SECURITIES PURCHASE AGREEMENT
SECURITIES
PURCHASE AGREEMENT
(the
"Agreement"),
dated
as of March 22, 2007, by and among IsoRay, Inc., a Minnesota corporation, with
headquarters located at 000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 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 desire to enter into this transaction to purchase the
Purchased Shares (as defined below) set forth herein pursuant to a currently
effective shelf registration statement on Form S-3, which provides for the
registration of up to $20 million of the Company’s securities including shares
of common stock, par value $0.001 per share, of the Company (the "Common
Stock")
and
warrants to purchase shares of common stock (Registration Number 333-140246)
(the "Registration
Statement"),
which
Registration Statement has been declared effective in accordance with the
Securities Act of 1933, as amended (the "1933
Act"),
by
the United States Securities and Exchange Commission (the "SEC").
b. Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) that aggregate number of shares of
Common Stock, set forth opposite such Buyer's name in column (3) on the Schedule
of Buyers (which aggregate amount for all Buyers together shall be 4,000,000
shares of Common Stock and shall collectively be referred to herein as the
"Purchased
Shares")
and
(ii) a warrant representing the right to acquire initially up to that number
of
additional shares of Common Stock set forth opposite such Buyer's name in column
(4) on the Schedule of Buyers (which aggregate amount for all Buyers together
shall be initially 800,000 shares of Common Stock and shall collectively be
referred to herein as the "Warrants"),
in
substantially the form attached hereto as Exhibit
A
(as
exercised, collectively, the "Warrant
Shares").
c. The
Purchased 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 PURCHASED SHARES AND WARRANTS.
a. Purchase
of Purchased Shares and Warrants.
Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
7
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 Closing Date (as
defined below) (i) the number of Purchased Shares as is set forth opposite
such
Buyer's name in column (3) on the Schedule of Buyers and (ii) Warrants to
acquire initially up to that number of Warrant Shares as is set forth opposite
such Buyer's name in column (4) on the Schedule of Buyers (the "Closing").
The
Closing shall occur on the Closing Date at the offices of Xxxxxx Xxxxxxxx,
PLC,
0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000.
b. Purchase
Price.
The
purchase price for each Purchased Share and the portion of the accompanying
Warrant Share corresponding to such Purchased Share to be purchased by each
Buyer at the Closing shall be $4.00 (the "Purchase
Price").
c. Closing
Date.
The date
and time of the Closing (the "Closing
Date")
shall
be 10:00 a.m., Mountain Standard Time, on March 19, 2007 (or such other date
as
is mutually agreed to by the Company and each Buyer), after notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
6 and 7 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 Phoenix are authorized or required by law to remain
closed.
d. Form
of Payment.
Prior to
the Closing Date, each Buyer shall have remitted its Purchase Price to an escrow
account established by the Company in connection with the transactions
contemplated hereby or by direct funding to the Company. On the Closing Date
(i)
through disbursement of the funds held in such escrow account or by direct
funding, Buyer shall pay its Purchase Price to the Company for the Purchased
Shares and Warrants to be issued and sold to such Buyer at the Closing, by
wire
transfer of immediately available funds in accordance with the Company's written
wire instructions and (ii) the Company shall (A) cause Computershare Trust
Company N.A., the Company's transfer agent (the "Transfer
Agent"),
to
issue a certificate for such aggregate number of Purchased Shares that such
Buyer is purchasing as is set forth opposite such Buyer's name in column (3)
of
the Schedule of Buyers in the name of such Buyer and (B) deliver to each Buyer
a
Warrant pursuant to which such Buyer shall have the right to acquire such number
of Warrant Shares as is set forth opposite such Buyer's name in column (4)
of
the Schedule of Buyers, duly executed on behalf of the Company and registered
in
the name of such Buyer.
2.
REPRESENTATIONS
AND WARRANTIES OF EACH BUYER.
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
applicable Transaction Documents (as defined below) and otherwise to carry
out
its obligations thereunder. The execution, delivery and performance by such
Buyer of the transactions contemplated by this Agreement has been duly
authorized by all necessary action on the part of such Buyer. This Agreement
has
been duly executed by such Buyer, and when delivered by such Buyer in accordance
with the terms hereof, each will constitute the valid and legally binding
obligation of such Buyer, enforceable against it in accordance with its terms,
except (a) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (b) as
enforceability of any indemnification and contribution provisions may be limited
under the federal and state securities laws and public policy, and (c) that
the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
b. Certain
Trading Activities.
Such
Buyer has not directly or indirectly, nor has any Person acting on behalf
of or
pursuant to any understanding with such Buyer, engaged in any purchases or
sales
of the Company's securities (including, without limitation, any Short Sales
involving the Company's securities) since the time that such Buyer was first
contacted by the Company or any agents thereof regarding the transactions
contemplated hereby. Such Buyer covenants that neither it nor any Person
acting
on its behalf or pursuant to any understanding with it will engage in any
transactions in the securities of the Company (including short sales) except
in
accordance with and as permitted by applicable law.
c. No
Conflicts.
