EXHIBIT 10.42
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
December 31, 2003 by and between Lynx Therapeutics, Inc., a Delaware corporation
(the "COMPANY"), and each purchaser identified on the signature pages hereto
(each, a "PURCHASER" and collectively, the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as
amended, the Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the Company,
certain securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each of the
Purchasers agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in
this Agreement, the following terms have the meanings indicated:
"AFFILIATE" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person, as such terms are used in and
construed under Rule 144.
"BANKRUPTCY EVENT" means any of the following events: (a) the
Company or any Subsidiary commences a case or other proceeding under
any bankruptcy, reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law of
any jurisdiction relating to the Company or any Subsidiary thereof; (b)
there is commenced against the Company or any Subsidiary any such case
or proceeding that is not dismissed within 60 days after commencement;
(c) the Company or any Subsidiary is adjudicated insolvent or bankrupt
or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company or any Subsidiary suffers any
appointment of any custodian or the like for it or any substantial part
of its property that is not discharged or stayed within 60 days; (e)
the Company or any Subsidiary makes a general assignment for the
benefit of creditors; (f) the Company or any Subsidiary fails to pay,
or states that it is unable to pay or is unable to pay, its debts
generally as they become due; (g) the Company or any Subsidiary calls a
meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (h) the Company or any
Subsidiary, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or
takes any corporate or other action for the purpose of effecting any of
the foregoing.
"BUSINESS DAY" means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
"CHANGE OF CONTROL" means the consummation of a "Rule 13e-3
transaction" as defined in Rule 13e-3 under the Exchange Act with
respect to the Company or the execution by the Company or its
controlling stockholders of an agreement providing for or reasonably
likely to result in the foregoing event.
"CLOSING" means the closing of the purchase and sale of the
Shares and the Warrants pursuant to Section 2.1.
"CLOSING DATE" means the date of the Closing.
"CLOSING PRICE" means, for any date, the price determined by
the first of the following clauses that applies: (a) if the Common
Stock is then listed or quoted on an Eligible Market or any other
national securities exchange, the closing bid price per share of the
Common Stock for such date (or the nearest preceding date) on the
primary Eligible Market or exchange on which the Common Stock is then
listed or quoted; (b) if prices for the Common Stock are then quoted on
the OTC Bulletin Board, the closing bid price per share of the Common
Stock for such date (or the nearest preceding date) so quoted; (c) if
prices for the Common Stock are then reported in the "Pink Sheets"
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent closing bid price per share of the Common
Stock so reported; or (d) in all other cases, the fair market value of
a share of Common Stock as determined by an independent appraiser
selected in good faith by a majority-in-interest of the Purchasers.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par
value $0.01 per share.
"COMMON STOCK EQUIVALENTS" means, collectively, Options and
Convertible Securities.
"COMPANY COUNSEL" means Xxxxxx Godward LLP.
"CONVERTIBLE SECURITIES" means any stock or securities (other
than Options) convertible into or exercisable or exchangeable for
Common Stock.
"EFFECTIVE DATE" means the date that the Registration
Statement is first declared effective by the Commission.
"ELIGIBLE MARKET" means any of the New York Stock Exchange,
the American Stock Exchange, the Nasdaq National Market or the Nasdaq
Small Cap Market.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
2
"EXCLUDED STOCK" means the issuance of Common Stock (A) upon
exercise or conversion of any options or other securities described in
Schedule 3.1(f) (provided that such exercise or conversion occurs in
accordance with the terms thereof, without amendment or modification,
and that the applicable exercise or conversion price or ratio is
described in such schedule), (B) in connection with any grant of
options, warrants or the issuance of additional securities to
employees, officers, directors or consultants of the Company pursuant
to a stock option plan or stock purchase plan duly adopted by the
Company's board of directors or in respect of the issuance of Common
Stock upon exercise of any such options, (C) pursuant to a bona fide
firm commitment underwritten public offering with a nationally
recognized underwriter (excluding any equity line) in an aggregate
offering amount greater than $20,000,000, or (D) in connection with a
bona fide joint venture or development agreement or strategic
partnership or merger, consolidation, acquisition or similar business
combination, the primary purpose of which is not to raise equity
capital.
"FILING DATE" means January 30, 2004.
"LIEN" means any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction.
"LOSSES" means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including, without
limitation, costs of preparation and reasonable attorneys' fees.
"OPTIONS" means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities.
"PERSON" means any individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or any court or other federal, state,
local or other governmental authority or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes
any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by the Registration
Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means any Common Stock (including
Underlying Shares) issued or issuable pursuant to the Transaction
Documents, together with any
3
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the
foregoing.
"REGISTRATION STATEMENT" means each registration statement
required to be filed under Article VI, including (in each case) the
Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed
to be incorporated by reference in such registration statement.
"REQUIRED EFFECTIVENESS DATE" means March 30, 2004.
"RULE 144," "RULE 415," and "RULE 424" means Rule 144, Rule
415 and Rule 424, respectively, promulgated by the Commission pursuant
to the Securities Act, as such Rules may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"SECURITIES" means the Shares, the Warrants and the Underlying
Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means an aggregate of 800,000 shares of Common Stock,
which are being issued and sold to the Purchasers at the Closing.
"SUBSIDIARY" means any Person in which the Company, directly
or indirectly, owns a majority of the capital stock or holds an equity
or similar majority interest that are required to be listed in Schedule
3.1(a).
"TRADING DAY" means (a) any day on which the Common Stock is
listed or quoted and traded on its primary Trading Market, (b) if the
Common Stock is not then listed or quoted and traded on any Eligible
Market, then a day on which trading occurs on the NASDAQ Small Cap
Market (or any successor thereto), or (c) if trading does not occur on
the NASDAQ Small Cap Market (or any successor thereto), any Business
Day.
"TRADING MARKET" means the NASDAQ Small Cap Market or any
other Eligible Market on which the Common Stock is then listed or
quoted.
"TRANSACTION DOCUMENTS" means this Agreement, the Warrants,
the Transfer Agent Instructions and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
"TRANSFER AGENT" means EquiServe Trust Company, N.A. or any
other transfer agent selected by the Company.
"TRANSFER AGENT INSTRUCTIONS" means the Irrevocable Transfer
Agent Instructions, in the form of Exhibit D, executed by the Company
and delivered to and acknowledged in writing by the Transfer Agent.
4
"UNDERLYING SHARES" means the shares of Common Stock issuable
upon exercise of the Warrants and any securities issued in exchange for
or in respect of such shares.
"WARRANTS" means, collectively, the Common Stock purchase
warrants issued and sold under this Agreement, in the form of Exhibit
A, and any warrants issued upon exercise of such warrants.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of Shares and a Warrant to purchase such number of Underlying
Shares, each as indicated below such Purchaser's name on the signature page of
this Agreement, for an aggregate purchase price for such Purchaser as indicated
below such Purchaser's name on the signature page of this Agreement. The Closing
shall take place at the offices of Proskauer Rose LLP immediately following the
execution hereof, or at such other location or time as the parties may agree.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause
to be delivered to each Purchaser the following:
(i) one or more stock certificates, free and clear of
all restrictive and other legends (except as expressly provided in
Section 4.1(b) hereof), evidencing the number of Shares indicated below
such Purchaser's name on the signature page of this Agreement,
registered in the name of such Purchaser;
(ii) a Warrant, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to
acquire the number of Underlying Shares indicated below such Purchaser's
name on the signature page of this Agreement, on the terms set forth
therein;
(iii) a legal opinion of Company Counsel, in the form of
Exhibit B, executed by such counsel and delivered to the Purchasers; and
(iv) duly executed Transfer Agent Instructions
acknowledged by the Transfer Agent.
(b) At the Closing, each Purchaser shall deliver or cause
to be delivered to the Company the purchase price indicated below such
Purchaser's name on the signature page of this Agreement, in United
States dollars and in immediately available funds, by wire transfer to
an account designated in writing by the Company for such purpose.
