserting
any loss, claim, damage, liability or expense purchased Common Stock, if copies
of the Prospectus were timely delivered to the Purchaser pursuant hereto and a
copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of the Purchaser or any such person to such person, if required by
law so to have been delivered, at or prior to the written confirmation of the
sale of the Common Stock to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or expense.
The Company will reimburse the Purchaser and each such controlling
person promptly upon demand for any legal or other costs or expenses reasonably
incurred by the Purchaser or any controlling person in investigating, defending
against, or preparing to defend against any such claim, action, suit or
proceeding, except that the Company will not be liable to the extent a claim or
action which results in a loss, claim, damage, liability or expense arises out
of, or is based upon, an untrue statement, alleged untrue statement, omission or
alleged omission, included in any Registration Statement, Prospectus or
Prospectus Supplement or any amendment or supplement to the thereto in reliance
upon, and in conformity with, written information furnished by the Purchaser to
the Company for inclusion in the Registration Statement, Prospectus or
Prospectus Supplement.
(b) Indemnification by the Purchaser. The Purchaser will indemnify and hold
harmless the Company, each of its directors and officers, and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act from and against any losses, claims,
damages, liabilities and expenses (including reasonable costs of defense and
investigation and all attorneys' fees) to which the Company and each director,
-22-
officer and person, if any, who controls the Company may become subject, under
the Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arise out of or are
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any Prospectus or Prospectus
Supplement or any amendment or supplement to it or (ii) the omission or alleged
omission to state in the Registration Statement or any Prospectus or Prospectus
Supplement or any amendment or supplement to it a material fact required to be
stated therein or necessary to make the statements therein not misleading, to
the extent, but only to the extent, the untrue statement, alleged untrue
statement, omission or alleged omission was made in reliance upon, and in
conformity with, written information furnished by the Purchaser to the Company
for inclusion in the Registration Statement, the Prospectus or Prospectus
Supplement or an amendment or supplement thereto, and the Purchaser will
reimburse the Company and each such director, officer or controlling person
promptly upon demand for any legal or other costs or expenses reasonably
incurred by the Company or the other person in investigating, defending against,
or preparing to defend against any such claim, action, suit or proceeding.
SECTION 8.2 Indemnification Procedures. Promptly after a
person receives notice of a claim or the commencement of an action for which the
person intends to seek indemnification under paragraph (a) or (b) of Section
8.1, the person will notify the indemnifying party in writing of the claim or
commencement of the action, suit or proceeding, but failure to notify the
indemnifying party will not relieve the indemnifying party from liability under
paragraph (a) or (b) of Section 8.1, except to the extent such indemnifying
party has been materially prejudiced by the failure to give notice. The
indemnifying party will be entitled to participate in the defense of any claim,
action, suit or proceeding as to which indemnification is being sought, and if
the indemnifying party acknowledges in writing the obligation to indemnify the
party against whom the claim or action is brought, the indemnifying party may
(but will not be required to) assume the defense against the claim, action, suit
or proceeding with counsel satisfactory to it. After an indemnifying party
notifies an indemnified party that the indemnifying party wishes to assume the
defense of a claim, action, suit or proceeding the indemnifying party will not
be liable for any legal or other expenses incurred by the indemnified party in
connection with the defense against the claim, action, suit or proceeding except
that if, in the opinion of counsel to the indemnifying party, one or more of the
indemnified parties should be separately represented in connection with a claim,
action, suit or proceeding the indemnifying party will pay the reasonable fees
and expenses of one separate counsel for the indemnified parties. Each
indemnified party, as a condition to receiving indemnification as provided in
paragraph (a) or (b) of Section 8.1, will cooperate in all reasonable respects
with the indemnifying party in the defense of any action or claim as to which
indemnification is sought. No indemnifying party will be liable for any
settlement of any action effected without its prior written consent. No
indemnifying party will, without the prior written consent of the indemnified
party, effect any settlement of a pending or threatened action with respect to
which an indemnified party is, or is informed that it may be, made a party and
for which it would be entitled to indemnification, unless the settlement
includes an unconditional release of the indemnified party from all liability
and claims which are the subject matter of the pending or threatened action.
If for any reason the indemnification provided for in this Agreement is
not available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in paragraph (a) or (b) of Section
-23-
8.1, each indemnifying party will, in lieu of indemnifying the indemnified
party, contribute to the amount paid or payable by the indemnified party as a
result of the loss or liability, (i) in the proportion which is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and by the indemnified party on the other from the sale of stock which is the
subject of the claim, action, suit or proceeding which resulted in the loss or
liability or (ii) if that allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits of the
sale of stock, but also the relative fault of the indemnifying party and the
indemnified party with respect to the statements or omissions which are the
subject of the claim, action, suit or proceeding that resulted in the loss or
liability, as well as any other relevant equitable considerations.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Fees and Expenses. The Company shall pay all
reasonable fees and expenses related to the transactions contemplated by this
Agreement; provided, that the Company shall pay, at the Closing, all reasonable
attorneys fees and expenses (exclusive of disbursements and out-of-pocket
expenses) incurred by the Purchaser of up to $50,000 in connection with the
preparation, negotiation, execution and delivery of this Agreement. In addition,
the Company shall pay all reasonable fees and expenses incurred by the Purchaser
in connection with any amendments, modifications or waivers of this Agreement or
incurred in connection with the enforcement of this Agreement, including,
without limitation, all reasonable attorneys' fees and expenses.