The
execution, delivery and performance by such Buyer of this Agreement and the
consummation by such Buyer of the transactions contemplated hereby 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.
d. Residency.
Such
Buyer is a resident of that jurisdiction specified below its address on the
Schedule of Buyers.
e. No
Intent to Effect a Change of Control.
Such
Buyer has no intent to change or influence the control of the Company within
the
meaning of Rule 13d-1 of the Exchange Act.
f. Information
And Suitability.
(i) The
Buyer
has been given the opportunity to review the Disclosure Materials (as
hereinafter defined) and has requested, received, reviewed and considered
all
other information the Buyer deems relevant in making an informed decision
to
purchase the Securities. The Buyer has had an opportunity to discuss the
Company’s business, management and financial affairs with its management and
also had an opportunity to ask questions of officers of the Company that
were
answered to the Buyer's satisfaction.
(ii) The
Buyer
recognizes that an investment in the Securities involves a high degree
of risk,
including a risk of total loss of the Buyer's investment. The Buyer is
able to
bear the economic risk of holding the Securities for an indefinite period,
and
has knowledge and experience in financial and business matters such that
it is
capable of evaluating the risks of the investment in the Securities.
(iii) The
Buyer
agrees and acknowledges that it has not relied upon the Placement Agents
(as
hereinafter defined) in negotiating the terms of its investment in the
Securities and has made its own decision to invest in the Securities, without
the assistance of the Placement Agents and based solely on the Disclosure
Materials, the Transaction Documents (as hereinafter defined) and information
otherwise furnished to it by the Company.
The
Company acknowledges and agrees that each Buyer does not make or has not
made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.
3.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company hereby makes the following representations and warranties to each
Buyer:
a. Subsidiaries.
There is
no entity in which the Company, directly or indirectly, owns capital stock
or
holds an equity or similar interest other than those listed in Schedule
3.1(a)
("Subsidiaries").
Except as disclosed in Schedule
3.1(a),
the
Company owns, directly or indirectly, all of the capital stock of each
Subsidiary free and clear of any and all liens, charges, encumbrances, security
interests, rights of first refusal or other restrictions of any kind
("Liens"),
and
all the issued and outstanding shares of capital stock of each Subsidiary
are
validly issued and are fully paid, non-assessable and free of preemptive
and
similar rights.
b. Organization
and Qualification.
The
Company and each Subsidiary is an entity duly organized, validly existing
and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and authority to own
and
use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any
of the
provisions of its respective certificate or articles of incorporation, bylaws
or
other organizational or charter documents. The Company and each Subsidiary
is
duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case
may
be, could not, individually or in the aggregate, have or reasonably be expected
to result in (i) an adverse effect on the legality, validity or enforceability
of any Transaction Document, (ii) a material and adverse effect on the results
of operations, assets, prospects, business or financial condition of the
Company
and the Subsidiaries, taken as a whole or (iii) an adverse impairment to
the
Company's ability to perform on a timely basis its obligations under any
Transaction Document (any of (i), (ii) or (iii), a "Material
Adverse Effect").
As
used in this Agreement, a "Subsidiary"
is an
entity in which the Company, directly or indirectly, owns capital stock or
holds
an equity or similar interest.
c. Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and
to
consummate the transactions contemplated by each of this Agreement, the
Warrants, the Irrevocable Transfer Agent Instructions (as defined below)
and any
other documents or agreements executed in connection with the transactions
contemplated hereunder (collectively, the "Transaction
Documents")
and
otherwise to carry out its obligations hereunder and thereunder and to issue
the
Securities in accordance with the terms hereof and thereof. The execution
and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Purchased Shares and the
Warrants and the reservation for issuance of the Warrant Shares issuable
upon
exercise of the Warrants, have been duly authorized by all necessary action
on
the part of the Company and no further action is required by the Company,
its
Board of Directors or its stockholders in connection herewith and therewith.
Each Transaction Document has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the terms
hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except (a) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (b) as enforceability
of any
indemnification and contribution provisions may be limited under the federal
and
state securities laws and public policy and (c) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
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 Purchased Shares
and
the Warrants and reservation for issuance of the Warrant Shares) do not and
will
not (i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, any certificate of
designations, preferences and rights of any outstanding series of preferred
stock, bylaws or other organizational or charter documents or (ii) conflict
with, or constitute a default (or an event that with notice or lapse of time
or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of
time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding
to
which the Company or any Subsidiary is a party or by which any property or
asset
of the Company or any Subsidiary is bound or affected or (iii) result in
a
violation of any law, rule, regulation, order, judgment, injunction, decree
or
other restriction of any court or governmental authority to which the Company
or
a Subsidiary is subject (including federal and state securities laws and
regulations of whichever of any market or quotation service on which the
Common
Stock is listed or quoted for trading on the date in question (any of the
foregoing, a "Trading
Market"),
or by
which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as could not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect.
e. Filings,
Consents and Approvals.
