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EXHIBIT 10.56
SUBSCRIPTION AGREEMENT
DATED AS OF JUNE 21, 2001
BY AND BETWEEN
STEMCELLS, INC.
AND
MILLENNIUM PARTNERS, L.P.
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COMMON STOCK, CALLABLE WARRANTS
AND
COMMON STOCK PURCHASE WARRANTS
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THIS SUBSCRIPTION AGREEMENT, dated as of June 21, 2001, (this
"Agreement") by and between STEMCELLS, INC., a Delaware corporation (the
"Company"), with headquarters located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and Millennium Partners, L.P., a Cayman Islands limited
partnership (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer and the Company are parties to that certain
subscription agreement, dated as of July 31, 2000 (the "Prior Subscription
Agreement"), pursuant to which the Company, among other things, issued shares of
the Company's Common Stock to the Buyer and granted the Buyer the option
("Option") to purchase additional shares of Common Stock pursuant to Section 5
of the Prior Subscription Agreement;
WHEREAS, on June 8, 2001, the Buyer exercised all of its
remaining Option to purchase, upon the terms and subject to the conditions of
this Agreement and the terms of Section 5 of the Prior Subscription Agreement,
shares of Common Stock, $.01 par value (the "Common Stock"), of the Company
having an aggregate purchase price of Two Million Dollars ($2,000,000); and
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 of Regulation D as promulgated by the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) SUBSCRIPTION. The Buyer hereby agrees to purchase from the Company, and the
Company hereby agrees to sell to the Buyer, the number of shares (the "Common
Shares") of Common Stock set forth on the signature page of this Agreement at
the price per share and for the aggregate purchase price set forth on the
signature page of this Agreement (the "Purchase Price"). The Purchase Price
shall be payable in United States dollars. In connection with the purchase of
the Common Shares by the Buyer, the Company shall issue to the Buyer, at the
closing on the Closing Date (as defined herein), (1) Callable Warrants in the
form attached hereto as ANNEX I (the "Callable Warrants") to purchase the number
of shares of Common Stock set forth therein (subject to adjustment as provided
in the Callable Warrants) and (2) Common Stock Purchase Warrants, Class A, in
the form attached hereto as ANNEX II (the "Class A Warrants") to purchase the
number of shares of Common Stock set forth therein (subject to adjustment as
provided in the Class A Warrants). The Callable Warrants and the Class A
Warrants are referred to herein collectively as the "Warrants." The shares of
Common Stock issuable upon exercise of the Warrants are referred to herein as
the "Warrant Shares." The Common Shares and the Warrant Shares are referred to
herein collectively as the "Shares." The Shares and the Warrants are referred to
herein collectively as the "Securities."
(b) THE CLOSING.
(1) TIMING. Subject to the fulfillment or waiver of the
conditions set forth in Section 6 hereof, the purchase and sale of the Common
Shares and Warrants shall take place at a closing (the "CLOSING") on the date
hereof or such other date as the Buyer and the Company may agree upon (the
"Closing Date") at the offices of Kleinberg, Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇, P.C.
(2) FORM AND TIMING OF PAYMENT. The Buyer shall pay the
Purchase Price for the Common Shares by delivering (A) 75% of the Purchase Price
to the Company on the Closing Date and (B) 25% of the Purchase Price to the
Company on the date on which the Registration Statement (as defined in the
registration rights agreement, dated as of June 21, 2001, between the Company
and the Buyer (the "Registration Rights Agreement")) becomes effective (or such
later date which is two (2) business days after Buyer receives written notice of
the date of such effectiveness). Upon Closing, the Company shall deliver (A)
instructions to its registrar and transfer agent regarding the issuance of the
certificates for all the Common Shares and shall cause its registrar and
transfer agent to deliver such certificates to Buyer as soon as possible after
Closing and (B) the Warrants, registered in the corporate securities records of
the Company and on the certificates in the name of the Buyer or its nominee, to
the Buyer (or Kleinberg, Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇, P.C. on behalf of the Buyer).
(c) METHOD OF PAYMENT. Payment of the Purchase Price for the Common Shares shall
be made in U.S. Dollars by wire transfer of funds to an account designated by
the Company.
As used in this Agreement, the term "Business Day"
means any day other than a Saturday, Sunday or other day on which commercial
banks in the City of New York are authorized or required by law to remain
closed.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
(a) ACCREDITED BUYER STATUS; SOPHISTICATED BUYER. The Buyer is
an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D under the 1933 Act. The Buyer has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of investment in the Common Shares, the
Warrants and Warrant Shares.
(b) INFORMATION. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and
operations of the Company which have been requested and materials
relating to the offer and sale of the Common Shares, the Warrants and
Warrant Shares which have been requested by the Buyer. The Buyer and
its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due
diligence investigations conducted by the Buyer or its advisors, if
any, or its representatives shall modify, amend or affect the Buyer's
right to rely on the Company's representations and warranties contained
in Section 3 below. The Buyer understands that its investment in the
Common Shares, the Warrants and
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Warrant Shares involves a high degree of risk. The Buyer has sought
such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of
the Common Shares, the Warrants and Warrant Shares.