(c) Notwithstanding anything to the contrary in this
Section 2.2, in the event that the Company cannot deliver all of the
items set forth in Sections 2.2(a) above, each Purchaser shall instead
deliver the purchase price set forth in Section 2.2(b) (the "ESCROW
5
FUNDS") to the Company Counsel, to be held by the Company Counsel in
escrow on behalf of such Purchaser. Upon confirmation from all the
Purchasers of receipt by the Purchasers of all the items set forth in
Sections 2(a) above (which may be in writing or via email), the Company
Counsel shall release the Escrow Funds to the Company. In the event all
of the items set forth in Sections 2(a) are not delivered to a
Purchaser on or prior to January 7, 2004, the Company Counsel shall
immediately return the Escrow Funds to a Purchaser upon the request of
such Purchaser. The Company Counsel hereby acknowledges and agrees to
act as escrow agent in accordance with this Section 2(c). The Company
Counsel (i) shall be entitled to rely on any written or email
communication received from a Purchaser and (ii) shall not be liable
for any acts or omissions of any kind any unless caused by its own
gross negligence or willful misconduct.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The
Company hereby represents and warrants to each of the Purchasers as follows:
(a) Subsidiaries. The Company has no direct or indirect
Subsidiaries other than those listed in Schedule 3.1(a). Except as
disclosed in Schedule 3.1(a), the Company owns, directly or indirectly,
all of the capital stock or comparable equity interests of each
Subsidiary free and clear of any Lien, and all the issued and
outstanding shares of capital stock or comparable equity interests of
each Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company
and the Subsidiaries is an entity duly 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. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing
as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or
in good standing, as the case may be, could not, individually or in the
aggregate, (i) adversely affect the legality, validity or
enforceability of any Transaction Document, (ii) have or result in a
material adverse effect on the results of operations, assets,
prospects, business or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (iii) adversely
impair the Company's ability to perform fully on a timely basis its
obligations under any of the Transaction Documents (any of (i), (ii) or
(iii), a "MATERIAL ADVERSE EFFECT").
(c) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate
the transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. 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
6
have been duly authorized by all necessary action on the part of the
Company and no further consent or action is required by the Company,
its Board of Directors or its stockholders. Each of the Transaction
Documents has been (or upon delivery will be) duly executed by the
Company and is, or 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.
(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 do not and
will not (i) conflict with or violate any provision of the Company's or
any Subsidiary's certificate or articles of incorporation, bylaws or
other organizational or charter documents, (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the Company
or any Subsidiary is bound or affected, except to the extent that such
conflict, default or termination right could not reasonably be expected
to have a Material Adverse Effect, 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 and the rules and regulations of any self-regulatory
organization to which the Company or its securities are subject), or by
which any property or asset of the Company or a Subsidiary is bound or
affected.
(e) Issuance of the Securities. The Securities (including
the Underlying Shares) are 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
Liens and shall not be subject to preemptive rights or similar rights
of stockholders. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable
upon exercise of the Warrants.
(f) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock, options and other
securities of the Company (whether or not presently convertible into or
exercisable or exchangeable for shares of capital stock of the Company)
is set forth in Schedule 3.1(f). All outstanding shares of capital
stock are duly authorized, validly issued, fully paid and nonassessable
and have been issued in compliance with all applicable securities laws.
Except as a result of the sale of the Warrants and as disclosed in
Schedule 3.1(f), there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations
convertible into or exercisable 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. There are no anti-dilution
or price adjustment provisions contained in any security issued by the
Company (or in any agreement
7
providing rights to security holders) and the issue and sale of the
Securities (including the Underlying Shares) will not obligate the
Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) and will not result in a right of
any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. To the knowledge of the
Company, except as specifically disclosed in Schedule 3.1(f), no Person
or group of related Persons beneficially owns (as determined pursuant
to Rule 13d-3 under the Exchange Act), or has the right to acquire, by
agreement with or by obligation binding upon the Company, beneficial
ownership of in excess of 5% of the outstanding Common Stock, ignoring
for such purposes any limitation on the number of shares of Common
Stock that may be owned at any single time.
(g) SEC Reports; Financial Statements. The Company has
filed all reports required to be filed by it under the Securities Act
and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the
foregoing materials being collectively referred to herein as the "SEC
REPORTS" and, together with this Agreement and 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 made available to the Purchasers copies of all SEC Reports
filed within the ten (10) days preceding the date hereof. As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Reports, when filed, contained any untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
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 Commission with
respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise
specified in such financial statements or the notes thereto or in the
case of unaudited financial statements, as permitted by Form 10-Q of
the Commission, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as
of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. All
material agreements, as such contracts are defined in Section
601(a)(10) of Regulation S-K under the Securities Act, to which the
Company or any Subsidiary is a party or to which the property or assets
of the Company or any Subsidiary are subject are included as part of or
specifically identified in the SEC Reports.
(h) Material Changes. Since the date of the latest
audited financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that, individually or in the aggregate, has
had or that could result in a Material Adverse Effect, (ii) the Company
has not incurred any 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)
8
liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made
with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not
declared or made any dividend or distribution of cash or other property
to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company
has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option and stock
purchase plans.
(i) Absence of Litigation. Except as set forth in
Schedule 3.1(i), there is no action, suit, claim, proceeding, inquiry
or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the
knowledge of the Company, overtly threatened against or affecting the
Company or any of its Subsidiaries that could, individually or in the
aggregate, have a Material Adverse Effect. Schedule 3.1(i) contains a
complete list and summary description of any pending or, to the
knowledge of the Company, threatened proceeding against or affecting
the Company or any of its Subsidiaries that could individually or in
the aggregate, have a Material Adverse Effect.
(j) Compliance. Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred
that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is
in default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not
such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has
been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety
and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or result in a Material Adverse
Effect.
(k) Title to Assets. The Company and the Subsidiaries
have good and marketable title in fee simple to all real property owned
by them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property
owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for
Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases of which
the Company and the Subsidiaries are in compliance.
(l) Certain Fees. Except for the fees to Ashenden Finance
& Cie, and those described in Schedule 3.1(l), all of which are payable
to registered broker-dealers, no brokerage or finder's fees or
commissions are or will be payable by the Company to any broker,
financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions
contemplated by this Agreement, and the Company has not taken any
action that would cause any Purchaser to be liable for any such fees or
commissions.
9
(m) Private Placement. Neither the Company nor any Person
acting on the Company's behalf has sold or offered to sell or solicited
any offer to buy the Securities by means of any form of general
solicitation or advertising. Neither the Company nor any of its
Affiliates nor any Person acting on the Company's behalf has, directly
or indirectly, at any time within the past six months, made any offer
or sale of any security or solicitation of any offer to buy any
security under circumstances that would (i) eliminate the availability
of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale of the Securities
as contemplated hereby or (ii) cause the offering of the Securities
pursuant to the Transaction Documents to be integrated with prior
offerings by the Company for purposes of any applicable law, regulation
or stockholder approval provisions, including, without limitation,
under the rules and regulations of any Trading Market. The Company is
not, and is not an Affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. The Company
is not a United States real property holding corporation within the
meaning of the Foreign Investment in Real Property Tax Act of 1980.
(n) Form S-3 Eligibility. The Company is eligible to
register its Common Stock for resale by the Purchasers using Form S-3
promulgated under the Securities Act.
(o) Listing and Maintenance Requirements. Except as
described in the Company's Annual Report for the year ended December
31, 2002 initially filed on Form 10-K with the Commission on March 28,
2003, as amended (the "ANNUAL REPORT"), the Company has not, in the two
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.
(p) Registration Rights. Except as described in Schedule
3.1(p), the Company has not granted or agreed to grant to any Person
any rights (including "piggy-back" registration rights) to have any
securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied.
(q) Application of Takeover Protections. There is no
control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's charter documents or the
laws of its state of incorporation that is or could become applicable
to any of the Purchasers as a result of the Purchasers and the Company
fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of
the Company's issuance of the Securities and the Purchasers' ownership
of the Securities.
(r) Disclosure. The Company confirms that neither it nor
any other Person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that
constitutes or might constitute material, nonpublic information. The
Company understands and confirms that each of the Purchasers will rely
on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated
10
hereby, including the Schedules to this Agreement, furnished by or on
behalf of the Company are true and correct and do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. No event
or circumstance has occurred or information exists with respect to the
Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly
announced or disclosed, except, until such time as the press release is
issued as contemplated by Section 4.6, the execution of this Agreement.