Neither
the Company nor any Subsidiary is required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration (collectively, "Consents")
with,
any Person in connection with the execution, delivery and performance by
the
Company of the Transaction Documents, other than (i) the filing with the
SEC of
the prospectus supplement required by the Registration Statement pursuant
to
Rule 424(b) under the 1933 Act (the "Prospectus
Supplement")
supplementing the base prospectus forming part of the Registration Statement
(the "Prospectus"),
(ii)
all filings required pursuant to Section 4(e) hereof and (iii) those Consents
that have been obtained prior to the date hereof. As used in this Agreement,
"Person"
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization, any other entity and
a
government or any department or agency thereof.
f. Issuance
of the Securities.
The
Purchased Shares and Warrants are duly authorized and, upon issuance in
accordance with the terms hereof, will be duly and validly issued, fully
paid
and nonassessable, free from all taxes, Liens and charges with respect to
the
issue thereof. The Warrant Shares have been duly authorized and, when issued
and
paid for in accordance with the Transaction Documents, will be duly and validly
issued, fully paid and nonassessable, free and clear of all taxes, Liens
and
charges with respect to the issue thereof. The Company has reserved from
its
duly authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to the Warrants in order to issue the full number of Warrant
Shares as are or may become issuable in accordance with the terms of the
Warrants. The issuance by the Company of the Securities has been registered
under the 1933 Act, the Securities are being issued pursuant to the Registration
Statement and all of the Securities are freely transferable and tradable
by the
Buyers without restriction. The
Registration Statement is effective and available for the issuance of the
Purchased Shares thereunder and the Company has not received any notice that
the
SEC has issued or intends to issue a stop-order with respect to the Registration
Statement or that the SEC otherwise has suspended or withdrawn the effectiveness
of the Registration Statement, either temporarily or permanently, or intends
or
has threatened in writing to do so. The "Plan of Distribution" section under
the
Registration Statement permits the issuance and sale of the Securities
hereunder. Upon receipt of the Purchased Shares and Warrant Shares, the Buyers
will have good and marketable title to such Purchased Shares and Warrant
Shares.
g. Capitalization.
The
number of shares and type of all authorized, issued and outstanding capital
stock of the Company is set forth in Schedule
3.1(g).
All
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable and have been issued in compliance with
all
applicable securities laws. Except as set forth in Schedule
3.1(g),
no
securities of the Company are entitled to preemptive or similar rights, and
no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents. Except as a result of the purchase and sale of the
Securities and except as disclosed in Schedule
3.1(g),
there
are no outstanding options, warrants, scrip rights to subscribe to, calls
or
commitments of any character whatsoever relating to, or securities, rights
or
obligations convertible into or exchangeable for, or giving any Person any
right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock,
or
securities or rights convertible or exchangeable into shares of Common Stock.
Except as set forth in Schedule
3.1(g),
the
issue and sale of the Securities will not, immediately or with the passage
of
time, obligate the Company to issue shares of Common Stock or other securities
to any Person (other than the Buyers) and will not result in a right of any
holder of Company securities to adjust the exercise, conversion, exchange
or
reset price under such securities.
h. SEC
Reports; Financial Statements.
The
Company has filed all reports required to be filed by it under the 1933 Act
and
the 1934 Act, including pursuant to Section 13(a) or 15(d) thereof, for the
two
(2) years preceding the date hereof (or such shorter period as the Company
was
required by law to file such reports) (the foregoing materials being
collectively referred to herein as the "SEC
Reports"
and,
together with the Schedules to this Agreement, the "Disclosure
Materials")
on a
timely basis or has received a valid extension of such time of filing and
has
filed any such SEC Reports prior to the expiration of any such extension.
The
Company has delivered to the Buyers a copy of all SEC Reports not available
on
the XXXXX system. As of their respective dates, the SEC Reports complied
in all
material respects with the requirements of the 1933 Act and the 1934 Act
and the
rules and regulations of the SEC promulgated thereunder, and none of the
SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The Registration Statement and any
prospectus included therein, including the Prospectus and the Prospectus
Supplement, complied in all material respects with the requirements of the
1933
Act and the 1934 Act and the rules and regulations of the SEC promulgated
thereunder, and none of such Registration Statement or any such prospectus,
including the Prospectus and the Prospectus Supplement, contain or 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 case of any prospectus in the light of the circumstances under which
they
were made, not misleading. The financial statements of the Company included
in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto
as in
effect at the time of filing. Such financial statements have been prepared
in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved ("GAAP"),
except as may be otherwise specified in such financial statements or the
notes
thereto, and fairly present in all material respects the financial position
of
the Company and its consolidated Subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end
audit adjustments. The Company does not have pending before the SEC any request
for confidential treatment of information.
i. Material
Changes.