(c) LEGENDS. The Company shall issue certificates for the
Common Shares, the Warrants and Warrant Shares to the Buyer without any
legend except as described herein. The Buyer covenants that, in
connection with any transfer of Shares by the Buyer pursuant to the
registration statement contemplated by the Registration Rights
Agreement, it will comply with the applicable prospectus delivery
requirements of the 1933 Act, provided that copies of a current
prospectus relating to such effective registration statement are or
have been supplied to the Buyer.
(d) AUTHORIZATION; ENFORCEMENT. Each of this Agreement and the
Registration Rights Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable against the Buyer in
accordance with its terms, subject as to enforceability to general
principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating
to, or affecting generally, the enforcement of applicable creditors'
rights and remedies. The Buyer has the requisite corporate power and
authority to enter into and perform its obligations under this
Agreement and the Registration Rights Agreement and each other
agreement entered into by the parties hereto in connection with the
transactions contemplated by this Agreement.
(e) NO CONFLICTS. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Buyer and
the consummation by the Buyer of the transactions contemplated hereby
and thereby will not result in a violation of the certificate of
incorporation, by-laws or other documents of organization of the Buyer.
(f) INVESTMENT REPRESENTATION. The Buyer is purchasing the
Common Shares and the Warrants for its own account and not with a view
to distribution in violation of any securities laws. The Buyer has been
advised and understands that neither the Common Shares, the Warrants
nor the Warrant Shares issuable upon exercise thereof have been
registered under the 1933 Act or under the "blue sky" laws of any
jurisdiction and may be resold only if registered pursuant to the
provisions of the 1933 Act or if an exemption from registration is
available, except under circumstances where neither such registration
nor such an exemption is required by law. The Buyer has been advised
and understands that the Company, in issuing the Common Shares and the
Warrant, is relying upon, among other things, the representations and
warranties of the Buyer contained in this Section 3 in concluding that
such issuance is a "private offering" and is exempt from the
registration provisions of the 1933 Act.
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(g) RULE 144. The Buyer understands that there is no public
trading market for the Warrants and that none is expected to develop.
The Buyer understands that the Common Shares, the Warrants and the
Warrant Shares received upon conversion or exercise thereof must be
held indefinitely unless and until registered under the 1933 Act or an
exemption from registration is available. The Buyer is aware of the
provisions of Rule 144 promulgated under the 1933 Act.
(h) RELIANCE BY THE COMPANY. The Buyer understands that the
Common Shares and the Warrants are being offered and sold in reliance
on a transactional exemption from the registration requirements of
Federal and state securities laws and that the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in
order to determine the applicability of such exemptions and the
suitability of the Buyer to acquire the Common Shares and the Warrants.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and
agrees with, the Buyer that, except as set forth in the schedules attached
hereto:
(a) ORGANIZATION AND QUALIFICATION; MATERIAL ADVERSE EFFECT.
The Company is a corporation duly incorporated and existing in good
standing under the laws of the State of Delaware and has the requisite
corporate power to own its properties and to carry on its business as
now being conducted. The Company does not have any Subsidiary other
than StemCells California, Inc. (the "SUBSIDIARY". The Subsidiary is
duly organized, and validly existing and in good standing under the
laws of its jurisdiction of formation. Except where specifically
indicated to the contrary, all references in this Agreement to
Subsidiary shall be deemed to refer to the Subsidiary of the Company.
The Company is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would not
have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any
adverse effect on the business, operations, properties, prospects or
financial condition of the Company and its Subsidiary, which is (either
alone or together with all other adverse effects) material to the
Company and its Subsidiary, taken as a whole, and any material adverse
effect on the transactions contemplated under this Agreement, the
Certificate, and the Registration Rights Agreement, or any other
agreement or document contemplated hereby or thereby.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement and the Warrants
("TRANSACTION DOCUMENTS") and to issue the Common Shares and the
Warrants in accordance with the terms
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hereof, (ii) the execution and delivery of this Agreement, the
Registration Rights Agreement, and the Warrants by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including the issuance of the Common Shares and the Warrants, have been
duly authorized by all necessary corporate action, and no further
consent or authorization of the Company or its Board of Directors (or
any committee or subcommittee thereof) or stockholders is required,
(iii) this Agreement, the Registration Rights Agreement, and the
Warrants have been duly executed and delivered by the Company, (iv)
this Agreement, the Registration Rights Agreement, and the Warrants
constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except (A) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors' rights and remedies
or by other equitable principles of general application, and (B) to the
extent the indemnification provisions contained in this Agreement and
the Registration Rights Agreement may be limited by applicable federal
or state securities laws and (v) the Common Shares, the Warrants, and
the Warrant Shares issuable upon the exercise thereof have been duly
authorized and, upon issuance thereof and payment therefor in
accordance with the terms of this Agreement, the Common Shares, the
Warrants, and the Warrant Shares issuable upon the exercise thereof
will be validly issued, fully paid and non-assessable, free and clear
of any and all liens, claims and encumbrances.