The Company acknowledges and agrees that no Purchaser makes or has made
any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section
3.2.
(s) Acknowledgment Regarding Purchasers' Purchase of
Securities. The Company acknowledges and agrees that each of the
Purchasers is acting solely in the capacity of an arm's length
purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that no Purchaser
is acting as a financial advisor or fiduciary of the Company or any
other Purchaser (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice given
by any Purchaser or any of their respective representatives or agents
in connection with this Agreement and the transactions contemplated
hereby is merely incidental to such Purchaser's purchase of the
Securities. The Company further represents to each Purchaser that the
Company's decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby
by the Company and its representatives.
(t) Patents and Trademarks. The Company and the
Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade
names, copyrights, licenses and other similar rights that are necessary
or material for use in connection with their respective businesses as
described in the SEC Reports and which the failure to so have could
have a Material Adverse Effect (collectively, the "INTELLECTUAL
PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has received
a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any
Person. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights.
(u) 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.
(v) 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 could
not, individually or in the
11
aggregate, have or result in a Material Adverse Effect ("MATERIAL
PERMITS"), and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any
Material Permit.
(w) Transactions With Affiliates and Employees. Except as
set forth in the Annual Report, 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.
(x) Solvency. Based on the financial condition of the
Company 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; (ii) the
Company's assets do not constitute unreasonably small capital to carry
on its business for the current fiscal year as now conducted and as
proposed to be conducted including its capital needs taking into
account the particular capital requirements of the business conducted
by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated
uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such
debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).
(y) Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
3.2 Representations and Warranties of the Purchasers. Each
Purchaser hereby, as to itself only and for no other Purchaser, represents and
warrants to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization with the requisite corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder. The purchase by
such Purchaser of the Shares and the Warrants hereunder has been duly
authorized by all necessary action on the part of such
12
Purchaser. This Agreement has been duly executed and delivered by such
Purchaser and constitutes the valid and binding obligation of such
Purchaser, enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes
only and not with a view to or for distributing or reselling such
Securities or any part thereof, without prejudice, however, to such
Purchaser's right, subject to the provisions of this Agreement, at all
times to sell or otherwise dispose of all or any part of such
Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws. Nothing
contained herein shall be deemed a representation or warranty by such
Purchaser to hold Securities for any period of time. Such Purchaser
does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.
(c) Purchaser Status. At the time such Purchaser was
offered the Shares and the Warrants, it was, and at the date hereof it
is, an "accredited investor" as defined in Rule 501(a) under the
Securities Act.
(d) Experience of such Purchaser. Such Purchaser, either
alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks
of such investment. Such Purchaser is able to bear the economic risk of
an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
(e) Access to Information. Such Purchaser acknowledges
that it has reviewed the Disclosure Materials and has been afforded (i)
the opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company concerning
the terms and conditions of the offering of the Securities and the
merits and risks of investing in the Securities; (ii) access to
information about the Company and the Subsidiaries and their respective
financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional
information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or
affect such Purchaser's right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents.
(f) No Short Positions or Stock Ownership. Each Purchaser
has not, as of the Closing Date, entered into any Short Sales. For
purposes of this Section 3.2(f), a "SHORT SALE" by a Purchaser means a
sale of Common Stock that is marked as a short sale and that is
executed at a time when such Purchaser has no equivalent offsetting
long position in the Common Stock. For purposes of determining whether
a Purchaser has an equivalent offsetting long position in the Common
Stock, all Common Stock and all Common Stock that
13
would be issuable upon conversion or exercise in full of all Options
then held by such Purchaser (assuming that such Options were then fully
convertible or exercisable, notwithstanding any provisions to the
contrary, and giving effect to any conversion or exercise price
adjustments scheduled to take effect in the future) shall be deemed to
be held long by such Purchaser.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) Securities may only be disposed of pursuant to an
effective registration statement under the Securities Act or pursuant
to an available exemption from the registration requirements of the
Securities Act, and in compliance with any applicable state securities
laws. In connection with any transfer of Securities other than pursuant
to an effective registration statement or to the Company or pursuant to
Rule 144(k), except as otherwise set forth herein, the Company may
require the transferor to provide to the Company an opinion of counsel
selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that
such transfer does not require registration under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and
agrees to register on the books of the Company and with its Transfer
Agent, without any such legal opinion, any transfer of Securities by a
Purchaser to an Affiliate of such Purchaser, provided that the
transferee certifies to the Company that it is an "accredited investor"
as defined in Rule 501(a) under the Securities Act.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of the following legend on any
certificate evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
NOTWITHSTANDING THE FOREGOING, THESE SECURITIES [AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THESE SECURITIES] MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
14
Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) following any sale of such Securities while a
Registration Statement covering the resale of such Securities is effective under
the Securities Act, provided that the prospectus delivery requirements of the
Securities Act have been met, or (ii) following any sale of such Securities
pursuant to Rule 144, or (iii) if such Securities are eligible for sale under
Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The Company shall cause
its counsel to issue the legal opinion included in the Transfer Agent
Instructions to the Transfer Agent on the Effective Date. Following the
Effective Date or at such earlier time as a legend is no longer required for
certain Securities, the Company will no later than three Trading Days following
the delivery by a Purchaser to the Company or the Transfer Agent of a legended
certificate representing such Securities and following delivery by a Purchaser
to the Company or Company Counsel of a signed and completed notice of sale
representing that the prospectus delivery requirements of the Securities Act
have been met with respect to such sale, deliver or cause to be delivered to
such Purchaser a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section.
(c) The Company acknowledges and agrees that a Purchaser
may from time to time pledge or grant a security interest in some or all of
the Securities in connection with a bona fide margin agreement or other loan
or financing arrangement secured by the Securities and, if required under
the terms of such agreement, loan or arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured parties.
Such a pledge or transfer would not be subject to approval of the Company
and no legal opinion of the pledgee, secured party or pledgor shall be
required in connection therewith, but such legal opinion may be required in
connection with a subsequent transfer following default by the Purchaser
transferee of the pledge. Further, no notice shall be required of such
pledge. At the appropriate Purchaser's expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of
the Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list
of selling stockholders thereunder.
4.2 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any Purchaser, the Company shall deliver to
such Purchaser a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. During the earlier of (i)
the date two years from the Closing Date or (ii) as long as any Purchaser owns
Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly available
in accordance with paragraph (c) of Rule 144 such information as is required for
the Purchasers to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request to satisfy the provisions of Rule
15
144 applicable to the issuer of securities relating to transactions for the sale
of securities pursuant to Rule 144.
4.3 Integration. The Company shall not, and shall use its best
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market.
4.4 Reservation of Securities. The Company shall maintain a
reserve from its duly authorized shares of Common Stock for issuance pursuant to
the Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares.
4.5 Subsequent Placements.
(a) From the date hereof until the Effective Date (the
"BLOCKOUT PERIOD"), the Company will not, directly or indirectly, offer,
sell, grant any option to purchase, or otherwise dispose of (or announce any
offer, sale, grant or any option to purchase or other disposition of) any of
its or the Subsidiaries' equity or equity equivalent securities, including
without limitation any debt, preferred stock or other instrument or security
that is, at any time during its life and under any circumstances,
convertible into or exchangeable or exercisable for Common Stock or Common
Stock Equivalents (any such offer, sale, grant, disposition or announcement
being referred to as a "SUBSEQUENT PLACEMENT"). The restrictions contained
in this Section 4.5 shall not apply to Excluded Stock.
(b) From the end of the Blockout Period until the one
year anniversary thereof, the Company will not, directly or indirectly,
effect any Subsequent Placement unless the Company shall have first complied
with this Section 4.5(b).
(i) Each Purchaser shall have a right of first
refusal to purchase up to its pro rata share in any Subsequent
Placement. Each Purchaser's pro rata share is equal to the ratio
of (x) the number of Shares and Warrant Shares (assuming full
exercise of the Warrants) which such Purchaser purchased on the
Closing Date to (y) the total number of shares of the Company's
Common Stock (assuming full exercise of the Warrants) outstanding
on the Closing Date.