Since
the date of the latest audited financial statements included within the SEC
Reports (i) there has been no event, occurrence or development that has had
or
that could reasonably be expected to result in a Material Adverse Effect,
(ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course
of
business consistent with past practice and (B) liabilities not required to
be
reflected in the Company's financial statements pursuant to GAAP or required
to
be disclosed in filings made with the SEC, (iii) the Company has not altered
its
method of accounting or the identity of its auditors, (iv) other than as
set
forth in Schedule
3.1(i),
the
Company has not declared or made any dividend or distribution of cash or
other
property to its stockholders or purchased, redeemed or made any agreements
to
purchase or redeem any shares of its capital stock, (v) the Company has not
issued any equity securities to any officer, director or any Person that,
directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such terms are
used
in and construed under Rule 144 promulgated under the 1933 Act, as amended
(or a
successor rule thereto) ("Rule
144")
(an
"Affiliate"),
except pursuant to existing Company stock option plans, (vi) the Company
has not
sold any assets, individually or in the aggregate, in excess of $100,000
outside
of the ordinary course of business or (vii) the Company has not had capital
expenditures, individually or in the aggregate, in excess of $100,000 outside
of
the ordinary course of business.
j. Litigation.
There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting
the
Company, any Subsidiary or any of their respective properties before or by
any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, if there were an unfavorable
decision, individually or in the aggregate, have or reasonably be expected
to
result in a Material Adverse Effect. Neither the Company nor any Subsidiary,
nor
any director or officer thereof, is or has been the subject of any claim,
action
or proceeding involving a claim of violation of or liability under federal,
state or foreign securities laws or a claim of breach of fiduciary duty nor
has
any director or officer engaged in any criminal activity. There has not been,
and to the knowledge of the Company, there is not pending or contemplated,
any
investigation by the SEC involving the Company or any current or former director
or officer of the Company. The SEC has not issued any stop order or other
order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the 1934 Act or the 1933 Act, including the Registration
Statement.
k. Labor
Relations.
No
strike, work stoppage, slow down or other material labor problem exists or,
to
the knowledge of the Company, is threatened or imminent with respect to any
of
the employees of the Company or any Subsidiary.
l. Compliance.
Except
as set forth in Schedule
3.1(l),
neither
the Company nor any Subsidiary (i) is in default under or in violation of
(and
no event has occurred that has not been waived that, with notice or lapse
of
time or both, would result in a default by the Company or any Subsidiary
under),
nor has the Company or any Subsidiary received notice of a claim that it
is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or
by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator, governmental body, or regulatory or self-regulatory authority
or
(iii) is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal,
state
and local laws relating to taxes, environmental protection, occupational
health
and safety, product quality and safety and employment and labor matters,
except
in each case as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.
m. Regulatory
Permits.
The
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described
in the
SEC Reports, except where the failure to possess such permits would not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect ("Material
Permits"),
and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
n. Title
to Assets.
Except
as disclosed in Schedule
3.1(n),
the
Company and the Subsidiaries have good and marketable title in fee simple
to all
real property owned by them that is material to their respective businesses
and
good and marketable title in all personal property owned by them that is
material to their respective businesses, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made
of
such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held
by them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance.
o. Patents
and Trademarks.
Except
as disclosed in Schedule
3.1(o),
the
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or material
for
use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have could, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect
(collectively, the "Intellectual
Property Rights").
None
of the Intellectual Property Rights has expired, terminated or been abandoned,
or is expected to expire or terminate or be abandoned within two (2) years
from
the date of this Agreement. Neither the Company nor any Subsidiary has received,
since the date of the latest audited financial statements included within
the
SEC Reports, a written notice of a claim or otherwise has any knowledge that
the
Intellectual Property Rights violate or infringe upon the rights of any Person,
except as would not have a Material Adverse Effect. To the knowledge of the
Company, all such Intellectual Property Rights are enforceable. There is
no
claim, action or proceeding being made or brought, or to the knowledge of
the
Company, being threatened, against the Company or its Subsidiaries regarding
its
Intellectual Property Rights.
p. Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries
are
engaged. Neither the Company nor any Subsidiary has any reason to believe
that
it will not be able to renew its existing insurance coverage as and when
such
coverage expires or to obtain similar coverage from similar insurers as may
be
necessary to continue its business without a significant increase in cost,
except for cost increases being experienced by public companies in similar
businesses and risk categories.
q. Foreign
Corrupt Practices.
Neither
the Company nor, to the knowledge of the Company, any director, officer or
employee 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 (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.
r. Transactions
With Affiliates and Employees.
Except
as set forth in the SEC Reports filed at least ten (10) days prior to the
date
hereof, none of the officers or directors of the Company and, to the knowledge
of the Company, none of the employees of the Company is presently a party
to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or
other
arrangement providing for the furnishing of services to or by, providing
for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of
the
Company, any entity in which any officer, director, or any such employee
has a
substantial interest or is an officer, director, trustee or
partner.
s. Tax
Status.
The
Company and each of its Subsidiaries (i) has made or filed all 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 material 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.
t. Internal
Accounting Controls.
The
Company and the Subsidiaries maintain a system of internal accounting controls
which the audit committee of the board of directors reasonably believes is
sufficient to provide reasonable assurance that (i) transactions are executed
in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
u. Solvency.
Based
on the financial condition of the Company as of the date hereof and as of
the
Closing Date (i) the Company's fair saleable value of its assets exceeds
the
amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities)
as
they mature and (ii) the current cash flow of the Company, together with
the
proceeds the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its debt when such amounts are required
to be paid.
v. Placement
Agent's Fees.