(c) CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (i) 45,000,000 shares of
Common Stock, of which, as of May 31, 2001, 21,470,385 shares were
issued and outstanding, and, as of the date hereof, 6,748,502 shares
are issuable and reserved for issuance pursuant to the Company's stock
option and purchase plans and committed pursuant to pending
acquisitions, and, as of the date hereof, other than pursuant to the
Prior Subscription Agreement and the Warrants issued in connection
therewith and the Warrants issued to the Buyer on August 30, 2000,
approximately 947,300 shares are issuable pursuant to securities (other
than options and purchase plans referred to above), exercisable or
exchangeable for, or convertible into, shares of Common Stock, and
approximately 1,369,600 shares are reserved for issuance pursuant to
such securities and (ii) 1,000,000 shares of preferred stock, of which,
as of the date hereof, (A) 2,626 shares are currently designated as 6%
Cumulative Convertible Preferred Stock, 1,500 shares of which are
issued and outstanding and (B) 450,000 shares are designated as Junior
Preferred Shares, none of which are issued or outstanding. All of such
outstanding shares have been, or upon issuance will be, validly issued,
fully paid and nonassessable. As of the date hereof, except as
disclosed in SCHEDULE 3(c) or pursuant to the Prior Subscription
Agreement and Warrants issued pursuant thereto, (i) no shares of the
Company's capital stock are subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by
the Company, (ii) there are no outstanding debt securities, (iii) there
are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of
the
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Company or its Subsidiary, or contracts, commitments, understandings or
arrangements by which the Company or its Subsidiary is or may become
bound to issue additional shares of capital stock of the Company or its
Subsidiary or options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the Company
or its Subsidiary, (iv) there are no agreements or arrangements under
which the Company or its Subsidiary is obligated to register the sale
of any of their securities under the Securities Act of 1933, as amended
("Securities Act" or "1933 Act") (except the Registration Rights
Agreement and except as set forth on SCHEDULE 3(c)), (v) there are no
outstanding securities of the Company or its Subsidiary which contain
any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or its
Subsidiary is or may become bound to redeem a security of the Company
or its Subsidiary, (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered
by the issuance of the Common Shares or the Warrants as described in
this Agreement or the Warrants and (vii) the Company does not have any
stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to the Buyer true
and correct copies of the Company's Certificate of Incorporation, as
amended and as in effect on the date hereof (the "CERTIFICATE OF
INCORPORATION"), and the Company's By-laws, as in effect on the date
hereof (the "BY-LAWS").
(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 and the
issuance of Common Shares, the Warrants, and the Warrant Shares
underlying the Warrants will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations,
preferences and rights of any outstanding series of preferred stock of
the Company or the By-laws; (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument
to which the Company or its Subsidiary is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree
(including United States federal and state securities laws and
regulations and the rules and regulations of the Nasdaq National Market
(the "PRINCIPAL MARKET") or other principal securities exchange or
trading market on which the Common Stock is traded or listed)
applicable to the Company or its Subsidiary or by which any property or
asset of the Company or its Subsidiary is bound or affected. Neither
the Company nor its Subsidiary is in violation of any term of, or in
default under, (x) its certificate of incorporation, any certificate of
designations, preferences and rights of any outstanding series of
preferred stock or By-laws or their organizational charter or by-laws,
respectively, (y) any material contract, agreement, mortgage,
indebtedness, indenture, instrument, or (z) any judgment, decree or
order or any statute, rule or regulation applicable to the Company or
its Subsidiary, the non-compliance with which (in the cases of (y) and
(z)) would cause a Material Adverse Effect. Except as specifically
contemplated by this
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Agreement and as required under the 1933 Act or state "blue sky" laws,
the Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations
under, or contemplated by, the Transaction Documents or the issuance of
the Common Shares and the Warrants in accordance with the terms hereof
or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the
date hereof, or in the case of post-sale filings, will be made promptly
after the date hereof. The Company complies with and is not in
violation of the listing requirements of the Principal Market as in
effect on the date hereof in all material respects and on the Closing
Date and is not aware of any existing facts which provide a basis for
delisting or suspension of the Common Stock by the Principal Market.
(e) SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31,
1998, the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to
the reporting requirements of the Securities Exchange Act of 1934, as
amended (the "1934 Act") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC DOCUMENTS"). As of their respective
dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of
the dates thereof and the results of its operations and cash flows for
the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Neither the Company nor its
Subsidiary or any of their officers, directors, employees or agents
have provided the Buyer with any material, nonpublic information which
was not publicly disclosed prior to the date hereof.
(f) ABSENCE OF CERTAIN CHANGES. Except as set forth in the SEC
Documents identified on Schedule 3(f) hereto, since December 31, 1998
there has been no adverse change or adverse development in the
business, properties,
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assets, operations, financial condition, prospects, liabilities or
results of operations of the Company or its Subsidiary which has had
or, to the knowledge of the Company or its Subsidiary, is reasonably
likely to have a Material Adverse Effect. The Company has not taken any
steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or its
Subsidiary have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings.
(g) ABSENCE OF LITIGATION. There is no action, suit,
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 or its Subsidiary, threatened
against or affecting the Company, the Common Stock or any of the
Company's Subsidiary or any of the Company's or the Company's
Subsidiary's officers or directors in their capacities as such, which
individually and in the aggregate, respectively, would be reasonably
likely to result in liability to the Company in excess of $50,000 and
$100,000, respectively.