(ii) If the Company proposes to effect any Subsequent
Offering, it shall give each Purchaser written notice of its
intention, describing the securities offered (the "OFFERED
SECURITIES"), identify the Persons or entities (if known) to
which or with which the Offered Securities are to be offered,
issued, sold or exchanged, the price (or the anticipated
mechanism for determining the price) and the terms and conditions
upon which the Company proposes to issue the same (the "NOTICE").
Each Purchaser shall have not less than seven (7) Trading Days
from the giving of such Notice to agree to
16
purchase up to its pro rata share of the Offered Securities for
the price and upon the terms and conditions specified in the
Notice by providing written notice to the Company and stating
therein the quantity of Offered Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required
to offer or sell such securities to any Purchaser who would cause
the Company to be in violation of applicable federal securities
laws by virtue of such offer or sale.
(iii) If the Purchasers fail to exercise in full the
rights of first refusal (such securities refused, the "REFUSED
SECURITIES"), the Company shall have 10 days thereafter to sell
the Offered Securities in respect of which the Purchasers' rights
were not exercised, but only to the offerees described in the
Notice (if so described therein) and only at a price and upon
general terms and conditions materially no more favorable to the
purchasers thereof than specified in the Notice to the Purchasers
pursuant to Section 4.5(b) hereof. If the Company has not sold
such Offered Securities within 10 days of the Notice provided
pursuant to Section 4(b)(ii), the Company shall not thereafter
issue or sell any securities, without first offering such Offered
Securities to the Purchasers in the manner provided above.
(iv) Upon the closing of the issuance, sale or
exchange of all or less than all of the Refused Securities, the
Purchasers shall acquire from the Company, and the Company shall
issue to the Purchasers, the number or amount of Offered
Securities specified in the notices of acceptance, upon the terms
and conditions specified in the Notice. The purchase by the
Purchasers, of any Offered Securities is subject in all cases to
the preparation, execution and delivery by the Company and the
Purchasers of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to the
Purchasers and their respective counsel.
4.6 Securities Laws Disclosure; Publicity. The Company shall, on
or before 9:30 a.m. New York City time of the first Trading Day following the
Closing Date, issue a press release acceptable to the Purchasers disclosing the
transactions contemplated hereby. Within one Trading Day following the Closing
Date, the Company shall file a Current Report on Form 8-K with the Commission
(the "8-K FILING") describing the transactions contemplated by the Transaction
Documents and including as exhibits to such Current Report on Form 8-K this
Agreement and the form of Warrants, in the form required by the Exchange Act.
Thereafter, the Company shall timely file any filings and notices required by
the Commission or applicable law with respect to the transactions contemplated
hereby and provide copies thereof to the Purchasers promptly after filing.
Except with respect to the 8-K Filing and the press release referenced above (a
copy of which will be provided to the Purchasers for their review as early as
practicable prior to its filing), the Company shall, at least two Trading Days
prior to the filing or dissemination of any disclosure required by this
paragraph, provide a copy thereof to the Purchasers for their review. The
Company and the Purchasers shall consult with each other in issuing any press
releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or Trading Market
with respect to the transactions contemplated hereby, and neither party shall
issue any such press release or otherwise make any such public statement, filing
or other communication without the prior consent of the other, except if such
disclosure is required by law, in which case the disclosing
17
party shall promptly provide the other party with prior notice of such public
statement, filing or other communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except
to the extent such disclosure (but not any disclosure as to the controlling
Persons thereof) is required by law or Trading Market regulations, in which case
the Company shall provide the Purchasers with prior notice of such disclosure.
The Company shall not, and shall cause each of its Subsidiaries and its and each
of their respective officers, directors, employees and agents not to, provide
any Purchaser with any material nonpublic information regarding the Company or
any of its Subsidiaries from and after the filing of the 8-K Filing without the
express written consent of such Purchaser. No Purchaser shall have any liability
to the Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, stockholders or agents for any such disclosure. Subject to
the foregoing, neither the Company nor any Purchaser shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of any Purchaser, to make any press release or other
public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) each Purchaser shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release). Each press
release disseminated during the 12 months preceding the date of this Agreement
did not at the time of release contain any untrue statement of a material fact.
4.7 Use of Proceeds. The Company shall use the net proceeds from
the sale of the Securities hereunder for working capital purposes and not for
the satisfaction of any portion of the Company's debt (other than payment of
trade payables and accrued expenses in the ordinary course of the Company's
business and consistent with prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.
4.8 Reimbursement. If any Purchaser or any of its Affiliates or
any officer, director, partner, controlling Person, employee or agent of a
Purchaser or any of its Affiliates (a "RELATED PERSON") becomes involved in any
capacity in any Proceeding brought by or against any Person in connection with
or as a result of any misrepresentation, breach or inaccuracy of any
representation, warranty, covenant or agreement made by the Company in any
Transaction Documents, the Company will indemnify and hold harmless such
Purchaser or Related Person for its reasonable legal and other expenses
(including the costs of any investigation, preparation and travel) and for any
Losses incurred in connection therewith, as such expenses or Losses are
incurred, excluding only Losses that result directly from such Purchaser's or
Related Person's gross negligence or willful misconduct. The conduct of any
Proceedings for which indemnification is available under this paragraph shall be
governed by Section 6.4(c) below. The indemnification obligations of the Company
under this paragraph shall be in addition to any liability that the Company may
otherwise have and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Purchasers and
any such Related Persons. The Company also agrees that neither the Purchasers
nor any Related Persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the transactions contemplated by the Transaction Documents,
except to the extent that any Losses incurred by the Company result
18
from the gross negligence or willful misconduct of the applicable Purchaser or
Related Person in connection with such transactions. If the Company breaches its
obligations under any Transaction Document, then, in addition to any other
liabilities the Company may have under any Transaction Document or applicable
law, the Company shall pay or reimburse the Purchasers on demand for all costs
of collection and enforcement (including reasonable attorneys fees and
expenses). Without limiting the generality of the foregoing, the Company
specifically agrees to reimburse the Purchasers on demand for all costs of
enforcing the indemnification obligations in this paragraph.
ARTICLE V
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:
(a) Representations and Warranties. The representations
and warranties of the Company contained herein shall be true and correct in
all material respects as of the date when made and as of the Closing as
though made on and as of such date; and
(b) Performance. The Company and each other Purchaser
shall have performed, satisfied and complied in all material respects with
all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to
the Closing.
5.2 Conditions Precedent to the Obligations of the Company. The
obligation of the Company to sell Securities at the Closing is subject to
the satisfaction or waiver by the Company, at or before the Closing, of each
of the following conditions:
(a) Representations and Warranties. The representations
and warranties of the Purchasers contained herein shall be true and correct
in all material respects as of the date when made and as of the Closing Date
as though made on and as of such date; and
(b) Performance. The Purchasers shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Purchasers at or prior to the
Closing.
ARTICLE VI
REGISTRATION RIGHTS
6.1 Shelf Registration
(a) As promptly as possible, and in any event on or prior
to the Filing Date, the Company shall prepare and file with the Commission a
"Shelf" Registration Statement covering the resale of all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 (except if the Company
is not then eligible to register for resale the Registrable Securities on
Form S-3, in
19
which case such registration shall be on another appropriate form in
accordance herewith as the Purchasers may consent) and shall contain
(except if otherwise directed by the Purchasers) the "Plan of
Distribution" attached hereto as Exhibit C.
(b) The Company shall use its commercially reasonably
efforts to cause the Registration Statement to be declared effective by
the Commission as promptly as possible after the filing thereof, but in
any event prior to the Required Effectiveness Date, and shall use its
best efforts to keep the Registration Statement continuously effective
under the Securities Act until the fifth anniversary of the Effective
Date or such earlier date when all Registrable Securities covered by
such Registration Statement have been sold or may be sold without
volume restrictions pursuant to Rule 144(k) (the "EFFECTIVENESS
PERIOD").
(c) The Company shall notify each Purchaser in writing
promptly (and in any event within one Trading Day) after receiving
notification from the Commission that the Registration Statement has
been declared effective.