The
Company shall be responsible for the payment of any placement agent's fees,
financial advisory or consultancy fees, brokers' commissions or finder's
fee
(other than for persons engaged by any Buyer or its investment advisor)
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 has engaged as placement
agents in connection with the sale of the Securities Punk, Xxxxxx & Company,
L.P. and Maxim
Group LLC
(the
"Placement
Agents").
w. Integration.
Neither
the Company, nor any of its Affiliates, nor any Person acting on its or 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
cause
this offering of the Securities to be integrated with prior offerings by
the
Company that would adversely affect eligibility to use a Form S-3 registration
statement for purposes of any applicable securities laws or 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, nor will the Company or any of its
Subsidiaries take any action or steps that would cause the offering of the
Securities to be so integrated with other offerings.
x. Listing
and Maintenance Requirements.
The
Company has not, in the two (2) years preceding the date hereof, received
notice
(written or oral) from any Trading Market on which the Common Stock is or
has
been listed or quoted to the effect that the Company is not in compliance
with
the listing or maintenance requirements of such Trading Market. The Company
is
currently in compliance with all such listing and maintenance requirements
and
has no reason to believe that it will not in the foreseeable future continue
to
be in compliance with all such listing and maintenance requirements. The
issuance and sale of the Securities hereunder does not contravene the rules
and
regulations of any such Trading Market and no approval of the stockholders
of
the Company is required for the Company to issue and deliver to the Buyers
the
maximum number of shares of Common Stock contemplated by this Agreement,
including by reason of the issuance of shares of Common Stock upon the issuance
of the Warrant Shares upon exercise in full of the Warrants.
y. Registration
Rights.
No
holder of securities of the Company has rights to the registration of any
securities of the Company because of the filing of the Registration Statement
or
the issuance of the Securities hereunder that could expose the Company to
material liability or any Holder to any liability or that could impair the
Company's ability to consummate the issuance and sale of the Securities in
the
manner, and at the times, contemplated hereby, which rights have not been
waived
by the holder thereof as of the date hereof.
z. Investment
Company.
The
Company is not, and is not an Affiliate of, an "investment company" within
the
meaning of the Investment Company Act of 1940, as amended.
aa. Application
of Takeover Protections.
The
Company has 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 Company's Certificate of Incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable
to
the Buyers solely as a result of the Buyers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation the Company's issuance of the Securities and
the
Buyers' ownership of the Securities.
bb. Disclosure.
The
Company confirms that neither it nor any Person acting on its behalf has
provided any of the Buyers or their agents or counsel with any information
that
the Company believes constitutes material, non-public information. The Company
understands and confirms that the Buyers will rely on the foregoing
representations and covenants in effecting transactions in securities of
the
Company. All disclosure provided to the Buyers regarding the Company, its
business and the transactions contemplated hereby, furnished by or on behalf
of
the Company (including the Company's representations and warranties set forth
in
this Agreement) are true and correct and do not contain any untrue statement
of
a material fact or omit to state any material fact necessary in order to
make
the statements made therein, in the light of the circumstances under which
they
were made, not misleading.
cc. 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.
dd. 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 an officer
or
director of the Company. The Company further acknowledges that no Buyer is
acting as a financial advisor or fiduciary of the Company (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.
ee. Registration
Statement.
The
Company has prepared and filed the Registration Statement in conformity with
the
requirements of the 1933 Act, which became effective on February 15, 2007
(the
"Effective
Date"),
including a base prospectus relating to the Securities (the "Base
Prospectus"),
and
such amendments and supplements thereto as may have been required to the
date of
this Agreement. The Registration Statement is effective under the 1933 Act
and
no stop order preventing or suspending the effectiveness of the Registration
Statement or suspending or preventing the use of the Prospectus has been
issued
by the SEC and no proceedings for that purpose have been instituted or, to
the
knowledge of the Company, are threatened by the SEC. The Company, if required
by
the rules and regulations of the SEC, proposes to file the Prospectus (as
defined below), with the SEC pursuant to Rule 424(b). At the time the
Registration Statement and any amendments thereto became effective, at the
date
of this Agreement and at the Closing Date, the Registration Statement and
any
amendments thereto conformed and will conform in all material respects to
the
requirements of the 1933 Act and did not and will not contain any untrue
statement of a material fact or omit to state any material fact required
to be
stated therein or necessary to make the statements therein not misleading;
and
the Prospectus and any amendments or supplements thereto, at the time the
Prospectus or any amendment or supplement thereto was issued and at the Closing
Date, conformed and will conform in all material respects to the requirements
of
the 1933 Act and did not and will not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.
COVENANTS.
a. Best
Efforts.
Each
party shall use its best efforts timely to satisfy each of the covenants
and the
conditions to be satisfied by it as provided in Sections 5, 6 and 7 of this
Agreement.
b. Maintenance
of Registration Statement.