(h) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SHARES. The
Company acknowledges and agrees that the Buyer is acting solely in the
capacity of arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby. The
Company further acknowledges that the Buyer is not acting as financial
advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated
hereby and thereby, and any advice given by the Buyer or any of its
respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is
merely incidental to the Buyer's purchase of the Common Shares. The
Company further represents to the Buyer that the Company's decision to
enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
(i) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. No event, liability, development or circumstance has
occurred or exists with respect to the Company or its Subsidiary or
their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the
Company under applicable securities laws in a registration statement
filed with the SEC relating to an issuance and sale by the Company of
its Common Stock and which has not been publicly disclosed.
(j) NO INSIDE INFORMATION. The Company has not provided and,
the Company shall not provide, the Buyer with any non-public
information, except to the extent that the Buyer exercises its right to
review a registration statement containing material non-public
information (after receiving written notice of the existence of such
content) and except in the case of the Buyer's exercising rights
pursuant to Section 4(i) of the Prior Subscription Agreement.
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(k) NO SECURITIES ACT REGISTRATION. The sale and issuance of
the Common Shares and Warrants in accordance with terms of this
Agreement and the issuance of Warrant Shares upon exercise of the
Warrants are exempt from registration under the 1933 Act.
(l) EMPLOYEE RELATIONS. Neither the Company nor its Subsidiary
is involved in any labor dispute nor, to the knowledge of the Company
or its Subsidiary, is any such dispute threatened, the effect of which
would be reasonably likely to result in a Material Adverse Effect.
Neither the Company nor its Subsidiary is a party to a collective
bargaining agreement. The Company and its Subsidiary believe that
relations between the Company and its Subsidiary and their respective
employees are good. No executive officer (as defined in Rule 501(f) of
the ▇▇▇▇ ▇▇▇) whose departure would be adverse to the Company has
notified the Company that such officer intends to leave the Company or
otherwise terminate such officer's employment with the Company.
(m) INTELLECTUAL PROPERTY RIGHTS. The Company and its
Subsidiary own or possess adequate rights or licenses to use all
trademarks, trade names, service marks, service ▇▇▇▇ registrations,
service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now
conducted. None of the Company's trademarks, trade names, service
marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government
authorizations, trade secrets or other intellectual property rights
have expired or terminated, or are expected to expire or terminate
within two (2) years from the date of this Agreement except as would
not have a Material Adverse Effect. The Company and its Subsidiary do
not have any knowledge of any infringement by the Company or its
Subsidiary of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service
▇▇▇▇ registrations, trade secret or other similar rights of others, or
of any such development of similar or identical trade secrets or
technical information by others, and no claim, action or proceeding has
been made or brought against, or to the Company's knowledge, is
threatened against, the Company or its Subsidiary regarding trademarks,
trade name rights, patents, patent rights, inventions, copyrights,
licenses, service names, service marks, service ▇▇▇▇ registrations,
trade secrets or other infringement. The Company and its Subsidiary
have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
(n) SHAREHOLDER APPROVAL RULE. Other than pursuant to the
Prior Subscription Agreement or the August 30, 2000 Subscription
Agreement, the Company has not issued any shares of Common Stock or
shares of any series of preferred stock or other securities convertible
into, exchangeable for or otherwise entitling the holder to acquire
shares of Common Stock which may be subject to Rule 4350(i)(1)(D) of
Nasdaq as in effect from time to time or any successor, replacement or
similar provision thereof or of any other market on which the Common
Stock is listed for trading (the "Shareholder Approval Rule") and which
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would be integrated with the sale of the Common Shares to the Buyer or
the issuance of Warrant Shares upon exercise of the Warrants for
purposes of the Shareholder Approval Rule.
(o) ENVIRONMENTAL LAWS. The Company and its Subsidiary (i) are
in compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received
all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses
and (iii) are in compliance with all terms and conditions of any such
permit, license or approval where such noncompliance or failure to
receive permits, licenses or approvals referred to in clauses (i), (ii)
or (iii) above could have, individually or in the aggregate, a Material
Adverse Effect.
(p) TITLE. The Company and its Subsidiary have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is
material to the business of the Company and its Subsidiary, in each
case free and clear of all liens, encumbrances and defects except such
as are described in SCHEDULE 3(p) or in the SEC Documents listed in
SCHEDULE 3(p) or such as do not materially and adversely affect the
value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or its Subsidiary.
Any real property and facilities held under lease by the Company or its
Subsidiary are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiary.
(q) INSURANCE. The Company and its Subsidiary are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiary are engaged. Neither the Company nor any such Subsidiary has
been refused any insurance coverage sought or applied for and neither
the Company nor any such Subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition, financial or
otherwise, or the earnings, business or operations of the Company and
its Subsidiary taken as a whole.
(r) REGULATORY PERMITS. The Company and its Subsidiary possess
all material certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities, necessary
to conduct their respective businesses, and neither the Company nor any
such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit.