(d) Upon the occurrence of any Event (as defined below)
and on every monthly anniversary thereof until the applicable Event is
cured, as partial relief for the damages suffered therefrom by the
Purchasers (which remedy shall not be exclusive of any other remedies
available under this Agreement, at law or in equity), the Company shall
pay to each Purchaser an amount in cash, as liquidated damages and not
as a penalty, equal to 1% of the aggregate purchase price paid by such
Purchaser hereunder. The payments to which a Purchaser shall be
entitled pursuant to this Section 6.1(d) are referred to herein as
"EVENT PAYMENTS". Any Event Payments payable pursuant to the terms
hereof shall apply on a pro-rata basis for any portion of a month prior
to the cure of an Event. In the event the Company fails to make Event
Payments in a timely manner, such Event Payments shall bear interest at
the rate of 1.5% per month (prorated for partial months) until paid in
full.
For such purposes, the occurrence of the Registration Statement not being filed
on or prior to the Filing Date or not being declared effective on or prior to
the Required Effectiveness Date shall constitute an "EVENT".
(e) Notwithstanding anything in this Agreement to the
contrary, the Company may, by written notice to the Purchasers, suspend
sales under a Registration Statement after the Effective Date thereof
and/or require that the Purchasers immediately cease the sale of shares
of Common Stock pursuant thereto and/or defer the filing of any
subsequent Registration Statement if at any time the Company determines
in good faith that such Registration Statement contains an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading and cannot be utilized in connection with the sale of shares
of Common Stock until it has been appropriately amended. Upon receipt
of such notice, each Purchaser shall immediately discontinue any sales
of Registrable Securities pursuant to such registration until such
Purchaser has received copies of a supplemented or amended Prospectus
or until such Purchaser is advised in writing by the Company that the
then-current Prospectus may be used and has received copies of any
additional or supplemental filings that are incorporated or deemed
incorporated by reference in such Prospectus. In no event, however,
shall this right be exercised to suspend sales beyond
20
the period during which (in the good faith determination of the
Company's Board of Directors) the failure to require such suspension
would be materially detrimental to the Company. Furthermore, in no
event may the Company exercise its rights hereunder for a period of
more than 7 consecutive Trading Days or more than 20 Trading Days in
any twelve month period. Immediately after the end of any suspension
period under this Section 6.1(e), the Company shall take all necessary
actions (including filing any required supplemental prospectus) to
restore the effectiveness of the applicable Registration Statement and
the ability of the Purchasers to publicly resell their Registrable
Securities pursuant to such effective Registration Statement.
(f) The Company shall not, prior to the Effective Date of
the Registration Statement, prepare and file with the Commission a
registration statement relating to an offering for its own account or
the account of others under the Securities Act of any of its equity
securities.
6.2 Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing
of a Registration Statement or any related Prospectus or any amendment
or supplement thereto (specifically excluding any document that would
be incorporated or deemed to be incorporated therein by reference), the
Company shall furnish to each Purchaser and any counsel designated by
any Purchaser (each, a "PURCHASER COUNSEL", and Vertical Ventures, LLC
has initially designated Proskauer Rose LLP) copies of all such
documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject
to the review of such Purchasers and each Purchaser Counsel. The
Company shall not file a Registration Statement or any such Prospectus
or any amendments or supplements thereto to which Purchasers holding a
majority of the Registrable Securities shall reasonably object in good
faith.
(b) (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to each Registration
Statement and the Prospectus used in connection therewith as may be
necessary to keep the Registration Statement continuously effective as
to the applicable Registrable Securities for the Effectiveness Period
and prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all
of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as
so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within 15
days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as
reasonably possible provide the Purchasers true and complete copies of
all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply in all material respects with
the provisions of the Securities Act and the Exchange Act with respect
to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with
the intended methods of disposition by the Purchasers thereof set forth
in the Registration Statement as so amended or in such Prospectus as so
supplemented
21
(c) Notify the Purchasers of Registrable Securities to be
sold and each Purchaser Counsel as promptly as reasonably possible, and
(if requested by any such Person) confirm such notice in writing no
later than one Trading Day thereafter, of any of the following events:
(i) the Commission notifies the Company whether there will be a
"review" of any Registration Statement; (ii) the Commission comments in
writing on any Registration Statement (in which case the Company shall
deliver to each Purchaser a copy of such comments and of all written
responses thereto); (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the Commission or
any other Federal or state governmental authority requests any
amendment or supplement to any Registration Statement or Prospectus or
requests additional information related thereto; (v) the Commission
issues any stop order suspending the effectiveness of any Registration
Statement or initiates any Proceedings for that purpose; (vi) the
Company receives notice of any suspension of the qualification or
exemption from qualification of any Registrable Securities for sale in
any jurisdiction, or the initiation or threat of any Proceeding for
such purpose; or (vii) the financial statements included in any
Registration Statement become ineligible for inclusion therein or any
statement made in any Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference
is untrue in any material respect or any revision to a Registration
Statement, Prospectus or other document is required so that it 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, in the light of the circumstances under which they
were made, not misleading.
(d) Use its best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of (i) any order suspending the
effectiveness of any Registration Statement, or (ii) any suspension of
the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.
(e) Furnish to each Purchaser and each Purchaser Counsel,
without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements
and schedules, all documents incorporated or deemed to be incorporated
therein by reference, and all exhibits to the extent requested by such
Person (including those previously furnished or incorporated by
reference) promptly after the filing of such documents with the
Commission.
(f) Promptly deliver to each Purchaser and each Purchaser
Counsel, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request. The Company
hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Purchasers in connection with
the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto.
(g) (i) In the time and manner required by each Trading
Market, prepare and file with such Trading Market an additional shares
listing application covering all of the Registrable Securities; (ii)
take all steps necessary to cause such Registrable Securities to be
approved for listing on each Trading Market as soon as possible
thereafter; (iii) provide to the
22
Purchasers evidence of such listing; and (iv) maintain the listing of
such Registrable Securities on each such Trading Market or another
Eligible Market.
(h) Prior to any public offering of Registrable
Securities, use its best efforts to register or qualify or cooperate
with the selling Purchasers and each applicable Purchaser Counsel in
connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Securities for
offer and sale under the securities or blue sky laws of such
jurisdictions within the United States as any Purchaser requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and
all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered
by a Registration Statement; provided, however, that the Company shall
not be obligated to file any general consent to service of process or
to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it
is not otherwise subject.
(i) Cooperate with the Purchasers to facilitate the
timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by this Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered
in such names as any such Purchasers may request.
(j) Upon the occurrence of any event described in Section
6.2(c)(vii), as promptly as reasonably possible, prepare a supplement
or amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered,
neither the Registration Statement nor such Prospectus will 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 light of the circumstances under which they were made,
not misleading.
(k) Comply with all applicable rules and regulations of
the Commission.
6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including without limitation (a)
all registration and filing fees and expenses, including without limitation
those related to filings with the Commission, any Trading Market and in
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the
Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company, (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, and (f) all listing fees to be paid
by the Company to the Trading Market.
6.4 Indemnification
23
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Purchaser, the officers, directors, partners, members,
agents, brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and
employees of each of them, each Person who controls any such Purchaser
(within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the officers, directors, partners, members,
agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all
Losses, as incurred, arising out of or relating to any untrue or
alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus,
or arising out of or relating to any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus
or supplement thereto, in the light of the circumstances under which
they were made) not misleading, except to the extent, but only to the
extent, that (i) such untrue statements, alleged untrue statements,
omissions or alleged omissions are based solely upon information
regarding such Purchaser furnished in writing to the Company by such
Purchaser expressly for use therein, or to the extent that such
information relates to such Purchaser or such Purchaser's proposed
method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus
or in any amendment or supplement thereto or (ii) in the case of an
occurrence of an event of the type specified in Section
6.2(c)(v)-(vii), the use by such Purchaser of an outdated or defective
Prospectus after the Company has notified such Purchaser in writing
that the Prospectus is outdated or defective and prior to the receipt
by such Purchaser of the Advice contemplated in Section 6.5. The
Company shall notify the Purchasers promptly of the institution, threat
or assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.