For so
long as any of the Warrants remain outstanding, the Company shall use its
reasonable best efforts to maintain the effectiveness of the Registration
Statement for the issuance thereunder of the Warrant Shares; provided that,
if
at any time while the Warrants are outstanding the Company shall be ineligible
to utilize Form S-3 (or any successor form) for the purpose of issuance of
the
Warrant Shares the Company shall promptly amend the Registration Statement
on
such other form as may be necessary to maintain the effectiveness of the
Registration Statement for this purpose.
c. Prospectus
Supplement, Form D and Blue Sky.
On or
before the execution of this Agreement, the Company shall have delivered,
and as
soon as practicable after the Closing the Company shall file, the Prospectus
Supplement with respect to the Purchased Shares as required under and in
conformity with the 1933 Act, including Rule 424(b) thereunder. If required,
the
Company, on or before the Closing Date, shall 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.
d. Reporting
Status.
Until
the date on which the Buyers shall have sold all the Purchased Shares and
Warrant Shares and
none
of the Warrants is outstanding (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 otherwise permit such termination.
e. Listing.
The
Company shall promptly secure the listing of all of the Purchased Shares
and
Warrant Shares 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 shares of Common
Stock from time to time issuable under the terms of the Transaction Documents.
So long as any Warrants are outstanding, the Company shall maintain the Common
Stock's authorization for listing thereon. 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 from any market. The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4(e).
f. Fees.
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. Except as otherwise set forth in this Agreement or in the Transaction
Documents, each party to this Agreement shall bear its own expenses in
connection with the sale of the Securities to the Buyers.
g. Disclosure
of Transactions and Other Material Information.
The
Company shall, on or before 8:30 a.m., Eastern Daylight Savings Time, on
the
first Business Day following
the execution and delivery of this Agreement,
issue a
press release reasonably acceptable to the Buyers disclosing all material
terms
of the transactions contemplated hereby (the "Press
Release").
On
or
before 8:30 a.m., Eastern Daylight Savings Time, on the
first
Business Day following the execution and delivery 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 the form of the Warrants) as exhibits to such filing
(including all attachments, the "8-K
Filing").
The
Company acknowledges and covenants that from and after the filing of the
Press
Release, no Buyer shall be in possession of any material, nonpublic information
received from the Company, any of its Subsidiaries or any of its respective
officers, directors, employees or agents, that is not disclosed in such Press
Release. The Company shall not, and shall cause each of its Subsidiaries
and its
and each of their respective officers, directors, employees and agents, not
to,
provide any Buyer with any material nonpublic information regarding the Company
or any of its Subsidiaries from and after the filing of the press release
referred to in the first sentence of this Section without the express written
consent of such Buyer. Subject to the foregoing, neither the Company 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 Filing and contemporaneously
therewith and (ii) as is required by applicable law and regulations, including
the applicable rules and regulations of any securities market (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 connection with the future SEC Reports, the Company
shall not disclose the name of any Buyer without the prior written consent
of
such Buyer in any filing, announcement, release or otherwise.
h. Reservation
of Shares.
The
Company shall take all action necessary to at all times have authorized,
and
reserved for the purpose of issuance, from and after the Closing Date, the
number of shares of Common Stock issuable upon exercise of the Warrants being
issued at the Closing.
i. Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Securities as set forth
in
the Prospectus Supplement and not for the repayment of long-term debt or
any
repurchase of capital securities.
5.
TRANSFER
AGENT INSTRUCTIONS.
The
Company shall issue irrevocable instructions to the Transfer Agent, and any
subsequent transfer agent, to issue certificates or credit shares to the
applicable balance accounts at the Depository Trust Company if the Company
is
then eligible to do so, registered in the name of each Buyer or its respective
nominee(s), for the Warrant Shares in
such
amounts as specified from time to time by each Buyer to the Company upon
exercise of the Warrants in the form of Exhibit
B
attached
hereto (the "Irrevocable
Transfer Agent Instructions").
The
Company represents and warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5 will be given by
the
Company to the Transfer Agent, and any subsequent 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 and to the extent provided in
this
Agreement and the other Transaction Documents. 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 will be inadequate and agrees, in
the
event of a breach or threatened breach by the Company of the provisions of
this
Section 5, 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.
6.
CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Purchased Shares
and
the related Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the 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:
a. Such
Buyer shall have executed this Agreement and delivered the same to the
Company.
b. Such
Buyer shall have delivered to the Company the Purchase Price for the Purchased
Shares and the related Warrants being purchased by such Buyer at the Closing
as
provided for in Section 1(d) hereof.
c. 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 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 Closing Date.
7.
CONDITIONS
TO EACH BUYER'S OBLIGATION TO PURCHASE.