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(s) INTERNAL ACCOUNTING CONTROLS. The Company and its
Subsidiary 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.
(t) FOREIGN CORRUPT PRACTICES ACT. Neither the Company, nor
any director, officer, agent, employee or other person acting on behalf
of the Company or any Subsidiary has, in the course of acting for, or
on behalf of, the Company, directly or indirectly used any corporate
funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; directly or
indirectly made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended, or any similar treaties of
the United States; or directly or indirectly made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government or party official or employee.
(u) TAX STATUS. The Company and its Subsidiary has made or
filed all United States federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which
it is subject and (i) has paid all taxes and other governmental
assessments and charges, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith
and (ii) has set aside on its books provisions reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid taxes
claimed to be due by the taxing authority of any jurisdiction, and the
Company is not aware of any basis for any such claim.
(v) CERTAIN TRANSACTIONS. Except as set forth in the SEC
Documents filed on ▇▇▇▇▇ at least thirty (30) Trading Days prior to the
date hereof and except for arm's length transactions pursuant to which
the Company makes payments in the ordinary course of business upon
terms no less favorable than the Company could obtain from third
parties and other than the grant of stock options disclosed on SCHEDULE
3(c), none of the officers, directors or employees of the Company is
presently a party to any transaction with the Company or its Subsidiary
(other than for services as employees, consultants, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation,
11
partnership, trust or other entity in which any officer, director or
any such employee has a substantial interest or is an officer,
director, trustee or partner.
(w) DILUTIVE EFFECT. The Company understands and acknowledges
that the number of Common Shares issuable upon exercise of the Warrants
purchased pursuant to this Agreement will increase in certain
circumstances. The Company further acknowledges that, subject to such
limitations as are expressly set forth in the Transaction Documents,
its obligation to issue Common Shares upon exercise of the Warrants
purchased pursuant to this Agreement, is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the
ownership interests of other shareholders of the Company.
(x) APPLICATION OF TAKEOVER PROTECTIONS. There are no
anti-takeover provisions contained in the Company's Certificate of
Incorporation or otherwise which will be triggered as a result of the
transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Common Shares and the Buyer's
ownership of the Common Shares.
(y) RIGHTS PLAN. The Company confirms that no provision of the
Company's rights plan will, under any present or future circumstances,
delay, prevent or interfere with the performance of any of the
Company's obligations under the Transaction Documents and such plan
will not be "triggered" by such performance.
(z) OBLIGATIONS ABSOLUTE. Each of the Company and the Buyer
agrees that, subject only to the conditions, qualifications and
exceptions (if any) specifically set forth in the Transaction
Documents, its obligations under the Transaction Documents are
unconditional and absolute. Except to the extent (if any) specifically
set forth in the Transaction Documents, each party's obligations
thereunder are not subject to any right of set off, counterclaim, delay
or reduction.
(aa) ISSUANCE OF COMMON SHARES. The Common Shares are duly
authorized and reserved for issuance and, upon exercise of the Warrants
in accordance with the terms thereof, such Common Shares will be
validly issued, fully paid and non-assessable, free and clear of any
and all liens, claims and encumbrances, and entitled to be traded on
the Principal Market or the New York Stock Exchange or the American
Stock Exchange, or the Nasdaq small cap market (collectively with the
Principal Market, the "APPROVED MARKETS"), and the holders of such
Common Shares shall be entitled to all rights and preferences accorded
to a holder of Common Stock. As of the date of this Agreement, the
outstanding shares of Common Stock are currently listed on the
Principal Market.
(bb) BROKERS. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's
fees or similar payments by the Buyer relating to this Agreement or the
transactions contemplated hereby.
12
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) TRANSFER RESTRICTIONS. The Company and the Buyer
acknowledge and agree that (A) the Shares and the Warrants have not been and are
not being registered under the provisions of the 1933 Act and, except as
provided in the Registration Rights Agreement with respect to the resale of the
Shares, the Shares have not been and are not being registered for resale under
the 1933 Act, and the Securities may not be transferred unless (i) subsequently
registered for resale thereunder or (ii) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration (unless waived) and (B) any resale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act ("Rule 144") may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any such resale of Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder.
(b) RESTRICTIVE LEGEND. (1) The Buyer acknowledges and agrees
that the Warrants shall bear a restrictive legend in substantially the following
form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned
in the absence of an effective registration statement for the
securities under the Securities Act of 1933, as amended, or an opinion
of counsel that registration is not required under said Act.
(2) The Buyer further acknowledges and agrees that
until such time as the Shares have been registered for resale under the 1933 Act
as contemplated by the Registration Rights Agreement, the certificates for the
Shares may bear a restrictive legend in substantially the following form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned
in the absence of an effective registration statement for the
securities under the Securities Act of 1933, as amended, or an opinion
of counsel that registration is not required under said Act.
(3) Once the Registration Statement required to be
filed by the Company pursuant to Section 2 of the Registration Rights Agreement
has been declared effective, thereafter (1) upon request of the Buyer the
Company will substitute certificates without restrictive legend for certificates
for all Shares issued prior to the date such Registration Statement is declared
effective by the SEC which bear such restrictive legend and remove any
stop-transfer restriction relating thereto promptly, but in no event later than
three Trading Days (as defined herein) after surrender of such certificates by
the Buyer and (2) the Company shall not place any restrictive legend on
certificates for Warrant Shares or impose any stop-transfer restriction thereon.