(b) Indemnification by Purchasers. Each Purchaser shall,
severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the
Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted
by applicable law, from and against all Losses (as determined by a
court of competent jurisdiction in a final judgment not subject to
appeal or review) arising solely out of any untrue statement of a
material fact contained in the Registration Statement, any Prospectus,
or any form of prospectus, or in any amendment or supplement thereto,
or arising solely out of any omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case
of any Prospectus or form of prospectus or supplement thereto, in the
light of the circumstances under which they were made) not misleading
to the extent, but only to the extent, that such untrue statement or
omission is contained in any information so furnished in writing by
such Purchaser to the Company specifically for inclusion in such
Registration Statement or such Prospectus or to the extent that (i)
such untrue statements or omissions are based solely upon information
regarding such Purchaser furnished in writing to the Company by such
Purchaser expressly for use therein, or to the extent that such
information relates to such Purchaser or such Purchaser's proposed
method of distribution of Registrable Securities and was reviewed
24
and expressly approved in writing by such Purchaser expressly for use
in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto or (ii) in the
case of an occurrence of an event of the type specified in Section
6.2(c)(v)-(vii), the use by such Purchaser of an outdated or defective
Prospectus after the Company has notified such Purchaser in writing
that the Prospectus is outdated or defective and prior to the receipt
by such Purchaser of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Purchaser hereunder be greater
in amount than the dollar amount of the net proceeds received by such
Purchaser upon the sale of the Registrable Securities giving rise to
such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any
Proceeding shall be brought or asserted against any Person entitled to
indemnity hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party
shall promptly notify the Person from whom indemnity is sought (the
"INDEMNIFYING PARTY") in writing, and the Indemnifying Party shall
assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent
that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further
review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(iii) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to
25
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under
Section 6.4(a) or (b) is unavailable to an Indemnified Party (by
reasons other than the specified exclusions to indemnification), then
each Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information
supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section
6.4(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such
party in accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6.4(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 6.4(d), no Purchaser
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the proceeds actually received by such Purchaser from the sale
of the Registrable Securities subject to the Proceeding exceeds the amount of
any damages that such Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6.5 Dispositions. Each Purchaser agrees that it will comply with
the prospectus delivery requirements of the Securities Act as applicable to it
in connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement until such Purchaser's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 6.2(j), or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional
26
or supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
6.6 No Piggyback on Registrations. Other than pursuant to the
exercise of existing registration rights by certain stockholders of the Company
as specified in Schedule 6.6 hereto, neither the Company nor any of its security
holders (other than the Purchasers in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
6.7 Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company
or any Purchaser, by written notice to the other parties, if the Closing has not
been consummated by the third Trading Day following the date of this Agreement;
provided that no such termination will affect the right of any party to xxx for
any breach by the other party (or parties).
7.2 Fees and Expenses. At the Closing, the Company shall pay to
Vertical Ventures, LLC an aggregate of $15,000 for their legal fees and expenses
incurred in connection with the preparation and negotiation of the Transaction
Documents and related work in connection with the filing of the Registration
Statement with the Commission. In lieu of the foregoing payment, Vertical
Ventures, LLC may retain such amount at the Closing or require the Company to
pay such amount directly to Proskauer Rose LLP. Except as expressly set forth in
the Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied
in connection with the issuance of the Securities.
7.3 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with
27
respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules. At or after the Closing, and without
further consideration, the Company will execute and deliver to the Purchasers
such further documents as may be reasonably requested in order to give practical
effect to the intention of the parties under the Transaction Documents.
Notwithstanding anything to the contrary herein, Securities may be assigned to
any Person in connection with a bona fide margin account or other loan or
financing arrangement secured by such Company Securities.
7.4 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The addresses and facsimile numbers for such notices and
communications are those set forth on the signature pages hereof, or such other
address or facsimile number as may be designated in writing hereafter, in the
same manner, by such Person.
7.5 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right. Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Purchasers under Article VI and that does not directly or indirectly
affect the rights of other Purchasers may be given by Purchasers holding at
least a majority of the Registrable Securities to which such waiver or consent
relates.
7.6 Construction. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
7.7 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchasers. Any Purchaser may
assign its rights under this Agreement to any Person to whom such Purchaser
assigns or transfers any Securities, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the provisions
hereof that apply to the "Purchasers." Notwithstanding anything to the contrary
herein, Securities may be assigned to any
28
Person in connection with a bona fide margin account or other loan or financing
arrangement secured by such Securities.
7.8 No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.8 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
7.9 Governing Law; Venue; Waiver Of Jury Trail. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY
SUBMIT 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
BROUGHT BY THE COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR
WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH
RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY
IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING
BROUGHT BY THE COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND PURCHASERS HEREBY WAIVE ALL
RIGHTS TO A TRIAL BY JURY.
7.10 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and/or
exercise of the Securities, as applicable.
7.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
29
7.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to
the contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
7.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
7.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
7.16 Payment Set Aside. To the extent that the Company makes a
payment or payments to any Purchaser hereunder or pursuant to the Warrants or
any Purchaser enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company by 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.
7.17 Adjustments in Share Numbers and Prices. In the event of any
stock split, subdivision, dividend or distribution payable in shares of Common
Stock (or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly shares of Common Stock), combination
or other similar recapitalization or event occurring after the date
30
hereof, each reference in any Transaction Document to a number of shares or a
price per share shall be amended to appropriately account for such event.
7.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Shares pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other Person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
7.19 Waiver of Certain Rights. Each of the signatories to this
Agreement hereby: (i) represents that they have not assigned (a) the Securities
Purchase Agreement dated as of September 24, 2003 by and between the Company and
the purchasers identified on the signature pages thereto (the "SEPTEMBER 2003
PURCHASE AGREEMENT") or any rights thereunder, or (b) the warrants issued
pursuant to the September 2003 Purchase Agreement (the "SEPTEMBER 2003
WARRANTS") or any rights thereunder; (ii) agrees that the provisions of and all
rights contained in Section 4.5 of the September 2003 Purchase Agreement are
hereby terminated and of no further force or effect; and (iii) waives any rights
to an adjustment of the Exercise Price (as defined in the September 2003
Warrants) under Section 9(d) of the September 2003 Warrants to the extent that
such an adjustment would result from the issuance of the Securities pursuant to
this Agreement.
[SIGNATURE PAGES TO FOLLOW]
31
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
LYNX THERAPEUTICS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------
Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
Address for Notice:
00000 Xxxxxxxxxx Xxxx.
Xxxxxxx, XX 00000
Facsimile No.: 000-000-0000
Telephone No.: 000-000-0000
Attn: President and Chief Executive Officer
With a copy to: Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxx X. Xxxxx, Esq.
Consented and Acknowledged
with respect to Section 2.2(c) only
XXXXXX GODWARD LLP
By: /s/ Xxxxx X. Xxxxx
-----------------------
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
VERTICAL VENTURES, LLC
By: /s/ Xxxxxx Xxxxxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Partner
Purchase Price: $1,000,000
Number of Shares to be acquired: 200,000
Underlying Shares subject to Warrant: 50,000
Address for Notice:
Vertical Ventures, LLC
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxxx Xxxxxxxxx
With a copy to: Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
BONANZA MASTER FUND LTD.
By: /s/ Xxxxx Laden
----------------------------------------
Name: Xxxxx Laden
Title: Managing Director
Purchase Price: $750,000
Number of Shares to be acquired: 150,000
Underlying Shares subject to Warrant: 37,500
Address for Notice:
0000 Xxxxxxx Xxx., Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: 214.987.4342
Telephone No.: 000.000.0000
Attn: Xxxxx Laden
SMITHFIELD FIDUCIARY, LLC
By: /s/ Xxxx Chill
----------------------------------------
Name: Xxxx Chill
Title: Authorized Signatory
Purchase Price: $ 250,000
Number of Shares to be acquired: 50,000
Underlying Shares subject to Warrant: 12,500
Address for Notice:
c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000)000-0000
Telephone No.: (000) 000-0000
Attn: Xxx Xxxxxx / Xxxx X. Chill
CRANSHIRE CAPITAL, L.P.
By: /s/ Xxxxxxxx Xxxxx
----------------------------------------
Name: Xxxxxxxx Xxxxx
Title:
Purchase Price: $ 2,000,000
Number of Shares to be acquired: 400,000
Underlying Shares subject to Warrant:100,000
Address for Notice:
000 Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Facsimile No.: 000-000-0000
Telephone No.: 000-000-0000
Attn: Xxxxxxxx X. Xxxxx
The below signatory shall not be considered a Purchaser for purposes of this
Agreement.