The
obligation of each Buyer hereunder to purchase the Purchased Shares and the
related Warrants at the Closing is subject to the satisfaction, at or before
the
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:
a. The
Company shall have (i) executed and delivered to such Buyer each of the
Transaction Documents, (ii) caused the Transfer Agent to deliver certificates
representing the Purchased Shares being purchased by such Buyer at the Closing
pursuant to this Agreement and (iii) executed and delivered the related Warrants
(in such amounts as such Buyer shall request) being purchased by such Buyer
at
the Closing pursuant to this Agreement.
b. The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit
B
attached
hereto, which instructions shall have been delivered to and acknowledged
in
writing by the Company's transfer agent.
c. The
Common Stock shall not have been suspended, as of the Closing Date, by the
SEC
or any securities market from trading on such market nor shall suspension
by the
SEC or any such market have been threatened, as of the Closing Date, either
(A)
in writing by the SEC or any such principal market or (B) by falling below
the
minimum listing maintenance requirements of such principal market.
d. The
Company shall have delivered to such Buyer a certified copy of the Articles
of
Incorporation, as amended to date (the "Articles
of Incorporation")
as
certified by the Secretary of State of Minnesota within 10 days of the Closing
Date.
e. The
representations and warranties of the Company shall be true and correct 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 specific date,
which shall be true and correct as of such 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 Closing
Date.
f. The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Purchased Shares, the
Warrants and the Warrant Shares.
g. The
Registration Statement shall be effective and available for the issuance
and
sale of the Purchased Shares hereunder and the Company shall have delivered
to
such Buyer the Prospectus and the Prospectus Supplement as required
thereunder.
8.
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.
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 supersedes 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 and the instruments
referenced herein 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 Buyers who purchased at least a majority of the amount
of
the Purchased Shares, or, if prior to the Closing Date, the Buyers listed
on the
Schedule of Buyers as being obligated to purchase at least a majority of
the
amount of the Purchased Shares. 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 Purchased 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 Purchased Shares, holders of the Warrants or holders
of
Warrant Shares, 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.
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);
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:
If
to the
Company:
000
Xxxxx
Xxxxxx, Xxxxx 000
Xxxxxxxx,
XX 00000
Facsimile
No.: (000) 000-0000
Telephone
No.: (000) 000-0000
Attn.:
Xxxxx Xxxxxx, Chief Executive Officer
If
to the
Transfer Agent:
Computershare
Trust Company N.A.
000
Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx,
Xxxxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
IsoRay, Inc. Representative
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,
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
Purchased 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 Purchased Shares representing at least a majority of the number
of
the Purchased Shares. A Buyer may assign some or all of its rights hereunder
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.
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.
The
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5
and 8
shall survive the Closing and the delivery and exercise of Securities, as
applicable. 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.
(i) 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 shareholders, 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 or any other certificate, instrument
or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
or
any other certificate, instrument or document contemplated hereby or thereby
or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party that is not an Affiliate of such Indemnitee (including for
these purposes a derivative action brought on behalf of the Company) and
arising
out of or resulting from (i) the execution, delivery, performance or enforcement
of the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Securities or (iii) the status of such Buyer or holder of the Securities
as an investor in the Company. To the extent that the foregoing undertaking
by
the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
(ii) Promptly
after receipt by an Indemnitee under this Section 8(k) of notice of the
commencement of any action or proceeding (including any governmental action
or
proceeding) involving an Indemnified Liability, such Indemnitee shall, if
a
claim for indemnification in respect thereof is to be made against any
indemnifying party under this Section 8(k), deliver to the indemnifying party
a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party
so
desires, jointly with any other indemnifying party similarly noticed, to
assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnitee; provided, however, that an Indemnitee
shall have the right to retain its own counsel with the fees and expenses
of not
more than one counsel for such Indemnitee to be paid by the indemnifying
party,
if, in the reasonable opinion of the Indemnitee, the representation by such
counsel of the Indemnitee and the indemnifying party would be inappropriate
due
to actual or potential differing interests between such Indemnitee and any
other
party represented by such counsel in such proceeding. Legal counsel referred
to
in the immediately preceding sentence shall be selected by the Buyers holding
at
least a majority of the Purchased Shares. The Indemnitee shall cooperate
fully
with the indemnifying party in connection with any negotiation or defense
of any
such action or Indemnified Liabilities by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to
the
Indemnitee that relates to such action or Indemnified Liabilities. The
indemnifying party shall keep the Indemnitee fully apprised at all times
as to
the status of the defense or any settlement negotiations with respect thereto.
No indemnifying party shall be liable for any settlement of any action, claim
or
proceeding effected without its prior written consent, provided, however,
that
the indemnifying party shall not unreasonably withhold, delay or condition
its
consent. No indemnifying party shall, without the prior written consent of
the
Indemnitee, consent to entry of any judgment or enter into any settlement
or
other compromise which does not include as an unconditional term thereof
the
giving by the claimant or plaintiff to such Indemnitee of a release from
all
liability in respect to such Indemnified Liabilities or litigation. The failure
to deliver written notice to the indemnifying party within a reasonable time
of
the commencement of any such action shall not relieve such indemnifying party
of
any liability to the Indemnitee under this Section 8(k), except to the extent
that the indemnifying party is prejudiced in its ability to defend such
action.
(iii) The
indemnification required by this Section 8(k) shall be made by periodic payments
of the amount thereof during the course of the investigation or defense,
as and
when bills are received or Indemnified Liabilities are incurred.
(iv) The
indemnity agreements contained herein shall be in addition to (x) any cause
of
action or similar right of the Indemnitee against the indemnifying party
or
others, and (y) any liabilities the indemnifying party may be subject to
pursuant to the law.