As used in this Agreement, "Trading Day" means a day on whichever of (x) the
national securities exchange, (y) Nasdaq or (z) the Nasdaq SmallCap Market (if
at the time
13
such market constitutes the principal securities market for the Common Stock) is
open for general trading.
(c) REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to
enter into the Registration Rights Agreement in the form attached hereto as
ANNEX III on or before the Closing Date.
(d) FORM D. The Company agrees to file a Form D with respect
to the Securities as required under Regulation D and to provide a copy thereof
to the Buyer promptly after such filing. The Buyer agrees to cooperate with the
Company in connection with such filing and, upon request of the Company, to
provide all information relating to the Buyer reasonably required for such
filing.
(e) AUTHORIZATION FOR TRADING; REPORTING STATUS. On or before
the Closing Date, the Company shall, if required, file a notification for
listing of additional shares with the Nasdaq relating to the Shares and shall
provide evidence of such filing to the Buyer. So long as the Buyer beneficially
owns any of the Shares or the Warrants, 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 Section 13(a) or 15(d) of the Exchange Act; provided, however, that
if the Company is not required to file reports pursuant to such sections, it
will prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act such
information as is required for the Purchasers to sell the Securities under Rule
144 promulgated under the Securities Act.
(f) USE OF PROCEEDS. Neither the Company nor any Subsidiary
owns or has any present intention of acquiring any "margin stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve
System ("margin stock"). The proceeds of sale of the Shares will be used for
general working capital purposes and in the operation of the Company's business.
None of such proceeds will be used, directly or indirectly (1) to make any loan
to or investment in any other person (other than financing the Company's
subsidiaries in the ordinary course of business or in connection with an
acquisition of another corporation or business or assets of another corporation
or business) or (2) for the purpose, whether immediate, incidental or ultimate,
of purchasing or carrying any margin stock or for the purpose of maintaining,
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any stock that is currently a margin stock or for any other purpose
which might constitute the transactions contemplated by this Agreement a
"purpose credit" within the meaning of such Regulation G. Neither the Company
nor any agent acting on its behalf has taken or will take any action which might
cause this Agreement or the transactions contemplated hereby to violate
Regulation G, Regulation T or any other regulation of the Board of Governors of
the Federal Reserve System or to violate the 1934 Act, in each case as in effect
now or as the same may hereafter be in effect.
(g) BLUE SKY LAWS. The Company shall take such action as shall
be necessary to qualify, or to obtain an exemption for, the Common Shares for
sale to the Buyer and the Warrants for issuance to the Buyer pursuant to this
Agreement and the Warrant Shares for issuance to the Buyer upon exercise of the
Warrants under such of the securities or "blue sky"
14
laws of jurisdictions as shall be applicable to the sale of the Common Shares
and the issuance of the Warrants pursuant to this Agreement and the issuance to
the Buyer of Warrant Shares upon exercise of the Warrants. The Company shall
furnish copies of all filings, applications, orders and grants or confirmations
of exemptions relating to such securities or "blue sky" laws.
(h) EXPENSES. The parties shall each bear their own expenses
in connection with this Agreement, the other Transaction Documents and the
transactions contemplated hereby and thereby. In addition, the Company or the
Buyer, as the case may be, shall pay on demand all expenses incurred by the
other party, including reasonable attorneys' fees and expenses, as a consequence
of, or in connection with any default or breach of any of the defaulting or
breaching party's obligations set forth in any of such agreements or instruments
and the enforcement of any right of, including the collection of any payments
due, the other party under any of such agreements or instruments, including any
action or proceeding relating to such enforcement, or any order, injunction or
other process seeking to restrain a party from paying any amount due the other
party, in which the other party prevails, provided that such reimbursable legal
fees and expenses do not exceed, in each instance, 35% of the amount sought in
good faith to be recovered.
(i) CERTAIN ISSUANCES OF SECURITIES. Unless the Company
obtains the approval of its stockholders as required by the Shareholder Approval
Rule or a waiver thereof from Nasdaq, the Company will not issue any shares of
Common Stock or shares of any series of preferred stock or other securities
convertible into, exchangeable for, or otherwise entitling the holder to
acquire, shares of Common Stock which would be subject to the requirements of
the Shareholder Approval Rule and which would be integrated with the sale of the
Common Shares and issuance of the Warrants to the Buyer or the issuance of
Warrant Shares upon exercise of the Warrants for purposes of the Shareholder
Approval Rule.
(j) CERTAIN TRADING RESTRICTIONS. The Buyer agrees that on and
after the Closing Date until the Buyer no longer holds any Securities, the Buyer
will not engage in any short sales or other hedging transactions (including
swaps, options or derivative securities) relating to the Shares; unless at the
time of any such transaction the Company is then in breach of its obligations to
have the Buyer's Securities duly registered under the Registration Rights
Agreement; and PROVIDED, HOWEVER, the Buyer may engage in such short sales
and/or hedging activity provided that (i) after the date hereof the Buyer may
not sell short a number of shares in excess of the number of Warrant Shares then
issuable upon exercise of the Callable Warrants, (ii) no such short sales shall
be at a per share price below $3.9375 (as such figure shall be appropriately
adjusted for any stock splits, recapitalizations or similar events), and (iii)
the aggregate amount of such short sales made on any one day shall not exceed 5%
of the total trading volume on such day.