Consented and Acknowledged with respect to Section 7.19 only
CLEVELAND OVERSEAS LIMITED
By: /s/ Xxxxx Xxxx
----------------------------------------
Name: Xxxxx Xxxx
Title: Director
Address for Notice:
c/o Vertical Ventures, LLC
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxxx Xxxxxxxxx
The below signatory shall not be considered a Purchaser for purposes of this
Agreement.
Consented and Acknowledged with respect to Section 7.19 only
XMARK FUND, L.P.
By: /s/ Xxxxxxxx Xxxx
----------------------------------------
Name: Xxxxxxxx Xxxx
Title:
Xmark Fund, L.P.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxxxxx Xxxx
The below signatory shall not be considered a Purchaser for purposes of this
Agreement.
Consented and Acknowledged with respect to Section 7.19 only
XMARK FUNDS, LTD.
By: /s/ Xxxxxxxx Xxxx
----------------------------------------
Name: Xxxxxxxx Xxxx
Title:
Address for Notice:
Xmark Fund, Ltd.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxxxxx Xxxx
Exhibits:
A Form of Warrant
B Opinion of Company Counsel
C Plan of Distribution
D Transfer Agent Instructions
Exhibit A
[The Form of Warrant]
Exhibit B
Form of Opinion of Company Counsel
December , 2003
To the Purchasers listed on Exhibit A hereto
RE: LYNX THERAPEUTICS, INC. PRIVATE PLACEMENT
Ladies and Gentlemen:
We have acted as counsel for Lynx Therapeutics, Inc., a Delaware corporation
(the "Company"), in connection with the issuance and sale of an aggregate of
eight hundred thousand (800,000) shares (the "Shares") of the Company's common
stock, par value $.01 per share (the "Common Stock") and warrants (the
"Warrants") to purchase an aggregate of two hundred thousand (200,000) shares of
Common Stock (the "Warrant Shares") under the Securities Purchase Agreement of
even date herewith (the "Purchase Agreement"), among the Company and the
Purchasers named therein (the "Purchasers"). The Shares, the Warrants and the
Warrant Shares are collectively referred to herein as the "Securities". We are
rendering this opinion pursuant to Section 2.2 of the Purchase Agreement. Except
as otherwise defined herein, capitalized terms used but not defined herein have
the respective meanings given to them in the Purchase Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in, and made
pursuant to, the Purchase Agreement by the various parties thereto, and have
examined and relied upon the originals or copies of such records, documents,
certificates, opinions, memoranda and other instruments as in our judgment are
necessary or appropriate to enable us to render the opinions expressed below.
As to certain factual matters, we have relied upon a certificate executed by an
officer of the Company, a copy of which has been provided to your counsel, and
have not sought to independently verify such matters. Where we render an opinion
"to the best of our knowledge" or concerning an item "known to us" or our
opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company; (ii) a review of certificates executed by an officer of the Company
covering such matters; and (iii) such other investigation, if any, that we
specifically set forth herein.
With regard to our opinions in paragraph 5 and 6 below, insofar as they address
"to our knowledge" agreements of the Company, we have relied on a certificate
executed by an officer of the Company and have reviewed (i) the Company's
Amended and Restated Certificate of Incorporation, (ii) the Company's Bylaws, as
amended, (iii) any material contract to which the Company is a party and
attached as an exhibit to an SEC Report, and (iv) such other agreements, if any,
as are identified in such officer's certificate.
With regard to our opinions in paragraphs 8 and 9 with respect to the Warrant
Shares, we have assumed with your permission that the Warrant Shares are issued
upon exercise of the Warrants at
the Closing and prior to the occurrence of any change in law or factual
circumstance that might affect the opinions expressed therein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Purchase Agreement and the Warrants (together, the
"Transaction Documents")) where authorization, execution and delivery are
prerequisites to the effectiveness of such documents. We have also assumed: that
all individuals executing and delivering documents in their individual
capacities had the legal capacity to so execute and deliver; that the
Transaction Documents are obligations binding upon the parties thereto other
than the Company; that the parties thereto other than the Company have received
all documents that they were to receive under the Transaction Documents; that
the parties to the Transaction Documents other than the Company have filed any
required California franchise tax or income tax returns and have paid any
required California franchise or income taxes; and that there are no extrinsic
agreements or understandings among the parties to the Transaction Documents that
would modify or interpret the terms thereof or the respective rights or
obligations of the parties thereunder.
Our opinions are expressed with respect only to the laws of the State of
California, the General Corporation Law of the State of Delaware and applicable
federal laws of the United States and are expressed only as to the outcome that
would pertain were California law, the General Corporation Law of the State of
Delaware or the federal laws of the United States (excluding choice of law
principles and excluding the effect of any law other than California law, the
General Corporation Law of the State of Delaware or the federal laws of the
United States) the governing law applicable to the relevant issue. We express no
opinion as to whether the laws of any particular jurisdiction apply. We note
that the parties to the Transaction Documents have designated the laws of the
State of New York as the laws governing such Transaction Documents. Accordingly,
with your permission, our opinion in paragraph 3 below as to the validity,
binding effect and enforceability of the Transaction Documents, is premised upon
the result that would obtain if a California court were to apply the internal
laws of the State of California (notwithstanding the designation of the laws of
the State of New York to govern the interpretation and enforcement of the
Transaction Documents). Neither special rulings of any governmental authorities
nor opinions of counsel in said jurisdiction have been obtained. We are not
rendering any opinion as to compliance with any federal or state (i) law, rule
or regulation relating to antitrust matters, or (ii) antifraud law, rule or
regulation relating to securities, or to the sale or issuance thereof or as to
the enforceability of any waiver of trial by jury.
With regard to our opinion in paragraph 1 below, with respect to the good
standing of the Company, we have relied solely on an examination of a
certificate of good standing issued by the Secretary of State of the State of
Delaware, dated December 29, 2003 and a certificate of good standing issued by
the Secretary of State of the State of California, dated December 29, 2003, and
a bringdown letter dated as of December 31, 2003.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
corporate good standing under the laws of the State of Delaware. The
Company is duly qualified to do business as a foreign corporation and
is in good standing under the laws of the state of California. The
Company has the corporate power and authority to own and hold its
properties and to carry on its business as currently conducted.
2. The Company has the corporate power and authority to enter into,
deliver and perform each of the Transaction Documents to which it is a
party and to issue, sell and deliver the Shares and the Warrants, and
to issue and deliver the Warrant Shares upon exercise of the Warrants.
3. All necessary corporate action has been taken by the Company to
authorize the execution, delivery and performance by the Company of
each of the Transaction Documents to which it is a party. Each of the
Transaction Documents has been duly executed and delivered by the
Company and constitutes a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except as
liquidated damages or penalty provisions and rights to indemnity and
contribution may be limited by applicable laws and except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting
creditors' rights, and subject to general equity principles and to
limitations on availability of equitable relief, including specific
performance.
4. The execution and delivery by the Company of the Transaction Documents
to which it is a party and the performance by it of its obligations
thereunder will not (i) violate the General Corporation Law of the
State of Delaware or federal law, or any court order, judgment or
decree applicable to the Company and known to us, (ii) conflict with,
result in a violation of or constitute a default under or breach of, or
result in the creation of a lien or a right of acceleration under, any
material contract to which the Company is a party and attached as an
exhibit to an SEC Report or (iii) violate its Amended and Restated
Certificate of Incorporation or Bylaws, as amended.