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. Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever any Buyer exercises
a
right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein
provided, then such Buyer may rescind or withdraw, in its sole discretion
from
time to time upon written notice to the Company, any relevant notice, demand
or
election in whole or in part without prejudice to its future actions and
rights.
o. 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, 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.
p. 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. 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.
[Signature
Page Follows]
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to the
Securities Purchase Agreement to be duly executed as of the date first written
above.
|
COMPANY:
|
|
|
By:
______________________________________
Name:
Title:
|
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to the
Securities Purchase Agreement to be duly executed as of the date first written
above.
Name
of
Investing Entity or Person: __________________________
Name
to
be listed on Stock Certificate (if different from above):
__________________________
Name
of
Authorized Signatory: _________________________
Title
of
Authorized Signatory: __________________________
Email
Address of Authorized Signatory: ________________________________
Tax
ID
number of Investing Entity or Person:
__________________________________
Address
for Notice of Investing Entity or Person:
Address
for Delivery of Securities for Investing Entity or Person (if different from
above):
Subscription
Amount:
Number
of
Shares: __________________
Dollar
Amount: $_________________
|
BUYERS:
|
|
|
________________________________
Buyer
Name
By:
______________________________
Name:
Title:
|
SCHEDULE
3.1(a)
COMPANY’S
SUBSIDIARIES
IsoRay
Medical, Inc.
SCHEDULE
3.1(g)
CAPITALIZATION
The
Company’s Articles of Incorporation provide that the Company has the authority
to issue 200 million shares of capital stock, which are currently divided
into
two classes as follows: 194 million shares of common stock, par value of
$0.001
per share; and 6 million shares of preferred stock, also with a par value
of
$0.001 per share. As of March 21, 2007, the Company had 18,559,933 shares
of
common stock and 59,065 shares of Series B preferred stock outstanding. The
Company also had options to purchase 3,088,439 shares of common stock, warrants
to purchase 2,656,931 shares of common stock, and $355,000 in principal amount
of convertible debentures (convertible into common stock at $4.15 per share)
outstanding on that date.
On
July
28, 2005, the Company adopted the Amended and Restated 2005 Stock Option
Plan
(the "Option Plan") and the Amended and Restated 2005 Employee Stock Option
Plan
(the "Employee Plan"), pursuant to which it may grant equity awards to eligible
persons. On August 15, 2006, the Company adopted the 2006 Director Stock
Option
Plan (the “Director Plan”) pursuant to which it may grant equity awards to
eligible persons. The Option Plan allows the Board of Directors to grant
options
to purchase up to 1,800,000 shares of common stock to directors, officers,
key
employees and service providers of the Company, and the Employee Plan allows
the
Board of Directors to grant options to purchase up to 2,000,000 shares of
common
stock to officers and key employees of the Company. The Director Plan allows
the
Board of Directors to grant options to purchase up to 1,000,000 shares of
common
stock to directors of the Company. As of March 21, 2007, options to purchase
1,755,468 shares had been granted (net of cancellations) under the Option
Plan,
options to purchase 1,882,754 shares had been granted (net of cancellations)
under the Employee Plan, and options to purchase 250,000 shares had been
granted
under the Director Plan. Of these options, 573,826 had been exercised under
the
Option Plan, 225,957 had been exercised under the Employee Plan, and no options
had been exercised under the Director Plan, as of March 21, 2007.
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights (#)
|
Weighted-average
exercise price of outstanding options, warrants and rights
($)
|
Number
of securities remaining available for future issuance under equity
compensation plans
|
|||
|
Equity
compensation plans approved by shareholders
|
N/A
|
N/A
|
N/A
|
|||
|
Equity
compensation plans not approved by shareholders
|
3,088,439
|
$2.48
|
911,778
|
|||
|
Total
|
3,088,439
|
$2.48
|
911,778
|
SCHEDULE
3.1(i)
MATERIAL
CHANGES
Preferred
Dividends
On
February 1, 2007, the Board of Directors declared a dividend on the Series
B
Preferred Stock of all outstanding and cumulative dividends through December
31,
2006. The total dividend of $38,458 was paid on February 15, 2007.
SCHEDULE
3.1(l)
COMPLIANCE
The
Company has obtained a debt covenant waiver from the Xxxxxx-Xxxxxxxx Economic
Development District as set forth below.
SCHEDULE
3.1(n)
TITLE
TO ASSETS
Included
on the Company’s books are assets leased under capital leases. These assets
include a hot cell and glovebox and they are owned by the lessor subject
to the
terms of the lease agreements.
The
Company has two notes payable to Xxxxxx-Xxxxxxxx Economic Development District
(“BFEDD”) and Hanford Area Economic Investment Fund Committee (“HAEIFC”). The
BFEDD note is collateralized by substantially all of the Company’s assets and is
guaranteed by certain shareholders. The HAEIFC note is collateralized by
receivables, inventory, equipment, and certain life insurance policies. A
potion
of the HAEIFC note is guaranteed by certain shareholders.
SCHEDULE
3.1(o)
PATENTS
AND TRADEMARKS
None.