(k) COMMERCIALLY REASONABLE EFFORTS. Each of the parties shall
use commercially reasonable efforts timely to satisfy each of the conditions to
the other party's obligations to sell and purchase the Common Shares set forth
in Section 7 or 8, as the case may be, of this Agreement on or before the
Closing Date.
15
5. INTENTIONALLY LEFT BLANK.
6. CLOSING DATE.
Subject to the satisfaction or waiver of the conditions set
forth in Sections 7 and 8 below, the date and time of the issuance and sale of
the Common Shares and the issuance of the Warrants shall be 12:00 noon, New York
City time, on the Closing Date.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND
ISSUE.
The Buyer understands that the Company's obligation to sell
the Common Shares and issue the Warrants to the Buyer pursuant to this Agreement
is conditioned upon the satisfaction of the following conditions precedent on or
before the Closing Date (any or all of which may be waived by the Company in its
sole discretion):
(a) The receipt by the Company of the Buyer's executed
signature page to this Agreement;
(b) Delivery by the Buyer to the Company of good funds for
payment of 75% of the Purchase Price for the Common Shares in accordance with
Section 1(b) hereof; and
(c) The accuracy in all material respects on the Closing Date
of the representations and warranties of the Buyer contained in this Agreement
as if made on the Closing Date and the performance by the Buyer on or before the
Closing Date of all covenants and agreements of the Buyer required to be
performed on or before the Closing Date, and receipt by the Company of a
certificate, dated the Closing Date, of a duly authorized signatory of the Buyer
confirming such matters and such other matters as the Company may reasonably
request.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Common Shares and acquire the Warrants on the Closing Date is
conditioned upon the satisfaction of the following conditions precedent on or
before the Closing Date (any or all of which may be waived by the Buyer in its
sole discretion):
(a) The receipt by the Buyer of the Company's executed
signature page to this Agreement;
(b) Delivery by the Company to the Buyer (or its counsel) of
the certificates for the Common Shares, the Callable Warrants and the Class A
Warrants in accordance with this Agreement;
(c) The accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained in this Agreement
as if made on the Closing Date and the performance by the Company on or before
the Closing Date of all covenants and agreements of the Company required to be
performed on or before the Closing Date, and receipt by the Buyer of a
certificate, dated the Closing Date, of the Chief Executive
16
Officer of the Company confirming such matters and such other matters as the
Buyer may reasonably request;
(d) The receipt by the Buyer of a certificate, dated the
Closing Date, of the Secretary of the Company certifying (1) the Certificate of
Incorporation, as amended, and By-Laws of the Company as in effect on the
Closing Date and (2) all resolutions of the Board of Directors (and committees
thereof) of the Company relating to this Agreement and the transactions
contemplated hereby (which may be the same resolutions adopted for the Prior
Subscription Agreement if sufficient in the reasonable opinion of the Company's
counsel);
(e) Receipt by the Buyer on the Closing Date of an opinion of
Ropes & ▇▇▇▇, dated the Closing Date, in such form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in ANNEX IV
attached hereto.
(f) From the date hereof to the Closing Date, trading in the
Company's Common Stock shall not have been suspended by the SEC and trading in
securities generally as reported by Nasdaq shall not have been suspended or
limited, and the Common Stock shall be listed on Nasdaq.
(g) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement, the
Warrants or the Registration Rights Agreement. The NASD shall not have objected
or indicated that it may object to the consummation of any of the transactions
contemplated by this Agreement.
(h) The Company and the Buyer shall have executed and
delivered the Registration Rights Agreement.
(i) The Company shall have delivered to the Buyer such other
documents relating to the transactions contemplated by this Agreement as the
Buyer or its counsel may reasonably request.
9. MISCELLANEOUS.
(a) GOVERNING LAW. The corporate laws of the State of Delaware
shall govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is 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
17
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.
(b) COUNTERPARTS. This Agreement may be executed in
counterparts and by the parties hereto on separate counterparts, all of which
together shall constitute one and the same instrument. A facsimile transmission
of this Agreement bearing a signature on behalf of a party hereto shall be legal
and binding on such party. Although this Agreement is dated as of the date first
set forth above, the actual date of execution and delivery of this Agreement by
each party is the date set forth below such party's signature on the signature
page hereof. Any reference in this Agreement or in any of the documents executed
and delivered by the parties hereto in connection herewith to (1) the date of
execution and delivery of this Agreement by the Buyer shall be deemed a
reference to the date set forth below the Buyer's signature on the signature
page hereof, (2) the date of execution and delivery of this Agreement by the
Company shall be deemed a reference to the date set forth below the Company's
signature on the signature page hereof and (3) the date of execution and
delivery of this Agreement or the date of execution and delivery of this
Agreement by the Buyer and the Company shall be deemed a reference to the later
of the dates set forth below the signatures of the parties on the signature page
hereof.