SECTION 9.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Each of the Company and the Purchaser (i) hereby
irrevocably submits to the jurisdiction of the United States District Court and
other courts of the United States sitting in the State of New York for the
purposes of any suit, action or proceeding arising out of or relating to this
Agreement and (ii) hereby waives, and agrees not to assert in any such suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Purchaser consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section shall affect or limit any right to serve
process in any other manner permitted by law.
-24-
SECTION 9.3 Entire Agreement; Amendment. This Agreement
contains the entire understanding of the parties with respect to the matters
covered hereby and, except as specifically set forth herein, neither the Company
nor the Purchaser makes any representations, warranty, covenant or undertaking
with respect to such matters. The parties hereto may not amend this Agreement or
any rights or obligations hereunder without the prior written consent of the
Company and each Purchaser to be affected by the amendment.
SECTION 9.4 Notices. Any notice, demand, request, waiver or
other communication required or permitted to be given hereunder shall be in
writing and shall be effective (a) upon hand delivery, by telecopy or facsimile
at the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such communications
shall be:
If to the Company: Columbia Laboratories, Inc.
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 00
Xxxxxxxxx Xxxxxx, XX 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
With copies to: Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
If to the Purchaser: Acqua Wellington North American
Equities Fund, Ltd.
c/o Fortis Fund Services (Bahamas) Ltd.
Xxxxxxxx Xxxxxxxx Centre
East Bay Street, P. O. Box SS-6238
Nassau, Bahamas
Tel. No: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxxx X.X. Xxxxx Xxxxxx
With copies to: Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
-25-
Tel. No: (000) 000-0000
Fax No: (000)000-0000
Attention: Xxxxxxxxxxx X. Xxxxxxx
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party hereto.
SECTION 9.5 Waivers. No provision of this Agreement may be
waived other than by a written instrument signed by the party against whom
enforcement of any such waiver is sought. No waiver by either party of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provisions, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
SECTION 9.6 Headings. The article, section and subsection
headings in this Agreement are for convenience only and shall not constitute a
part of this Agreement for any other purpose and shall not be deemed to limit or
affect any of the provisions hereof.
SECTION 9.7 Successors and Assigns. The Purchaser may not
assign this Agreement to any person without the prior consent of the Company,
which consent will not be unreasonably withheld. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
After Closing, the assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party under this Agreement.
SECTION 9.8 Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without giving effect to the choice of law provisions.
SECTION 9.9 Survival. The representations and warranties of
the Company and the Purchaser contained in Article III and the covenants
contained in Article IV shall survive the execution and delivery hereof until
the termination of this Agreement, and the agreements and covenants set forth in
Article VIII of this Agreement shall survive the execution and delivery hereof
and the termination of this Agreement hereunder.
SECTION 9.10 Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument and shall become effective when counterparts have been
signed by each party and delivered to the other parties hereto, it being
understood that all parties need not sign the same counterpart. In the event any
signature is delivered by facsimile transmission, the party using such means of
delivery shall cause four additional executed signature pages to be physically
delivered to the other parties within five days of the execution and delivery
hereof.
SECTION 9.11 Publicity. The Company shall not issue any press
release or otherwise make any public statement or announcement with respect to
this Agreement or the transactions contemplated hereby or the existence of this
-26-
Agreement without the prior written consent of the Purchaser. Notwithstanding
the foregoing, in the event the Company is required by law or regulation to
issue a press release or otherwise make a public statement or announcement with
respect to this Agreement or the transaction contemplated hereby prior to or
after the Closing, the Company shall consult with the Purchaser on the form and
substance of such press release or other disclosure.
SECTION 9.12 Severability. The provisions of this Agreement
are severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
SECTION 9.13 Further Assurances. From and after the date of
this Agreement, upon the request of the Purchaser or the Company, each of the
Company and the Purchaser shall execute and deliver such instrument, documents
and other writings as may be reasonably necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement.
[END OF PAGE]
-27-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
COLUMBIA LABORATORIES, INC.
By: /s/ Xxxxx X. Xxxxxxxxxxx
------------------------------------------------
Name: Xxxxx X. Xxxxxxxxxxx
Title: Vice Chairman and President
ACQUA WELLINGTON NORTH AMERICAN EQUITIES FUND, LTD.
By: /s/ Xxxxxxx X. X. Xxxxx Xxxxxx
------------------------------------------------
Name: Xxxxxxx X. X. Xxxxx Xxxxxx
Title: Director