5. The authorized capital stock of the Company immediately prior to the
Closing consists of 60,000,000 shares of Common Stock, par value $0.01
per share, of which, to our knowledge, 5,399,245 shares are validly
issued and outstanding, fully paid and non-assessable, and 2,000,000
shares of Preferred Stock, par value $0.01 per share, none of which are
issued or outstanding. Except as set forth in the SEC Reports, the
Transaction Documents, the Disclosure Schedule or the Company's Amended
and Restated Certificate of Incorporation, to our knowledge, (i) no
subscription, warrant, option, convertible security or other right to
purchase or otherwise acquire shares of the capital stock or other
equity securities of the Company under any agreement to which the
Company is a party is authorized or outstanding and (ii) there is no
commitment by the Company to issue shares, subscriptions, warrants,
options, convertible securities or other such rights or to distribute
to holders of any of its equity securities any evidence of indebtedness
or asset. Except as provided in the Company's Amended and Restated
Certificate of Incorporation, the SEC Reports, the Transaction
Documents or the Disclosure Schedule, to our knowledge, (i) the Company
has
no obligation to purchase, redeem or otherwise acquire any of its
equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof, and (ii) there are no
voting trusts or agreements, stockholders' agreements, pledge
agreements, buy-sell agreements, rights of first refusal, preemptive
rights, registration rights or proxies relating to any securities of
the Company under any agreements to which the Company is a party.
6. The Shares and the Warrant Shares have been duly authorized and the
Warrant Shares have been reserved for issuance upon exercise of the
Warrants. The issuance, sale and delivery of the Shares and the
Warrants by the Company to the Purchasers in accordance with the
Purchase Agreement, and the issuance and delivery of the Warrant Shares
upon exercise of the Warrants, have been duly authorized by all
necessary corporate action on the part of the Company. The Shares, when
issued, sold and delivered against payment therefor in accordance with
the provisions of the Purchase Agreement and the Warrant Shares, when
issued upon exercise of the Warrants and payment therefor in accordance
with the terms of the Warrants, will be duly and validly issued, fully
paid and non-assessable. Except as set forth in the Transaction
Documents or the Disclosure Schedule or the SEC Reports, neither the
issuance, sale and delivery of the Shares and the Warrants nor the
issuance and delivery of the Warrant Shares upon exercise of the
Warrants is subject to any preemptive right or right of first refusal
on the part of the holders of any class of securities of the Company
arising under law, the Company's Amended and Restated Certificate of
Incorporation or Bylaws, as amended, or, to our knowledge, under any
other agreement to which the Company is a party.
7. To our knowledge, no action, suit, claim or proceeding to which the
Company or its subsidiaries is a party is pending or is overtly
threatened in writing against the Company or its subsidiaries that
could have a Material Adverse Effect or that questions the validity or
enforceability of, or seeks to enjoin the performance of, the
Transaction Documents.
8. No notices, reports or other filings are required to be made by the
Company or any of its subsidiaries with, nor are any consents,
registrations, applications, approvals, permits, licenses or
authorizations required to be obtained by the Company or any of its
subsidiaries from any regulatory authority or governmental body in the
United States required in connection with the consummation or
performance by the Company of the transactions contemplated by the
Transaction Documents or in connection with the issuance of the Shares
and the Warrants or upon issuance of the Warrant Shares other than
those contemplated by the Purchase Agreement and normal post-closing
filings in connection with qualifying for exemptions from the
registration requirements of applicable securities laws.
9. Assuming the accuracy of the representations and warrants of the
Company set forth in Section 3.1 of the Purchase Agreement and of the
Purchasers set forth in Section 3.2 of the Purchase Agreement, the
offer and sale of the Shares and Warrants pursuant to the Purchase
Agreement is exempt from the registration requirements of the
Securities Act subject to the timely filing of a Form D pursuant to
Securities and Exchange Commission Regulation D.
10. To our knowledge, the Company meets the eligibility requirements for
the use of Form S-3 for the registration of the secondary offering of
the Securities and Underlying Securities.
Our opinions are limited to the specific issues addressed and are limited in all
respects to laws and facts existing on the date hereof. By rendering our
opinions, we do not undertake to advise you of any changes in such laws or facts
which may occur after the date hereof or the effect that such changes or
occurrences might have on our opinions.
Our opinions are limited to the matters expressly stated herein and are rendered
solely for your benefit and may not be quoted or relied upon for any other
purpose or by any other person, firm or entity without our prior written
consent.
Sincerely,
Xxxxx X. Xxxxx
EXHIBIT A
PURCHASERS
VERTICAL VENTURES, LLC
BONANZA MASTER FUND LTD.
CRANSHIRE CAPITAL, L.P.
SMITHFIELD FIDUCIARY LLC
Exhibit C
Plan of Distribution
The selling stockholders may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market or trading facility
on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The selling stockholders may use any one or more of
the following methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- short sales;
- broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling stockholders may also engage in short sales against the
box, puts and calls and other transactions in our securities or derivatives of
our securities and may sell or deliver shares in connection with these trades.
Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved. Any
profits on the resale of shares of common stock by a broker-dealer acting as
principal might be deemed to be underwriting discounts or commissions under the
Securities Act. Discounts, concessions, commissions and similar selling
expenses, if any, attributable to the sale of shares will be borne by a selling
stockholder. The selling stockholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the shares if liabilities are imposed on that person under the Securities
Act.
The selling stockholders may from time to time pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus after we have filed an amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act of 1933 amending the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this
prospectus.
The selling stockholders also may transfer the shares of common stock
in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus and may sell the shares of common stock from time to time under
this prospectus after we have filed an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 amending
the list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares of common stock may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In such event, any commissions received by such broker-dealers or agents
and any profit on the resale of the shares of common stock purchased by them may
be deemed to be underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the
registration of the shares of common stock, including $10,000 of fees and
disbursements of counsel to the selling stockholders. We have agreed to
indemnify the selling stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
The selling stockholders have advised us that they have not entered
into any agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor is there
an underwriter or coordinating broker acting in connection with a proposed sale
of shares of common stock by any selling stockholder. If we are notified by any
selling stockholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares of common stock, if required, we will file
a supplement to this prospectus. If the selling stockholders use this prospectus
for any sale of the shares of common stock, they will be subject to the
prospectus delivery requirements of the Securities Act.
The anti-manipulation rules of Regulation M under the Securities
Exchange Act of 1934 may apply to sales of our common stock and activities of
the selling stockholders.
Exhibit D
Transfer Agent Instructions
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
LYNX THERAPEUTICS, INC.
[Transfer Agent]
Ladies and Gentlemen:
Reference is made to the Securities Purchase Agreements (the "Purchase
Agreement"), dated as of December__, 2003, among Lynx Therapeutics, Inc., a
Delaware corporation (the "Company") and the purchasers named therein (the
"Holders") pursuant to which the Company is issuing the Company's common stock,
$0.01 par value per share (the "Common Stock"), and certain Common Stock
purchase warrants (the "Warrants") which shall be exercisable into shares of
Common Stock. The shares of Common Stock issued and transferred at the Closing
and issuable and transferable upon exercise of the Warrants are collectively
referred to herein as "Underlying Shares."
The Company has agreed with the Holders that it will instruct you to: (A) issue
the Underlying Shares free of all restrictive and other legends if, at the time
of such issue, (i) (a) a Holder has sold such Underlying Shares pursuant to a
then-effective registration statement covering the resale of such Underlying
Shares and (b) such Holder represents that the prospectus delivery requirements
of the Securities Act have been met, (ii) such Underlying Shares are eligible
for sale under Rule 144(k) or (iii) such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission); or (B) reissue the
Underlying Shares (if such shares were originally issued with a restrictive
legend) free of all restrictive and other legends (i) a Holder has sold such
Underlying Shares pursuant to a then-effective registration statement covering
the resale of such Underlying Shares or (ii) following any sale of such
Underlying Shares pursuant to Rule 144 or (iii) such Underlying Shares are
eligible for sale under Rule 144(k) or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission).
Pursuant to the foregoing, either the Company or our counsel will prepare
further letters in order to effect any future issuance or reissuance of shares
of Common Stock to the Holders as contemplated by the Purchase Agreement and
this letter. This letter shall serve as our standing irrevocable instructions
with regard to this matter
Please be advised that the Holders have relied upon this instruction letter as
an inducement to enter into the Purchase Agreement. Please execute this letter
in the space indicated to acknowledge your agreement to act in accordance with
these instructions.
Very truly yours,
LYNX THERAPEUTICS, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
ACKNOWLEDGED AND AGREED:
EquiServe Trust Company, N.A.
By: ________________________________
Name:_______________________________
Title:______________________________