(c) HEADINGS, ETC. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
(e) AMENDMENTS. No amendment, modification, waiver, discharge
or termination of any provision of this Agreement nor consent to any departure
by the Buyer or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific instance and for the purpose
for which given. No course of dealing between the parties hereto shall operate
as an amendment of this Agreement.
(f) WAIVERS. Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, or any course of dealings between the parties, shall not
operate as a waiver thereof or an amendment hereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or exercise of any other right or power.
(g) NOTICES. Any notices required or permitted to be given
under the terms of this Agreement shall be delivered personally (which shall
include telephone line facsimile transmission with answer back confirmation) or
by courier and shall be effective upon receipt, in the case of the Company
addressed to the Company at its address shown in the introductory paragraph of
this Agreement, Attention: Chief Executive Officer (telephone line facsimile
18
transmission number (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Ropes & ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Esq., (facsimile number (▇▇▇) ▇▇▇-▇▇▇▇), or, in the case of the Buyer, at its
address or telephone line facsimile transmission number shown on the signature
page of this Agreement, with a copy to Kleinberg, Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇, P.C.,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇) or such other address or telephone line
facsimile transmission number as a party shall have provided by notice to the
other party in accordance with this provision.
(h) ASSIGNMENT. Prior to the Closing Date, the Buyer may not
assign its rights and obligations under this Agreement. Any transfer of the
Shares or the Warrants by the Buyer after the Closing Date shall be made in
accordance with Section 4. After the Closing Date, the Buyer shall have the
right to assign its rights and obligations under this Agreement in connection
with any transfer of the Securities upon execution by any transferee of an
instrument reasonably satisfactory to the Company pursuant to which the
transferee agrees with the Company to be bound as a Buyer by the terms and
conditions of this Agreement.
(i) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations, warranties, covenants and agreements of the Buyer and the
Company contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall survive the delivery of and
payment for the Common Shares and shall remain in full force and effect
regardless of any investigation made by or on behalf of them or any person
controlling or advising any of them.
(j) ENTIRE AGREEMENT. This Agreement and its Schedules and
Annexes, together with the Prior Subscription Agreement and its Schedules and
Annexes and the documents entered into or delivered in connection therewith or
the transactions contemplated thereby set forth the entire agreement between the
parties hereto with respect to the subject matter hereof.
19
(k) [INTENTIONALLY LEFT BLANK].
(l) FURTHER ASSURANCES. Each party to this Agreement will
perform any and all acts and execute any and all documents as may be necessary
and proper under the circumstances in order to accomplish the intents and
purposes of this Agreement and to carry out its provisions.
(m) PUBLIC STATEMENTS, PRESS RELEASES, ETC. The Company and
the Buyer shall have the right to approve before issuance 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 the Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law or Nasdaq
regulation (although the Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release and
shall be provided with a copy thereof).
(n) CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
(o) INDEMNIFICATION. In consideration of the Buyer's execution
and delivery of this Agreement, the Registration Rights Agreement and acquiring
the Common Shares hereunder and in addition to all of the Company's other
obligations under this Agreement or the transaction documents contemplated
hereby, the Company shall defend, protect, indemnify and hold harmless the Buyer
and all of its partners, officers, directors, employees, members and direct or
indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or the other transaction documents contemplated hereby
or any other certificate or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement or the other transaction documents contemplated herein or any other
certificate or document contemplated hereby or thereby, (c) any cause of action,
suit or claim brought or made against such Indemnitee by a third party and
arising out of or resulting from (i) the execution, delivery, performance,
breach by the Company or enforcement of this Agreement or the other transaction
documents contemplated hereby or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Shares or (iii) the status of the Buyer or holder of the Shares or
Warrants as an investor in the Company and (d) the enforcement of this Section.
Notwithstanding the foregoing, Indemnified Liabilities shall not include any
liability of any Indemnitee arising solely out of such Indemnitee's gross
negligence, willful misconduct or fraudulent action(s). To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the
20
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Except as otherwise set forth herein, the
mechanics and procedures with respect to the rights and obligations under this
section shall be the same as those set forth in the Registration Rights
Agreement, including, without limitation, those procedures with respect to the
settlement of claims and Company's right to assume the defense of claims.
[SIGNATURE PAGE FOLLOWS]
21
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer and the Company by their respective officers or other representatives
thereunto duly authorized on the respective dates set forth below.
NUMBER OF SHARES: 457,750
PRICE PER SHARE: $4.3692
AGGREGATE PURCHASE PRICE: $2,000,000.00
MILLENNIUM PARTNERS, LP
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Financial Officer
Date: As of June 21, 2001
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
STEMCELLS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President, Chief
Executive Officer
Date: As of June 21, 2001
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SCHEDULES
Disclosure Schedule
ANNEXES
Annex I Form of Callable Warrant
Annex II Form of Common Stock Purchase Warrant, Class A
Annex III Form of Registration Rights Agreement
Annex IV Form of Opinion of Counsel to Be Delivered on
Closing Date
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